Document:

Unassociated Document

    
 

    NU
      HORIZONS ELECTRONICS CORP.

    (the
      “Borrower”)

    AND

    CITIBANK,
      N.A.

    (“Administrative
      Agent” and as a “Lender”)

    

    BANK
      OF AMERICA, N.A.

    (“Documentation
      Agent” and as a “Lender”)

    

    JPMORGAN
      CHASE BANK, N.A.

    (“Syndication
      Agent” and as a “Lender”)

    

    ISRAEL
      DISCOUNT BANK OF NEW YORK

    (“Syndication
      Agent” and as a “Lender”)

    

    AND

    THE
      LENDERS PARTY HERETO

    (each
      a “Lender”)

    

    

    AMENDED
      AND RESTATED

    CREDIT
      AGREEMENT

    DATED
      AS OF JANUARY 31, 2007

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    TABLE
      OF CONTENTS

    

    

      
        	
                 

              	
                 

              	
                Page

              
	 	 	 
	
                SECTION
                  1. DEFINITIONS

              	
                2

              
	
                1.1

              	
                Defined
                  Terms

              	
                2

              
	
                1.2

              	
                Accounting
                  Terms

              	
                14

              
	
                 

              	 	 
	
                SECTION
                  2. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS

              	
                14

              
	
                2.1

              	
                Revolving
                  Credit Commitments

              	
                14

              
	
                2.2

              	
                Revolving
                  Credit Loans

              	
                14

              
	
                2.3

              	
                Revolving
                  Credit Notes

              	
                15

              
	
                2.4

              	
                Interest

              	
                15

              
	
                2.5

              	
                Procedure
                  for Revolving Credit Borrowing

              	
                15

              
	
                2.6

              	
                Conversion
                  and Renewals

              	
                16

              
	
                2.7

              	
                Suspension
                  of Eurodollar Loans

              	
                16

              
	
                2.8

              	
                Commitment
                  Fees; Other Fees

              	
                17

              
	
                2.9

              	
                Additional
                  Compensation in Certain Circumstances

              	
                18

              
	
                2.10

              	
                Termination
                  or Reduction of Commitment

              	
                20

              
	
                2.11

              	
                Prepayment

              	
                20

              
	
                2.12

              	
                Payments

              	
                20

              
	
                2.13

              	
                Pro
                  Rata Treatment

              	
                21

              
	
                2.14

              	
                Sharing
                  of Setoffs

              	
                22

              
	
                2.15

              	
                Use
                  of Proceeds

              	
                23

              
	
                2.16

              	
                Issuance
                  of Letters of Credit

              	
                23

              
	
                2.17

              	
                Actions
                  of Issuing Lender

              	
                24

              
	
                2.18

              	
                Indemnity
                  as to Letters of Credit

              	
                24

              
	
                2.19

              	
                Payment
                  in Respect of Letters of Credit; Reimbursement

              	
                24

              
	
                 

              	 	
                 

              
	
                SECTION
                  3. REPRESENTATIVES AND WARRANTIES

              	
                27

              
	
                3.1

              	
                Financial
                  Condition

              	
                27

              
	
                3.2

              	
                No
                  Change

              	
                27

              
	
                3.3

              	
                Corporate
                  Existence; Compliance with Law; Subsidiaries

              	
                27

              
	
                3.4

              	
                Corporate
                  Power; Authorization; Enforceable Obligations

              	
                27

              
	
                3.5

              	
                Legal
                  Bar

              	
                28

              
	
                3.6

              	
                No
                  Material Litigation

              	
                28

              
	
                3.7

              	
                No
                  Default

              	
                28

              
	
                3.8

              	
                No
                  Burdensome Restrictions

              	
                28

              
	
                3.9

              	
                Federal
                  Regulations

              	
                28

              
	
                3.10

              	
                Environmental
                  Regulation

              	
                28

              
	
                3.11

              	
                Title
                  to Properties

              	
                29

              
	
                3.12

              	
                Taxes

              	
                29

              
	
                3.13

              	
                ERISA

              	
                29

              
	
                3.14

              	
                Operation
                  of Business

              	
                30

              
	
                3.15

              	
                Security
                  Agreements and Pledge Agreements

              	
                30

              

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      
        	
                 

              	 	
                 

              
	
                SECTION
                  4. CONDITIONS PRECEDENT

              	
                30

              
	
                4.1

              	
                Conditions
                  to Initial Revolving Credit Loan

              	
                30

              
	
                4.2

              	
                Conditions
                  to All Revolving Credit Loans, Etc.

              	
                32

              
	
                 

              	 	 
	
                SECTION
                  5. AFFIRMATIVE COVENANTS

              	
                33

              
	
                5.1

              	
                Information

              	
                33

              
	
                5.2

              	
                Corporate
                  Existence; Continuance of Business

              	
                35

              
	
                5.3

              	
                Payment
                  of Obligations

              	
                36

              
	
                5.4

              	
                Insurance

              	
                36

              
	
                5.5

              	
                Payment
                  of Indebtedness and Performance of Obligations

              	
                36

              
	
                5.6

              	
                Condition
                  of Property

              	
                36

              
	
                5.7

              	
                Observance
                  of Legal Requirements

              	
                36

              
	
                5.8

              	
                Books
                  and Records

              	
                36

              
	
                5.9

              	
                Inspection

              	
                36

              
	
                5.10

              	
                Compliance
                  with Environmental Laws; Indemnity

              	
                37

              
	
                5.11

              	
                New
                  Subsidiaries

              	
                37

              
	
                5.12

              	
                Collection
                  of Accounts

              	
                38

              
	
                5.13

              	
                Cash
                  Concentration Accounts

              	
                39

              
	 	 	
                 

              
	
                SECTION
                  6. FINANCIAL COVENANTS

              	
                39

              
	
                6.1

              	
                Capital
                  Base

              	
                39

              
	
                6.2

              	
                Domestic
                  Capital Base

              	
                39

              
	
                6.3

              	
                Minimum
                  Excess Availability

              	
                39

              
	
                6.4

              	
                Maximum
                  Net Loss

              	
                39

              
	
                6.5

              	
                Capital
                  Expenditures

              	
                40

              
	
                 

              	 	
                 

              
	
                SECTION
                  7. NEGATIVE COVENANTS

              	
                40

              
	
                7.1

              	
                Indebtedness
                  for Borrowed Money

              	
                40

              
	
                7.2

              	
                Liens

              	
                40

              
	
                7.3

              	
                Loans
                  and Investments

              	
                41

              
	
                7.4

              	
                Fundamental
                  Changes

              	
                41

              
	
                7.5

              	
                Contingent
                  Liabilities

              	
                41

              
	
                7.6

              	
                Sales
                  of Receivables; Sale-Leasebacks

              	
                42

              
	
                7.7

              	
                Lease
                  Payments

              	
                42

              
	
                7.8

              	
                Dividends

              	
                42

              
	
                7.9

              	
                Supply
                  and Purchase Contracts

              	
                42

              
	
                7.10

              	
                Nature
                  of Business

              	
                42

              
	
                7.11

              	
                Stock
                  of Subsidiaries

              	
                42

              
	
                7.12

              	
                Transactions
                  with Affiliates

              	
                43

              
	
                7.13

              	
                ERISA

              	
                43

              
	
                7.14

              	
                Change
                  of Management

              	
                43

              
	 	 	 
	
                SECTION
                  8. EVENTS OF DEFAULT

              	
                43

              

      

       

      
        
           

        

        
          -ii-

          
            

          

        

        
           

        

      

       

      
        	 	 	
                 

              
	
                SECTION
                  9. ADMINISTRATAIVE AGENT

              	
                46

              
	 	 	
                 

              
	
                SECTION
                  10. MISCELLANEOUS

              	
                49

              
	
                10.1

              	
                Notices

              	
                49

              
	
                10.2

              	
                Survival
                  of Agreement

              	
                49

              
	
                10.3

              	
                Successors
                  and Assigns; Participations

              	
                50

              
	
                10.4

              	
                Expenses;
                  Indemnity

              	
                52

              
	
                10.5

              	
                Applicable
                  Law

              	
                53

              
	
                10.6

              	
                Right
                  of Setoff

              	
                53

              
	
                10.7

              	
                Payments
                  on Business Days

              	
                53

              
	
                10.8

              	
                Waivers;
                  Amendments

              	
                54

              
	
                10.9

              	
                Severability

              	
                54

              
	
                10.10

              	
                Entire
                  Agreement; Waiver of Jury Trial, Etc.

              	
                55

              
	
                10.11

              	
                Confidentiality

              	
                55

              
	
                10.12

              	
                Submission
                  to Jurisdiction

              	
                56

              
	
                10.13

              	
                Interest
                  Rate Limitation

              	
                56

              
	
                10.14

              	
                Further
                  Assurances

              	
                56

              
	
                10.15

              	
                Counterparts

              	
                57

              
	
                10.16

              	
                Provisions
                  Regarding Syndication and Documentation Agents

              	
                57

              
	
                10.17

              	
                USA
                  PATRIOT ACT

              	
                57

              
	
                10.18

              	
                Headings

              	
                57

              

      

    

    
      	 	 
	
              SCHEDULE
                I

            	
              Schedule
                I/Page 1

            
	 	 
	
              EXHIBIT
                A - Revolving Credit Note

            	
              Exhibit
                A/Page 1

            
	 	 
	
              EXHIBIT
                B - Borrowing Base Certificate

            	
              Exhibit
                B/Page 1

            
	 	 
	
              EXHIBIT
                C - Form of Assignment and Acceptance

            	
              Exhibit
                C/Page 1

            
	 	 
	
              EXHIBIT
                D - Control Agreement (Bank Accounts)

            	
              Exhibit
                D/Page 1

            

    

    

    

    
      
         

      

      
        -iii-

        
          

        

      

      
         

      

    

    AMENDED
      AND RESTATED CREDIT AGREEMENT (the “Agreement”) dated as of January 31, 2007, by
      and among NU HORIZONS ELECTRONICS CORP., a Delaware corporation, having its
      principal executive office at 70 Maxess Road, Melville, New York (the
“Borrower”), the lenders which from time to time are parties to this Agreement
      (including, without duplication, the Issuing Lender (as defined herein), if
      the
      context so requires, individually, a “Lender” and, collectively, the “Lenders”),
      BANK OF AMERICA, N.A., a national banking association, as Documentation Agent
      for the Lenders, JPMORGAN CHASE BANK, N.A., a national banking association,
      as
      Syndication Agent for the Lenders, ISRAEL DISCOUNT BANK OF NEW YORK, a New
      York
      bank, as Syndication Agent for the Lenders and CITIBANK, N.A., a national
      banking association, as administrative agent for the Lenders (the
“Administrative Agent”).

     

    W
      I T N E
      S S E T H:

    

    WHEREAS,
      the Borrower and certain lenders entered into a credit agreement dated as of
      September 30, 2004, as amended by a first amendment dated as of February 28,
      2005, a second amendment dated as of November 21, 2005 and a third amendment
      dated as of August 29, 2006 (collectively, the “Prior Agreement”);

    

    WHEREAS,
      the Borrower has requested that the Prior Lenders under the Prior Agreement
      amend and restate the Prior Agreement to provide for, among other things, an
      increase in the amount of the credit facilities provided under the Prior
      Agreement, an extension of the maturity thereof and other revisions to the
      credits and loans available and that the Lenders party hereto join in such
      amendment and restatement;

    

    WHEREAS,
      the following principal amounts are currently outstanding under the notes
      executed pursuant to the Prior Agreement and owing to, respectively, Citibank,
      N.A., JPMorgan Chase Bank, N.A., Israel Discount Bank of New York, Bank of
      America, N.A., Sovereign Bank, HSBC Bank USA, National Association, North Fork
      Bank and Bank Leumi USA (collectively, the “Lenders”): $9,639,000.00,
      $6,885,000.00, $6,426,000.00, $6,885,000.00, $3,442,500.00, $4,590,000.00,
      $4,590,000.00 and $3,442,500.00 (collectively, the “Prior Loans”);

    

    WHEREAS,
      the Borrower represents and warrants that it has complied or has caused the
      compliance with the provisions of Sections 5.11 and 5.13 hereof;

    

    WHEREAS,
      the Prior Loans shall continue as Revolving Credit Loans under this
      Agreement;

    

    WHEREAS,
      the Security Agreements and the Guarantees shall remain in full force and shall
      be reaffirmed by documentation of even date herewith acceptable to the
      Agent;

    

    WHEREAS,
      the Administrative Agent and the Lenders hereto are willing to extend such
      credits and make such loans by amending and restating the Prior Agreement upon
      the terms and conditions hereinafter set forth;

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    NOW,
      THEREFORE, in consideration of the premises and the agreements hereinafter
      set
      forth and for other good and valuable consideration, the parties hereto agree
      to
      amend and restate the Prior Agreement and covenant and agree as
      follows:

    

    SECTION
      1. DEFINITIONS

    

    1.1 Defined
      Terms.
      As used
      herein, the following terms shall have the following meanings:

    

    “Accounts”
      shall
      mean those accounts arising out of the sale or lease of goods or the rendition
      of services by the Borrower and its Domestic Subsidiaries.

    

    “Account
      Debtor”
      shall
      mean the person who is obligated on or under an Account.

    

    “Aggregate
      Outstandings”
shall
      mean, on the date of determination, the sum of (a) the Letter of Credit
      Exposure, and (b) the aggregate outstanding principal amount of all Revolving
      Credit Loans at such time.

    

    “Blocked
      Account”
shall
      have the meaning ascribed thereto in the Blocked Account Agreement.

    

    “Blocked
      Account Agreement”
shall
      mean, collectively, the blocked account agreement by and between the Borrower,
      NIC Components Corp., Nu Horizons International Corp., Titan Supply Chain
      Services Corp. and Razor Electronics, Inc., as applicable, and the
      Administrative Agent in the form of Exhibit E hereto.

    

    “Board”
shall
      mean the Board of Governors of the Federal Reserve System of the United States
      of America.

    

    “Borrowing
      Base”
shall
      mean the lesser of (i) the amount of the Total Revolving Credit Commitment
      or
      (ii) 80% of the Eligible Accounts plus the lesser of (a) 40% of the Eligible
      Inventory as reported on the most recent Borrowing Base Certificate delivered
      pursuant to Section 5.1 (12) hereof or (b) $60,000,000; provided, however,
      if
      such certificate has not been provided the Borrowing Base shall be deemed to
      be
      zero.

    

    “Borrowing
      Base Certificate”
      shall
      mean a certificate of the Borrower in the form of Exhibit B hereto setting
      forth
      the Borrower’s calculation of the Borrowing Base.

    

    “Business
      Day”
      shall
      mean (a) a day other than a Saturday, Sunday or other day on which commercial
      banks in New York, New York are authorized or required by law to close and
      (b)
      relative to the date of (i) continuing a Eurodollar Loan as, or converting
      a
      Prime Rate Loan to, a Eurodollar Loan, (ii) making any payment or prepayment
      of
      principal of or payment of interest on a Eurodollar Loan, or (iii) the Borrower
      giving any notice (or the number of Business Days to elapse prior to the
      effectiveness thereof) in connection with any matter referred to in (b)(i)
      or
      (b)(ii), any day on which dealings in U.S. dollars are carried on in the London
      interbank eurodollar market.

    

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

    “Capital
      Assets”
      shall
      mean assets that in accordance with GAAP are required or permitted to be
      depreciated or amortized on a balance sheet.

    

    “Capital
      Leases”
      shall
      mean capital leases, conditional sales contracts and other title retention
      agreements, relating to the purchase or acquisition of Capital
      Assets.

    

    “CERCLA”
      shall
      mean the Comprehensive Environmental Response, Compensation and Liability Act
      of
      1980 (or any successor statute) and the rules and regulations thereunder, all
      as
      from time to time in effect.

    

    “CERCLIS”
      shall
      mean the Comprehensive Environmental Response Compensation Liability Information
      System List.

    

    “Commitment
      Period”
      shall
      mean the period from and including the date hereof to, but not including, the
      Termination Date or such earlier date as the Revolving Credit Commitments shall
      terminate as provided herein.

    

    “Consolidated
      Net Income”
      shall
      mean, for the applicable period, the net income or loss of the Borrower and
      its
      Subsidiaries from continuing operations determined on a consolidated basis
      for
      such period.

    

    “Contractual
      Obligations”
      shall
      mean as to any Person, any provision of any security issued by such Person
      or of
      any agreement, instrument or undertaking to which such Person is a party or by
      which it or any of its property is bound.

    

    “Control
      Agreement”
shall
      mean, collectively, the agreement(s) regarding the concentration deposit
      accounts of the Borrower, NIC Components Corp., Nu Horizons International Corp.,
      Titan Supply Chain Services Corp. and Razor Electronics, Inc. (and each Domestic
      Subsidiary of the Borrower which, from time to time hereafter, is required
      to
      execute a Control Agreement in accordance with Section 5.13 hereof,
      collectively, the “Control Agreement Guarantors”) by and among the Borrower, or
      the Control Agreement Guarantors, as applicable, Mellon Bank, N.A., or any
      other
      depository acceptable to the Administrative Agent, and the Administrative Agent
      in the form of Exhibit D hereto.

    

    “Default”
      shall
      mean any of the events specified in Section 8 hereof, whether or not any
      requirement for the giving of notice, the lapse of time, or both, or any other
      condition, has been satisfied or given, as the case may be.

    

    “Dollars”
      and
“$”
      shall
      mean lawful currency of the United States of America.

    

    “Domestic
      Subsidiary”
      shall
      mean, as to any Person, any Subsidiary of such Person organized under the laws
      of the United States of America or any state thereof.

    

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

    “EBIT”
      shall
      mean, for the Borrower and its Subsidiaries on a consolidated basis for the
      applicable period, Consolidated Net Income (Net Loss) less all interest income
      plus Interest Expense and all income taxes to any government or governmental
      instrumentality expensed on such Person’s books (whether paid or accrued)
      determined in accordance with GAAP. 

    

    “EBITDA”
      shall
      mean, for the Borrower and its Subsidiaries for the applicable period, EBIT
      plus
      the sum of depreciation expense and amortization expense, all as determined
      in
      accordance with GAAP.

    

    “Eligible
      Accounts”
      shall
      mean those Accounts of the Borrower and its Domestic Subsidiaries with respect
      to which, when scheduled on a Borrowing Base Certificate and at all times
      thereafter, the Administrative Agent on behalf of the Lenders has a valid and
      perfected first priority security interest, there is no violation of the
      negative, affirmative or collateral covenants or other provisions of this
      Agreement or any other Loan Document and which the Administrative Agent in
      its
      reasonable credit judgment, deems to be Eligible Accounts based on such credit
      and collateral considerations as the Administrative Agent may deem appropriate.
      In general, an Account of the Borrower or a Domestic Subsidiary shall be an
      Eligible Account if:

    

    (a) such
      Accounts (i) arise from the actual and bona
      fide
      sale and
      delivery of goods or rendition of services in the ordinary course of business
      which transactions are completed in accordance with the terms and provisions
      contained in any documents related thereto, (ii) are not evidenced by or payable
      pursuant to invoices or similar documentation issued by, or calling for payment
      to, any other Person and (iii) do not arise from or in connection with any
      sales
      of goods or rendition of services to an Affiliate or any Subsidiary;

    

    (b) such
      Accounts are not unpaid more than ninety (90) days after date of original
      invoice;

    

    (c) such
      Accounts do not have or include any deductions, contras, unapplied cash,
      unapplied credits or credit balances existing or asserted with respect
      thereto;

    

    (d) such
      Accounts do not arise from sales on consignment, guaranteed sale, sale and
      return, sale on approval, or other terms under which payment by the Account
      Debtor may be conditional or contingent;

    

    (e) the
      chief
      executive office of the Account Debtor with respect to such Accounts is located
      in the United States of America, or, subject to the prior written consent of
      the
      Required Lenders and any conditions so imposed by the Required Lenders, Canada,
      or, at the Administrative Agent’s option, if either: (i) the Account Debtor has
      delivered an irrevocable letter of credit issued or confirmed by a bank
      satisfactory to the Administrative Agent, sufficient to cover such Account,
      in
      form and substance satisfactory to the Administrative Agent and, if required
      by
      the Administrative Agent, the original of such letter of credit has been
      delivered to the Administrative Agent and the issuer thereof notified of the
      assignment of the proceeds of such letter of credit to the Administrative Agent,
      or (ii) such Account is subject to credit insurance payable to the
      Administrative Agent issued by an insurer and on terms and in an amount
      acceptable to the Administrative Agent, or (iii) such Account is otherwise
      acceptable in all respects to the Required Lenders (subject to such lending
      formula with respect thereto as the Required Lenders may
      determine);

    

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

    (f) such
      Accounts do not consist of progress billings, bill and hold invoices or
      retainage invoices, except as to bill and hold invoices, if the Administrative
      Agent shall have received an agreement in writing from the Account Debtor,
      in
      form and substance satisfactory to the Administrative Agent, confirming the
      unconditional obligation of the Account Debtor to take the goods related thereto
      and pay such invoice;

    

    (g) the
      Account Debtor with respect to such Accounts has not asserted a counterclaim,
      defense or dispute and does not have, and does not engage in transactions which
      may give rise to, any right of setoff against such Accounts;

    

    (h) there
      are
      no facts, events or occurrences which would impair the validity, enforceability
      or collectability of such Accounts or reduce the amount payable or delay payment
      thereunder;

    

    (i) such
      Accounts are subject to the first priority, valid and perfected security
      interest of the Administrative Agent and any goods giving rise thereto are
      not,
      and were not at the time of the sale thereof, subject to any liens except those
      permitted in this Agreement;

    

    (j) neither
      the Account Debtor nor any officer or other person who, in each case, performs
      any management functions for or with respect to the Account Debtor with respect
      to such Accounts is an officer or other person who, in each case, performs
      any
      management functions for or with respect to, is an agent of, or is affiliated
      with, the Borrower directly or indirectly by virtue of family membership,
      ownership, control, management or otherwise;

    

    (k) the
      Account Debtors with respect to such Accounts are not any foreign government,
      the United States of America, any State, political subdivision, department,
      agency or instrumentality thereof, unless, if the Account Debtor is the United
      States of America, any State, political subdivision, department, agency or
      instrumentality thereof, upon the Administrative Agent’s request, the Federal
      Assignment of Claims Act of 1940, as amended or any similar State or local
      law,
      if applicable, has been complied with in a manner satisfactory to the
      Administrative Agent;

    

    (l) there
      are
      no proceedings or actions which are threatened or pending against the Account
      Debtors with respect to such Accounts which might result in any material adverse
      change, in the credit judgment of the Administrative Agent, in any such Account
      Debtor’s financial condition;

    

    (m) the
      Accounts do not arise out of or in connection with any contract for services
      or
      involving projects entered into by the Borrower or a Domestic Subsidiary that
      require a bond, guaranty or other similar surety as credit support;

    

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

    (n) such
      Accounts are not owed by an Account Debtor who has Accounts unpaid more than
      ninety (90) days after the date of the original invoice and which constitute
      more than fifty (50%) percent of the total Accounts of such Account
      Debtor;

    

    (o) such
      Accounts are not owed by an Account Debtor that is a Subsidiary of, Affiliate
      of, or has common officers or directors with the Borrower or its
      Subsidiaries;

    

    (p) that
      portion of any Accounts not representing late fees, service charges or interest
      but only to the extent of such portion;

    

    (q) Accounts
      owed by any Account Debtor which is not insolvent or is not the subject of
      an
      insolvency proceeding; and

    

    (r) such
      Accounts are owed by Account Debtors deemed creditworthy at all times by the
      Administrative Agent, as determined by the Administrative Agent.

    

    General
      criteria for Eligible Accounts may be established and revised from time to
      time
      by Required Lenders in good faith on the basis of Field Audits and Required
      Lenders reserve the right, in their reasonable discretion, to create, from
      time
      to time, additional categories of ineligible Accounts. Any Accounts which are
      not Eligible Accounts shall nevertheless be part of the Collateral.

    

    “Eligible
      Inventory”
      shall
      mean all unencumbered inventory of raw material, work in process and finished
      goods of the Borrower and its Domestic Subsidiaries exclusive of End of Life
      Inventory, as herein defined, from time to time on hand, valued at the lowest
      of
      (a) cost, (b) market value, or (c) the valuation consistent with that employed
      in the preparation of the financial statements of the Borrower referred to
      in
      Section 5.1 hereof. ‘End of Life Inventory’ shall mean inventory that the vendor
      of which has discontinued or declared obsolete and whose sale is final and
      without return privileges.

    

    “Environmental
      Laws”
      shall
      mean all applicable federal, state or local statutes, laws, ordinances, codes,
      rules, regulations and guidelines (including consent decrees and administrative
      orders) relating to public health and safety and protection of the
      environment.

    

    “ERISA”
      shall
      mean the Employee Retirement Income Security Act of 1974, and all rules and
      regulations promulgated pursuant thereto, as the same may from time to time
      be
      supplemented or amended.

    

    “ERISA
      Affiliate”
      shall
      mean any trade or business (whether or not incorporated) which together with
      the
      Borrower or its Subsidiaries would be treated as a single employer under Section
      4001 of ERISA.

    

    “Eurocurrency
      Reserve Requirement”
      shall
      mean for any day as applied to a Eurodollar Loan, the aggregate (without
      duplication) of the rates (expressed as a decimal fraction) of reserve
      requirements in effect on such day (including, without limitation, basic,
      supplemental, marginal and emergency reserves under any regulations of the
      Board
      of Governors of the Federal Reserve System or other governmental authority
      having jurisdiction with respect thereto), as from time to time hereafter in
      effect, dealing with reserve requirements prescribed for eurocurrency funding
      (currently referred to as “Eurocurrency Liabilities” in Regulation D of such
      Board) maintained by a member bank of such system.

    

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

    “Eurodollar
      Loan”
      shall
      mean any Revolving Credit Loan when and to the extent that the interest rate
      therefor is determined by reference to the Reserve Adjusted LIBOR.

    

    “Event
      of Default”
      shall
      mean any of the events specified in Section 8 hereof, provided that any
      requirement for the giving of notice, the lapse of time, or both, or any other
      condition, has been satisfied.

    

    “Field
      Audit”
      shall
      have the meaning assigned thereto in Section 5.1 (11) hereof.

    

    “First-Tier
      Subsidiary”
shall
      mean any Subsidiary of any Person which Subsidiary is directly owned by such
      Person. 

    

    “Foreign
      Acquisition”
shall
      mean the acquisition by the Borrower or any Subsidiary of the Borrower of more
      than 50% of the capital stock, membership interests, partnership interests
      or
      other similar ownership interests of a Person not organized under the laws
      of
      the United States or any state thereof or the purchase of all or substantially
      all of the assets owned by such Person.

    

    “Foreign
      Subsidiary”
      shall
      mean, as to any Person, any Subsidiary of such Person which is not organized
      under the laws of the United States of America or any state
      thereof.

    

    “Funded
      Debt”
      shall
      mean, on a consolidated basis with respect to the Borrower and its Subsidiaries,
      without duplication, (i) indebtedness for borrowed money, (ii) obligations
      to
      pay the deferred purchase price of property or services (other than trade
      payables arising in the ordinary course of business which are not overdue),
      (iii) obligations as lessee under Capital Leases, (iv) obligations evidenced
      by
      bonds, debentures, notes or equivalent instruments and (v) reimbursement
      obligations (contingent or otherwise) in respect of drawings made under letters
      of credit and acceptance drafts.

    

    “GAAP”
      shall
      mean generally accepted accounting principles applied in a manner consistent
      with that employed in the preparation of the Borrower’s certified annual
      consolidated financial statements for the fiscal year ended February 28,
      2006.

    

    “Governmental
      Authority”
      shall
      mean any nation or government, any state or other political subdivision thereof,
      and any entity exercising executive, legislative, judicial, regulatory or
      administrative functions of or pertaining to government, and any corporation
      or
      other entity owned or controlled (through stock or capital ownership or
      otherwise) by any of the foregoing.

    

    “Guarantee”
      or
      “Guarantees”
      shall
      mean, collectively, the Guarantee and Reaffirmation and Acknowledgment of
      Guaranty in the forms prepared by counsel to the Administrative Agent to be
      executed and delivered by each Guarantor on the date of this Agreement and
      thereafter by any Domestic Subsidiaries of the Borrower required to deliver
      a
      Guarantee pursuant to Section 5.11 hereof, as the same may hereafter be amended,
      restated, supplemented or otherwise modified from time to time.

    

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

    

    “Guarantors”
      shall
      mean, collectively, NIC Components Corp. a New York corporation, Nu Horizons
      International Corp. a New York corporation, NUV Inc. (formerly known as Nu
      Visions Manufacturing, Inc.), a Massachusetts corporation, Titan Supply Chain
      Services Corp. (formerly known as Titan Logistics Corp.), a New York
      corporation, Razor Electronics, Inc. (formerly known as Hunter Electronics,
      Inc.), a New York corporation, NuXChange B2B Services, Inc., a Delaware
      corporation and each other Domestic Subsidiary of the Borrower which, from
      time
      to time hereafter, is required to execute a Guarantee in accordance with Section
      5.11 hereof.

    

    “Hazardous
      Materials”
      shall
      mean: (a) any “hazardous substance” as defined by CERCLA; (b) any “hazardous
      waste” as defined by the Resource Conservation and Recovery Act; (c) any
      petroleum product; or (d) any pollutant or contaminant or hazardous, dangerous
      or toxic chemical, material or substance within the meaning of any other
      applicable federal, state or local law, regulation, ordinance or requirement
      (including consent decrees and administrative orders) relating to or imposing
      liability or standards of conduct concerning any hazardous, toxic or dangerous
      waste, substance or material, all as heretofore amended or hereafter
      amended.

    

    “Indebtedness”
      shall
      mean all obligations that in accordance with GAAP should be classified as
      liabilities upon a balance sheet or for which references should be made by
      footnotes thereto.

    

    “Interest
      Expense”
shall
      mean, for the applicable period, all interest expense exclusive of all interest
      income determined in accordance with GAAP.

    

    “Interest
      Period”
      with
      respect to any Eurodollar Loan shall mean:

    

    (a) initially,
      the period commencing on the date such Eurodollar Loan is made and ending one,
      two, three or six months thereafter; and 

    

    (b) thereafter,
      each period commencing on the last day of the next preceding Interest Period
      applicable to such Eurodollar Loan and ending one, two, three or six months
      thereafter, as selected by the Borrower by irrevocable written notice to the
      Administrative Agent not less than three (3) Business Days prior to the last
      day
      of the then current Interest Period with respect to such Eurodollar Loan;
      provided, however, that all of the foregoing provisions relating to Interest
      Periods are subject to the following:

    

    (i) if
      any
      Interest Period pertaining to a Eurodollar Loan would otherwise end on a day
      which is not a Business Day, the Interest Period shall be extended to the next
      succeeding Business Day unless the result of such extension would be to carry
      such Interest Period into another calendar month, in which event such Interest
      Period shall end on the immediately preceding Business Day;

    

    
      
         

      

      
        -8-

        
          

        

      

      
         

      

    

    (ii) if
      the
      Borrower shall fail to give notice as provided in clause (b) above, the Borrower
      shall be deemed to have requested conversion of the affected Eurodollar Loan
      to
      a Prime Rate Loan on the last day of the then current Interest Period with
      respect thereto;

    

    (iii) any
      Interest Period that begins on the last Business Day of a calendar month (or
      on
      a day for which there is no numerically corresponding day in the calendar month
      at the end of such Interest Period) shall end on the last Business Day of a
      calendar month; and

    

    (iv) no
      Interest Period may be selected which ends later than the Termination
      Date.

    

    “Involuntary
      Rate”
      shall
      mean at any time a rate per annum equal to two (2%) percent in excess of the
      otherwise applicable rate or, if there is no rate in effect, two (2%) percent
      in
      excess of the Prime Rate in effect from time to time.

    

    “Issuing
      Lender”
      shall
      mean the Lender which is the Administrative Agent in its capacity as the issuer
      of Letters of Credit hereunder.

    

    “Letter
      of Credit”
      or
“Letters
      of Credit”
      shall
      mean letters of credit issued by the Issuing Lender pursuant to Section 2.16
      hereof for the account of the Borrower.

    

    “Letter
      of Credit Exposure”
      shall
      mean at any time the sum of (a) the aggregate undrawn amount of all outstanding
      Letters of Credit and (b) the aggregate amount of all drawings under Letters
      of
      Credit for which the Administrative Agent or the Lenders shall not have been
      reimbursed as provided in Section 2.19 hereof.

    

    “Lien”
      shall
      mean any mortgage, pledge, security interest, hypothecation, assignment, deposit
      arrangement, encumbrance, lien (statutory or other), or preference, priority
      or
      other security agreement or preferential arrangement of any kind or nature
      whatsoever (including, without limitation, any conditional sale or other title
      retention agreement, any financing lease having substantially the same economic
      effect as any of the foregoing, and the filing of any financing statement under
      the Uniform Commercial Code or comparable law of any jurisdiction pursuant
      to
      any of the types of security interests referred to herein).

    

    “Loan
      Documents”
      shall
      mean, collectively, this Agreement, the Revolving Credit Notes, documents
      executed in connection with a Letter of Credit, the Security Agreements, the
      Guarantee, the Pledge Agreement, the Control Agreement, the Blocked Account
      Agreement, reaffirmations of any of the foregoing agreements and any other
      documents executed by the Borrower or the Guarantors in connection herewith
      including any and all amendments to such documents.

    

    “Minority
      Interest Purchase”
      shall
      have the meaning set forth in Section 7.3 hereof.

    

    “Multiemployer
      Plan”
      shall
      mean any Plan described in Section 4001(a)(3) of ERISA.

    

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

    “PBGC”
      shall
      mean the Pension Benefit Guaranty Corporation or any successor
      thereto.

    

    “Permitted
      Acquisition”
      shall
      mean an acquisition by the Borrower or any Subsidiary of the Borrower by merger,
      by consolidation or by purchase of a voting majority of the stock of another
      Person or the purchase of all or substantially all of the assets of another
      Person (or of a division or other operating component of another Person) (an
      “Acquisition”) if all of the following conditions are met:

    

    (i) The
      total
      consideration, including the cash purchase price for such Acquisition and any
      Funded Debt incurred or assumed in connection therewith, does not exceed
      $15,000,000 and the aggregate total consideration for all Acquisitions
      consummated during the Commitment Period does not exceed
      $25,000,000;

    

    (ii) The
      Acquisition is identified as a “Permitted Acquisition” by the Borrower in
      writing to the Administrative Agent;

    

    (iii) The
      Borrower and its Subsidiaries have not closed more than two (2) Acquisitions
      in
      any twelve (12) month period and four (4) Acquisitions during the Commitment
      Period of which no more than one of which shall be a Foreign Acquisition which
      has a total consideration that does not exceed $12,000,000. In the case of
      such
      Foreign Acquisition, the business to be acquired shall be acquired by (x) the
      Borrower or a Domestic Subsidiary, (y) a First-Tier Subsidiary of the Borrower
      or a Domestic Subsidiary, or (z) a direct or indirect wholly-owned Subsidiary
      of
      a First-Tier Subsidiary of a Domestic Subsidiary, provided that if such
      First-Tier Subsidiary is a Foreign Subsidiary, then 65% of the capital stock
      of
      such First-Tier Subsidiary shall have been pledged to the Administrative Agent
      for the benefit of the Lenders. 

    

    (iv) No
      Acquisition shall be a Permitted Acquisition if the business which is the
      subject of such acquisition has a negative EBITDA for the most recently
      concluded four quarters;

    

    (v) Substantially
      all of the revenue of the Person or assets being acquired is derived from
      products and services substantially similar to those currently provided by
      the
      Borrower and/or its Subsidiaries;

    

    (vi) The
      Administrative Agent and the Lenders shall have received at least three (3)
      years of historical financial statements of such Person (or, if such Person
      has
      been in business for less than three (3) years, financial statements for such
      lesser number of years) and a set of projections setting forth in reasonable
      detail (with those stated assumptions set forth below) the pro forma effect
      of
      such Acquisition and showing compliance by the Borrower with all covenants
      set
      forth in this Agreement for the next succeeding four (4) fiscal quarters. The
      projections to be delivered hereunder shall include and specify the assumptions
      used to prepare such projections regarding growth of sales, margins on sales
      and
      cost savings resulting from such Acquisition;

    

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

    (vii) The
      Administrative Agent and the Lenders shall have received a certificate signed
      by
      the chief financial officer of the Borrower to the effect that (and including
      calculations indicating that) on a pro forma basis after giving effect to such
      Acquisition: (a) all representations and warranties contained in the Loan
      Documents will remain true and correct except those, if any, made as of a
      specific time which shall have been true and correct when made, (b) the Borrower
      will remain in compliance with all covenants contained in the Loan Documents,
      and (c) no Default or Event of Default has occurred and is continuing or will
      occur as a result of the consummation of such Acquisition;

    

    (viii) With
      respect to such Person which is the subject of an Acquisition, such Acquisition
      has been (x) approved by the board of directors or other appropriate governing
      body of such Person or (y) recommended for approval by such board of directors
      or governing body to the shareholders, members, partners, or other owners of
      such Person, as required under applicable law or the certificate of
      incorporation and by-laws or other organizational documents of such Person
      and
      subsequently approved by the shareholders, members, partners or other owners
      if
      such approval is required under applicable law or by the certificate of
      incorporation and by-laws or other organizational documents of such Person
      or
      (z) otherwise agreed to by all shareholders, members, partners or owners of
      such
      Person;

    

    (ix) The
      Borrower has timely delivered the financial statements required pursuant to
      Section 5.1(1) and 5.1(2) hereof; 

    

    (x) The
      Borrower and such other Person, if any, has complied with the provisions of
      Section 5.11 hereof; and

    

    (xi) The
      Acquisition constitutes a Domestic Acquisition, as hereinafter defined, unless
      same is the Foreign Acquisition permitted by subparagraph (iii) above. Domestic
      Acquisition shall mean the acquisition by the Borrower or any Subsidiary of
      the
      Borrower of more than 50% of the capital stock, membership interests,
      partnership interests or other similar ownership interests of a Person organized
      under the laws of the United States or any state thereof or the purchase of
      all
      or substantially all of the assets owned by such Person substantially all of
      which assets are located in the United States.

    

    “Person”
      shall
      mean any individual, corporation, partnership, joint venture, limited liability
      company, trust, unincorporated organization or any other juridical entity,
      or a
      government or state or any agency or political subdivision thereof.

    

    “Plan”
      shall
      mean any plan of a type described in Section 4021(a) of ERISA in respect of
      which the Borrower or any of its Subsidiaries or any ERISA Affiliate is an
      “employer” as defined in Section 3(5) of ERISA.

    

    “Pledge
      Agreement”
shall
      mean (a) with respect to the Borrower, any Pledge Agreement entered into in
      accordance with Section 5.11 hereof relating to the capital stock or other
      equity interests of a Foreign Subsidiary of the Borrower which is a First-Tier
      Subsidiary of the Borrower substantially in the form prepared by counsel to
      the
      Administrative Agent, (b) with respect to each Domestic Subsidiary, as
      applicable, any Pledge Agreement entered into in accordance with Section 5.11
      hereof relating to the capital stock or other equity interests of a Foreign
      Subsidiary which is a First-Tier Subsidiary of a Domestic Subsidiary of the
      Borrower substantially in the form prepared by counsel to the Administrative
      Agent and as each of the same may hereafter be amended, restated, supplemented
      or otherwise modified from time to time.

    

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    

    “Prime
      Rate”
      the rate
      per annum announced by the Administrative Agent from time to time as its prime
      rate in effect at its principal office. Each change in the Prime Rate shall
      be
      effective on the date such change is announced to become effective.

    

    “Prime
      Rate Loan”
      shall
      mean any Revolving Credit Loan when and to the extent

    that
      the
      interest rate therefor is determined by reference to the Prime
      Rate.

    

    “Prior
      Agreement”
      shall
      mean that certain credit agreement among the Borrower and certain lenders dated
      as of September 30, 2004, as amended by a First Amendment dated as of February
      28, 2005, a Second Amendment dated as of November 21, 2005 and a Third Amendment
      dated as of August 29, 2006.

    

    “Prohibited
      Transaction”
      means
      any transaction set forth in Section 406 of ERISA or Section 4975 of the
      Internal Revenue Code of 1986, as amended from time to time.

    

    “Reportable
      Event”
      shall
      mean any of the events set forth in Section 4043(b) of ERISA or the regulations
      thereunder.

    

    “Required
      Lenders”
      shall
      mean at any time Lenders having at least fifty-one (51%) percent of the
      aggregate amount of the Revolving Credit Commitments or, if the Revolving Credit
      Commitments are no longer in effect, Lenders holding at least fifty-one (51%)
      percent of the aggregate outstanding principal amount of the sum of the
      Revolving Credit Notes and the Letter of Credit Exposure (or participation
      in
      any of the foregoing); provided, however, that such calculation shall be made
      without including the Revolving Credit Commitment and pro rata portion of Letter
      of Credit Exposure of any Lender or principal amount of Revolving Credit Notes
      held by such Lender, if such Lender is in default with respect to any of its
      obligations to the Administrative Agent, the Borrower or any
      Lender.

    

    “Requirements
      of Law”
      shall
      mean, as to any Person, the certificate of incorporation and by-laws or other
      organizational or governing documents of such Person, and any material law,
      treaty, rule or regulation, or any determination of an arbitrator or a court
      or
      other Governmental Authority, in each case applicable to or binding upon such
      Person or any of its property or to which such Person or any of its property
      is
      subject.

    

    “Reserve
      Adjusted LIBOR”
      shall
      mean with respect to the Interest Period pertaining to a Eurodollar Loan, the
      rate per annum equal to the quotient (rounded upwards to the next higher 1/16
      of
      one percent) of (a) the annual rate of interest at which dollar deposits of
      an
      amount comparable to the amount of such Revolving Credit Loan and for a period
      equal to the Interest Period applicable thereto are offered to the
      Administrative Agent in the London interbank market at approximately 11:00
      a.m.
      (London time) on the second Business Day prior to the beginning of such Interest
      Period, divided by (b) a number equal to 1.00 minus the Eurocurrency Reserve
      Requirement.

    

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

    “Revolving
      Credit Commitment”
      shall
      mean, with respect to each Lender, the obligation of such Lender to make
      Revolving Credit Loans to the Borrower during the Commitment Period pursuant
      to
      the terms hereof as such Commitment is described in Section 2.1
      hereof.

    

    “Revolving
      Credit Loan”
      shall
      mean a loan made pursuant to the terms of Section 2.2 hereof.

    

    “Revolving
      Credit Note”
      or
“Revolving
      Credit Notes”
      shall
      mean the Revolving Credit Notes referred to in Section 2.3 hereof in the form
      of
      Exhibit “A” hereto.

    

    “Security
      Agreement”
      or
“Security
      Agreements”
      shall
      mean a Security Agreement executed by the Borrower and each of its Domestic
      Subsidiaries in the form prepared by counsel to the Administrative
      Agent.

    

    “Subordinated
      Debt”
      shall
      mean indebtedness of the Borrower subordinated in right of payment to the
      obligations to the Lenders under this Agreement pursuant to documentation
      containing maturities, amortization schedules, covenants, defaults, remedies,
      subordination provisions and other material terms in form and substance
      reasonably satisfactory to the Administrative Agent and the Required
      Lenders.

    

    “Subsidiary”
      shall
      mean with respect to any Person (the “parent”) at any date, any corporation,
      limited liability company, partnership, association or other entity the accounts
      of which would be consolidated with those of the parent in the parent’s
      consolidated financial statements if such financial statements were prepared
      in
      accordance with GAAP as of such date, as well as any other corporation, limited
      liability company, partnership, association or other entity of which securities
      or other ownership interests representing more than 50% of the equity or more
      than 50% of the ordinary voting power or, in the case of a partnership, more
      than 50% of the partnership interests are, as of such date, owned, controlled
      or
      held, directly or indirectly, by the parent.

    

    “Tangible
      Net Worth”
      shall
      mean, for the Borrower and its Subsidiaries on a consolidated basis, at any
      date, the excess of total assets over total liabilities, total assets and total
      liabilities each to be determined in accordance with GAAP consistently applied,
      excluding, however, from the determination of total assets all assets which
      would be classified as intangible assets under GAAP, including, without
      limitation, goodwill, patents, trademarks, trade names, copyrights and
      franchises.

    

    “Termination
      Date”
      shall
      mean September 30, 2011 or, if such date is not a Business Day, the Business
      Day
      next succeeding such date.

    

    “Total
      Revolving Credit Commitment”
      shall
      mean the sum of the Lenders’ Revolving Credit Commitments, as the same may be
      reduced from time to time in accordance with Section 2.10 hereof.

    

    
      
         

      

      
        -13-

        
          

        

      

      
         

      

    

    1.2 Accounting
      Terms.
      As used
      herein and in any certificate or other documents made or delivered pursuant
      hereto, accounting terms not specifically defined herein shall have the
      respective meanings given to them under GAAP.

    

    SECTION
      2. AMOUNT
      AND TERMS OF REVOLVING CREDIT COMMITMENTS

    

    2.1 Revolving
      Credit Commitments.
      Subject
      to the terms and conditions and relying upon the representations and warranties
      herein set forth, each Lender, severally and not jointly, agrees to make
      Revolving Credit Loans to the Borrower, at any time and from time to time from
      the date hereof to the Termination Date, or until the earlier termina-tion
      of
      its Revolving Credit Commitment in accordance with the terms hereof, in an
      aggregate principal amount at any time out-standing not to exceed the amount
      of
      such Lender’s Revolving Credit Commitment set forth opposite its name in
      Schedule I hereto, as such Revolving Credit Commitment may be changed from
      time
      to time in accordance with the provisions of this Agreement. Notwithstanding
      the
      foregoing, the sum of (i) the aggregate principal amount of Revolving Credit
      Loans outstanding at any time to the Borrower and (ii) the Letter of Credit
      Exposure shall not exceed the lesser of (y) the Total Revolving Credit
      Commitment or (z) the Borrowing Base. The Revolving Credit Commitment of each
      Lender shall automatically and permanently terminate on the Termination
      Date.

    

    Within
      the foregoing limits, the Borrower may borrow, repay (or, subject to the
      provisions of Section 2.9 hereof, prepay) and reborrow, during the Commitment
      Period, subject to the terms, provisions and limitations set forth
      herein.

    

    2.2
       Revolving
      Credit Loans.
      (a) The
      Revolving Credit Loans made by a Lender on any date shall be in a minimum amount
      of $500,000 and in integral multiples of $100,000 in excess thereof in the
      case
      of a Eurodollar Loan or in a minimum amount of $250,000 and in integral
      multiples of $100,000 in excess thereof in the case of a Prime Rate
      Loan.

    

    (b) Revolving
      Credit Loans shall be made ratably by the Lenders in accordance with their
      respective Revolving Credit Commitments; provided, however, that the failure
      of
      any Lender to make any Revolving Credit Loan shall not in itself relieve any
      other Lender of its obligation to lend hereunder.

    

    (c) Each
      Revolving Credit Loan shall be either a Prime Rate Loan or a Eurodollar Loan
      as
      the Borrower may request pursuant to Section 2.5 hereof. Revolving Credit Loans
      of more than one type and Interest Period may be outstanding at the same
      time.

    

    (d) Each
      Lender shall make its Revolving Credit Loans on the proposed dates thereof
      by
      paying the amount required to the Administrative Agent in Hauppauge, New York,
      in immediately available funds not later than 1:00 p.m., New York time, and
      the
      Administrative Agent shall as soon as practicable, but in no event later than
      3:00 p.m., New York time, credit the amounts so received to the general deposit
      account of the Borrower with the Administrative Agent in immediately available
      funds or, if Revolving Credit Loans are not to be made on such date because
      any
      condition precedent to a borrowing herein specified is not met, return the
      amounts so received to the respective Lenders. 

    

    
      
         

      

      
        -14-

        
          

        

      

      
         

      

    

    2.3 Revolving
      Credit Notes
      (a) The
      Revolving Credit Loans made by the Lenders pursuant to Section 2.2 hereof shall
      be evidenced by promissory notes of the Borrower substantially in the form
      of
      Exhibit “A” hereto with appropriate insertions (individually, a “Revolving
      Credit Note” and, collectively, the “Revolving Credit Notes”), payable to the
      order of each Lender and evidencing the obligations of the Borrower to pay
      to
      each Lender on the Termination Date the lesser of (y) the amount of each
      Lender’s Revolving Credit Commitment or (z) the aggregate unpaid principal
      amount of all Revolving Credit Loans made by such Lender, with interest thereon
      as hereinafter prescribed in Section 2.4 hereof. The revolving credit notes
      payable to the order of the Prior Lenders shall be amended and restated as
      the
      Revolving Credit Notes payable to the order of the Lenders under this
      Agreement.

    

    (b) The
      date
      and amount of each Revolving Credit Loan, the basis for calculating interest,
      the Interest Period (if any) applicable thereto and each payment of principal
      with respect thereto may be endorsed by the Lenders on the schedule annexed
      to
      and constituting a part of the Revolving Credit Notes. The aggregate unpaid
      amount of Revolving Credit Loans set forth on such schedule shall be presumed
      to
      be the principal amount owing and unpaid thereon. The failure of a Lender to
      make such endorsement on such schedule shall not prejudice such Lender in any
      way, nor affect its rights hereunder with respect to any Revolving Credit Loan.
      The Revolving Credit Notes shall be dated the date of this Agreement and be
      stated to mature on the Termination Date.

    

    2.4 Interest.
      Interest on each Revolving Credit Loan shall be at a per annum rate to be
      elected by the Borrower, in accordance with Section 2.5 hereof, and shall be
      either a fluctuating rate equal to the Prime Rate or, subject to availability,
      the Reserve Adjusted LIBOR for Interest Periods selected by the Borrower plus
      1.50%. Interest on each Prime Rate Loan shall be payable monthly in arrears
      to
      the Administrative Agent for the pro rata benefit of the Lenders, on the first
      Business Day of each month, commencing on the first such day to occur after
      the
      pertinent Revolving Credit Loan is made and upon payment in full thereof.
      Interest on each Eurodollar Loan shall be payable to the Administrative Agent
      for the pro rata benefit of the Lenders in arrears (i) in the case of Eurodollar
      Loans with Interest Periods of three months or less, at the end of each
      applicable Interest Period and (ii) in the case of Eurodollar Loans with
      Interest Periods of more than three months, on the numerically corresponding
      day
      that falls three months after the beginning of such Interest Period and at
      the
      end of the applicable Interest Period. Whenever the unpaid principal balance
      of
      any Revolving Credit Loan shall become due and payable (whether at the stated
      maturity thereof, by acceleration or otherwise) interest shall thereafter be
      payable, on demand, to the Administrative Agent for the pro rata benefit of
      the
      Lenders at the Involuntary Rate. Interest on each Revolving Credit Loan shall
      be
      calculated on the basis of a year of 360 days for the actual number of days
      elapsed.

    

    2.5 Procedure
      for Revolving Credit Borrowing.
      The
      Borrower may borrow under the Revolving Credit Commitments during the Commitment
      Period on any Business Day by giving the Administrative Agent irrevocable notice
      of a request for a Revolving Credit Loan hereunder setting forth the amount
      of
      the Revolving Credit Loan requested, the date thereof, whether it is to be
      a
      Eurodollar Loan or a Prime Rate Loan and, if it is to be a Eurodollar Loan,
      the
      duration of the Interest Period applicable thereto. Requests for Eurodollar
      Loans shall be received by the Administrative Agent not later than 11:00 a.m.
      (New York time) three (3) Business Days prior to the first day of the Interest
      Period for each such Revolving Credit Loan. Requests for Prime Rate Loans may
      be
      made up to 11:00 a.m. (New York time) on the day such Revolving Credit Loan
      is
      to be made. Any request for a Revolving Credit Loan may be written or oral,
      but
      if oral, it shall be confirmed in writing sent by the Borrower to the
      Administrative Agent by the close of business of such Business Day. The
      Administrative Agent shall promptly advise (but in any event, by 2:00 p.m.
      New
      York time, three (3) Business Days prior to a Eurodollar Loan or by 12:00 p.m.
      on the same Business Day in the case of a Prime Rate Loan) the Lenders of any
      notice given pursuant to this Section 2.5 and of each Lender’s portion of the
      requested borrowing.

    

    
      
         

      

      
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    2.6 Conversion
      and Renewals.
      The
      Borrower may elect from time to time to convert all or a part of one type of
      Revolving Credit Loan into another type of Revolving Credit Loan or to renew
      all
      or part of a Revolving Credit Loan by giving the Administrative Agent notice
      by
      11 a.m. (New York time) on the day of the conversion into a Prime Rate Loan
      and
      at least three (3) Business Days before the conversion into or renewal of a
      Eurodollar Loan, specifying: (1) the renewal or conversion date; (2) the amount
      of the Revolving Credit Loan to be converted or renewed; (3) in the case of
      conversions, the type of Revolving Credit Loan to be converted into; and (4)
      in
      the case of renewals of or a conversion into Eurodollar Loans, the duration
      of
      the Interest Period applicable thereto; provided that (a) the minimum principal
      amount of each Revolving Credit Loan of a Lender outstanding after a renewal
      or
      conversion to a Eurodollar Loan shall be $500,000 or to a Prime Rate Loan shall
      be $250,000; and (b) Eurodollar Loans can be converted only on the last day
      of
      the Interest Period of such Revolving Credit Loan. All notices given under
      this
      Section 2.6 shall be irrevocable and shall be given not later than 11:00 a.m.
      (New York time) on the day which is the day or not less than the number of
      Business Days, as the case may be, specified above for such notice. Any request
      for a conversion or a renewal under this Section 2.6 may be written or oral,
      but
      if oral, it shall be confirmed in writing sent by the Borrower to the
      Administrative Agent by the close of business of such Business Day. If the
      Borrower shall fail to give the Administrative Agent the notice as specified
      above for the renewal or conversion of a Eurodollar Loan prior to the end of
      the
      Interest Period with respect thereto, such Eurodollar Loan shall automatically
      be converted into a Prime Rate Loan on the last day of the Interest Period
      for
      such Revolving Credit Loan. The Administrative Agent shall promptly advise
      (but
      in any event, by 2:00 p.m. New York time, three (3) Business Days prior to
      a
      Eurodollar Loan or by 3:00 p.m. on the same Business Day in the case of a Prime
      Rate Loan) the Lenders of any notice given pursuant to this Section 2.6 and
      of
      each Lender’s portion of the requested conversion or renewal.

    

    2.7 Suspension
      of Eurodollar Loans.

    

    (a) Disaster.
      Notwithstanding anything contained in this Agreement to the contrary, if the
      Administrative Agent determines that:

    

    (i) it
      is
      unable for any reason to quote or determine rates based upon a Reserve Adjusted
      LIBOR, or

    

    
      
         

      

      
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    (ii) the
      Reserve Adjusted LIBOR does not accurately reflect the cost to a Lender of
      making or maintaining a Eurodollar Loan,

    

    then
      the
      Administrative Agent shall give the Borrower and the Lenders prompt notice
      thereof, and so long as such condition shall remain in effect the right of
      the
      Borrower to select a Eurodollar Loan or to convert a Prime Rate Loan into,
      or to
      borrow or renew, a Eurodollar Loan shall be suspended. The Borrower, in such
      event, shall, on the last day of a then current Interest Period either prepay
      such loan together with accrued interest thereon or convert such loan into
      a
      Prime Rate Loan.

    

    (b) Illegality.
      Notwithstanding any other provisions herein, if any Requirements of Law,
      regulation, order or decree or any change therein or in the interpretation
      or
      application thereof shall make it unlawful for a Lender to make or maintain
      Eurodollar Loans as contemplated by this Agreement, the commitment hereunder
      to
      make Eurodollar Loans shall forthwith be canceled with respect to such Lender
      upon notice to the Administrative Agent and the Borrower and Revolving Credit
      Loans of such Lender then outstanding as Eurodollar Loans, if any, shall, at
      the
      option of the Borrower, be prepaid in full together with all interest accrued
      and unpaid to the date of any such prepayment together with any amounts required
      by Section 2.9 hereof, or converted into a Prime Rate Loan.

    

    2.8 Commitment
      Fees; Other Fees.

    

    (a) Commitment
      Fees.
      As
      additional compensation for the Revolving Credit Commitments, the Borrower
      agrees to pay to the Administrative Agent for the pro rata benefit of the
      Lenders a commitment fee for the Commitment Period based on the average daily
      unused portion of the Total Revolving Credit Commitment (without reference
      to
      the Borrowing Base) of .20% which fee shall accrue from the date of this
      Agreement.

    

    Any
      fee
      payable under this Section 2.8 which is not paid when due shall bear interest
      at
      the Involuntary Rate until paid, payable on demand. Such fee shall be computed
      on the basis of a 360 day year for the actual days elapsed and shall be payable
      monthly on the first day of each month during the Commitment Period and on
      the
      Termination Date or any earlier date of termination in accordance with the
      terms
      of this Agreement. The “unused portion of the Total Revolving Credit Commitment”
means, at any time, the Total Revolving Credit Commitment less the sum of (a)
      the unpaid principal balance of all Revolving Credit Loans and (b) the Letter
      of
      Credit Exposure. Upon termination or reduction of the Revolving Credit
      Commitments or adjustment of the Lenders’ percentage of Total Revolving Credit
      Commitments, the Borrower will pay to the Administrative Agent, for the pro
      rata
      account of the Lenders, accrued unused fees on the portion of the Revolving
      Credit Commitment terminated or reduced to the date of termination or
      reduction.

    

    (b) Letter
      of Credit Fees.

    

    (i) In
      connection with Standby Letters of Credit, the Borrower will pay the
      Administrative Agent a non-refundable Standby Letter of Credit Fee equal to
      1.25% per annum on the amount available to be drawn under such Standby Letter
      of
      Credit. Such fee shall be payable to the Administrative Agent upon
      issuance.

    

    
      
         

      

      
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    (ii) In
      connection with Commercial Letters of Credit, the Borrower will pay the
      Administrative Agent a non-refundable (y) fronting fee equal to 1/8 of 1% of
      the
      amount of such Commercial Letter of Credit and (z) a presentation fee equal
      to
      1/8 of 1% of the amount of such Commercial Letter of Credit.

    

    (iii) The
      Administrative Agent will distribute all fees provided for in subsections (i)
      and (ii) of less than $500.00 to the Issuing Lender for its own account and
      with
      respect to all fees of $500.00 or more, it will pay $500.00 to the Issuing
      Lender, for its own account and any excess to the Lenders on a pro rata basis
      in
      accordance with the provisions of Section 2.13 hereof.

    

    (iv) The
      Borrower agrees to pay to the Issuing Lender for its own account the customary
      administration, amendment, and transfer fees charged by the Issuing Lender
      in
      connection with its issuance and administration of Letters of
      Credit.

    

    (c) Administrative
      Agent’s Fee.
      The
      Borrower agrees to pay to the Administrative Agent, for its own account, an
      annual fee payable in the amount and at the time separately agreed upon between
      the Borrower and the Administrative Agent.

    

    (d) Payment
      of All Fees.
      All
      fees payable hereunder shall be paid on the dates due, in immediately available
      funds, to the Administrative Agent. Fees paid shall not be refundable under
      any
      circumstances.

    

    2.9 Additional
      Compensation in Certain Circumstances.

    

    (a) Increased
      Costs or Reduced Return Resulting From Taxes, Reserves, Capital Adequacy
      Requirements, Expenses, Etc.
      If any
      law or guideline or interpretation or application thereof by any Governmental
      Authority charged with the interpretation or administration thereof, or any
      change therein, or compliance with any request or directive of any Governmental
      Authority (whether or not having the force of law) now existing or hereafter
      adopted:

    

    (i) subjects
      the Administrative Agent or a Lender to any tax or changes the basis of taxation
      with respect to this Agreement, the Revolving Credit Notes, the Revolving Credit
      Loans, any other extensions of credit under this Agreement or payments by the
      Borrower of principal, interest, commitment fee or other amounts due from the
      Borrower hereunder or under the Revolving Credit Notes (except for taxes on
      the
      overall net income of the Administrative Agent or a Lender imposed by the
      jurisdiction in which the Administrative Agent or such Lender’s principal office
      is located),

    

    (ii) imposes,
      modifies or deems applicable any reserve, special deposit or similar requirement
      against credits or commitments to extend credit extended by, assets (funded
      or
      contingent) of, deposits with or for the account of, or other acquisition of
      funds by, the Administrative Agent or a Lender (or participations in any of
      the
      foregoing) (other than requirements expressly included herein in the
      determination of the Reserve Adjusted LIBOR hereunder),

    

    
      
         

      

      
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    (iii) imposes,
      modifies or deems applicable any capital adequacy or similar requirement (A)
      against assets (funded or contingent) of, or credits or commitments to extend
      credit extended by, the Administrative Agent or a Lender (or participations
      therein) or (B) otherwise applicable to the obligations of the Administrative
      Agent or a Lender under this Agreement, or

    

    (iv) imposes
      upon the Administrative Agent or a Lender any other condition or expense with
      respect to this Agreement, the Revolving Credit Notes or its making, maintenance
      or funding any part of the Revolving Credit Loans or any other extensions of
      credit under this Agreement (or participations therein), and the result of
      any
      of the foregoing is to increase the cost to, reduce the income receivable by,
      or
      impose any expense (including loss of margin) upon the Administrative Agent
      or a
      Lender with respect to this Agreement, the Revolving Credit Notes or the making,
      maintenance or funding of any part of the Revolving Credit Loans or any other
      extensions of credit under this Agreement (or, in the case of any capital
      adequacy or similar requirement, to have the effect of reducing the rate of
      return on the Administrative Agent’s or a Lender’s capital, taking into
      consideration the Administrative Agent’s and such Lender’s policies with respect
      to capital adequacy) by an amount which the Administrative Agent or a Lender
      deems to be material, the Administrative Agent or such Lender shall from time
      to
      time notify the Borrower of the amount determined in good faith (using any
      averaging and attribution methods) by the Administrative Agent or such Lender
      (which determination shall be conclusive) to be necessary to compensate the
      Administrative Agent or such Lender for such increase, reduction or imposition.
      Such amount shall be due and payable by the Borrower to the Administrative
      Agent
      or the applicable Lender ten (10) Business Days after such notice is given.
      A
      certificate by the Administrative Agent or a Lender as to the amount due and
      payable under this Section 2.9(a) from time to time and the method of
      calculating such amount shall be conclusive absent manifest error. All
      references to “Lender” shall be deemed to include any participant in such
      Lender’s Revolving Credit Commitment.

    

    (b) Indemnity.
      In
      addition to the compensation required by subsection (a) of this Section 2.9,
      the
      Borrower shall indemnify the Administrative Agent and each Lender against any
      loss or expense (including loss of margin) which the Administrative Agent or
      such Lender has sustained or incurred as a consequence of any

    

    (i) payment,
      prepayment or conversion of any part of any Eurodollar Loan on a day other
      than
      the last day of the applicable Interest Period (whether or not such payment,
      prepayment or conversion is mandatory or automatic and whether or not such
      payment or prepayment is then due),

    

    (ii) attempt
      by the Borrower to revoke (expressly, by later inconsistent notices or
      otherwise) in whole or part any notice stated herein to be irrevocable (the
      Administrative Agent having in its sole discretion the options (A) to give
      effect to such attempted revocation and obtain indemnity under this Section
      2.9(b) or (B) to treat such attempted revocation as having no force or effect,
      as if never made), or

    

    
      
         

      

      
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    (iii) default
      by the Borrower in the performance or observance of any covenant or condition
      contained in this Agreement or the Revolving Credit Notes, including without
      limitation any failure of the Borrower to pay when due (by acceleration or
      otherwise) any principal, interest, commitment fee or other amount due hereunder
      or under a Revolving Credit Note.

    

    If
      the
      Administrative Agent or a Lender sustains or incurs any such loss or expense
      it
      shall from time to time notify the Borrower of the amount determined in good
      faith by the Administrative Agent or such Lender (which determination shall
      be
      conclusive) to be necessary to indemnify the Administrative Agent or such Lender
      for such loss or expense. Such amount shall be due and payable by the Borrower
      to the Administrative Agent or Lender ten (10) Business Days after such notice
      is given. All references to “Lender” shall be deemed to include any participant
      in such Lender’s Revolving Credit Commitment.

    

    The
      indemnities set forth herein shall survive payment in full of all Eurodollar
      Loans and all other Revolving Credit Loans made pursuant to this
      Agreement.

    

    2.10 Termination
      or Reduction of Commitment.
      Subject
      to the indemnity agreement with respect to Eurodollar Loans set forth in Section
      2.9(b) hereof, the Borrower shall have the right, upon not less than three
      (3)
      Business Days’ irrevocable notice to the Administrative Agent (which shall
      promptly notify each of the Lenders), to terminate the Total Revolving Credit
      Commitment or, from time to time, to reduce the amount of the Total Revolving
      Credit Commitment, provided that (a) any such reduction (i) shall be in the
      minimum amount of $1,000,000 or a multiple thereof, (ii) shall reduce
      permanently the amount of the Total Revolving Credit Commitment then in effect,
      and (iii) shall be accompanied by prepayment of the Revolving Credit Loans
      outstanding, together with accrued interest on the amount so prepaid to the
      dates of each such prepayment, to the extent, if any, that the Aggregate
      Outstandings exceed the amount of the Total Revolving Credit Commitment as
      then
      reduced, and (b) any such termination of the Total Revolving Credit Commitment
      shall be accompanied by prepayment in full of the Revolving Credit Loans
      outstanding, together with accrued interest thereon to the date of prepayment,
      and the payment of any unpaid commitment fee then accrued hereunder, and (c)
      no
      such reduction shall reduce the Total Revolving Credit Commitment to an amount
      which is less than the Letter of Credit Exposure, and (d) no such termination
      shall be effective if there is then any Letter of Credit Exposure.

    

    2.11 Prepayment.
      Subject
      to the indemnity agreement with respect to Eurodollar Loans set forth in Section
      2.9(b) hereof, the Borrower (a) may prepay any Revolving Credit Loan in whole
      or
      in part without premium or penalty and (b) shall prepay Revolving Credit Loans
      to the extent that the Aggregate Outstandings exceed the Borrowing Base no
      later
      than five (5) Business Days after the occurrence of such excess. Each prepayment
      shall be made together with interest accrued on the amount prepaid to the date
      of prepayment. Prepayments of Revolving Credit Loans may be reborrowed on a
      revolving basis as aforesaid.

    

    2.12 Payments.

    

    (a) All
      payments (including prepayments) to be made by the Borrower on account of
      principal, interest and fees shall be made without setoff or counterclaim and
      shall be made to the Lenders on the date of payment at the office of the
      Administrative Agent set forth in Section 10.1 hereof or at such other place
      as
      the Administrative Agent may from time to time designate in writing on or before
      11:00 a.m. (New York time). All such payments shall be made in lawful money
      of
      the United States of America and in immediately available funds. If any payment
      hereunder (other than payments on Eurodollar Loans) becomes due and payable
      on a
      day other than a Business Day, such payment shall be extended to the next
      succeeding Business Day and, with respect to payments of principal, interest
      thereon shall be payable at the then applicable rate during such extension.
      If
      any payment on a Eurodollar Loan becomes due and payable on a day other than
      a
      Business Day, the maturity thereof shall be extended to the next succeeding
      Business Day unless the result of such extension would be to extend such payment
      into another calendar month in which event such payment shall be made on the
      immediately preceding Business Day and, in the event of any extension, with
      respect to payments of principal, interest thereon shall be payable at the
      then
      applicable rate during such extension.

    

    
      
         

      

      
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    (b) The
      Borrower hereby authorizes the Administrative Agent to charge any of its
      accounts maintained at the Administrative Agent on the date any payment is
      due
      hereunder or under a Revolving Credit Note.

    

    2.13  Pro
      Rata Treatment.

    

    (a) Except
      for any payment, reimbursement or other indemnity to any Lender or other
      indemnified person under Section 2.7(b), 2.8(b), 2.8(c), 2.9, 2.18 or 10.4
      hereof, each borrowing by the Borrower of Revolving Credit Loans from the
      Lenders hereunder, each conversion or renewal of a Revolving Credit Loan, each
      payment by the Borrower of any commitment fees, letter of credit fees or
      participation fees hereunder (subject to the provisions of Section 2.8(b) (iii)
      hereof) and each reduction of the Total Revolving Credit Commitment shall be
      made pro rata among the Lenders in the proportions that their Revolving Credit
      Commitments bear to the Total Revolving Credit Commitment. Each payment or
      prepayment of principal of the Revolving Credit Notes and each payment of
      interest on the Revolving Credit Notes shall be made pro rata among the Lenders
      in the proportions that the amount outstanding under a Revolving Credit Note
      payable to a particular Lender bears to the aggregate amount outstanding under
      the Revolving Credit Notes.

    

    (b) Unless
      the Administrative Agent shall have been notified in writing by any Lender
      prior
      to the time such Lender is required to fund any proposed borrowing that such
      Lender will not make the amount that would constitute its pro rata share of
      such
      borrowing on such date available to the Administrative Agent, the Administrative
      Agent may (assuming that the Administrative Agent has furnished such Lender
      with
      notice of the proposed borrowing as required under Section 2.5 hereof) assume
      that such Lender has made such amount available to the Administrative Agent
      on
      such date, and the Administrative Agent may, in reliance upon such assumption,
      make available to the Borrower a corresponding amount. If such amount is made
      available by such Lender to the Administrative Agent on a date after such
      borrowing date, such Lender shall pay to the Administrative Agent on demand
      an
      amount equal to the product of (i) the daily average Federal funds rate during
      such period as quoted by the Administrative Agent, times (ii) the amount of
      such
      Lender’s pro rata share of such borrowing, times (iii) a fraction the numerator
      of which is the number of days that elapse from and including such borrowing
      date to the date on which such Lender’s pro rata share of such borrowing shall
      have become immediately available to the Administrative Agent and the
      denominator of which is 360. A certificate of the Administrative Agent submitted
      to any Lender with respect to any amounts owing under this subsection shall
      be
      conclusive in the absence of manifest error. If such Lender’s pro rata share of
      such borrowing is not in fact made available to the Administrative Agent by
      such
      Lender within three (3) Business Days of such borrowing date, the Administrative
      Agent shall be entitled to recover such amount with interest thereon at the
      rate
      per annum applicable to the relevant Revolving Credit Loans hereunder, on
      demand, from the Borrower.

    

    
      
         

      

      
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    (c) Notwithstanding
      the foregoing provisions of this Section 2.13, in the event that a Lender fails
      to make any amount that would constitute its pro rata share of a borrowing
      available to the Administrative Agent, the Administrative Agent shall so notify
      the other Lender(s) whereupon such Lender(s) shall be required to make such
      amount available to the Administrative Agent on a pro rata basis between (or
      among) the Lenders in the proportions that their Revolving Credit Commitments
      bear to the Total Revolving Credit Commitment, in an aggregate amount not to
      exceed the amount of such Lender’s unused Revolving Credit Commitment as set
      forth on Schedule I attached hereto.

    

    2.14 Sharing
      of Setoffs.
      Each
      Lender agrees that if it shall, through the exercise of a right of banker’s
      lien, setoff or counterclaim against the Borrower or a Guarantor, including,
      but
      not limited to, a secured claim under Section 506 of Title 11 of the United
      States Code or other security or interest arising from, or in lieu of, such
      secured claim, received by such Lender under any applicable bankruptcy,
      insolvency or other similar law or otherwise, obtain payment (voluntary or
      involuntary) in respect of a Revolving Credit Note held by it as a result of
      which the unpaid principal portion of the Revolving Credit Note held by it
      shall
      be proportionately less than the unpaid principal portion of the Revolving
      Credit Notes held by any other Lender, it shall be deemed to have simultaneously
      purchased from such other Lender a participation in the Revolving Credit Note
      or
      participation held by such other Lender with the purchase price payable in
      cash
      upon demand by such other Lender, so that the aggregate unpaid principal amount
      of the Revolving Credit Notes and participations in Revolving Credit Notes
      held
      by it shall be in the same proportion to the aggregate unpaid principal amount
      of all Revolving Credit Notes then outstanding as the principal amount of the
      Revolving Credit Notes held by it prior to such exercise of banker’s lien,
      setoff or counterclaim was to the principal amount of all Revolving Credit
      Notes
      outstanding prior to such exercise of banker’s lien, setoff or counterclaim;
      provided, however, that if any such purchase or purchases or adjustments shall
      be made pursuant to this Section 2.14 and such other Lender shall thereafter
      receive or recover from or respecting the Borrower or any Guarantor any amount
      in respect of a Revolving Credit Note proportionally greater than that received
      by the first Lender, such purchase or purchases or adjustments shall be
      repurchased and rescinded to the extent of such receipt or recovery and the
      purchase price or prices paid or adjustments made shall be repaid or restored,
      as applicable, without interest; provided, that, if such disproportionate amount
      received or recovered by such other Lender exceeds the amount necessary to
      restore the Lenders respective pro rata shares, then this section shall apply
      to
      such excess. If all or part of any proportionately greater payment received
      by
      any purchasing Lender is thereafter recovered from such purchasing Lender upon
      the bankruptcy or reorganization of the Borrower or any Guarantor, or otherwise,
      the purchases by such purchasing Lender shall be rescinded and the purchase
      price paid for the participations purchased by such purchasing Lender shall
      be
      returned to such purchasing Lender ratably to the extent of such recovery,
      but
      without interest. The Borrower expressly consents to the foregoing arrangements
      and agrees that any Lender holding a participation in a Revolving Credit Note
      deemed to have been so purchased may exercise any and all rights of banker’s
      lien, setoff or counterclaim with respect to any and all moneys owing by the
      Borrower to such Lender as fully as if such Lender held a Revolving Credit
      Note
      in the amount of such participation.

    

    
      
         

      

      
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    2.15 Use
      of
      Proceeds.
      The
      Borrower has utilized the proceeds of the initial Revolving Credit Loans to
      refinance any amounts owing to the Administrative Agent or the Prior Lenders
      under the Prior Agreement. The proceeds of any subsequent Revolving Credit
      Loans
      may be used by the Borrower for working capital purposes, capital expenditures,
      to fund the purchase price of Permitted Acquisitions and to repurchase stock
      of
      the Borrower in an aggregate cumulative amount during the Commitment Period
      not
      to exceed $4,000,000 valued at the market price at the time of purchase. Each
      Standby Letter of Credit, as defined in section 2.16 hereof, shall be used
      by
      the Borrower solely to provide support for an obligation of a Person and which
      may be drawn on upon the failure of such Person to perform such obligation
      or
      other contingency for the purposes of the Borrower and its Subsidiaries in
      the
      ordinary course of business. Each Commercial Letter of Credit, as defined in
      Section 2.16 hereof, shall be used by the Borrower and its Subsidiaries solely
      to provide the primary means of payment in connection with the purchase of
      goods
      or services by the Borrower and its Subsidiaries in the ordinary course of
      business. No portion of the proceeds of any Revolving Credit Loan and no Letter
      of Credit shall be used by the Borrower in any manner which might cause the
      borrowing of such Revolving Credit Loan, or such Letter of Credit or the
      application of such proceeds to violate Regulation U, Regulation T or Regulation
      X of the Board.

    

    2.16 Issuance
      of Letters of Credit.
      Upon
      the request of the Borrower, and subject to the conditions set forth herein
      and
      such other conditions to the opening of Letters of Credit as the Issuing Lender
      requires of its customers generally, the Issuing Lender shall from time to
      time
      during the Commitment Period issue letters of credit for the account of the
      Borrower as follows:

    

    (i) standby
      letters of credit (collectively, the “Standby Letters of Credit”) in a form
      reasonably satisfactory to the Issuing Lender and in favor of such beneficiaries
      as the Borrower shall specify form time to time (which shall be reasonably
      satisfactory to the Issuing Lender); and

    

    (ii) commercial
      letters of credit in the form of the Issuing Lender’s standard commercial
      letters of credit (“Commercial Letters of Credit”) in favor of sellers of goods
      or services to the Borrower or its Subsidiaries (the Standby Letters of Credit
      and the Commercial Letters of Credit, collectively, the “Letters of
      Credit”).

    

    The
      issuance of each Letter of Credit shall be made on at least two (2) Business
      Days prior written notice from the Borrower to the Issuing Lender which written
      notice shall be an application for a Letter of Credit on the Issuing Lender’s
      customary form. The expiration date of any Letter of Credit shall not be later
      than one (1) year from the date of issuance thereof nor, in any event, later
      than the Termination Date. The Letters of Credit shall be denominated in Dollars
      and shall be issued in respect of any transactions occurring in the Borrower’s
      ordinary course of business.

    

    
      
         

      

      
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    2.17 Actions
      of Issuing Lender.
      Any
      Letter of Credit may, in the discretion of the Issuing Lender or its
      correspondents, be interpreted by them (to the extent not inconsistent with
      such
      Letter of Credit) in accordance with the Uniform Customs and Practice for
      Documentary Credits of the International Chamber of Commerce, as adopted or
      amended from time to time, or any other rules, regulations and customs
      prevailing at the place where any Letter of Credit is available or the drafts
      thereunder are drawn or nego-tiated. The Issuing Lender and its correspondents
      may in good faith accept and act upon the name, signature, or act of any party
      purporting to be the executor, administrator, receiver, trustee in bankruptcy,
      or other legal representative of any party designated in any Letter of Credit
      in
      the place of the name, signature, or act of such party.

    

    2.18 Indemnity
      as to Letters of Credit.
      The
      Borrower hereby agrees to indemnify and hold harmless the Issuing Lender, the
      Administrative Agent and the Lenders from and against any and all claims,
      damages, losses, liabilities, costs or expenses whatsoever which the Issuing
      Lender, the Administrative Agent or the Lenders may incur or suffer by reason
      of
      or in connection with the execution and delivery or assignment of, or payment
      under, any Letter of Credit, except only if and to the extent that any such
      claim, damage, loss, liability, cost or expense shall be caused by the willful
      misconduct or gross negligence of the Issuing Lender, the Administrative Agent
      or any Lender performing its obligations respecting such Letter of Credit under
      this Agreement. Without limiting the foregoing, the Borrower further agrees
      to
      indemnify and hold harmless the Issuing Lender, the Administrative Agent, the
      Lenders and their respective officers and directors, each Person who controls
      any of the foregoing within the meaning of Section 15 of the Securities Act
      of
      1933 or any applicable state securities law and their respective successors
      and
      assigns from and against any and all claims, damages, losses, liabilities,
      costs
      or expenses, joint or several, to which they or any of them may become subject
      under any federal or state securities law, rule or regulation, at common law
      or
      otherwise, insofar as such claims, damages, losses, liabilities, costs or
      expenses arise out of or are based upon the execution and delivery by the
      Issuing Lender of any Letters of Credit or the execution and delivery of any
      other document in connection therewith (but not including any claims, damages,
      losses, liabilities, costs or expenses arising from the gross negligence or
      willful misconduct of the Issuing Lender, the Administrative Agent or a Lender).
      The Borrower upon demand by the Administrative Agent at any time, shall
      reimburse the Administrative Agent for any reasonable legal or other expenses
      incurred in connection with investigating or defending against any of the
      foregoing. The indemnities contained herein shall survive the expiration or
      termination of the Letters of Credit and this Agreement.

    

    2.19 Payment
      in Respect of Letters of Credit; Reimbursement.
      Upon
      the issuance of any Letter of Credit, the Issuing Lender shall notify the
      Administrative Agent which shall notify each Lender of the principal amount,
      the
      number, and the expiration date thereof and the amount of such Lender’s
      participation therein. By the
      issuance of a Letter of Credit hereunder and without further action on the
      part
      of the Issuing Lender, the Administrative Agent or the Lenders, each Lender
      hereby accepts from the Issuing Lender a participation (which participation
      shall be nonrecourse to the Issuing Lender) in such Letter of Credit equal
      to
      such Lender’s pro rata (based on its Revolving Credit Commitment) share of such
      Letter of Credit, effective upon the issuance of such Letter of Credit. Each
      Lender hereby absolutely and unconditionally agrees to pay and discharge, and
      to
      indemnify and hold harmless the Issuing Lender from liability in respect of,
      such Lender’s pro rata share of the amount of any drawing under a Letter of
      Credit. Each Lender acknowledges and agrees that its obligation to acquire
      participations in each Letter of Credit issued by the Issuing Lender and its
      obligation to make the payments specified herein, and the right of the Issuing
      Lender to receive the same, in the manner specified herein, are absolute and
      unconditional and shall not be affected by any circumstance whatsoever,
      including, without limitation, the occurrence and continuance of a Default
      or an
      Event of Default hereunder, and that each such payment shall be made without
      any
      offset, abatement, withholding or reduction whatsoever. The Issuing Lender
      shall
      review, on behalf of the Lenders, each draft presented under a Letter of Credit
      and shall notify each Lender of any such presentment. Promptly after it shall
      have ascertained that any draft presented under any Letter of Credit appears
      on
      its face to be in substantial conformity with the terms and conditions of such
      Letter of Credit, the Issuing Lender shall give notice to the Administrative
      Agent which shall give telephonic or facsimile notice to the Lenders and the
      Borrower of the receipt and amount of such draft and the date on which payment
      thereon will be made provided, however, the Issuing Lender shall have the right,
      in its sole discretion, to decline to accept any documents and to decline to
      make payment under any Letter of Credit if the documents presented are not
      in
      strict compliance with the terms of such Letter of Credit. The Borrower shall
      pay to the Issuing Lender the amount specified in such notice by no later than
      11:00 a.m. (New York time) on the date such payment is scheduled to be made.
      If
      the Borrower has not so discharged such payment obligations and the Issuing
      Lender is unable to recover the required amount by debiting the Borrower’s
      account, the Issuing Lender shall give the Administrative Agent notice which
      shall give each Lender notice of any amount that remains unpaid, and each Lender
      shall promptly pay the amounts required to the Issuing Lender in immediately
      available funds, and, with respect to Letters of Credit, the Issuing Lender,
      not
      later than 3:00 p.m. (New York time) on such day, shall make the appropriate
      payment to the applicable beneficiary. If the Lenders shall pay to the Issuing
      Lender the amount of any draft presented under a Letter of Credit, then the
      Issuing Lender, on behalf of the Lenders, shall charge the general deposit
      account of the Borrower with the Issuing Lender for the amount thereof, together
      with the Issuing Lender’s customary overdraft or similar fee in the event the
      funds available in such account shall not be sufficient to reimburse the Lenders
      for such payment. If the Lenders have not been paid with respect to any drawing
      as provided above, the Borrower shall pay to the Issuing Lender, for the account
      of the Lenders, the amount of such drawing together with interest on such amount
      at a rate per annum (computed on the basis of the actual number of days elapsed
      over a year of 360 days) equal to the Involuntary Rate, payable on demand.
      The
      obligations of the Borrower under this Section 2.19 to pay the Issuing Lender,
      the Lenders and the Administrative Agent for all drawings under Letters of
      Credit shall be absolute, unconditional and irrevocable and shall be satisfied
      strictly in accordance with their terms, irrespective of:

    

    
      
         

      

      
        -24-

        
          

        

      

      
         

      

    

    (a) any
      lack
      of validity or enforceability of any Letter of Credit;

    

    (b) the
      existence of any claim, setoff, defense or other right which the Borrower or
      any
      other Person may at any time have against the beneficiary under any Letter
      of
      Credit, the Issuing Lender, the Administrative Agent or any Lender (other than
      the defense of payment in accordance with the terms of this Agreement or a
      defense not otherwise waived hereunder based on the gross negligence or willful
      misconduct of the Issuing Lender, the Administrative Agent or any Lender) or
      any
      other Person in connection with this Agreement or any other
      transaction;

    

    (c) any
      draft
      or other document presented under or in connection with any Letter of Credit
      proving to be forged, fraudulent, invalid or insufficient in any respect or
      any
      statement therein being untrue or inaccurate in any respect;

    

    (d) payment
      by the Issuing Lender under any Letter of Credit against presentation of a
      draft
      or other document which does not comply with the terms of such Letter of
      Credit;

    

    
      
         

      

      
        -25-

        
          

        

      

      
         

      

    

    (e) the
      existence, character, quantity, quality, condition, packing, value or delivery
      of any goods or other property relating to any Letter of Credit;

    

    (f) the
      time,
      place, manner or order in which shipment is made;

    

    (g) the
      provisions of any insurance policy or any act or omission of any insurer,
      shipper, warehouseman, carrier, correspondent or other Person; or

    

    (h) any
      other
      circumstance or event whatsoever, whether or not similar to any of the
      foregoing.

    

    Neither
      the Issuing Lender, the Administrative Agent nor a Lender shall have any
      liability or responsibility by reason of or in connection with the issuance
      or
      transfer of any Letter of Credit or any payment or failure to make payment
      thereunder (irrespective of any of the circumstances referred to above), or
      any
      error, omission, interruption, loss or delay in transmission or delivery of
      any
      draft, notice or other communication under or relating to any Letter of Credit
      (including any document required to make a drawing thereunder), any error in
      interpretation of technical terms or any consequence arising from causes beyond
      the control of the Issuing Lender, the Administrative Agent or a Lender,
      provided that the foregoing shall not be construed to excuse the Issuing Lender,
      the Administrative Agent or a Lender from liability to the Borrower to the
      extent of damages suffered by the Borrower that are caused by the Issuing
      Lender’s, the Administrative Agent’s or such Lender’s gross negligence or
      willful misconduct. It is understood that in making any payment under any Letter
      of Credit (x) the Issuing Lender’s exclusive reliance on the documents presented
      to it under such Letter of Credit as to any and all matters set forth therein,
      including, without limitation, good faith reliance on the amount of any draft
      presented under such Letter of Credit, whether or not the amount due to the
      beneficiary equals the amount of such draft and whether or not any document
      presented pursuant to such Letter of Credit proves to be insufficient in any
      respect, if such document on its face appears to be in order, and whether or
      not
      any other statement or any other document presented pursuant to such Letter
      of
      Credit proves to be forged or invalid or any statement therein proves to be
      inaccurate or untrue in any respect whatsoever and (y) any noncompliance in
      any
      immaterial respect of the documents presented under such Letter of Credit with
      the terms thereof shall, in each case, not be deemed willful misconduct or
      gross
      negligence of the Issuing Lender.

    

    
      
         

      

      
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    SECTION
      3. REPRESENTATIONS
      AND WARRANTIES

    

    In
      order
      to induce the Administrative Agent and the Lenders to enter into this Agreement
      and to make the Revolving Credit Loans and to issue Letters of Credit herein
      provided for, the Borrower hereby covenants, represents and warrants to the
      Administrative Agent and the Lenders that:

    

    3.1 Financial
      Condition.
      The
      consolidated balance sheet and consolidated statements of income, retained
      earnings and cash flows of the Borrower and its Subsidiaries as at February
      28,
      2006 audited by Lazar Levine & Company, LLC, CPAs and the interim
      consolidated balance sheet and related consolidated statements of income,
      retained earnings and cash flows as of November 30, 2006 have heretofore been
      furnished to the Lenders, and fairly present the financial condition of the
      Borrower and its Subsidiaries as at such dates, and the results of their
      operations for the fiscal year and fiscal quarter, respectively, then ended.
      Such annual financial statements have been prepared in accordance with GAAP
      and
      such interim financial statements have been prepared on a basis consistent
      with
      the annual financial statements, subject to year end adjustments. Neither the
      Borrower nor any of its Subsidiaries has any material contingent obligations,
      contingent liabilities or liability for taxes, long-term lease or unusual
      forward or long-term commitment, which are not reflected in the foregoing
      statements or in the notes thereto.

    

    3.2 No
      Change.
      Since
      November 30, 2006, there has been no material adverse change in the business,
      operations, assets or financial or other condition of the Borrower or its
      Subsidiaries.

    

    3.3 Corporate
      Existence; Compliance with Law; Subsidiaries.
      Each of
      the Borrower and each of its Subsidiaries (i) is duly organized, validly
      existing and in good standing under the laws of the jurisdiction of its
      incorporation, (ii) has the corporate power and authority and the legal right
      to
      own and operate its properties, and to conduct the business in which it is
      currently engaged, (iii) does not own or operate properties or conduct business
      which requires qualification as a foreign corporation in any jurisdiction in
      which it is not so qualified, and (iv) is in compliance with all Requirements
      of
      Law; except to the extent that the failure to so qualify as a foreign
      corporation as required by clause (iii) of this Section 3.3 or to comply with
      all Requirements of Law as required by clause (iv) of this Section 3.3 would
      not, in the aggregate, have a material adverse effect on the business,
      operations, property or financial or other condition of the Borrower and its
      Subsidiaries taken as a whole, and would not materially adversely affect the
      ability of the Borrower or a Subsidiary to perform its obligations under the
      Loan Documents.

    

    3.4 Corporate
      Power; Authorization; Enforceable Obligations.
      The
      Borrower and each of its Subsidiaries has the corporate power and authority
      and
      the legal right to execute, deliver and perform its obligations under the Loan
      Documents and, in the case of the Borrower, to borrow and obtain other
      extensions of credit hereunder. The Borrower has taken all necessary corporate
      action to authorize the borrowings and other extensions of credit hereunder
      on
      the terms and conditions of this Agreement and the Borrower and each of its
      Subsidiaries has taken all necessary corporate action to authorize the
      execution, delivery and performance of the Loan Documents. No consent or
      authorization of, filing with, or other act by or in respect of any other Person
      (including stockholders and creditors of the Borrower or its Subsidiaries)
      or
      any Governmental Authority, is required in connection with the borrowings and
      other extensions of credit hereunder or with the execution, delivery,
      performance, validity or enforceability of the Loan Documents. Each of the
      Loan
      Documents has been duly executed and delivered on behalf of the Borrower or
      its
      Subsidiaries, as applicable, and each of the Loan Documents constitutes a legal,
      valid and binding obligation of the Borrower or its Subsidiaries, as applicable,
      enforceable against the Borrower or its Subsidiaries, as applicable, in
      accordance with its terms, except as enforceability may be limited by applicable
      bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
      the
      enforcement of creditors’ rights generally.

    

    
      
         

      

      
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    3.5 Legal
      Bar.
      The
      execution, delivery and performance of each of the Loan Documents and the
      borrowings and other extensions of credit hereunder and the use of the proceeds
      thereof, will not violate any of the Requirements of Law or Contractual
      Obligations of the Borrower or its Subsidiaries, and will not result in, or
      require the creation or imposition of, any Lien on any of its respective
      properties or revenues pursuant to any Requirements of Law or Contractual
      Obligations.

    

    3.6 No
      Material Litigation.
      No
      litigation, investigation or proceeding of or before any arbitrator or
      Governmental Authority is pending by or against the Borrower or any Subsidiary
      or, to the knowledge of the Borrower, threatened against or affecting the
      Borrower or any of its Subsidiaries or any of their respective properties or
      revenues (a) with respect to any of the Loan Documents or any of the
      transactions contemplated hereby or thereby, or (b) which if adversely
      determined, would have a material adverse effect on the business, operations,
      property or financial or other condition of the Borrower and its Subsidiaries
      taken as a whole.

    

    3.7 No
      Default.
      Neither
      the Borrower nor any of its Subsidiaries is in default under or with respect
      to
      any Contractual Obligations in any respect which would be materially adverse
      to
      the business, operations, property or financial or other condition of the
      Borrower and its Subsidiaries taken as whole or which would materially and
      adversely affect the ability of the Borrower or its Subsidiaries to perform
      its
      respective obligations under any of the Loan Documents. No Default or Event
      of
      Default has occurred and is continuing.

    

    3.8 No
      Burdensome Restrictions.
      No
      Contractual Obligations of the Borrower or its Subsidiaries and no Requirements
      of Law materially adversely affect, or insofar as the Borrower or its
      Subsidiaries may reasonably foresee may so affect, the business, operations,
      property or financial or other condition of the Borrower and its Subsidiaries
      taken as a whole.

    

    3.9 Federal
      Regulations.
      Neither
      the Borrower nor its Subsidiaries is engaged nor will it engage, principally
      or
      as one of its important activities, in the business of extending credit for
      the
      purpose of “purchasing” or “carrying” any “margin stock” within the respective
      meanings of each of the quoted terms under Regulation U of the Board as now
      and
      from time to time hereafter in effect. No part of the proceeds of any Revolving
      Credit Loans hereunder, and no Letter of Credit, will be used for “purchasing”
or “carrying” “margin stock” as so defined or for any purpose which violates, or
      which would be inconsistent with, the provisions of the regulations of the
      Board.

    

    3.10 Environmental
      Regulation.

    

    (a) The
      Borrower has no knowledge of receipt of any past, pending or
      threatened:

    

    
      
         

      

      
        -28-

        
          

        

      

      
         

      

    

    (i) claims,
      complaints, notices or requests for information with respect to any alleged
      violation of any Environmental Law that, singly or in the aggregate, have
      resulted in, or may reasonably be expected to result in, any material adverse
      change in the financial or business conditions of the Borrower and its
      Subsidiaries taken as a whole; or

    

    (ii) complaints,
      notices or inquiries to the Borrower or any Subsidiary of the Borrower regarding
      potential liability under any Environmental Law that, singly or in the
      aggregate, have resulted in, or may reasonably be expected to result in, any
      material adverse change in the financial or business conditions of the Borrower
      and its Subsidiaries taken as a whole;

    

    (b) No
      property now or previously owned or leased by the Borrower or any Subsidiary
      of
      the Borrower is listed or proposed for listing on the National Priorities List
      pursuant to CERCLA, on CERCLIS or on any similar state list of sites requiring
      investigation or clean-up; and

    

    (c) Neither
      the Borrower nor any Subsidiary of the Borrower has directly transported or
      directly arranged for the transportation of any Hazardous Material to any
      location which is listed or proposed for listing on the National Priorities
      List
      pursuant to CERCLA, on CERCLIS or on any similar state list or which is the
      subject of federal, state or local enforcement actions or other investigations
      which may lead to material claims against the Borrower for any remedial work,
      damage to natural resources or personal injury, including claims under
      CERCLA.

    

    3.11 Title
      to Properties.
      Each of
      the Borrower and its Subsidiaries has valid leases of or good and marketable
      title to its respective properties and assets, including the properties and
      assets reflected in the balance sheets described in Section 3.1 hereof. Such
      properties and assets are not subject to any Lien, except as reflected in such
      balance sheets and except to the extent otherwise permitted by Section 7.2
      hereof.

    

    3.12 Taxes.
      The
      Borrower and its Subsidiaries have filed all Federal, state and other tax
      returns which to the knowledge of the Borrower and its Subsidiaries are required
      to be filed and have paid all taxes shown as due and payable on said returns
      or
      on any assessments made against them or any of their respective properties
      except such taxes, if any, as are being contested in good faith and by proper
      proceedings and as to which adequate reserves have been maintained in conformity
      with GAAP.

    

    3.13 ERISA.
      Based
      upon ERISA and the regulations and published interpretations thereunder, each
      of
      the Borrower, its Subsidiaries and each ERISA Affiliate is in compliance in
      all
      material respects with all applicable provisions, if any, of ERISA. Neither
      a
      Reportable Event nor a Prohibited Transaction has occurred and is continuing
      with respect to any Plan; no notice of intent to terminate a Plan has been
      filed
      nor has any Plan been terminated; no circumstances exist which constitute
      grounds under Section 4042 of ERISA entitling the PBGC to institute proceedings
      to terminate, or appoint a trustee to administer, a Plan, nor has the PBGC
      instituted such proceedings; each of the Borrower, its Subsidiaries and each
      ERISA Affiliate has met its minimum funding requirements under ERISA with
      respect to all of its Plans and the present fair market value of all Plan assets
      exceeds the present value of all vested benefits under each Plan, as determined
      on the most recent valuation date of such Plan in accordance with the provisions
      of ERISA and the regulations thereunder for calculating the potential liability
      of the Borrower, its Subsidiaries and each ERISA Affiliate to the PBGC or such
      Plan under Title IV of ERISA, and neither the Borrower, its Subsidiaries nor
      an
      ERISA Affiliate has incurred any liability to the PBGC under ERISA.

    

    
      
         

      

      
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    3.14 Operation
      of Business.
      The
      Borrower and its Subsidiaries possess all licenses, permits, franchises,
      patents, copyrights, trademarks, and trade names, or rights thereto, necessary
      to conduct their respective businesses substantially as now conducted and as
      presently proposed to be conducted, and neither the Borrower nor any Subsidiary
      is in material violation of any valid rights of others with respect to any
      of
      the foregoing except where the failure to obtain licenses or permits does not
      individually or in the aggregate materially and adversely impair the ability
      of
      the Borrower or any of its Subsidiaries to operate its business or perform
      its
      obligations under a Loan Document. 

    

    3.15 Security
      Agreements and Pledge Agreements.
      Each
      Security Agreement and Pledge Agreement executed by the Borrower and each
      Domestic Subsidiary, as applicable, shall, pursuant to its terms and applicable
      law, constitute a valid and continuing lien on and security interest in the
      collateral referred to in such Security Agreement and such Pledge Agreement
      in
      favor of the Administrative Agent, for the ratable benefit of the Lenders,
      which
      shall be prior to all other Liens, claims and rights of all other Persons in
      such collateral which may be perfected under the laws of any state of the United
      States of America except Liens permitted by the terms hereof.

    

    SECTION
      4. CONDITIONS
      PRECEDENT

    

    4.1 Conditions
      to Initial Revolving Credit Loan.
      The
      obligation of the Lenders to make the initial extension of credit to the
      Borrower hereunder is subject to the satisfaction of the following conditions
      precedent:

    

    (a) Revolving
      Credit Notes.
      Each
      Lender shall have received a Revolving Credit Note conforming to the
      requirements hereof and duly executed by the Borrower.

    

    (b) Legal
      Opinion.
      The
      Administrative Agent and each Lender shall have received a favorable opinion
      of
      counsel to the Borrower and the Guarantors satisfactory in form and substance
      to
      the Administrative Agent and the Lenders and covering such matters incident
      to
      the transactions contemplated by this Agreement as the Administrative Agent
      shall reasonably require.

    

    (c) Guarantee.
      The
      Administrative Agent shall have received the Reaffirmation and Acknowledgement
      of Guarantee duly executed by each Guarantor in favor of the Administrative
      Agent for the benefit of the Lenders.

    

    (d) Security
      Agreements.
      The
      Administrative Agent shall have received the Reaffirmation and Acknowledgement
      of Security Agreements duly executed by the Borrower and its Domestic
      Subsidiaries, together with UCC-1 financing statements in favor of the
      Administrative Agent for the benefit of the Lenders, Form UCC-3 termination
      statements or amendments (if required), Uniform Commercial searches and security
      agreement questionnaires.

    

    
      
         

      

      
        -30-

        
          

        

      

      
         

      

    

    (e) Control
      Agreement.
      The
      Administrative Agent shall have received the Reaffirmation and Acknowledgement
      of Control Agreement duly executed by the Borrower, NIC Components Corp., Nu
      Horizons International Corp., Titan Supply Chain Services Corp. and
      Razor
      Electronics Inc. in favor of the Administrative Agent for the benefit of the
      Lenders.

    

    (f) Blocked
      Account Agreement.
      The
      Administrative Agent shall have received the Reaffirmation and Acknowledgement
      of Blocked Account Agreement duly executed by the Borrower, NIC Components
      Corp., Nu Horizons International Corp., Titan Supply Chain Services
      Corp. and
      Razor
      Electronics Inc. in favor of the Administrative Agent for the benefit of the
      Lenders.

    

    (g) Pledge
      Agreement.
      The
      Administrative Agent shall have received the Reaffirmation and Acknowledgement
      of Pledge Agreement duly executed by the Borrower in favor of the Administrative
      Agent for the benefit of the Lenders.

    

    (h) Certificate
      of Insurance.
      The
      Administrative Agent shall have received a certificate of insurance naming
      the
      Administrative Agent, for the benefit of itself and for the ratable benefit
      of
      the Lenders as loss payee.

    

    (i) Certified
      Copies and Other Documents.
      The
      Lenders shall have received such certificates and other documents relating
      to
      the Borrower and the Guarantors with respect to the matters herein contemplated
      as the Administrative Agent may request, including but not limited
      to:

    

    (i) certificates
      of good standing from the Secretary of State of New York if incorporated under
      the laws of the State of New York or doing business in New York and, if
      incorporated in a jurisdiction other than New York, from the Secretary of State
      or applicable Governmental Authority of such jurisdiction of incorporation
      and
      from the Secretary of State or applicable Governmental Authority of each
      jurisdiction in which an office is maintained;

    

    (ii) certificates
      of incorporation and all amendments thereto certified by the applicable
      Secretary of State or applicable Governmental Authority;

    

    (iii) certificates
      of an officer of the Borrower dated the date of this Agreement certifying (x)
      true and correct copies of the by-laws of the Borrower as in effect on the
      date
      of adoption of the resolutions referred to in (y) of this subsection (iii),
      (y)
      true and correct copies of resolutions adopted by the board of directors of
      the
      Borrower (1) authorizing the borrowings and the other extensions of credit
      from
      the Lenders hereunder, the execution, delivery and performance by the Borrower
      of each of the Loan Documents to which it is a party and the performance by
      the
      Borrower of its obligations under each of the Loan Documents to which it is
      a
      party, (2) approving forms in substantially execution form of each of the Loan
      Documents to which it is a party, and (3) authorizing officers of the Borrower
      to execute and deliver each of the Loan Documents to which it is a party, and
      (z) the incumbency and specimen signatures of the officers of the Borrower
      executing any documents delivered to the Administrative Agent or a Lender by
      the
      Borrower in connection herewith; and

    

    
      
         

      

      
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    (iv) certificates
      of an officer of each Guarantor dated the date of this Agreement certifying
      (w)
      true and correct copies of the by-laws of such Guarantor as in effect on the
      date of adoption of the resolutions referred to in (x) of this subsection (iv),
      (x) true and correct copies of resolutions adopted by the board of directors
      of
      such Guarantor authorizing (1) the execution, delivery and performance by such
      Guarantor of each of the Loan Documents to which it is a party and the
      performance by such Guarantor of its obligations under each of the Loan
      Documents to which it is a party, (2) approving forms in substantially execution
      form of each of the Loan Documents to which it is a party, and (3) authorizing
      officers of such Guarantor to execute and deliver each of the Loan Documents
      to
      which it is a party, (y) true and correct copies of resolutions adopted by
      the
      shareholders of such Guarantor authorizing the execution and delivery of the
      Loan Documents to which it is a party and (z) the incumbency and specimen
      signatures of the officers of such Guarantor executing any documents delivered
      to the Administrative Agent or a Lender by such Guarantor in connection
      herewith.

    

    (j) Fees.
      The
      Administrative Agent shall have received evidence of payment of an origination
      fee in the amount of $35,000 for the pro rata benefit of those Lenders that
      have
      increased their Revolving Credit Commitments above those contained in the Prior
      Agreement, an extension fee in the amount of $150,000 based on the Commitments
      under this Agreement for the pro rata benefit of the Lenders, the Administrative
      Agent’s per annum fee pursuant to a side letter between the Administrative Agent
      and the Borrower and the Administrative Agent’s attorneys’ fees and
      disbursements.

    

    (k) Amounts
      Due under the Prior Agreement.
      The
      administrative agent under the Prior Agreement shall have received evidence
      of
      payment of all interest and fees accrued under the Prior Agreement and any
      administrative agent fee letter referred to therein or related
      thereto.

    

    (l) Field
      Audit.
      The
      Lenders shall have received an updated field examination satisfactory in all
      respects to the Lenders.

    

    (m) Additional
      Matters.
      All
      other documents and legal matters in connection with the transactions
      contemplated by this Agreement shall be satisfactory in form and substance
      to
      the Administrative Agent and its counsel.

    

    4.2 Conditions
      to All Revolving Credit Loans, Etc.
      The
      obligation of the Lenders to make any Revolving Credit Loan (including the
      initial Revolving Credit Loan) to be made hereunder, or to issue any Letter
      of
      Credit to be issued hereunder is subject to the satisfaction of the following
      conditions precedent:

    

    (a) Representations
      and Warranties.
      The
      representations and warranties made by the Borrower herein or which are
      contained in any other Loan Document or any certificate, document or financial
      or other statement furnished at any time under or in connection herewith, shall
      be correct on and as of the date of such extension of credit as if made on
      and
      as of such date except to the extent that such representation is stated to
      be
      made as of a date certain.

    

    
      
         

      

      
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    (b) No
      Default or Event of Default.
      No
      Default or Event of Default shall have occurred and be continuing on the date
      of
      such extension of credit or after giving effect to the extension of credit
      to be
      made on such date.

    

    Each
      extension of credit to the Borrower hereunder shall constitute a representation
      and warranty by the Borrower hereunder as of the date of each such extension
      of
      credit that the conditions in clauses (a) and (b) of this Section 4.2 have
      been
      satisfied.

    

    SECTION
      5. AFFIRMATIVE
      COVENANTS

    

    The
      Borrower hereby agrees that so long as the Revolving Credit Commitments remain
      in effect, a Revolving Credit Note or any Letter of Credit remains outstanding
      and unpaid, or any other amount is owing to the Administrative Agent or a Lender
      hereunder, the Borrower will and will cause each of its Subsidiaries
      to:

    

    5.1 Information.
      Furnish
      to each of the Lenders or cause to be furnished to each of the
      Lenders:

    

    (1) As
      soon
      as available, but not more than the earlier of one hundred (100) days or ten
      (10) days after the date specified in SEC regulations for delivery of annual
      financial statements applicable to the Borrower (the “Annual Delivery Date”)
      after the close of each fiscal year, the Borrower’s Form 10-K and the financial
      statements of the Borrower and its Subsidiaries including the consolidated
      and
      consolidating balance sheets of the Borrower and its Subsidiaries with related
      consolidated and consolidating statements of income, retained earnings and
      cash
      flows for such fiscal year, setting forth in each case in comparative form
      the
      figures as of the end of and for the previous fiscal year, all prepared in
      accordance with GAAP consistently applied and audited by a firm of independent
      certified public accountants acceptable to the Required Lenders. Such financial
      statements shall be accompanied by (i) copy of the management letter, if any,
      prepared by such firm and (ii) a certificate of the chief financial officer
      of
      the Borrower with computations demonstrating compliance with the financial
      covenants contained in Section 6 of this Agreement and to the effect that,
      having read this Agreement and the other Loan Documents and based upon an
      examination which in the opinion of such officer was sufficient to enable such
      officer to make an informed statement, nothing came to such officer’s attention
      which would cause such officer to believe that an Event of Default or Default
      had occurred, and, if so, stating the facts with respect thereto and whether
      the
      same has been cured prior to the date of such certificate, and, if not, what
      action is proposed to be taken with respect thereto.

    

    (2) As
      soon
      as possible, but not more than the earlier of fifty (50) days or five (5) days
      after the date specified in SEC regulations for delivery of quarterly financial
      statements applicable to the Borrower (the “Quarterly Delivery Date”) after the
      close of the first three (3) fiscal quarters of each year, the Borrower’s Form
      10-Q and the financial statements of the Borrower and its Subsidiaries including
      consolidated and consolidating balance sheets of the Borrower and its
      Subsidiaries with related consolidated and consolidating statements of income,
      retained earnings and cash flows as of the last day of and for such quarter
      and
      for the period of the fiscal year ended as of the close of the particular
      quarter, all such quarterly statements to be in reasonable detail, all prepared
      on a basis consistent with the annual financial statements, subject to year
      end
      adjustments and certified as to fairness of presentation by the chief financial
      officer of the Borrower. Such financial statements shall be accompanied by
      a
      certificate signed by the chief financial officer of such Borrower as specified
      in paragraph (1) above.

    

    
      
         

      

      
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    (3) Prompt
      written notice if: (i) any obligation (other than an obligation under this
      Agreement) of the Borrower or any of its Subsidiaries for borrowed money or
      for
      the deferred purchase price of any property is declared or shall become due
      and
      payable prior to its stated maturity, (ii) the holder of any note (other than
      a
      Revolving Credit Note), or other evidence of indebtedness, certificate or
      security evidencing any such obligation, has the right to declare such
      obligation due and payable prior to its stated maturity, or (iii) to the
      knowledge of any officer of the Borrower or any of its Subsidiaries there shall
      occur an Event of Default or a Default.

    

    (4) Prompt
      written notice of: (i) any citation, summons, subpoena, order to show cause
      or
      other order naming the Borrower or any of its Subsidiaries a party to any
      proceeding before any governmental body which relates to any of the Loan
      Documents or which if adversely determined would have a material adverse effect
      on the business, financial condition or operations of the Borrower and its
      Subsidiaries taken as a whole, and include with such notice a copy of such
      citation, summons, subpoena, order to show cause or other order, (ii) any lapse
      or other termination of a license, permit or other authorization issued to
      the
      Borrower or any of its Subsidiaries by any Governmental Authority or Person,
      which lapse or other termination would have a material adverse effect on the
      property, business, profits or conditions (financial or otherwise) of the
      Borrower and its Subsidiaries taken as a whole, (iii) any refusal by any
      Governmental Authority or any other Person to renew or extend such license,
      permit or other authorization, and (iv) any suit between the Borrower or any
      of
      its Subsidiaries and any Governmental Authority or any other Person or formal
      demand made upon the Borrower or any of its Subsidiaries by any Governmental
      Authority or any other Person which if adversely determined would have a
      material adverse effect on the property, business, profits or conditions
      (financial or otherwise) of the Borrower and its Subsidiaries taken as a
      whole.

    

    (5) Prompt
      written notice in the event that: (i) the Borrower or an ERISA Affiliate shall
      fail to make any payment when due and payable under any Plan or (ii) the
      Borrower or an ERISA Affiliate shall receive notice from the Internal Revenue
      Service or the Department of Labor that it shall have failed to meet the minimum
      funding requirements of any Plan, and include therewith a copy of such
      notice.

    

    (6) Copies
      of
      any request for a waiver of the funding standards or any extension of the
      amortization periods required by Sections 303 and 304 of ERISA, or Section
      402
      of the Internal Revenue Code of 1986, as amended from time to time, promptly
      after any such request is submitted to the Department of Labor or the Internal
      Revenue Service, as the case may be.

    

    (7) Promptly
      after a Reportable Event occurs which may result in a termination of a Plan,
      or
      the Borrower or an ERISA Affiliate receives notice that the PBGC has instituted
      or intends to institute proceedings under Section 4042 of ERISA to terminate
      or
      appoint a trustee to administer a Plan, a copy of any notice of such Reportable
      Event which is filed with the PBGC, or any notice delivered by the PBGC
      evidencing its institution of such proceedings or its intent to institute such
      proceedings, or any notice to the PBGC that a Plan is to be terminated, as
      the
      case may be.

    

    
      
         

      

      
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    (8) Promptly
      upon becoming aware of the occurrence of any Prohibited Transaction in
      connection with any Plan, a written notice specifying the nature thereof, what
      action the Borrower or an ERISA Affiliate is taking or proposes to take with
      respect thereto, and, when known, any action taken by the Internal Revenue
      Service or the PBGC with respect thereto.

    

    (9) Promptly
      after the filing thereof, copies of each annual report required to be filed
      pursuant to Section 103 of ERISA and copies of any other reports required to
      be
      filed with respect to any Plan.

    

    (10) Within
      ten (10) days after the filing thereof, copies of all other periodic reports
      which the Borrower or any of its Subsidiaries may now or hereafter be required
      to file with or deliver to any securities exchange or to the Securities and
      Exchange Commission, or any other Governmental Authority succeeding to the
      functions thereof.

    

    (11) At
      all
      times relevant hereto the Borrower shall grant reasonable access to the
      Administrative Agent and/or its duly authorized representatives or agents,
      and
      cooperate fully with the Administrative Agent in any inspection of the
      Borrower’s and its Subsidiaries books and records and all collateral wherever
      located (“Field Audit”), provided that, prior to an Event of Default, such Field
      Audits will be limited to one in each 12 month period and to a review of
      Accounts, Inventory, accounts payable, taxes and insurance of the Borrower
      and
      its Domestic Subsidiaries. 

    

    (12) Within
      twenty (20) days after the close of each month, an accounts receivable aging
      report and an accounts receivable concentration report of the ten (10) largest
      Account Debtors of the Borrower and its Domestic Subsidiaries on a combined
      basis accompanied by a Borrowing Base Certificate.

    

    (13) Promptly
      upon request therefor, such other information and reports relating to the
      financial condition and operations of the Borrower or any of its Subsidiaries
      as
      the Administrative Agent or a Lender at any time or from time to time may
      reasonably request.

    

    5.2 Corporate
      Existence; Continuance of Business.
      Preserve and maintain its corporate existence and its rights, privileges and
      franchises, continue to engage in substantially the same line of business in
      which it was engaged on the date hereof and its right to conduct business in
      all
      states in which the nature of its business requires qualification to do
      business; provided, however, that nothing herein shall prevent the dissolution
      or termination of the existence, rights, privileges or franchises of a
      Subsidiary of the Borrower if the Board of Directors of the Borrower shall
      determine that the preservation thereof is no longer desirable in the conduct
      of
      the business of the Borrower and its Subsidiaries taken as a whole. In the
      event
      of dispute between the Borrower or any of its Subsidiaries and the
      Administrative Agent as to when qualification is necessary, the decision of
      the
      Administrative Agent in its reasonable judgment shall control.

    

    
      
         

      

      
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    5.3 Payment
      of Obligations.
      Pay and
      discharge all taxes, assessments and governmental charges or levies imposed
      upon
      it or upon its income and profits, or upon any property belonging to it, prior
      to the date upon which penalties attach thereto except where contested in good
      faith and by proper proceedings if appropriate reserves are maintained with
      respect thereto in conformity with GAAP.

    

    5.4 Insurance.
      Maintain insurance, at all times throughout the term of this Agreement, on
      its
      property with responsible insurance carriers licensed or authorized to do
      business in the State of New York and each state in which the Borrower or any
      of
      its Subsidiaries conducts business against such risks, loss, damage and
      liability (including liability to third parties) and in such amounts as is
      customarily maintained by similar businesses, including, without limitation,
      public liability and workers’ compensation insurance, and file with the
      Administrative Agent within ten (10) Business Days after request therefor a
      certificate of such insurance then in effect on Acord form or other similar
      form
      acceptable to the Administrative Agent.

    

    5.5 Payment
      of Indebtedness and Performance of Obligations.
      Pay and
      discharge promptly all lawful claims for labor, materials and supplies or
      otherwise which, if unpaid, would have a material adverse effect on the
      operations, business or financial or other condition of the Borrower and its
      Subsidiaries taken as a whole except where contested in good faith and by proper
      proceedings if appropriate reserves are maintained with respect thereto in
      conformity with GAAP.

    

    5.6 Condition
      of Property.
      At all
      times, maintain, protect and keep in good repair, working order and condition,
      normal wear and tear excepted, all property of the Borrower and its Subsidiaries
      necessary and useful in the judgment of the Borrower and its Subsidiaries in
      connection with the proper conduct of the business of the Borrower and its
      Subsidiaries.

    

    5.7 Observance
      of Legal Requirements.
      Observe
      and comply in all respects with all material laws (including but not limited
      to
      ERISA), ordinances, orders, judgments, rules, regulations, certifications,
      franchises, permits, licenses, directions and requirements of all governmental
      bodies which now or at any time hereafter may be applicable to the Borrower
      or
      any of its Subsidiaries.

    

    5.8 Books
      and Records.
      Keep
      proper books of record and account.

    

    5.9 Inspection.
      At any
      reasonable times and from time to time, upon reasonable notice permit the
      Administrative Agent and the Lenders, through officers or employees or
      authorized representatives to visit and inspect any of the properties of the
      Borrower or any of its Subsidiaries, and to examine the minute books, books
      of
      account, reports and other records of the Borrower and its Subsidiaries
      including records relating to the Accounts and Inventory and make copies thereof
      or extracts therefrom, and discuss the affairs, finances and accounts of the
      Borrower and its Subsidiaries with its principal officers or with such
      Borrower’s independent accountants. Such right of inspection shall encompass the
      conduct of a Field Audit by the Administrative Agent or its duly authorized
      representatives.

    

    
      
         

      

      
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    5.10 Compliance
      with Environmental Laws; Indemnity.

    

    (a) Use
      and
      operate all of its facilities and properties in material compliance with all
      Environmental Laws, keep all necessary permits, approvals, certificates,
      licenses and other authorizations relating to environmental matters in effect
      and remain in material compliance therewith, and handle all Hazardous Materials
      in material compliance with all applicable Environmental Laws;

    

    (b) Immediately
      notify the Administrative Agent and the Lenders, and provide copies upon
      receipt, of all written claims, complaints, notices or inquires relating to
      the
      condition of its facilities and properties relating to, or compliance with,
      Environmental Laws, and promptly cure and have dismissed with prejudice to
      the
      satisfaction of the Administrative Agent and the Lenders any actions and
      proceedings relating to compliance with Environmental Laws; 

    

    (c) Provide
      such information and certifications which the Administrative Agent or a Lender
      may reasonably request from time to time to evidence compliance with this
      Section 5.10; and 

    

    (d) Indemnify
      the Administrative Agent and the Lenders for, and hold the Administrative Agent
      and the Lenders harmless from, all liability, costs and expenses (including
      reasonable attorney’s fees) incurred by, or imposed upon, or sought to be
      imposed upon, any Lender arising out of the breach by the Borrower of any of
      the
      covenants set forth in this Section 5.10. Notwithstanding anything herein
      contained to the contrary, the provisions of this paragraph shall survive
      payment in full of the Revolving Credit Loans.

    

    5.11 New
      Subsidiaries. Give
      the
      Administrative Agent prompt written notice of the creation, establishment or
      acquisition, in any manner, of any Subsidiary not existing on the date of this
      Agreement. The Borrower (a) shall cause any Domestic Subsidiary formed after
      the
      date of this Agreement to become a Guarantor of all debts and obligations of
      the
      Borrower under this Agreement and cause such Domestic Subsidiary to execute
      a
      Guarantee and a Security Agreement together with related security agreement
      questionnaires and UCC-1 financing statements which shall be acceptable to
      the
      Administrative Agent in all respects and (b) the Borrower or a Domestic
      Subsidiary of the Borrower, as appropriate, shall execute a Pledge Agreement
      in
      the form provided by counsel to the Administrative Agent, with respect to not
      more than 65% of each class of the capital stock or other equity interest of
      any
      First-Tier Subsidiary of such Person which is or becomes a Foreign Subsidiary
      formed after the date of this Agreement to be pledged to the Agent for the
      pro
      rata benefit of the Lenders pursuant to the Pledge Agreement or an amendment
      thereto and deliver to the Agent the stock certificates, if any, evidencing
      the
      shares or other interests pledged under such Pledge Agreement together with
      stock powers executed in blank. In no event shall the Borrower or a Domestic
      Subsidiary be required to pledge any of the assets of a Subsidiary that is
      a
      controlled foreign corporation, as defined in Section 957(a) of the Internal
      Revenue Code, including, but not limited to the stock of any Subsidiary held
      directly or indirectly by any such Subsidiary. In the case of both (a) and
      (b)
      above, within ten (10) days after the creation, establishment, or acquisition
      of
      such Subsidiary, the Borrower and or a Domestic Subsidiary shall deliver or
      cause to be delivered such proof of corporate action, incumbency of officers,
      opinions of counsel and other documents as are consistent with those delivered
      as to each Subsidiary pursuant to Section 4.1 hereof or as the Administrative
      Agent shall request, each in form and substance satisfactory to the
      Administrative Agent.

    

    
      
         

      

      
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    5.12 Collection
      of Accounts.

    

    (a) In
      the
      event that the Borrower is in default of (1) the Minimum Excess Availability
      covenant contained in Section 6.3 of this Agreement and, provided there is
      at
      least $1.00 of Excess Availability, such default continues for a period of
      fifteen (15) days or (2) the provisions of Section 8(a) hereof, after giving
      effect to any period of grace, then in each instance and in addition to any
      other rights of the Administrative Agent or the Lenders and/or remedies
      available to the Administrative Agent under the Loan Documents (y) the
      Administrative Agent shall give the Notice of Exclusive Control under the
      Control Agreement, for the Borrower’s and the Control Agreement Guarantors’ cash
      concentration account(s) at Mellon Bank, N.A. and, in addition, (z) the
      Administrative Agent shall (A) require the Borrower to deposit, promptly upon
      receipt, all payments on Accounts and all proceeds of other collateral securing
      the Revolving Credit Loans in the identical form in which such payments are
      made, whether by cash, check or other manner, into the Blocked Account, (B)
      cause the Borrower to give notice to all account debtors to deposit all payments
      on Accounts, whether by cash, check or other manner, into the Blocked Account,
      and (c) give the Notice of Full Dominion under the Blocked Account Agreement.
      The Borrower and each Domestic Subsidiary hereby agree that all payments made
      to
      the Blocked Account or other funds received and collected by the Administrative
      Agent, whether on the Accounts or as proceeds of other collateral or otherwise,
      shall be the property of the Administrative Agent for the pro rata benefit
      of
      the Lenders. Neither the Borrower nor any Domestic Subsidiary shall be entitled
      to make withdrawals from the Blocked Account except in accordance with the
      terms
      of the Blocked Account Agreement.

    

    (b) Such
      payments or other funds received pursuant to Section 5.12(a) hereof will be
      applied (conditional upon final collection) in the manner specified in the
      Blocked Account Agreement.

    

    (c) In
      the
      event that subsection (a) is applicable, the Borrower and all of its Affiliates,
      Subsidiaries, shareholders, directors, employees or agents shall, acting as
      trustee for the Administrative Agent, receive, as the property of the
      Administrative Agent for the pro rata benefit of the Lenders, any monies,
      checks, notes, drafts or any other payment relating to and/or proceeds of
      Accounts or other collateral which come into their possession or under their
      control and immediately upon receipt thereof, shall deposit or cause the same
      to
      be deposited in the Blocked Account, or otherwise remit the same or cause the
      same to be remitted, in kind, to the Administrative Agent. In no event shall
      the
      same be commingled with any of the Borrower’s own funds.

    

    (d)  If
      there
      has occurred a Full Dominion Effective Date as defined in and provided for
      in
      the Blocked Account Agreement due to a violation of Section 6.3 hereof, the
      Administrative Agent’s control over the Blocked Account will remain in effect
      until such time as the Borrower has maintained Minimum Excess Availability,
      as
      defined in Section 6.3 hereof, for a consecutive two (2) month period as
      reflected in the Borrowing Base Certificates delivered pursuant to Section
      5.1
      (12) hereof. Upon satisfaction of such condition the Administrative Agent shall
      give the Notice of Termination of Exclusive Control under the Control Agreement
      and give the Notice of Termination of Full Dominion under the Blocked Account
      Agreement.

    

    
      
         

      

      
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    5.13 Cash
      Concentration Accounts.
      Maintain and cause its Domestic Subsidiaries to maintain any cash concentration
      accounts subject to the Lien of the Administrative Agent and in furtherance
      thereof enter into and maintain the Control Agreement.

    

    SECTION
      6. FINANCIAL
      COVENANTS

    

    The
      Borrower hereby agrees that, so long as the Revolving Credit Commitments remain
      in effect, a Revolving Credit Note or any Letter of Credit remains outstanding
      and unpaid, or any other amount is owing to the Administrative Agent or a Lender
      hereunder, the Borrower and its Subsidiaries, on a consolidated basis, will
      comply with the following financial covenants:

    

    6.1 Capital
      Base.
      Maintain a minimum Capital Base, as defined herein, as at 11/30/06 and at the
      end of each fiscal quarter thereafter of at least the sum of $133,997,000 plus
      75% of cumulative consolidated quarterly net income of the Borrower and its
      Subsidiaries after 11/30/06. In addition, 75% of the net proceeds received
      by
      the Borrower or its Subsidiaries from any equity offering will be added to
      the
      applicable Capital Base amount required as set forth above for the next
      succeeding fiscal quarter and in each fiscal quarter thereafter. Net losses,
      if
      any, will not be deducted from the applicable calculation of Capital Base.
      Capital Base shall mean for the Borrower and its Subsidiaries on a consolidated
      basis the sum of Tangible Net Worth plus Subordinated Debt.

    

    6.2 Domestic
      Capital Base.
      Maintain a minimum Domestic Capital Base, as defined herein, as at 11/30/06
      and
      at the end of each fiscal quarter thereafter of at least the sum of $112,783,000
      plus 75% of cumulative consolidated quarterly net income of the Borrower and
      its
      Domestic Subsidiaries after 11/30/06. In addition, 75% of the net proceeds
      received by the Borrower or its Domestic Subsidiaries from any equity offering
      will be added to the applicable Domestic Capital Base amount required as set
      forth above for the next succeeding fiscal quarter and in each fiscal quarter
      thereafter. Net losses, if any, will not be deducted from the applicable
      calculation of Domestic Capital Base. Domestic Capital Base shall mean for
      the
      Borrower and its Domestic Subsidiaries on a consolidated basis the sum of
      Tangible Net Worth plus Subordinated Debt, in each case, of the Borrower and
      its
      Domestic Subsidiaries.

    

    6.3 Minimum
      Excess Availability.
      Maintain at all times an Excess Availability, as herein defined, of $7,500,000.
      Excess Availability means the amount of Revolving Credit Loans which would
      be
      available if the Borrowing Base was calculated without giving effect to the
      limitations on the maximum amount of same imposed by reference to the definition
      of Total Revolving Credit Commitments, less the sum of the amounts of Revolving
      Credit Loans outstanding and the Letter of Credit Exposure.

    

    6.4 Maximum
      Net Loss.
      Not
      incur a net loss as of the end of each fiscal quarter for the rolling four
      fiscal quarters then ended.

    

    
      
         

      

      
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    6.5 Capital
      Expenditures.
      As at
      the end of each fiscal quarter, not make Capital Expenditures of more than
      $3,000,000 for the rolling four quarters then ended. Capital Expenditures means
      the aggregate amount of expenditures (including purchase money indebtedness
      and
      purchase money Liens) for assets (including fixed assets acquired under Capital
      Leases) which it is contemplated will be used or usable in fiscal years
      subsequent to the fiscal year of acquisition. Notwithstanding the foregoing,
      up
      to an aggregate amount of $5,000,000 of Capital Expenditures used for machinery,
      equipment or leasehold improvements associated with the Borrower’s or any of its
      Subsidiaries’ proposed new leased warehouse (“New Warehouse CapEx”) shall be
      excluded for purposes of calculating compliance with this covenant.

    

    Except
      as
      specifically otherwise provided, all financial covenants shall be calculated
      in
      accordance with GAAP consistently applied.

    

    SECTION
      7. NEGATIVE
      COVENANTS

    

    The
      Borrower hereby agrees that, so long as the Revolving Credit Commitments remain
      in effect, a Revolving Credit Note or any Letter of Credit remains outstanding
      and unpaid, or any other amount is owing to a Lender hereunder, the Borrower
      will not, nor will it permit any Subsidiary to:

    

    7.1 Indebtedness
      for Borrowed Money.
      Incur,
      or permit to exist, any indebtedness for borrowed money except (i) indebtedness
      incurred pursuant to borrowings or other extensions of credit hereunder, (ii)
      purchase money indebtedness (y) secured by Liens described in Section 7.2(iv)
      hereof which has an annual debt service requirement of not more than $8,000,000
      in the aggregate inclusive of the annual amounts expended by the Borrower for
      operating leases pursuant to Section 7.7 hereof and (z) incurred in connection
      with New Warehouse CapEx, as defined in Section 6.5 hereof, (iii) indebtedness
      existing on the date of this Agreement and reflected in the financial statements
      referred to in Section 3.1 hereof and extensions, renewals and refinancings
      thereof (without increase in principal amount), (iv) indebtedness incurred
      in
      the ordinary course of business inclusive of trade payables but exclusive of
      that incurred in the borrowing of money and provided such trade payables shall
      be paid or discharged when due unless same are included as loans by the Borrower
      under Section 7.3(vii) hereof, (v) Subordinated Indebtedness, (vi) indebtedness
      incurred by the Foreign Subsidiaries to institutional lenders not to exceed
      (x)
      $30,000,000 in the aggregate outstanding prior to the effective date of the
      DT
      Electronics Limited Acquisition referred to in the Third Amendment of the Prior
      Agreement, (y) $35,000,000 in the aggregate prior to the date of this Agreement
      and (z) $40,000,000 in the aggregate after the date of this Agreement, and
      (vii)
      other indebtedness which shall not exceed in the aggregate for the Borrower
      and
      all Domestic Subsidiaries, at any time outstanding, the sum of
      $1,000,000.

    

    7.2 Liens.
      Create,
      assume or permit to exist any Lien on any of its property or assets now owned
      or
      hereafter acquired except (i) Liens in favor of the Administrative Agent for
      the
      benefit of the Lenders; (ii) other Liens incidental to the conduct of its
      business or the ownership of its property and assets which were not incurred
      in
      connection with the borrowing of money or the obtaining of advances or credit
      and which do not materially impair the use thereof in the operation of its
      business; (iii) Liens for taxes or other governmental charges which are not
      delinquent or which are being contested in good faith and for which a reserve
      shall have been established in accordance with GAAP; (iv) purchase money Liens
      on fixed assets granted to secure either the unpaid balance of the purchase
      price thereof or a loan made to finance the purchase of such assets, all to
      the
      extent permitted under Section 7.1(ii)(y) and (z) hereof; (v) Liens existing
      on
      the date hereof and disclosed in writing to the Lenders as indicated on Schedule
      II hereto and (vi) Liens attaching to the property of the Foreign Subsidiaries
      securing indebtedness of the Foreign Subsidiaries permitted by Section 7.1
      (vi)
      hereof.

    

    
      
         

      

      
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    7.3 Loans
      and Investments.
      Lend or
      advance money, credit or property to or invest in (by capital contribution,
      loan, purchase or otherwise) any firm, corporation, or other Person except
      (i)
      investments in United States Government obligations, certificates of deposit
      of
      any banking institution with combined capital and surplus of at least
      $200,000,000 and commercial paper of the highest credit rating given by Moody’s
      Investors Service, Inc. or Standard and Poor’s Ratings Services, (ii) the
      Borrower may make loans provided that the aggregate thereof at any time
      outstanding and owing by any one Person shall not exceed $200,000, (iii)
      investments in stocks, securities or assets of other Persons which qualify
      as a
      Permitted Acquisition, (iv) the purchase of up to $1,000,000 of the stock of
      the
      Borrower on behalf of the ESOP valued at the market price at the time of such
      purchase, (v) investments in stocks, securities or assets of other corporations
      not meeting the requirements of subsection (iii) above, so long as such
      corporation is in the electronics or high tech business; provided, however,
      that
      (1) the aggregate of such investments shall not exceed $1,000,000 and (2) such
      corporation is organized under the laws of any state of the United States of
      America, (vi) the purchase of not more than an aggregate of $4,000,000 of
      minority interests in the Borrower’s Foreign Subsidiaries pursuant to and in
      accordance with the terms of the shareholder agreements of such Foreign
      Subsidiaries (a “Minority Interest Purchase”) and (vii) investments by the
      Borrower and its Domestic Subsidiaries in stocks, securities or assets of
      Foreign Subsidiaries or loans to Foreign Subsidiaries provided that such
      investments and loans together with the guarantees permitted by Section 7.5
      (iii) hereof do not exceed $70,000,000 in the aggregate reduced by any amount
      utilized for any Minority Interest Purchase under subsection (vi)
      above.

    

    7.4 Fundamental
      Changes.
      Wind
      up, liquidate, or dissolve itself, reorganize, merge or consolidate with or
      into, or convey, sell, assign, transfer, lease, or otherwise dispose of (whether
      in one transaction or a series of transactions) all or substantially all of
      its
      assets, (whether now owned or hereafter acquired other than sales of inventory
      and obsolete equipment in the ordinary course of business) to any Person, or,
      except with respect to a Permitted Acquisition, acquire all or substantially
      all
      of the assets or the business of any Person except: a wholly owned Subsidiary
      of
      the Borrower may merge into or consolidate with (1) a wholly owned Subsidiary
      of
      the Borrower or (2) the Borrower, provided that no Foreign Subsidiary shall
      merge with and into another Foreign Subsidiary if 65% of the shares or other
      ownership interests of the surviving Subsidiary cannot be pledged to the
      Administrative Agent for the benefit of the Lenders, provided further that
      in
      each case that immediately after giving effect thereto, the surviving entity
      is
      obligated under this Agreement and no event shall occur and be continuing which
      constitutes a Default or an Event of Default.

    

    7.5 Contingent
      Liabilities.
      Assume,
      endorse, be or become liable for or guarantee the obligations of any Person
      if,
      as a result thereof, the aggregate of such contingent liabilities with respect
      to any one Person would exceed $100,000 excluding, however, (i) the endorsement
      of negotiable instruments for deposit or collection in the ordinary course
      of
      business, (ii) guarantees given by the Borrower for obligations of its Domestic
      Subsidiaries and guarantees given by Domestic Subsidiaries for the obligations
      of the Borrower and (iii) guarantees by the Borrower and its Foreign
      Subsidiaries for obligations of Foreign Subsidiaries permitted by Section 7.1
      (vi) hereof provided that such obligations together with investments and loans
      permitted by Section 7.3 (vii) and Minority Interest Purchases permitted by
      Section 7.3 (vi) do not exceed $70,000,000 in the aggregate and such guarantees
      are not secured by any property of the Borrower or its Domestic Subsidiaries.
      Solely for purposes of calculating compliance with the provisions of (iii)
      above, the guaranteed amount pursuant to guarantees by the Borrower and/or
      one
      or more guarantors of the same indebtedness obligations shall only be counted
      once.

    

    
      
         

      

      
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    7.6 Sales
      of Receivables; Sale - Leasebacks.
      Sell,
      discount or otherwise dispose of notes, accounts receivable or other obligations
      owing to the Borrower or its Domestic Subsidiaries, with or without recourse,
      except for the purpose of collection in the ordinary course of business; or
      sell
      any asset pursuant to an arrangement to thereafter lease such asset from the
      purchaser thereof.

    

    7.7 Lease
      Payments.
      Expend
      in the aggregate for the Borrower and all Subsidiaries in excess of $8,000,000
      in any fiscal year for the lease, rental or hire of real or personal property
      provided the limitation shall exclude leases that have been or should be
      capitalized in accordance with GAAP.

    

    7.8 Dividends.
      Declare
      or pay any dividends on its capital stock (other than dividends payable solely
      in shares of its own common stock), or purchase, redeem, retire or otherwise
      acquire any of its capital stock at any time outstanding, except that (i) the
      Borrower may purchase shares of its own common stock in an aggregate cumulative
      amount during the Commitment Period not to exceed $4,000,000 valued at the
      market price at the time of such purchase, excluding from such amount any
      purchase price of shares acquired by an employee stock ownership plan formed
      by
      the Borrower, (ii) any Subsidiary wholly-owned by the Borrower may declare
      and
      pay dividends to, and purchase, redeem, retire and otherwise acquire its capital
      stock from, the Borrower so long as such Subsidiary remains a wholly-owned
      Subsidiary of the Borrower, (iii) the Borrower may make Minority Interest
      Purchases within the limitations of Section 7.3(vi) hereof and (iv) the Borrower
      may declare and pay cash dividends for each fiscal year solely out of 25% of
      consolidated net income based upon the most recent financial statements
      delivered pursuant to Section 5.1(1) hereof for the immediately preceding fiscal
      year.

    

    7.9 Supply
      and Purchase Contracts.
      Enter
      into or be a party to any contract for the purchase of materials, supplies
      or
      other property if such contract requires that payment for such materials,
      supplies or other property be made whether or not delivery of such materials,
      supplies or other property is ever made or tendered.

    

    7.10 Nature
      of Business.
      Materially alter the nature of the Borrower’s or a Subsidiary of the Borrower’s
      business.

    

    7.11 Stock
      of Subsidiaries.
      Sell or
      otherwise dispose of any Subsidiary of the Borrower (except in connection with
      a
      merger or consolidation of a Subsidiary of the Borrower into the Borrower or
      another such Subsidiary or with the dissolution of a Subsidiary of the Borrower)
      or permit a Subsidiary of the Borrower to issue any additional shares of its
      capital stock except pro rata to its stockholders and except for the sale
      of
      an additional 10% of the shares of NIC Eurotech Limited to Nippon Industries
      Co.
      Ltd.

    

    
      
         

      

      
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    7.12 Transactions
      with Affiliates.
      Except
      for existing employment agreements and any stock options or warrants and
      Minority Interest Purchases within the limitations of Section 7.3(vi) hereof
      or
      except in the ordinary course of and pursuant to the reasonable requirements
      of
      the Borrower’s or any of its Subsidiaries’ business and upon fair and reasonable
      terms no less favorable to the Borrower or such Subsidiary than would obtain
      in
      a comparable arms’ length transaction with a Person not an Affiliate, enter into
      any transaction, including, without limitation, the purchase, sale, or exchange
      of property or the rendering of any service, with any Affiliate. “Affiliate”
shall mean a Person (1) which directly or indirectly controls, or is controlled
      by, or is under common control with the Borrower or any of its Subsidiaries,
      (2)
      which directly or indirectly beneficially owns or holds five (5%) percent or
      more of any class of voting stock of the Borrower or any of its Subsidiaries,
      or
      (3) five (5%) percent or more of the voting stock of which is directly or
      indirectly beneficially owned or held by the Borrower or any of its
      Subsidiaries. The term “control” means the possession, directly or indirectly,
      of the power to direct or cause the direction of the management and policies
      of
      a Person, whether through the ownership of voting securities, by contract,
      or
      otherwise.

    

    7.13 ERISA.
      (a)
      Terminate and Plan so as to result in any material liability of the Borrower
      or
      any Subsidiary to the PBGC, (b) engage in or permit any Person to engage in
      any
      prohibited Transaction involving any Plan which would subject the Borrower
      or
      any of its Subsidiaries to any material tax, penalty or other liability, (c)
      incur or suffer to exist any material “accumulated funding deficiency” (as
      defined in Section 202 of ERISA), whether or not waived, involving any Plan,
      or
      (d) allow or suffer to exist any event or condition, which presents a material
      risk of incurring a material liability of the borrower or any Subsidiary to
      the
      PBGC by reason of termination of any Plan.

    

    7.14 Change
      of Management.
      Permit
      Arthur Nadata and Richard Schuster at any time not to be active on a
      substantially full time basis in the affairs of the Borrower by maintaining
      the
      positions of Chairman and Chief Executive Officer and President/Chief Operating
      Officer and Secretary, respectively, or their equivalents, provided that the
      failure of one of such individuals to comply with this Section 7.14 shall not
      be
      deemed a violation.

    

    SECTION
      8. EVENTS
      OF DEFAULT

    

    Upon
      the
      occurrence of any of the following events (each an “Event of
      Default”):

    

    (a) The
      Borrower shall fail to pay within five (5) days of the due date thereof any
      interest under or principal of any Revolving Credit Note; any other amount
      payable hereunder including, without limitation, amounts necessary to pay to
      the
      Issuing Lender the amount of a draw under a Letter of Credit or the Borrower
      shall default under any other agreement, instrument or obligation made with
      or
      in favor of or owing to the Administrative Agent or a Lender (including any
      applicable grace period or notice requirement); provided, however, that the
      five-day grace period provided in this paragraph for payment of interest and
      principal under the Revolving Credit Notes and for obligations with respect
      to
      Letters of Credit shall not affect the obligation of the Borrower to pay
      interest for such period at the rate in effect prior to maturity with respect
      to
      payments due under the Revolving Credit Notes and at the rates provided in
      Section 2.19 hereof with respect to Letters of Credit; or

    

    
      
         

      

      
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    (b) Any
      representation or warranty made or deemed made by the Borrower herein or which
      is contained in any certificate, document or financial or other statement
      furnished at any time under or in connection with this Agreement shall prove
      to
      have been false in any material respect on or as of the date made or deemed
      made
      or furnished; or

    

    (c)
       The
      Borrower shall default in the observance or performance of any of its agreement
      set forth in Sections 5.11, 6 (other than Section 6.3 unless there is less
      than
      $1.00 of Excess Availability) or 7 hereof; or

    

    (d) The
      Borrower shall default in the observance or performance of any other agreement
      contained in this Agreement and such default shall continue unremedied for
      a
      period of ten (10) days after written notice thereof is given to the Borrower
      by
      the Administrative Agent; or

    

    (e) With
      respect to any indebtedness for borrowed money, which indebtedness is in an
      outstanding principal amount in excess of Five Hundred Thousand and 00/100
      ($500,000) Dollars (other than the Revolving Credit Notes), the Borrower or
      any
      Subsidiary of the Borrower shall (i) default in any payment of any such
      indebtedness beyond the grace period, if any, provided in the instrument or
      agreement under which such indebtedness was created; or (ii) default in the
      observance or performance of any other agreement or condition relating to any
      such indebtedness or contained in any instrument or agreement evidencing,
      securing or relating thereto or any other event shall occur or condition exist,
      in each case the effect of which default or other event or condition is to
      entitle the holder or holders of such indebtedness (or a trustee or agent on
      behalf of such holder or holders) to cause such indebtedness to become due
      prior
      to its stated maturity; or

    

    (f) (i)
      The
      Borrower or any of its Subsidiaries shall commence any case, proceeding or
      other
      action (A) under any existing or future law of any jurisdiction, domestic or
      foreign, relating to bankruptcy, insolvency, reorganization or relief of
      debtors, seeking to have an order for relief entered with respect to it, or
      seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
      arrangement, adjustment, winding-up, liquidation, dissolution, composition
      or
      other relief with respect to it or its debts, or (B) seeking appointment of
      a
      receiver, trustee, custodian or other similar official for it or for all or
      any
      substantial part of its assets, or the Borrower or any of its Subsidiaries
      shall
      make a general assignment for the benefit of its creditors; or (ii) there shall
      be commenced against the Borrower or any of its Subsidiaries any case,
      proceeding or other action of a nature referred to in clause (i) above which
      (A)
      results in the entry of an order for relief or any such adjudication or
      appointment or (B) remains undismissed, undischarged or unbonded for a period
      of
      sixty (60) days; or (iii) there shall be commenced against the Borrower or
      any
      of its Subsidiaries any case, proceeding or other action seeking issuance of
      a
      warrant of attachment, execution, distraint or similar process against all
      or
      any substantial part of its assets which results in the entry of an order for
      any such relief which shall have not been vacated, discharged, or stayed or
      bonded pending appeal within twenty (20) days from the entry thereof; or (iv)
      the Borrower or any of its Subsidiaries shall take any action in furtherance
      of,
      or indicating its consent to, approval of, or acquiescence in, any of the acts
      set forth in clause (i), (ii) or (iii) of this Section 8(f); or (v) the Borrower
      or any of its Subsidiaries shall generally not, or shall be unable to, or shall
      admit in writing its inability to, pay its debts as they become due;
      or

    

    
      
         

      

      
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    (g) Any
      of
      the following events occur or exist with respect to the Borrower or an ERISA
      Affiliate: (1) any Prohibited Transaction involving any Plan, (2) any Reportable
      Event shall occur with respect to any Plan, (3) a notice of intent to terminate
      any Plan shall be filed or the termination of any Plan, (4) any event or
      circumstance exists which might constitute grounds entitling the PBGC to
      institute proceedings for the termination of, or for the appointment of a
      trustee to administer, any Plan, or the institution by the PBGC of any such
      proceedings, or (5) the complete or partial withdrawal from any Multiemployer
      Plan, and in each case above, such event or condition, together with all other
      events or conditions listed above, if any, would reasonably be expected to
      subject the Borrower or any Subsidiary of the Borrower to any tax, penalty,
      or
      other liability to a Plan, the PBGC or otherwise (or a combination thereof)
      which in the aggregate exceeds or may exceed One Hundred Thousand and 00/100
      ($100,000) Dollars; or

    

    (h) The
      rendition by any court of a final judgment or judgments against the Borrower
      or
      any of its Subsidiaries which shall not be satisfactorily stayed, discharged,
      vacated or set aside within sixty (60) days of the making thereof; or the
      attachment of any property of the Borrower or any of its Subsidiaries which
      has
      not been released or provided for to the reasonable satisfaction of the
      Administrative Agent within sixty (60) days after the making thereof, which
      judgment or attachment is for an amount of One Hundred Thousand and 00/100
      ($100,000) or more; or

    

    (i) A
      Loan
      Document shall cease, for any reason, to be in full force and effect or shall
      be
      declared null and void, a default shall occur thereunder or any party thereto
      shall assert that it has no further obligation to a Lender or the Administrative
      Agent thereunder (unless such party has been discharged from such obligation
      under such Loan Document by such Lender or the Administrative Agent in writing)
      or any Security Agreement or any Pledge Agreement shall for any reason, except
      to the extent permitted by this Agreement or any other Loan Document, cease
      to
      create, or the Administrative Agent (for any reason other than termination
      or
      release as permitted by this Agreement) shall cease to have, for the benefit
      of
      itself and the ratable benefit of the Lenders, a valid, enforceable and
      perfected first priority security interest in the Collateral (as defined
      therein) or any portion thereof, then, in any such event, any or all of the
      following actions shall be taken: (i) the Administrative Agent with the written
      consent of the Required Lenders may, and upon the written request of the
      Required Lenders shall, by notice of default to the Borrower, declare the
      Revolving Credit Commitments to be terminated forthwith, whereupon the Revolving
      Credit Commitments and all obligations of the Lenders to make Revolving Credit
      Loans or issue Letters of Credit, shall immediately terminate; (ii) the
      Administrative Agent with the written consent of the Required Lenders may,
      and
      upon the written request of the Required Lenders shall, by notice of default
      to
      the Borrower, declare the entire amounts due under the Revolving Credit Notes
      (with accrued interest thereon) and all other amounts owing under this Agreement
      to be immediately due and payable; provided, however, that upon the happening
      of
      an event specified in subsection (f) of this Section 8, the obligation of the
      Lenders to make further Revolving Credit Loans and the Issuing Lender to issue
      Letters of Credit shall terminate and the Revolving Credit Notes and all other
      amounts owing under this Agreement shall be immediately due and payable without
      declaration or other notice to the Borrower. Except as expressly provided above
      in this Section, presentment, demand, protest and all other notices of any
      kind
      are hereby expressly waived.

    

    
      
         

      

      
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    SECTION
      9. ADMINISTRATIVE
      AGENT

    

    In
      order
      to expedite the transactions contemplated by this Agreement, Citibank, N.A.
      is
      hereby appointed to act as Administrative Agent on behalf of the Lenders. Each
      of the Lenders and each subse-quent holder of any Revolving Credit Note or
      issuer of any Letter of Credit, irrevocably authorizes the Administrative Agent
      to take such action on its behalf and to exercise such powers hereunder and
      under the other Loan Documents as are specifically delegated to or required
      of
      the Administrative Agent by the terms hereof and the terms thereof together
      with
      such powers as are reasonably incidental thereto. Neither the Administrative
      Agent nor any of its directors, officers, employees or Administrative Agents
      shall be liable as such for any action taken or omitted to be taken by it or
      them hereunder or under any of the other Loan Documents or in connection
      herewith or therewith (a) at the request or with the approval of the Required
      Lenders (or, if otherwise specifically required hereunder or thereunder, the
      consent of the Lenders) or (b) in the absence of its or their own gross
      negligence or willful misconduct.

    

    The
      Administrative Agent is hereby expressly authorized on behalf of the Lenders,
      without hereby limiting any implied authority, and the Administrative Agent
      hereby agrees, (a) to receive on behalf of each of the Lenders any payment
      of
      principal of or interest on the Revolving Credit Notes outstanding hereunder
      and
      all other amounts accrued hereunder paid to the Administrative Agent, and
      promptly to distribute to each Lender its proper share of all payments so
      received, (b) to distribute to each Lender copies of all notices, agreements
      and
      other material as provided for in this Agreement or in the other Loan Documents
      as received by the Administrative Agent and (c) to take all actions with respect
      to this Agreement and the other Loan Documents as are specifically delegated
      to
      the Administrative Agent.

    

    In
      the
      event that (a) the Borrower fails to pay when due the principal of or interest
      on any Revolving Credit Note, any amount payable under any Letter of Credit,
      or
      any fee payable hereunder or (b) the Administrative Agent receives written
      notice of the occurrence of a Default or an Event of Default, the Administrative
      Agent within a reasonable time shall give written notice thereof to the Lenders;
      and shall take such action with respect to such Event of Default or other
      condition or event as it shall be directed to take by the Required Lenders
      or
      all Lenders, as applicable hereunder; provided, however, that, unless and until
      the Administrative Agent shall have received such directions, the Administrative
      Agent may take such action or refrain from taking such action hereunder or
      under
      any other Loan Documents with respect to a Default or Event of Default as it
      shall deem advisable in the best interests of the Lenders. 

    

    The
      Administrative Agent shall not be responsible in any manner to any of the
      Lenders for the effectiveness, enforceability, perfection, value, genuineness,
      validity or due execution of this Agreement, the Revolving Credit Notes or
      any
      of the other Loan Documents or any other agreements or certificates, requests,
      financial statements, notices or opinions of counsel or for any recitals,
      statements, warranties or representations contained herein or in any such
      instrument or be under any obligation to ascertain or inquire as to the
      performance or observance of any of the terms, provisions, covenants,
      conditions, agreements or obligations of this Agreement or any of the other
      Loan
      Documents or any other agreements on a part of the Borrower and, without
      limiting the generality of the foregoing, the Administrative Agent shall, in
      the
      absence of knowledge to the contrary, be entitled to accept in good faith any
      certificate furnished pursuant to this Agreement or any of the other Loan
      Documents as conclusive evidence of the facts stated therein and shall be
      entitled to rely in good faith on any note, notice, consent, certificate,
      affidavit, letter, telegram, teletype message, statement, order or other
      document which it believes in good faith to be genuine and correct and to have
      been signed or sent by the proper person or persons. It is understood and agreed
      that the Lender which is the Administrative Agent may exercise its rights and
      powers under other agreements and instruments to which it is or may be a party,
      and engage in other transactions with the Borrower, as though it were not
      Administrative Agent of the Lenders hereunder.

    

    
      
         

      

      
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    The
      Administrative Agent shall promptly give notice to the Lenders of the receipt
      or
      sending of any notice, schedule, report, projec-tion, financial statement or
      other document or information pursuant to this Agreement or any of the other
      Loan Documents and shall promptly forward a copy thereof to each
      Lender.

    

    Neither
      the Administrative Agent nor any of its directors, officers, employees or agents
      shall have any responsibility to the Borrower on account of the failure or
      delay
      in performance or breach by any Lender of any of its obligations hereunder
      or to
      any Lender on account of the failure of or delay in performance or breach by
      any
      other Lender or the Borrower of any of their respective obligations hereunder
      or
      in connection herewith.

    

    The
      Administrative Agent may consult with legal counsel selected by it with
      reasonable care in connection with matters arising under this Agreement or
      any
      of the other Loan Documents and any action taken or suffered in good faith
      by it
      in accordance with the opinion of such counsel shall be full justification
      and
      protection to it. The Administrative Agent may exercise any of its powers and
      rights and perform any duty under this Agreement or any of the other Loan
      Documents through agents or attorneys.

    

    The
      Administrative Agent and the Borrower may deem and treat the payee or most
      recent assignee pursuant to Section 10.3 hereof, as applicable, of any Revolving
      Credit Note as the holder thereof until written notice of transfer shall have
      been delivered as provided in Section 10.3 hereof by such payee to the
      Administrative Agent and the Borrower.

    

    With
      respect to the Revolving Credit Loans made hereunder, the Revolving Credit
      Notes
      issued to it and any other extension of credit applicable to it, the Lender
      which is the Administrative Agent in its individual capacity as the Issuing
      Lender or Lender and not as an Administrative Agent shall have the same rights,
      powers and duties hereunder and under any other agreement executed in connection
      herewith as any other Lender and may exercise the same as though it were not
      the
      Administrative Agent, and the Lender which is the Administrative Agent and
      its
      affiliates may accept deposits from, lend money to and generally engage in
      any
      kind of business with the Borrower or other affiliate thereof as if it were
      not
      the Administrative Agent.

    

    
      
         

      

      
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    Each
      Lender agrees (i) to reimburse the Administrative Agent in the amount of such
      Lender’s pro rata share (based on its Revolving Credit Commitment hereunder) of
      any reasonable out-of-pocket expenses incurred for the benefit of the Lenders
      by
      the Administrative Agent, including reasonable fees and disbursements of counsel
      to the Administrative Agent and compensation of agents and employees paid for
      services rendered on behalf of the Lenders, not reimbursed by the Borrower
      pursuant to Section 10.4 hereof and (ii) to indemnify and hold harmless the
      Administrative Agent and any of its directors, officers, employees or agents,
      on
      demand, in the amount of its pro rata share (based on its Revolving Credit
      Commitment hereunder), from and against any and all liabilities, obligations,
      losses, damages, penalties, actions, judgments, suits, costs, expenses or
      disbursements of any kind or nature whatsoever which may be imposed on, incurred
      by or asserted against it in its capacity as the Administrative Agent or any
      of
      them in any way relating to or arising out of this Agreement or any of the
      other
      Loan Documents or any action taken or omitted by it or any of them under this
      Agreement or any of the other Loan Documents, to the extent not reimbursed
      by
      the Borrower pursuant to Section 10.4 hereof; provided, however, that no Lender
      shall be liable to the Administrative Agent for any portion of such liabilities,
      obligations, losses, damages, penalties, actions, judgments, suits, costs,
      expenses or disbursements resulting from the gross negligence or willful
      misconduct of the Administrative Agent or any of its directors, officers,
      employees or agents.

    

    Each
      Lender acknowledges that it has, independently and without reliance upon the
      Administrative Agent or any other Lender and based on such documents and
      information as it has deemed appropriate, made its own credit analysis and
      decision to enter into this Agreement and any other Loan Document to which
      such
      Lender is a party. Each Lender also acknowledges that it will, independently
      and
      without reliance upon the Administrative Agent or any other Lender and based
      on
      such documents and information as it shall deem appropriate at the time,
      continue to make its own decisions in taking or not taking action under or
      based
      upon this Agreement, any other Loan Document, any related agreement or any
      document furnished hereunder.

    

    No
      Lender
      identified in this Agreement as the Documentation Agent or as a Syndication
      Agent shall have any right, power, obligation, liability, responsibility or
      duty
      under this Agreement other than those applicable to all Lenders as such. Without
      limiting the foregoing, none of such Lenders shall have or be deemed to have
      a
      fiduciary relationship with any other Lender. Each Lender hereby makes the
      same
      acknowledgments with respect to such Lenders as it makes with respect to the
      Administrative Agent in the preceding paragraph.

    

    Subject
      to the appointment and acceptance of a successor Administrative Agent as
      provided below, the Administrative Agent may resign at any time by notifying
      the
      Lenders and the Borrower. Upon any such resignation, the Lenders shall have
      the
      right to appoint a successor Administrative Agent. If no successor
      Administrative Agent shall have been so appointed by such Lenders and shall
      have
      accepted such appointment within thirty (30) days after the retiring
      Administrative Agent gives notice of its resignation, then the retiring
      Administrative Agent may, on behalf of the Lenders, appoint a successor
      Administrative Agent which shall be a Lender with an office (or an affiliate
      with an office) in the New York metropolitan area having a combined capital
      and
      surplus of at least $500,000,000. Upon the acceptance of any appointment as
      Administrative Agent hereunder by a successor, such successor shall thereupon
      succeed to and become vested with all the rights, powers, privileges and duties
      of the retiring Administrative Agent and the retiring Administrative Agent
      shall
      be discharged from its duties and obligations hereunder and under each of the
      other Loan Documents. After any Administrative Agent’s resignation hereunder,
      the provisions of this Article shall continue in effect for its benefit in
      respect of any actions taken or omitted to be taken by it while it was acting
      as
      Administrative Agent.

    

    
      
         

      

      
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    The
      Lenders hereby acknowledge that the Administrative Agent shall be under no
      duty
      to take any discretionary action permitted to be taken by the Administrative
      Agent pursuant to the provisions of this Agreement or any of the other Loan
      Documents unless it shall be requested in writing to do so by the Required
      Lenders.

    

    SECTION
      10. MISCELLANEOUS

    

    10.1 Notices.
      Notices, consents and other communications provided for herein shall be in
      writing and shall be delivered or mailed (or in the case of telex or facsimile
      communication, delivered by telex, telecopier or other telecommunications
      equipment, with receipt confirmed) addressed:

    

    (a) if
      to the
      Borrower, any Guarantor or any of their respective subsidiaries at Nu Horizons
      Electronics Corp., 70 Maxess Road, Melville, New York 11747, Attn.: Mr. Kurt
      Freudenberg, Vice President, Treasurer and Chief Financial Officer with a copy
      to Farrell Fritz, P.C. 1320 Reckson Plaza, Uniondale, New York 11556-1320,
      Attn:
      Nancy D. Lieberman, Esq.

    

    (b) if
      to the
      Administrative Agent, at Citibank, N.A., 730 Veterans Memorial Highway,
      Hauppauge, New York, 11788, Attn: Mr. Stuart N. Berman, Vice
      President.

     

    (c) if
      to any
      Lender at the address set forth on the signature pages to this
      Agreement.

    

    All
      notices and other communications given to any party hereto in accordance with
      the provisions of this Agreement shall be deemed to have been given on the
      date
      of receipt if hand delivered or three (3) Business Days after being sent by
      registered or certified mail, postage prepaid, return receipt requested, if
      by
      mail, or upon receipt during normal business hours on any Business Day (or
      otherwise the next Business Day) if by any telex, facsimile or other
      telecommunications equipment, in each case addressed to such party as provided
      in this Section 10.1 or in accordance with the latest unrevoked direction from
      such party.

    

    10.2 Survival
      of Agreement.
      All
      covenants, agreements, representations and warranties made by the Borrower
      or
      any of its Subsidiaries herein and in the other Loan Documents and the
      certificates or other instruments prepared or delivered in connection with
      this
      Agreement or any other Loan Document shall be considered to have been relied
      upon by the Lenders and shall survive the making by the Lenders of the Revolving
      Credit Loans and the execution and delivery to the Lenders of the Revolving
      Credit Notes and the occurrence of any other extension of credit and shall
      continue in full force and effect as long as the principal of or any accrued
      interest on the Revolving Credit Notes or any other fee or amount payable under
      the Revolving Credit Notes or this Agreement or any other Loan Document is
      outstanding and unpaid and so long as any Lender’s Revolving Credit Commitment
      has not been terminated.

    

    
      
         

      

      
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    10.3 Successors
      and Assigns: Participations.

    

    (a) Whenever
      in this Agreement any of the parties hereto is referred to, such reference
      shall
      be deemed to include the successors and assigns of such party; and all
      covenants, promises and agreements by or on behalf the Borrower, any Guarantor,
      any ERISA Affiliate, any Subsidiary of any thereof, the Administrative Agent
      or
      the Lenders, that are contained in this Agreement shall bind and inure to the
      benefit of such Persons and their respective successors and assigns. Without
      limiting the generality of the foregoing, the Borrower specifically confirms
      that the Administrative Agent and each Lender may at any time and from time
      to
      time assign or pledge or otherwise grant a security interest in any Revolving
      Credit Loan or any Revolving Credit Note (or any part thereof) to any Federal
      Reserve Bank. The Borrower may not assign or transfer any of its rights or
      obligations hereunder without the written consent of all the Lenders and any
      such assignment or transfer without such consent shall be null and
      void.

    

    (b) Each
      Lender, without the consent of the Borrower, may sell participations to one
      or
      more banks or other entities in all or a portion of its rights and obligations
      under this Agreement (including, without limitation, all or a portion of its
      Revolving Credit Commitment and the Revolving Credit Loans owing to it and
      undrawn Letters of Credit and the Revolving Credit Notes held by it); provided,
      however, that (i) such Lender’s obligations under this Agreement (including,
      without limitation, its Revolving Credit Commitment) shall remain unchanged,
      (ii) such Lender shall remain solely responsible to the other parties hereto
      for
      the performance of such obligations, (iii) the banks or other entities buying
      participations shall be entitled to the cost protection provisions contained
      in
      Sections 2.7 and 2.9 hereof (except to the extent that application of such
      Section 2.9 to such banks and other entities would cause the Borrower to make
      duplicate payments thereunder), and (iv) the Borrower, the Administrative Agent
      and the other Lenders shall continue to deal solely and directly with such
      Lender in connection with such Lender’s rights and obligations under this
      Agreement.

    

    (c) Each
      Lender may assign by novation as of the date of assignment, to any one or more
      Lenders or other entities with the consent of the Borrower (which consent shall
      be given in its sole discretion unless the Administrative Agent waives its
      additional fee for the assignment to such Lender or Lenders in which case
      consent will not be unreasonably withheld) and the Administrative Agent (which
      consent will not be unreasonably withheld) (except that in the case of an
      assignment by a Lender to one of its Affiliates or to another Lender no such
      consent of the Administrative Agent or the Borrower shall be required), all
      or a
      portion of its interests, rights and obligations under this Agreement and the
      other Loan Documents (including, without limitation, all or a portion of its
      Revolving Credit Commitment and the same portion of the Revolving Credit Loans
      and undrawn Letters of Credit at the time owing to it and the Revolving Credit
      Notes held by it), provided, however, that (i) each such assignment shall be
      of
      a constant, and not a varying, percentage of all of the assigning Lender’s
      rights and obligations under this Agreement, which shall include the same
      percentage interest in the Revolving Credit Loans, Letters of Credit and
      Revolving Credit Notes, (ii) the amount of the Revolving Credit Commitment
      of
      the assigning Lender being assigned pursuant to each such assignment (determined
      as of the date the Assignment and Acceptance with respect to such assignment
      is
      delivered to the Administrative Agent) shall be in a minimum principal amount
      of
      $5,000,000 and (iii) the parties to each such assignment shall execute and
      deliver to the Administrative Agent, for its acceptance and recording in the
      Register (as defined below), an assignment and acceptance in form and substance
      acceptable to the Administrative Agent (an “Assignment and Acceptance”),
      together with any Revolving Credit Note subject to such assignment and a
      processing and recordation fee of $2,500 payable by the assigning Lender. Upon
      such execution, delivery, acceptance and recording and after receipt of the
      written consent of the Administrative Agent, from and after the effective date
      specified in each Assignment and Acceptance, which effective date shall be
      at
      least five (5) Business Days after the execution thereof, (x) the assignee
      thereunder shall be a party hereto and, to the extent provided in such
      Assignment and Acceptance, have the rights and obligations of a Lender hereunder
      and under the other Loan Documents and (y) the Lender which is assignor
      thereunder shall, to the extent provided in such Assignment and Acceptance,
      be
      released from its obligations under this Agreement and the other Loan Documents
      (and, in the case of an Assignment and Acceptance covering all or the remaining
      portion of an assigning Lender’s rights and obligations under this Agreement,
      such Lender shall cease to be a party hereto and thereto except in respect
      of
      Sections 2.9 and 10.4 hereof for the period prior to the effective date
      thereof).

    

    
      
         

      

      
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    (d) By
      executing and delivering an Assignment and Acceptance, the Lender which is
      assignor thereunder and the assignee thereunder confirm to, and agree with,
      each
      other and the other parties hereto as follows: (i) other than the representation
      and warranty that it is the legal and beneficial owner of the interest being
      assigned thereunder free and clear of any adverse claim created by it, such
      assignor Lender makes no representation or warranty and assumes no
      responsibility with respect to any statements, warranties or representations
      made in or in connection with this Agreement, the other Loan Documents or any
      other instrument or document furnished pursuant hereto or thereto or the
      execution, legality, validity, enforceability, perfection, genuineness,
      sufficiency or value of this Agreement, the other Loan Documents or any other
      instrument or document furnished pursuant hereto or thereto; (ii) such Lender
      makes no representation or warranty and assumes no responsibility with respect
      to the financial condition of the Borrower, any Guarantor or any Subsidiary
      of
      any thereof or the performance or observance by the Borrower, any Guarantor
      or
      any Subsidiary of any thereof of any of their respective obligations under
      this
      Agreement or any of the other Loan Documents or any other instrument or document
      furnished pursuant hereto or thereto; (iii) such assignee confirms that it
      has
      received a copy of this Agreement and the other Loan Documents, together with
      copies of financial statements and such other documents and information as
      it
      has deemed appropriate to make its own credit analysis and decision to enter
      into such Assignment and Acceptance; (iv) such assignee will, independently
      and
      without reliance upon the Administrative Agent, such Lender or any other Lender
      and based on such documents and information as it shall deem appropriate at
      the
      time, continue to make its own credit decisions in taking or not taking action
      under this Agreement; (v) such assignee appoints and authorizes the
      Administrative Agent to take such action as the Administrative Agent on its
      behalf and to exercise such powers under this Agreement as are delegated to
      the
      Administrative Agent by the terms hereof, together with such powers as are
      reasonably incidental thereto; and (vi) such assignee agrees that it will
      perform in accordance with their terms all of the obligations which by the terms
      of this Agreement are required to be performed by it as a Lender.

    

    
      
         

      

      
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    (e) The
      Administrative Agent shall maintain at its address referred to in Section 10.1
      hereof a copy of each Assignment and Acceptance delivered to it and a register
      for the recordation of the names and addresses of the Lenders and the Revolving
      Credit Commitment of, and principal amount of the Revolving Credit Loans and
      other extensions of credit owing to, each Lender from time to time (the
“Register”). The entries in the Register shall be conclusive, in the absence of
      manifest error or written notice to the contrary delivered in accordance with
      this Agreement, and the Borrower, the Administrative Agent and the Lenders
      may
      treat each Person whose name is so recorded in the Register as a Lender
      hereunder for all purposes of this Agreement. The Register shall be available
      for inspection by the Borrower or any Lender at any reasonable time and from
      time to time upon reasonable prior notice.

    

    (f) Upon
      its
      receipt of an Assignment and Acceptance executed by an assigning Lender and
      an
      assignee together with any Revolving Credit Note subject to such assignment
      and
      the written consent to such assignment, the Administrative Agent shall (i)
      accept such Assignment and Acceptance, (ii) record the information contained
      therein in the Register and (iii) give prompt notice thereof to the Lenders
      and
      the Borrower. Within five (5) Business Days after receipt of such notice, the
      Borrower, at its own expense, shall execute and deliver to the Administrative
      Agent in exchange for each surrendered Revolving Credit Note or Revolving Credit
      Notes a new Revolving Credit Note to the order of such assignee in an amount
      equal to the Revolving Credit Commitment assumed by it pursuant to such
      Assignment and Acceptance and, if the assigning Lender has retained any
      Revolving Credit Commitment hereunder, a new Revolving Credit Note to the order
      of the assigning Lender in an amount equal to the Revolving Credit Commitment
      retained by it hereunder. Such new Revolving Credit Note shall be in an
      aggregate principal amount equal to the aggregate principal amount of such
      surrendered Revolving Credit Note, shall be dated the effective date of such
      Assignment and Acceptance and shall otherwise be in substantially the form
      of
      Exhibit C hereto.

    

    (g) Notwithstanding
      any other provision herein, any Lender may, in connection with any assignment
      or
      participation or proposed assignment or participation pursuant to this Sec-tion
      10.3, disclose to the assignee or participant or proposed assignee or
      participant, any information relating to the Borrower, any Guarantor or any
      Subsidiary of any thereof furnished to such Lender by or on behalf of the
      Borrower, such Guarantor or such Subsidiary in connection with this Agreement;
      provided, however, that prior to any such disclosure, each such assignee or
      participant or proposed assignee or participant shall agree to preserve the
      confidentiality of any confidential information relating to the Borrower, any
      Guarantor or any Subsidiary of any thereof received from such
      Lender.

    

    10.4 Expenses;
      Indemnity.

    

    (a) The
      Borrower agrees to pay all reasonable out-of-pocket expenses incurred by the
      Administrative Agent in connection with the preparation of this Agreement,
      the
      Revolving Credit Notes and the other Loan Documents or with any amendments,
      modifications or waivers of the provisions hereof or thereof or incurred by
      the
      Administrative Agent or any of the Lenders in connection with the enforcement,
      adjudication or protection of its rights in connection with this Agreement
      or
      any of the other Loan Documents or with the Revolving Credit Loans made or
      the
      Revolving Credit Notes or Letters of Credit issued hereunder or the use of
      proceeds therefrom, or in connection with any pending or threatened action,
      proceeding, or investigation relating to the foregoing, including but not
      limited to the reasonable fees and disbursements of counsel for the
      Administrative Agent and, in connection with such enforcement or protection,
      the
      reasonable fees and disbursements of counsel for the Lenders. The Borrower
      also
      agrees to pay the Administrative Agent an annual fee for acting as same in
      accordance with the terms of a side letter between the Borrower and the
      Administrative Agent. In connection with Field Audits, the Borrower agrees
      to
      pay the out of pocket expenses and costs incurred by the Administrative Agent
      in
      conducting periodic Field Audits, provided however, that so long as no Event
      of
      Default has occurred and is continuing the costs and expenses of any Field
      Audit
      required by Section 5.1, shall not exceed $10,000 per annum. The Borrower
      further indemnifies the Lenders from and agrees to hold them harmless against
      any documentary taxes, assessments or charges made by any governmental authority
      by reason of the execution and delivery of this Agreement or the Revolving
      Credit Notes.

    

    
      
         

      

      
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    (b) The
      provisions of this Section 10.4 shall remain operative and in full force and
      effect regardless of the expiration of the term of this Agreement, the
      consummation of the transactions contemplated hereby, the repayment of any
      of
      the Revolving Credit Loans, the invalidity or unenforceability of any term
      or
      provision of this Agreement or the Revolving Credit Notes, or any investigation
      made by or on behalf of the Administrative Agent or any Lender. All amounts
      due
      under this Section 10.4 shall be payable on written demand
      therefor.

    

    10.5 Applicable
      Law.
      THIS
      AGREEMENT AND THE REVOLVING CREDIT NOTES SHALL BE CONSTRUED IN ACCORDANCE WITH
      AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

    

    10.6 Right
      of Setoff.
      If an
      Event of Default shall have occurred and be continuing, each Lender shall and
      is
      hereby authorized at any time and from time to time, to the fullest extent
      permitted by law, to set off and apply any and all deposits (general or special,
      time or demand, provisional or final) at any time held and other indebtedness
      at
      any time owing by such Lender to or for the credit or the account of the
      Borrower or any Guarantor against any and all of the obligations of the Borrower
      now or hereafter existing under this Agreement and the Revolving Credit Notes
      held by such Lender, irrespective of whether or not such Lender shall have
      made
      any demand under this Agreement or the Revolving Credit Notes and although
      such
      obligations may be unmatured. Each Lender agrees to notify promptly the
      Administrative Agent and the Borrower and any applicable Guarantor after any
      such setoff and application made by such Lender, but the failure to give such
      notice shall not affect the validity of such setoff and application. The rights
      of each Lender under this Section are in addition to other rights and remedies
      (including, without limitation, other rights of setoff) which may be available
      to such Lender.

    

    10.7 Payments
      on Business Days.
      Should
      the principal of or interest on the Revolving Credit Notes or any fee or other
      amount payable hereunder become due and payable on other than a Business Day,
      payment in respect thereof may be made on the next succeeding Business Day
      (except as otherwise specified in the definition of “Interest Period”), and such
      extension of time shall in such case be included in computing interest, if
      any,
      in connection with such payment and fees payable hereunder.

    

    
      
         

      

      
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    10.8 Waivers;
      Amendments.

    

    (a) No
      failure or delay of any Lender in exercising any power or right hereunder shall
      operate as a waiver thereof, nor shall any single or partial exercise of any
      such right or power, or any abandonment or discontinuance of steps to enforce
      such right or power, pre-clude any other or further exercise thereof or the
      exercise of any other right or power. The rights and remedies of the Lenders
      hereunder are cumulative and not exclusive of any rights or remedies which
      they
      may otherwise have. No waiver of any provision of this Agreement or the
      Revolving Credit Notes nor consent to any departure by the Borrower therefrom
      shall in any event be effective unless the same shall be authorized as provided
      in paragraph (b) below, and then such waiver or consent shall be effective
      only
      in the specific instance and for the purpose for which given. No notice to
      or
      demand on the Borrower in any case shall entitle it to any other or further
      notice or demand in similar or other circumstances. Each holder of any of the
      Revolving Credit Notes shall be bound by any amendment, modification, waiver
      or
      consent authorized as provided herein, whether or not such Revolving Credit
      Note
      shall have been marked to indicate such amendment, modification, waiver or
      consent.

    

    (b) Neither
      this Agreement nor any provision hereof may be waived, amended or modified
      except pursuant to an agreement or agreements in writing entered into by the
      Borrower and the Required Lenders or by the Borrower and the Administrative
      Agent with the consent of the Required Lenders; provided
      that no
      such agreement shall (i) increase the Revolving Credit Commitment of any Lender
      without the written consent of such Lender, (ii) reduce the principal amount
      of
      any Revolving Credit Loan or reduce the rate of interest thereon, or reduce
      any
      fees payable hereunder, or reduce any payment by the Borrower hereunder in
      respect of any Letter of Credit without the written consent of each Lender
      affected thereby, (iii) postpone the scheduled date of payment of the principal
      amount of any Revolving Credit Loan or any interest thereon, or any fees payable
      hereunder, or any payment by the Borrower hereunder in respect of any Letter
      of
      Credit or reduce the amount of, waive or excuse any such payment, or postpone
      the scheduled date of expiration of any Revolving Credit Commitment, without
      the
      written consent of each Lender affected thereby, (iv) change Section 2.12 or
      2.13 hereof in a manner that would alter the pro rata sharing of payments
      required thereby, without the written consent of each Lender, (v) change any
      of
      the provisions of this Section or the definition of “Required Lenders” or any
      other provision hereof specifying the number or percentage of Lenders required
      to waive, amend or modify any rights hereunder or make any determination or
      grant any consent hereunder without the written consent of each Lender, or
      (vi)
      release any Guarantor or any Collateral (as defined in any Security Agreement)
      without the written consent of each Lender; provided
      further
      that no
      such agreement shall amend, modify or otherwise affect the rights or duties
      of
      the Administrative Agent hereunder without the prior written consent of the
      Administrative Agent as the case may be.

    

    10.9 Severability.
      In the
      event any one or more of the provisions contained in this Agreement or in the
      Revolving Credit Notes should be held invalid, illegal or unenforceable in
      any
      respect, the validity, legality and enforceability of the remaining provisions
      contained herein or therein shall not in any way be affected or impaired
      thereby. The parties shall endeavor in good faith negotiations to replace the
      invalid, illegal or unenforceable provisions with valid provisions the economic
      effect of which comes as close as possible to that of the invalid, illegal
      or
      unenforceable provisions.

    

    
      
         

      

      
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    10.10 Entire
      Agreement; Waiver of Jury Trial, Etc.
      (a) This
      Agreement, the Revolving Credit Notes and the other Loan Documents constitute
      the entire contract between the parties hereto relative to the subject matter
      hereof and thereof. Any previous agreement among the parties hereto with respect
      to the transactions contemplated hereby and thereby is superseded by this
      Agreement, the Revolving Credit Notes and the other Loan Documents. Except
      as
      expressly provided in this Agreement, the Revolving Credit Notes or the other
      Loan Documents, nothing in this Agreement, the Revolving Credit Notes or the
      other Loan Documents is intended to confer upon any party, other than the
      parties hereto, any rights, remedies, obligations or liabilities under or by
      reason of this Agreement, the Revolving Credit Notes or the other Loan
      Documents.

    

    (b) THE
      BORROWER HEREBY EXPRESSLY WAIVES ANY AND EVERY RIGHT TO A TRIAL BY JURY IN
      ANY
      ACTION ON OR RELATED TO ANY OF THE LOAN DOCUMENTS OR THE ENFORCEMENT OF ANY
      OR
      ALL OF THE SAME. THE BORROWER HEREBY EXPRESSLY WAIVES ANY RIGHT TO INTERPOSE
      A
      COUNTERCLAIM IN ANY ACTION OR PROCEEDING ON OR RELATED TO THIS AGREEMENT EXCEPT
      FOR MANDATORY COUNTERCLAIMS.

    

    (c) Except
      as
      prohibited by law, each party hereto hereby waives any right it may have to
      claim or recover in any litigation referred to in paragraph (b) of this Section
      10.10 any special, exemplary or punitive damages.

    

    (d) Each
      party hereto (i) certifies that no representative, agent or attorney of any
      Lender has represented, expressly or otherwise, that such Lender would not,
      in
      the event of litigation, seek to enforce the foregoing waivers and (ii)
      acknowledges that it has been induced to enter into this Agreement, the
      Revolving Credit Notes or the other Loan Documents, as applicable, by, among
      other things, the mutual waivers and certifications herein.

    

    10.11 Confidentiality.
      The
      Administrative Agent and the Lenders agree to keep confidential (and to cause
      their respective officers, directors, employees, agents and representatives
      to
      keep confidential) all information, materials and documents furnished to the
      Administrative Agent or any Lender (the “Information”). Notwithstanding the
      foregoing, the Administrative Agent and each Lender shall be permitted to
      disclose Information (i) to such of its officers, directors, employees, agents,
      attorneys and representatives as need to know such Information in connection
      with its participation in any of the contemplated transactions or the
      administration of this Agreement or the other Loan Documents; (ii) to the extent
      required by applicable laws and regulations or by any subpoena or similar legal
      process, or requested by any governmental agency or authority; (iii) to the
      extent such Information (A) becomes publicly available other than as a result
      of
      a breach of this Agreement, (B) becomes available to the Administrative Agent
      or
      such Lender on a non-confidential basis from a source other than the Borrower,
      any Guarantor or any of their respective Subsidiaries or (C) was available
      to
      the Administrative Agent or such Lender on a non-confidential basis prior to
      its
      disclosure to the Administrative Agent or such Lender by the Borrower, any
      Guarantor or any of their respective Subsidiaries; (iv) to the extent the
      Borrower, any Guarantor or any of their respective Subsidiaries shall have
      consented to such disclosure in writing; (v) in connection with the sale of
      any
      collateral pursuant to the provisions of any of the other Loan Documents; (vi)
      pursuant to Section 10.3(g) hereof; or (vii) in connection with any litigation
      to which the Administrative Agent or any Lender is a party.

    

    
      
         

      

      
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    10.12 Submission
      to Jurisdiction.

    

    (a) Any
      legal
      action or proceeding with respect to this Agreement or the Revolving Credit
      Notes or any other Loan Document may be brought in the courts of the State
      of
      New York or of the United States of America for the Southern District of New
      York, and, by execution and delivery of this Agreement, the Borrower and each
      of
      the Guarantors hereby accept for themselves and in respect of their property,
      generally and unconditionally, the jurisdiction of the aforesaid
      courts.

    

    (b) The
      Borrower and each of the Guarantors hereby irrevocably waive, in connection
      with
      any such action or proceeding, any objection, including, without limitation,
      any
      objection to the laying of venue or based on the grounds of forum non
      conveniens, which they may now or hereafter have to the bringing of any such
      action or proceeding in such respective jurisdictions.

    

    (c) The
      Borrower and each of the Guarantors hereby irrevocably consent to the service
      of
      process of any of the aforementioned courts in any such action or proceeding
      by
      the mailing of copies thereof by registered or certified mail, postage prepaid,
      to each such person, as the case may be, at its address set forth in Section
      10.1 hereof.

    

    (d) Nothing
      herein shall affect the right of the Administrative Agent or any Lender to
      serve
      process in any other manner permitted by law or to commence legal proceedings
      or
      otherwise proceed against the Borrower or any Guarantor in any other
      jurisdiction.

    

    10.13 Interest
      Rate Limitation.
      Notwithstanding anything herein to the contrary, if at any time the interest
      rate applicable to any Revolving Credit Loan, together with all fees, charges
      and other amounts which are treated as interest on such loan under applicable
      law (collectively the “Charges”), shall exceed the maximum lawful rate (the
“Maximum Rate”) which may be contracted for, charged, taken, received or
      reserved by the Lender holding such loan in accordance with applicable law,
      the
      rate of interest payable in respect of such loan hereunder, together with all
      Charges payable in respect thereof, shall be limited to the Maximum Rate and,
      to
      the extent lawful, the interest and Charges that would have been payable in
      respect of such loan but were not payable as a result of the operation of this
      Section shall be cumulated and the interest and Charges payable to such Lender
      in respect of other loans or periods shall be increased (but not above the
      Maximum Rate therefor) until such cumulated amount, together with interest
      thereon to the date of repayment, shall have been received by such
      Lender.

    

    10.14 Further
      Assurances.
      The
      Borrower agrees at any time and from time to time at its expense, upon request
      of any Lender, to promptly execute, deliver, or obtain or cause to be executed,
      delivered or obtained any and all further instruments and documents and to
      take
      or cause to be taken all such other action as any Lender may reasonably deem
      desirable in obtaining the full benefits of the Loan Documents.

    

    
      
         

      

      
        -56-

        
          

        

      

      
         

      

    

    10.15. Counterparts.
      This
      Agreement each of the other Loan Documents may be executed in counterparts
      of
      the entire document, or of signature pages to the document, each of which shall
      constitute an original but all of which when taken together shall constitute
      but
      one contract, and shall become effective when copies which, when taken together,
      bear the signatures of each of the parties hereto or thereto shall be delivered
      to the Administrative Agent and the Borrower.

    

    10.16. Provisions
      Regarding Syndication and Documentation Agents.
      No
      Syndication or Documentation Agent shall have any duties or responsibilities
      under this Agreement or the Loan Documents, other than their responsibilities
      as
      a Lender, or any fiduciary relationship with the Administrative Agent or any
      Lender, and no implied covenants, functions, responsibilities, duties,
      obligations or liabilities shall be read into this Agreement or any other Loan
      Document or otherwise exist against a Syndication or Documentation
      Agent.

    

    10.17. USA
      PATRIOT ACT.
      Each
      Lender that is subject to the requirements of the USA PATRIOT ACT (Title III
      of
      Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”) hereby notifies
      the Borrower that pursuant to the requirements of the Act, it is or may be
      required to obtain, verify and record information that identifies the Borrower
      and its Subsidiaries which information includes the name and address of the
      Borrower and its Subsidiaries and other information that will allow such Lender
      to identify the Borrower and its Subsidiaries in accordance with the
      Act.

    

    10.18. Headings.
      Article
      and Section headings and the Table of Contents used herein are for convenience
      of reference only and are not to affect the construction of, or to be taken
      into
      consideration in interpreting, this Agreement.

     

    
      
         

      

      
        -57-

        
          

        

      

      
         

      

    

    
 

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

    

    

    
      	 	
              Borrower:

              

              NU
                HORIZONS ELECTRONICS CORP.

              

              By: s/Kurt
                Freudenberg                   
                 

              Kurt
                Freudenberg

              Vice
                President, Treasurer and Chief Financial Officer

              

              

              Administrative
                Agent:

              

              CITIBANK,
                N.A., as Administrative Agent

              

              By: s/Stuart
                N.
                Berman                   
                 

              Stuart
                N. Berman

              Vice
                President

              

              

              Documentation
                Agent:

              

              BANK
                OF AMERICA, N.A.,

              as
                Documentation Agent

              

              By: s/Steven
                J.
                Melicharek                
                 

              Steven
                J. Melicharek

              Senior
                Vice President

              

              

              Syndication
                Agent:

              

              JPMORGAN
                CHASE BANK, N.A.,

              as
                Syndication Agent

              

              By: s/Allison
                Masciangelo                
                  

              Allison
                Masciangelo

              Assistant
                Vice President

            

    

     

     

    
      
         

      

      
        -58-

        
          

        

      

      
         

      

       

    

    
      	 	
              Syndication
                Agent:

              

              ISRAEL
                DISCOUNT BANK OF NEW YORK, as Syndication Agent

              

              By: s/Scott
                Fishbein                           
                 

              Scott
                Fishbein

              First
                Vice President

              

              By: s/Michael
                Paul                               
                 

              Michael
                Paul

              Assistant
                Vice President

            

    

     

    
      	
              Notice
                Addresses:

               

              CITIBANK,
                N.A.

              730
                Veterans Memorial Highway

              Hauppauge,
                NY 11788

            	
              Lenders:

               

              CITIBANK, N.A.

              
                By: s/Stuart
                  N.
                  Berman                        
                   

                Stuart
                  N. Berman

                Vice
                  President

              

            

    

     

    
      	
              JPMORGAN
                CHASE BANK, N.A.

              395
                North Service Road, Floor 3

              Melville,
                NY 11747

            	
              JPMORGAN CHASE BANK, N.A.

               

              
                By: 
                  s/Allison
                  Masciangelo                 
                   

                Allison
                  Masciangelo

                Assistant
                  Vice President

              

            

    

     

    
      	
              ISRAEL
                DISCOUNT BANK OF NEW YORK

              511
                Fifth Avenue

              New
                York, NY 10017

            	
              ISRAEL DISCOUNT BANK OF NEW YORK

               

              
                By: s/Scott
                  Fishbein                           
                   

                Scott
                  Fishbein

                First
                  Vice President

                

                By: s/Michael
                  Paul                                

                Michael
                  Paul

                Assistant
                  Vice President

              

            

    

     

    
 

    
      	
              BANK
                OF AMERICA, N.A.

              1185
                Avenue of the Americas

              New
                York, NY 10036

            	
              BANK OF AMERICA, N.A.

               

              
                By: s/Steven
                  J.
                  Melicharek                  
                   

                Steven
                  J. Melicharek

                Senior
                  Vice President

              

            

    

     

     

    
      
         

      

      
        -59-

        
          

        

      

      
         

      

    

    
 

    
      	
              SOVEREIGN
                BANK

              3
                Huntington Quadrangle

              Suite
                103 South

              Melville,
                NY 11747

            	
              SOVEREIGN BANK

               

              
                By: s/Christine
                  Gerula                         
                   

                Christine
                  Gerula

                Senior
                  Vice President

              

            
	 	 
	
              HSBC
                BANK USA, NATIONAL 

              ASSOCIATION

              534
                Broad Hollow Road

              Melville,
                NY 11747

            	
              HSBC BANK USA, NATIONAL

              ASSOCIATION

               

              
                By: s/Christopher
                  J. Mendelsohn        

                Christopher
                  J. Mendelsohn

                First
                  Vice President

              

            
	 	 
	
              NORTH
                FORK BANK

              275
                Broadhollow Road

              Melville,
                NY 11747

            	
              NORTH FORK BANK

               

              
                By: s/Robert
                  J.
                  Milas                           
                   

                Robert
                  J. Milas

                Vice
                  President

              

            
	 	 
	
              BANK
                LEUMI USA     

              48
                South Service Road

              Suite
                200 

              Melville,
                NY 11747

            	
              BANK LEUMI USA

               

              By: s/Paul
                Tine                                    
                

              Paul
                Tine
                First
                  Vice President

              

            

    

    

    

    
      
         

      

      
        -60-

        
          

        

      

      
         

      

    

     

    SCHEDULE
      I

    

    Revolving
      Credit Commitments (Section 2.1)

    

    Facility
      Amount: $150,000,000

    

    
      	
              Bank

               

              Citibank,
                N.A

               

              JPMorgan
                Chase Bank, N.A.

               

              Israel
                Discount Bank of New York

               

              Bank
                of America, N.A.

               

              Sovereign
                Bank

               

              HSBC
                Bank USA, National Association

               

              North
                Fork Bank

               

              Bank
                Leumi USA

            	
              Revolving
                Credit Commitment

               

              $30,000,000

               

              $21,000,000

               

              $21,000,000

               

              $19,500,000

               

              $18,000,000

               

              $15,000,000

               

              $13,500,000

               

              $12,000,000

            	
              Percentage
                of Total

               

              20%

               

              14%

               

              14%

               

              13%

               

              12%

               

              10%

               

              9%

               

              8%

            

    

    

     

    
      
         

      

      
        Schedule
          A/Page
          1

        
          

        

      

      
         

      

       

    

    EXHIBIT
      A

    REVOLVING
      CREDIT NOTE

     

    
      	$30,000,000 	
              730
                Veterans Memorial Highway 

            	
              As
                of ____________,
                2007

            

    

    Hauppauge,
      NY 11788

    

    FOR
      VALUE
      RECEIVED, NU HORIZONS ELECTRONICS CORP., (the “Borrower”) promises to pay to the
      order of CITIBANK, N.A. (the “Lender”) on the Termination Date, at the office of
      Citibank, N.A., as administrative agent (“the Administrative “Agent”) specified
      in Section 10.1 of the Amended and Restated Credit Agreement, dated as of
      __________, 2007 among the Borrower, the Lender, certain other lenders named
      therein and the Administrative Agent (as amended from time to time, the
“Agreement”; terms defined in the Agreement shall have their defined meanings
      when used in this Note), in lawful money of the United States of America and
      in
      immediately available funds the principal amount of THIRTY MILLION AND 00/100
      ($30,000,000) DOLLARS or, if less than such principal amount, the aggregate
      unpaid principal amount of all Revolving Credit Loans made by the Lender to
      the
      Borrower pursuant to Section 2 of the Agreement. The Borrower further promises
      to pay interest in like money on the unpaid principal balance of this Note
      from
      time to time outstanding at such rates, and payable at such times, as are
      specified in the Agreement. All Revolving Credit Loans made by the Lender
      pursuant to Section 2 of the Agreement and all payments of principal thereon
      may
      be endorsed by the holder of this Note on the schedule annexed hereto, which
      holder may add additional pages to such schedule. The aggregate net unpaid
      amount of Revolving Credit Loans set forth in such schedule shall be presumed
      to
      be the principal balance hereof. After the stated or any accelerated maturity
      hereof, this Note shall bear interest at such rates as are specified in the
      Agreement, payable on demand, but in no event in excess of the maximum rate
      of
      interest permitted under applicable law.

    

    This
      Note
      is one of the Revolving Credit Notes referred to in the Agreement, and is
      entitled to the benefits thereof and may be prepaid in whole or in part as
      provided therein. This note replaces and supersedes the original Note dated
      September 30, 2004, as previously replaced and superseded by the note of
      November 21, 2005, but shall not constitute a repayment thereof, and the
      execution and delivery of this Note shall not be deemed to terminate or
      discharge the security interests securing the original Note or any replacements
      thereof.

    

    Upon
      the
      occurrence of any one or more of the Events of Default specified in the
      Agreement, all amounts then remaining unpaid on this Note may be declared to
      be
      or may become immediately due and payable as provided in the
      Agreement.

    

    This
      Note
      shall be construed in accordance with and governed by the laws of the State
      of
      New York.

    

    NU
      HORIZONS ELECTRONICS CORP.

     

    
      
         

      

      
        Exhibit
          A/Page 1

        
          

        

      

      
         

      

    

     

    SCHEDULE
      OF

    REVOLVING
      CREDIT LOANS

    AND

    PAYMENTS
      OF PRINCIPAL

    TO
      REVOLVING CREDIT NOTE

    DATED
      ______________, 2007

    NU
      HORIZONS ELECTRONICS CORP.

    TO

    CITIBANK,
      N.A.

    

    

      
        	
              	
              	
                Amount

              	 	 	
                Balance

              	 
	
              	
                 

              	
                and
                  Type

              	Interest
	Principal	
                Remaining

              	
                Notation

              
	
                Date

              	
                Borrower

              	
                of
                  Loan

              	
                Period
                  

              	Paid	
                Unpaid

              	
                Made
                  By

              

      

    

     

    
      
        

      

       

    

    
      
        

      

    

     

    
      
        

      

       

    

    
      
        

      

      

      
        

      

    

    
       

      
        
          

        

        
          

        

         

        
          
            

          

           

          
            
              

            

             

            
              
                

              

               

              
                
                  

                

                 

                
                  
                    

                  

                   

                  
                    
                      

                    

                     

                  

                

              

            

          

        

      

      
        
           

        

        
          Exhibit A/Page
            2

          
            

          

        

        
           

        

      

    

    

    EXHIBIT
      B

    BORROWING
      BASE CERTIFICATE

    

    ____________
      __, 20__

    

    
      	
              To:

            	
              Citibank,
                N.A., as administrative agent (the “Administrative Agent”) under a certain
                Amended and Restated Credit Agreement dated as of __________ __,
                2007 (as
                the same may be amended from time to time, the “Agreement”), by and among
                the Administrative Agent, each of the Lenders that is a signatory
                thereof
                and Nu Horizons Electronics Corp. (the
                “Borrower”).

            

    

    

    Terms
      used in this certificate shall have the same meaning as ascribed thereto in
      the
      Agreement.

    

    For
      the
      Month of _________________

    

    

      
        	
                I.

              	
                Total
                  Accounts Receivable

              	
                _______________

              
	
                 

              	
                Less
                  Ineligibles:

              	 

      

    

    
      
        	
                (a)

              	
                (applicable
                  subsections of the

              	 
	
              	
                
                  definition
                    of Eligible Accounts)

                

              	
                _______________

              
	
                (b)

              	
                 

              	
                _______________

              
	
                (c)

              	
                 

              	
                _______________

              
	
                (d)

              	
                 

              	
                _______________

              
	
                (e)

              	
                 

              	
                _______________

              
	
                (f)

              	
                 

              	
                _______________

              
	
                (g)

              	
                 

              	
                _______________

              
	
                (h)

              	
                 

              	
                _______________

              
	
                (i)

              	
                 

              	
                _______________

              
	
                (j)

              	
                 

              	
                _______________

              
	
                (k)

              	
                 

              	
                _______________

              
	
                (l)

              	
                 

              	
                _______________

              
	
                (m)

              	
                 

              	
                _______________

              
	
                (n)

              	
                 

              	
                _______________

              
	
                (o)

              	
                 

              	
                _______________

              
	
                (p)

              	
                 

              	
                _______________

              
	
                (q)

              	
                 

              	
                _______________

              
	
                (r)

              	
                 

              	
                _______________

              
	
                Total
                  Ineligibles

              	
                _______________

              

      

    

    

    

      
        	
                Total
                  Eligible Accounts Receivable

              	
                _________________

              

      

       

    

    
      
        
        

      

      
        
          Exhibit
            B/Page 1

        

        
          

        

      

      
         

      

    

     

    
      
        	II.	
                Total
                  Inventory

              	
                
                  __________________

                

              
	 	
                Less
                  Ineligibles (including inventory at leased premises,

              	 
	 	
                without
                  a landlord waiver):

              	
                
                  __________________

                

              
	 	
                End
                  of Life Inventory

              	
                
                  __________________

                

              
	 	
                Total
                  Ineligible Inventory

              	
                
                  __________________

                

              
	 	 	 
	 	
                Total
                  Eligible Inventory

              	
                __________________

              
	 	 	 
	 	 	 
	 	
                Borrowing
                  Base

              	 
	 	
                80%
                  of Total Eligible A/R’s

              	
                __________________

              
	 	 	 
	 	
                40%
                  of Total Eligible Inventory

              	 
	 	
                (not
                  more than 60MM)

              	
                __________________

              
	 	 	 
	 	
                Total
                  of Available Collateral

              	
                __________________

              
	 	 	 
	 	
                Commitment
                  Amount

              	
                __________________

              
	 	 	 
	 	
                Aggregate
                  Outstanding as of the date of this Certificate

              	
                __________________

              
	 	 	 
	 	
                Collateral
                  Excess/ (Deficiency)

              	
                __________________

              

      

       

    

    The
      undersigned, certifies that this Borrowing Base Certificate is true, accurate
      and complete in all material respects as of
      __________________________.

    

    

    
      	 	
              By:
                ________________________________

              Name:

              Title:

            

    

    

     

    
      
         

      

      
        
          Exhibit
            B/Page 2

        

        
          

        

      

      
         

      

       

    

    EXHIBIT
      C

    FORM
      OF ASSIGNMENT AND ACCEPTANCE

    

    Dated:
      _____________, 200__

    

    Reference
      is made to the Amended and Restated Credit Agreement, dated as of ___________
      __, 2007 (as amended, modified or supplemented from time to time in accordance
      with its terms, the “Agreement”), among NU HORIZONS ELECTRONICS CORP. (the
“Borrower”), the LENDERS party thereto (collectively, the “Lenders”) and
      CITIBANK, N.A., as Administrative Agent for the Lenders (in such capacity,
      the
“Administrative Agent”). Capitalized terms used herein and not otherwise defined
      herein shall have the meanings assigned to such terms in the
      Agreement.

    

    _______________________________
      (the “Assignor”) and

    _______________________________
      (the “Assignee”) agree as follows:

    

    1. The
      Assignor hereby sells and assigns to the Assignee, and the Assignee hereby
      purchases and assumes from the Assignor, ____% interest in and to all the
      Assignor’s rights and obligations under the Agreement as of the Effective Date
      (as defined below) (including, without limitation, such percentage interest
      in
      the Revolving Credit Commitment of the Assignor on the Effective Date and/or
      such percentage interest in the Revolving Credit Loans owing to the Assignor
      outstanding on the Effective Date and/or such percentage interest in the Letters
      of Credit and Acceptance Drafts outstanding on the Effective Date, together
      with
      such percentage interest in all unpaid interest and commitment fees accrued
      to
      the Effective Date and such percentage interest in the Revolving Credit Note
      held by the Assignor).

    

    2. The
      Assignor (i) represents that as of the date hereof, its Revolving Credit
      Commitment (without giving effect to assignments thereof which have not yet
      become effective) is $___________, the outstanding balance of its Revolving
      Credit Loans (unreduced by any assignments thereof which have not yet become
      effective) is $ ,
      and the
      amount of its participation in Letters of Credit and Acceptance Drafts
      (unreduced by any assignments thereof which have not yet become effective)
      that
      have been issued and remain undrawn is $___________, (ii) makes no
      representation or warranty and assumes no responsibility with respect to any
      statements, warranties or representations made in or in connection with the
      Agreement or the execution, legality, validity, enforceability, perfection,
      genuineness, sufficiency or value of the Agreement or any other Loan Documents
      or any other instrument or document furnished pursuant to any thereof, other
      than that it is the legal and beneficial owner of the interest being assigned
      by
      it hereunder and that such interest is free and clear of any adverse claim;
      (iii) makes no representation or warranty and assumes no responsibility with
      respect to the financial condition of the Borrower or any Guarantor, or the
      performance or observance by the Borrower or any Guarantor, of its obligations
      under the Agreement or any other Loan Documents or any other instrument or
      document furnished pursuant to any thereof; and (iv) attaches the Revolving
      Credit Note referred to in paragraph 1 above and requests that the
      Administrative Agent exchange such Revolving Credit Note for a new Revolving
      Credit Note [payable to Assignee] [payable to Assignor] in principal amounts
      equal to _______ and _______, respectively.

    

    
      
         

      

      
        
          Exhibit
            C/Page 1

        

        
          

        

      

      
         

      

    

    3. The
      Assignee (i) represents and warrants that it is legally authorized to enter
      into
      this Assignment and Acceptance and the other documents executed and delivered
      in
      connection therewith; (ii) confirms that it has received a copy of the Agreement
      and the other Loan Documents, together with copies of such financial statements
      and such other documents and information as it has deemed appropriate to make
      its own credit analysis and decision to enter into this Assignment and
      Acceptance; (iii) agrees that it will, independently and without reliance upon
      the Administrative Agent, the Assignor or any other Lender and based on such
      documents and information as it shall deem appropriate at the time, continue
      to
      make its own credit decisions in taking or not taking action under the
      Agreement; (iv) appoints and authorizes the Administrative Agent to take such
      action as Administrative Agent on its behalf and to exercise such powers under
      the Agreement as are delegated to the Administrative Agent by the terms thereof,
      together with such powers as are reasonably incidental thereto; (v) agrees
      that
      it will perform in accordance with their terms all of the obligations which
      by
      the terms of the Agreement are required to be performed by it as a Lender;
      and
      (vi) agrees that it will keep confidential all information with respect to
      the
      Borrower furnished to it by the Borrower or the Assignor (other than information
      generally available to the public or otherwise available to the Assignor on
      a
      nonconfidential basis). [; and (vii) attaches the forms prescribed by the
      Internal Revenue Service of the United States certifying as to the Assignee’s
      exemption from United States withholding taxes with respect to all payments
      to
      be made to the Assignee under the Agreement or such other documents as are
      necessary to indicate that all such payments are subject to such tax at a rate
      reduced by an applicable tax treaty.] 1 

    

    4. The
      effective date for this Assignment and Acceptance shall be  
      (the
“Effective Date”). 1 
      Following the execution of this Assignment and Acceptance, it will be delivered
      to the Administrative Agent for acceptance and recording by the Administrative
      Agent.

    

    5. Upon
      such
      acceptance and recording, from and after the Effective Date, (i) the Assignee
      shall be a party to the Agreement and, to the extent provided in this Assignment
      and Acceptance, have the rights and obligations of a Lender thereunder and
      (ii)
      the Assignor shall, to the extent provided in this Assignment and Acceptance,
      relinquish its rights and be released from its obligations under the
      Agreement.

    

    6. Upon
      such
      acceptance and recording, from and after the Effective Date, the Administrative
      Agent shall make all payments in respect of the interest assigned hereby
      (including payments of principal, interest, fees and other amounts) to the
      Assignee. The Assignor and Assignee shall make all appropriate adjustments
      in
      payments for periods prior to the Effective Date by the Administrative Agent
      or
      with respect to the making of this assignment directly between
      themselves.

    
       

      
        
          

        

      

      
        1
          If
          the
          Assignee is organized under the laws of a jurisdiction outside the United
          States.

         

      

      
        2
          See
          Section 10.3 of the Agreement. Such date shall be at least five Business
          Days
          after the execution of this Assignment and Acceptance and delivery thereof
          to
          the Administrative Agent.

         

      

    

    
      
         

      

      
        
          Exhibit
            C/Page 2

        

        
          

        

      

      
         

      

       

    

    7. THIS
      ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
      WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO
      BE
      PERFORMED IN SAID STATE.

    

    
      
        	 	
                [NAME
                  OF ASSIGNOR]

                

                By:_______________________

                Name:

                Title:

                

                [NAME
                  OF ASSIGNEE]

                

                

                By:_______________________

                Name:

                Title:

              

      

    

     

    Accepted
      this              
       day

    of
              
      ,
      200   
      

    

    CITIBANK,
      N.A., as Administrative Agent

    

    

    By:_______________________

    Name:

    Title:

     

    
      
         

      

      
        
          Exhibit
            C/Page 3

        

        
          

        

      

      
         

      

       

    

    EXHIBIT
      D

    

    CONTROL
      AGREEMENT (BANK ACCOUNTS)

    

    This
      CONTROL AGREEMENT (BANK ACCOUNTS) dated as of [____________], 20___ (this
“Agreement”) is made among [_______________] (“Pledgor”), Citibank, N.A., as
      Administrative Agent (“Administrative Agent”), Mellon Bank, N.A. (“Mellon Bank”)
      and Mellon Financial Services Corporation #1 (“MFSC#1”). Mellon Bank and MFSC#1
      are collectively referred to herein as “Mellon”.

    

    The
      parties hereto refer to Account No. [__________] in the name of the Pledgor
      maintained at Mellon Bank (the “Account”) and lockbox [_________] maintained at
      Mellon Bank in accordance with the Mellon Global Cash Management Terms and
      Conditions dated October 1, 1994 (“Mellon T&C”). In addition, the parties
      hereto refer to lockbox 21102 maintained at Mellon Financial Services
      Corporation #1 in accordance with the Mellon Financial Services Corporation
      #1
      Global Cash Management Terms and Conditions dated April 1, 1994 (“MFSC #1
      T&C”). Lockboxes [________] and [________] are collectively referred to as
      the “Lockbox”. The Mellon T&C and the MFSC#1 T&C are collectively
      referred to herein as the “Terms and Conditions”. The parties hereby agree as
      follows:

    

    1. Pledgor
      and Administrative Agent notify Mellon that by separate agreement Pledgor has
      granted Administrative Agent a security interest in the Account and all funds
      therein and rights thereto. Mellon acknowledges being so notified and confirms
      that it has no actual knowledge or notice of any restraint, security interest,
      lien or other adverse claim in or to the Account or any funds
      therein.

    

    2. Mellon
      shall comply with orders received from Pledgor (without further
      consent from
      Administrative Agent) concerning the Account until Mellon has received a notice
      purporting to be signed and sent by the Administrative Agent in substantially
      the form attached as Exhibit A hereto (a “Notice of Exclusive Control”). After
      such receipt, Mellon shall not honor any orders from Pledgor and shall comply
      with all withdrawal, transfer, payment and other instructions (collectively,
      “orders”) received from Administrative Agent (without further consent from
      Pledgor) concerning the Account until such time as an Exclusive Control
      Termination Date, as hereinafter defined, has occurred. Any Notice of Exclusive
      Control received by Mellon after 1:00
      p.m.
      on any business day shall not be deemed effective until the opening of business
      on the next succeeding business day. Orders directing disposition of funds
      will
      apply only to available funds Notwithstanding the foregoing: (i) all
      transactions relating to the Account and any items therein duly consummated
      or
      processed by Mellon prior to its receipt of a Notice of Exclusive Control (or
      duly commenced by Mellon prior to any such receipt and so consummated or
      processed thereafter) shall be deemed not to constitute a violation of this
      Agreement; (ii) Mellon may (at its discretion and without any obligation to
      do
      so) commence honoring solely Administrative Agent’s orders concerning the
      Account at any time or from time to time after it becomes aware that
      Administrative Agent has sent to it a Notice of Exclusive Control (including
      without limitation reversing or redirecting any transaction referred to in
      clause (i) above) with no liability whatsoever to Pledgor or Administrative
      Agent or any other party for doing so; and (iii) Mellon shall not change the
      name or account number of any Account without having received the Administrative
      Agent’s prior express written consent thereto. In case of any conflict between
      instructions received by Mellon from Administrative Agent and Pledgor, the
      instructions from Administrative Agent shall prevail. “Exclusive Control
      Effective Date” means the date of receipt by Mellon of the Notice of Exclusive
      Control in the form of Exhibit A hereto. Such notice shall be in effect until
      Mellon has received from the Administrative Agent a written notice of Pledgor’s
      satisfaction of the release provisions in the separate documentation between
      Pledgor and the Administrative Agent in the form attached as Exhibit B hereto,
      and the date of receipt by Mellon of such notice shall be referred to as the
      “Exclusive Control Termination Date.” Any period between an Exclusive Control
      Effective Date and an Exclusive Control Termination Date shall be referred
      to as
      an Administrative Agent Control Period.

    

    
      
         

      

      
        
          Exhibit
            D/Page 1

        

        
          

        

      

      
         

      

    

    3. Mellon
      is
      authorized to debit the Account in accordance with Mellon’s customary practices
      with respect to (i) payment of customary fees and charges with respect to the
      routine maintenance and operation of the Account and Lockbox (“Fees”) and (ii)
      any items (including, but not limited to, checks, drafts, Automatic
      Clearinghouse (ACH) credits or wire transfers or other electronic transfers
      or
      credits) deposited to the Account and returned or otherwise not collected,
      whether for insufficient funds or any other reason (“Returned Items”), in each
      case as provided for under any agreements between Pledgor and Mellon relating
      to
      the Account. In the event Mellon is unable to obtain sufficient funds from
      such
      charges to cover Fees or Returned Items, Pledgor and, with respect to any
      Administrative Agent Control Period, Pledgor and Administrative Agent, jointly
      and severally, shall indemnify Mellon for all amounts related to the Fees or
      Returned Items incurred by Mellon. Mellon shall neither advance margin or other
      credit against the Account, nor hypothecate any funds deposited in the Account,
      without the prior written consent of Administrative Agent. Except as required
      by
      law, Mellon shall not agree with any other person or entity that it will comply
      with any withdrawal, transfer, payment instructions, or any other orders, from
      such person or entity concerning the Account or any funds therein, without
      the
      prior written consent of Administrative Agent and any such agreement entered
      into without such consent shall be null and void, provided, however, that the
      foregoing shall not apply to any withdrawals, transfers, payment instructions,
      debits or other orders that are the result of any wire drawdowns or ACH debits
      to the Account that have been initiated prior to Mellon’s receipt of a Notice of
      Exclusive Control.

    

    4. Mellon
      represents and warrants to Administrative Agent that: (i) Mellon Bank
      constitutes a “bank” (as defined in Section 9-102 of the Pennsylvania Uniform
      Commercial Code (“UCC”)), and (ii) that the jurisdiction (determined in
      accordance with Section 9-304 of the UCC) of Mellon Bank for purposes of each
      Account maintained by Pledgor with Mellon Bank shall be the Commonwealth of
      Pennsylvania. Mellon will not, without Administrative Agent’s prior written
      consent, amend the Terms and Conditions so that Mellon Bank’s jurisdiction for
      purposes of Section 9-304 of the UCC is other than a jurisdiction permitted
      pursuant to preceding clause (ii). Upon request, Mellon will promptly furnish
      to
      Administrative Agent a copy of the Terms and Conditions. Upon request, Mellon
      shall furnish to Administrative Agent, at its address indicated below, copies
      of
      all monthly account statements and other information relating to each Account
      that Mellon sends to Pledgor and to disclose to Administrative Agent all
      information requested by Administrative Agent regarding the
      Account.

    

    
      
         

      

      
        
          Exhibit
            D/Page 2

        

        
          

        

      

      
         

      

    

    5. Anything
      to the contrary in this Agreement notwithstanding: (i) Mellon shall have only
      the duties and responsibilities expressly set forth in writing herein (and
      in
      its Terms and Conditions as in effect from time to time, all of which shall
      apply to the Account to the extent not inconsistent with this Agreement) and
      shall not be deemed to be a fiduciary for any party hereto; (ii) Mellon shall
      be
      fully protected in acting or refraining from acting in good faith on any written
      notice, instruction or request purportedly furnished to it by Administrative
      Agent in accordance with the terms hereof, in which case the parties hereto
      agree that Mellon has no duty to make any further inquiry whatsoever; (iii)
      unless
      Mellon is grossly negligent or engages in willful misconduct in performance
      or
      non-performance in connection with this Agreement and the Account,
      Pledgor
      and Administrative Agent expressly agree that Mellon’s liability shall be
      limited to damages directly caused by such breach and in no event shall Mellon
      be liable for any incidental, indirect, punitive or consequential damages or
      attorneys’ fees;
      and
      (iv) the Pledgor and, with respect to any Administrative Agent Control Period,
      the Pledgor and the Administrative Agent, jointly and severally, hereby
      indemnify Mellon for, and hold Mellon harmless against, any claim, loss, cost,
      liability or expense (including reasonable inside or outside counsel fees and
      disbursements) incurred or suffered by any
      party
      in connection herewith
      arising
      out of or in connection with this Agreement or the Account, except as may result
      from its willful misconduct or gross negligence.

    

    6. Notwithstanding
      any other provision of this Agreement, Mellon shall not be liable for any
      failure, inability to perform, or delay in performance hereunder, if such
      failure, inability, or delay is due to acts of God, war, civil commotion,
      governmental action, fire, explosion, strikes, other industrial disturbances,
      equipment malfunction, action, non-action or delayed action on the part of
      the
      Pledgor or Administrative Agent or any other entity or any other events or
      circumstances that are beyond Mellon’s reasonable control.

    

    7. Any
      amendment, modification or supplementation of this Agreement shall be effected
      solely by an instrument in writing executed by all the parties hereto.
This
      Agreement may not be terminated by the Pledgor unless the prior written consent
      of Mellon and the Administrative Agent are obtained. Mellon may terminate this
      Agreement: (i) upon ten (10) days prior written notice for cause, or (ii) upon
      thirty (30) days’ prior written notice without cause, in each case, to the
      Pledgor and the Administrative Agent. Administrative Agent may terminate this
      Agreement (i) upon ten (10) days prior written notice for cause, or (ii) upon
      thirty (30) days’ prior written notice without cause, in each case, to Mellon.
      Pledgor’s and Administrative Agent’s obligations, if any, to Mellon under this
      Agreement to indemnify, hold harmless and pay amounts owed shall survive
      termination of this Agreement. Administrative
      Agent shall provide a written notice to Mellon when all obligations of the
      Pledgor
      to Administrative Agent are paid and satisfied in full or when the security
      agreement is terminated.

    

    8. All
      notices shall be in writing and sent (including via facsimile with receipt
      confirmed by telephone) to the parties hereto at their respective addresses
      or
      facsimile or telephone numbers (or to such other address or facsimile and
      telephone numbers as any such party shall designate in writing to the other
      parties from time to time). Notices shall be
      deemed
      to have been properly given when delivered in person, or when sent by facsimile
      or other electronic means and electronic confirmation of error-free receipt
      is
      received, or
      three
      (3) business days after being sent by certified or registered mail, return
      receipt requested, postage prepaid, addressed to the party at the address set
      forth below:

    

    
      
         

      

      
        
          Exhibit
            D/Page 3

        

        
          

        

      

      
         

      

       

      
        
          	
                  Pledgor:

                	[_____________________]
	 	70 Maxess Road
	 	 Melville, New York
                  11747
	 	Attention:	Mr. Kurt
                  Freudenberg
	 	 	Vice President, Treasurer and Chief
                  Financial
                  Officer
	 	Phone:	631-396-5000
	 	Fax:	631-396-5060

        

      

       

    

    
      
        
          	
                  Bank:

                	Mellon Bank, N.A.
	 	Mellon Financial Services
                  Corporation #1
	 	Mellon Client Service
                  Center
	 	500 Ross Street, Room
                  1380
	 	Pittsburgh, PA
                  15262-0001
	 	Attention:	Document Control Group Manager
	 	Phone:	412-234-4172
	 	Fax:	412-236-7419

        

      

    

     

    
      
        
          	
                  Administrative
                    Agent: 

                	Citibank, N.A.
	 	
                  730
                    Veterans Memorial Highway

                
	 	
                  Hauppauge,
                    New York 11788

                
	 	Attention:	Stuart N. Berman
	 	 	
                  Vice
                    President

                
	 	Phone:	631-265-3430
	 	Fax:	631-265-4888

        

      

    

     

    9. This
      Agreement: (i) may be signed in any number of counterparts, each of which shall
      be an original, with the same effect as if the signatures thereto and hereto
      were upon the same instrument; (ii) shall become effective when counterparts
      hereof have been signed by the parties hereto; and (iii) shall be governed
      by
      and construed in accordance with the laws of the Commonwealth of
      Pennsylvania.

    

    10. To
      the
      extent a conflict exists between the terms of this Agreement and the Terms
      and
      Conditions, the terms of this Agreement shall control.

    

    11. The
      provisions of this Agreement shall be binding upon and inure to the benefit
      of
      Mellon, Administrative Agent and Pledgor and their respective successors and
      assigns provided that Pledgor and Mellon may not assign any of their respective
      rights or obligations hereunder without the prior written consent of the
      Administrative Agent, provided however, with respect to Mellon an assignment
      by
      operation of law in connection with a merger or similar transaction will not
      be
      deemed to be an assignment requiring the consent of the Administrative Agent.
      Administrative Agent agrees to provide written notice to Mellon if
      Administrative Agent assigns its rights under this Agreement. 

    

    
      
         

      

      
        
          Exhibit
            D/Page 4

        

        
          

        

      

      
         

      

    

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

    

     

     

    
      	 	
              [______________________________]

              

              

              By:____________________________

              Kurt
                Freudenberg

              Vice
                President, Treasurer and Chief Financial Officer

              

              

              

              Mellon
                Bank, N.A.

              Mellon
                Financial Services Corporation #1

              

              

              By:
                ___________________________

              Name:

              Title:

              

              

              Citibank,
                N.A., as Administrative Agent

              

              

              By:
                ___________________________

              Stuart
                N. Berman

              Vice
                President

            

    

     

     

    
      
         

      

      
        
          Exhibit
            D/Page 5

        

        
          

        

      

      
         

      

    

    

    EXHIBIT
      A

    

    Citibank,
      N.A.

    

    

    NOTICE
      OF
      EXCLUSIVE CONTROL

    

    

    _______________,
      ____

    

    Mellon
      Bank, N.A.

    __________________________

    __________________________

    __________________________

    Attention:
      __________________

    

    

    
      	 	
              Re:

            	
              CONTROL
                AGREEMENT (BANK ACCOUNTS) dated as of November ___, 20___ (the
                “Agreement”) among [___________________], Citibank, N.A., as
                Administrative Agent and Mellon Bank, N.A. relating to Account(s)
                No.
                [_____________________]

            

    

    

    Ladies
      and Gentlemen:

    

    This
      constitutes the Notice of Exclusive Control referred to in paragraph 2 of the
      Agreement. In accordance with paragraph 2 of the Agreement we hereby inform
      you
      that the Exclusive Control Effective Date has occurred upon your receipt
      hereof.

    

    
      
        	 	
                Citibank,
                  N.A.

                

                

                By:
                  ___________________________

                Stuart
                  N. Berman

                Vice
                  President

              

      

    

     

     

    
      
         

      

      
        
          Exhibit
            D/Page 6

        

        
          

        

      

      
         

      

    

    

    EXHIBIT
      B

    

    Citibank,
      N.A.

    

    NOTICE
      OF
      TERMINATION OF EXCLUSIVE CONTROL

    

    

    

    _______________,
      ____

    

    Mellon
      Bank, N.A.

    __________________________

    __________________________

    __________________________

    Attention:
      __________________

    

    

    
      	 	
              Re:

            	
              CONTROL
                AGREEMENT (BANK ACCOUNTS) dated as of November ___, 20___ (the
                “Agreement”) among [____________________], Citibank, N.A., as
                Administrative Agent and Mellon Bank, N.A. relating to Account(s)
                No.
                [____________________]

            

    

    

    Ladies
      and Gentlemen:

    

    This
      constitutes the Notice of Termination of Exclusive Control referred to in
      paragraph 2 of the Agreement. In accordance with paragraph 2 of the Agreement
      we
      hereby inform you that the Exclusive Control Termination Date has occurred
      upon
      your receipt hereof.

    

      

      
        
          	 	
                  Citibank,
                    N.A.

                  

                  

                  By:
                    ___________________________

                  Stuart
                    N. Berman

                  Vice
                    President

                

        

      

    

     

     

    
      
         

      

      
        
          Exhibit
            D/Page 6EXHIBIT
      4.3

     

    NEITHER
      THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE
      BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
      COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
      MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
      OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
      SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
      EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
      SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY
      AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN
      CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
      SECURITIES.

    

    COMMON
      STOCK PURCHASE WARRANT

    

    PACE
      HEALTH MANAGEMENT SYSTEMS, INC.

    
      
        	 	 
	
                Warrant
                  No. ______

              	
                Warrant
                  Shares: _______

              

      

    

     

    THIS
      COMMON STOCK PURCHASE WARRANT (the “Warrant”)
      certifies that, for value received, ____________ (the “Holder”),
      is
      entitled, upon the terms and subject to the limitations on exercise and the
      conditions hereinafter set forth, at any time on or after the date Shareholder
      Approval is obtained and deemed effective (the “Initial
      Exercise Date”)
      and on
      or prior to the close of business on the fifth anniversary of the Initial
      Exercise Date (the “Termination
      Date”)
      but
      not thereafter, to subscribe for and purchase from Pace Health Management
      Systems, Inc., an Iowa corporation (the “Company”),
      up to
      ______ shares (the “Warrant
      Shares”)
      of
      common stock, no par value per share (the “Common
      Stock”),
      of
      the Company. The purchase price of one share of Common Stock under this Warrant
      shall be equal to the Exercise Price, as defined in Section 2(b). 

     

    Section
      1.    Definitions.
      Capitalized terms used and not otherwise defined herein shall have the meanings
      set forth in that certain Securities Purchase Agreement (the “Purchase
      Agreement”),
      dated
      January 24, 2007, among the Company and the purchasers signatory
      thereto.

     

    Section
      2.    Exercise.

     

    a)    Exercise
      of Warrant.
      Exercise of the purchase rights represented by this Warrant may be made, in
      whole or in part, at any time or times on or after the Initial Exercise Date
      and
      on or before the Termination Date by delivery to the Company of a duly executed
      facsimile copy of the Notice of Exercise Form annexed hereto (or
      such

    
      
         

      

      
        -1-

        
          

        

      

      
         

      

    

     

    other
      office or agency of the Company as it may designate by notice in writing to
      the
      registered Holder at the address of such Holder appearing on the books of the
      Company); and, within 3 Trading Days of the date said Notice of Exercise is
      delivered to the Company, the Company shall have received payment of the
      aggregate Exercise Price of the Warrant Shares thereby purchased by wire
      transfer or cashier’s check drawn on a United States bank. Notwithstanding
      anything herein to the contrary, the Holder shall not be required to physically
      surrender this Warrant to the Company until the Holder has purchased all of
      the
      Warrant Shares available hereunder and the Warrant has been exercised in full,
      in which case, the Holder shall surrender this Warrant to the Company for
      cancellation within 3 Trading Days of the date the final Notice of Exercise
      is
      delivered to the Company. Partial exercises of this Warrant resulting in
      purchases of a portion of the total number of Warrant Shares available hereunder
      shall have the effect of lowering the outstanding number of Warrant Shares
      purchasable hereunder in an amount equal to the applicable number of Warrant
      Shares purchased. The Holder and the Company shall maintain records showing
      the
      number of Warrant Shares purchased and the date of such purchases. The Company
      shall deliver any objection to any Notice of Exercise Form within 1 Business
      Day
      of receipt of such notice. In the event of any dispute or discrepancy, the
      Notice of Exercise shall be controlling and determinative in the absence of
      manifest error. The Holder and any assignee, by acceptance of this Warrant,
      acknowledge and agree that, by reason of the provisions of this paragraph,
      following the purchase of a portion of the Warrant Shares hereunder, the number
      of Warrant Shares available for purchase hereunder at any given time may be
      less
      than the amount stated on the face hereof.

     

    b)    Exercise
      Price.
      The
      exercise price per Warrant Share under this Warrant shall be $0.30, subject
      to
      adjustment hereunder (the “Exercise
      Price”).

     

    c)    Cashless
      Exercise.
      If at
      any time after one year from the date of issuance of this Warrant there is
      no
      effective Registration Statement registering, or no current prospectus available
      for, the resale of the Warrant Shares by the Holder, then this Warrant may
      also
      be exercised at such time by means of a “cashless exercise” in which the Holder
      shall be entitled to receive a certificate for the number of Warrant Shares
      equal to the quotient obtained by dividing [(A-B) (X)] by (A),
      where:

     

    (A)
      = the
      VWAP on the Trading Day immediately preceding the date of such
      election;

    

    (B)
      = the
      Exercise Price of this Warrant, as adjusted; and 

    

    (X)
      = the
      number of Warrant Shares issuable upon exercise of this Warrant in accordance
      with the terms of this Warrant by means of a cash exercise rather than a
      cashless exercise.

    

    Notwithstanding
      anything herein to the contrary, on the Termination Date, this Warrant shall
      be
      automatically exercised via cashless exercise pursuant to this Section
      2(c).

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

    d)    Holder’s
      Restrictions.
      The
      Company shall not effect any exercise of this Warrant, and a Holder shall not
      have the right to exercise any portion of this Warrant, pursuant to Section
      2(c)
      or otherwise, to the extent that after giving effect to such issuance after
      exercise as set forth on the applicable Notice of Exercise, such Holder
      (together with such Holder’s Affiliates, and any other person or entity acting
      as a group together with such Holder or any of such Holder’s Affiliates), as set
      forth on the applicable Notice of Exercise, would beneficially own in excess
      of
      the Beneficial Ownership Limitation (as defined below).  For purposes of
      the foregoing sentence, the number of shares of Common Stock beneficially owned
      by such Holder and its Affiliates shall include the number of shares of Common
      Stock issuable upon exercise of this Warrant with respect to which such
      determination is being made, but shall exclude the number of shares of Common
      Stock which would be issuable upon (A) exercise of the remaining, nonexercised
      portion of this Warrant beneficially owned by such Holder or any of its
      Affiliates and (B) exercise or conversion of the unexercised or nonconverted
      portion of any other securities of the Company (including, without limitation,
      any other Preferred Stock) subject to a limitation on conversion or exercise
      analogous to the limitation contained herein beneficially owned by such Holder
      or any of its affiliates.  Except as set forth in the preceding sentence,
      for purposes of this Section 2(d), beneficial ownership shall be calculated
      in
      accordance with Section 13(d) of the Exchange Act and the rules and regulations
      promulgated thereunder, it being acknowledged by a Holder that the Company
      is
      not representing to such Holder that such calculation is in compliance with
      Section 13(d) of the Exchange Act and such Holder is solely responsible for
      any
      schedules required to be filed in accordance therewith. To the extent that
      the
      limitation contained in this Section 2(d) applies, the determination of whether
      this Warrant is exercisable (in relation to other securities owned by such
      Holder together with any Affiliates) and of which a portion of this Warrant
      is
      exercisable shall be in the sole discretion of a Holder, and the submission
      of a
      Notice of Exercise shall be deemed to be each Holder’s determination of whether
      this Warrant is exercisable (in relation to other securities owned by such
      Holder together with any Affiliates) and of which portion of this Warrant is
      exercisable, in each case subject to such aggregate percentage limitation,
      and
      the Company shall have no obligation to verify or confirm the accuracy of such
      determination. In addition, a determination as to any group status as
      contemplated above shall be determined in accordance with Section 13(d) of
      the
      Exchange Act and the rules and regulations promulgated thereunder. For purposes
      of this Section 2(d), in determining the number of outstanding shares of Common
      Stock, a Holder may rely on the number of outstanding shares of Common Stock
      as
      reflected in (x) the Company’s most recent Form 10-QSB or Form 10-KSB, as the
      case may be, (y) a more recent public announcement by the Company or (z) any
      other notice by the Company or the Company’s Transfer Agent setting forth the
      number of shares of Common Stock

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

    outstanding. 
      Upon the written or oral request of a Holder, the Company shall within two
      Trading Days confirm orally and in writing to such Holder the number of shares
      of Common Stock then outstanding.  In any case, the number of outstanding
      shares of Common Stock shall be determined after giving effect to the conversion
      or exercise of securities of the Company, including this Warrant, by such Holder
      or its Affiliates since the date as of which such number of outstanding shares
      of Common Stock was reported. The “Beneficial
      Ownership Limitation”
shall
      be 9.99% of the number of shares of the Common Stock outstanding immediately
      after giving effect to the issuance of shares of Common Stock issuable upon
      exercise of this Warrant. The provisions of this paragraph shall be construed
      and implemented in a manner otherwise than in strict conformity with the terms
      of this Section 2(d) to correct this paragraph (or any portion hereof) which
      may
      be defective or inconsistent with the intended Beneficial Ownership Limitation
      herein contained or to make changes or supplements necessary or desirable to
      properly give effect to such limitation. The limitations contained in this
      paragraph shall apply to a successor holder of this Warrant.

     

    e)    Mechanics
      of Exercise.

     

    i.    Authorization
      of Warrant Shares.
      The
      Company covenants that all Warrant Shares which may be issued upon the exercise
      of the purchase rights represented by this Warrant and payment of the purchase
      price for the Warrant Shares so purchased will, upon exercise of the purchase
      rights represented by this Warrant, be duly authorized, validly issued, fully
      paid and nonassessable and free from all taxes, liens and charges created by
      the
      Company in respect of the issue thereof (other than taxes in respect of any
      transfer occurring contemporaneously with such issue). 

     

    ii.    Delivery
      of Certificates Upon Exercise.
      Certificates for shares purchased hereunder shall be transmitted by the transfer
      agent of the Company to the Holder by crediting the account of the Holder’s
      prime broker with the Depository Trust Company through its Deposit Withdrawal
      Agent Commission (“DWAC”)
      system
      if the Company is a participant in such system, and otherwise by physical
      delivery to the address specified by the Holder in the Notice of Exercise within
      3 Trading Days from the delivery to the Company of the Notice of Exercise Form,
      surrender of this Warrant (if required) and payment of the aggregate Exercise
      Price as set forth above (“Warrant
      Share Delivery Date”).
      This
      Warrant shall be deemed to have been exercised on the date the Exercise Price
      is
      received by the Company. The Warrant Shares shall be deemed to have been issued,
      and Holder or any other person so designated to be named therein shall be deemed
      to have become a holder of record of such shares for all purposes, as of the
      date the Warrant has been exercised by payment to the Company of the Exercise
      Price (or by cashless exercise, if

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

    permitted)
      and all taxes required to be paid by the Holder, if any, pursuant to Section
      2(e)(vii) prior to the issuance of such shares, have been paid. 

     

    iii.    Delivery
      of New Warrants Upon Exercise.
      If this
      Warrant shall have been exercised in part, the Company shall, at the request
      of
      a Holder and upon surrender of this Warrant certificate, at the time of delivery
      of the certificate or certificates representing Warrant Shares, deliver to
      Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased
      Warrant Shares called for by this Warrant, which new Warrant shall in all other
      respects be identical with this Warrant.

     

    iv.    Rescission
      Rights.
      If the
      Company fails to cause its transfer agent to transmit to the Holder a
      certificate or certificates representing the Warrant Shares pursuant to this
      Section 2(e)(iv) by the second Trading Day following the Warrant Share Delivery
      Date, then the Holder will have the right to rescind such exercise.

     

    v.    Compensation
      for Buy-In on Failure to Timely Deliver Certificates Upon
      Exercise.
      In
      addition to any other rights available to the Holder, if the Company fails
      to
      cause its transfer agent to transmit to the Holder a certificate or certificates
      representing the Warrant Shares pursuant to an exercise on or before the second
      Trading Day following the Warrant Share Delivery Date, and if after such date
      the Holder is required by its broker to purchase (in an open market transaction
      or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of
      Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant
      Shares which the Holder anticipated receiving upon such exercise (a
“Buy-In”),
      then
      the Company shall (1) pay in cash to the Holder the amount by which (x) the
      Holder’s total purchase price (including brokerage commissions, if any) for the
      shares of Common Stock so purchased exceeds (y) the amount obtained by
      multiplying (A) the number of Warrant Shares that the Company was required
      to
      deliver to the Holder in connection with the exercise at issue times (B) the
      price at which the sell order giving rise to such purchase obligation was
      executed, and (2) at the option of the Holder, either reinstate the portion
      of
      the Warrant and equivalent number of Warrant Shares for which such exercise
      was
      not honored or deliver to the Holder the number of shares of Common Stock that
      would have been issued had the Company timely complied with its exercise and
      delivery obligations hereunder. For example, if the Holder purchases Common
      Stock having a total purchase price of $11,000 to cover a Buy-In with respect
      to
      an attempted exercise of shares of Common Stock with an aggregate sale price
      giving rise to such purchase obligation of $10,000, under clause (1) of the
      immediately preceding sentence the Company shall be required to pay the Holder
      $1,000. The Holder shall provide the Company written notice indicating the
      amounts payable to the

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

    Holder
      in
      respect of the Buy-In and, upon request of the Company, evidence of the amount
      of such loss. Nothing herein shall limit a Holder’s right to pursue any other
      remedies available to it hereunder, at law or in equity including, without
      limitation, a decree of specific performance and/or injunctive relief with
      respect to the Company’s failure to timely deliver certificates representing
      shares of Common Stock upon exercise of the Warrant as required pursuant to
      the
      terms hereof.

     

    vi.    No
      Fractional Shares or Scrip.
      No
      fractional shares or scrip representing fractional shares shall be issued upon
      the exercise of this Warrant. As to any fraction of a share which Holder would
      otherwise be entitled to purchase upon such exercise, the Company shall at
      its
      election, either pay a cash adjustment in respect of such final fraction in
      an
      amount equal to such fraction multiplied by the Exercise Price or round up
      to
      the next whole share.

     

    vii.    Charges,
      Taxes and Expenses.
      Issuance of certificates for Warrant Shares shall be made without charge to
      the
      Holder for any issue or transfer tax or other incidental expense in respect
      of
      the issuance of such certificate, all of which taxes and expenses shall be
      paid
      by the Company, and such certificates shall be issued in the name of the Holder
      or in such name or names as may be directed by the Holder; provided,
      however,
      that in
      the event certificates for Warrant Shares are to be issued in a name other
      than
      the name of the Holder, this Warrant when surrendered for exercise shall be
      accompanied by the Assignment Form attached hereto duly executed by the Holder;
      and the Company may require, as a condition thereto, the payment of a sum
      sufficient to reimburse it for any transfer tax incidental thereto.

     

    viii.    Closing
      of Books.
      The
      Company will not close its stockholder books or records in any manner which
      prevents the timely exercise of this Warrant, pursuant to the terms
      hereof.

     

    Section
      3.    Certain Adjustments.

     

    a)    Stock
      Dividends and Splits.
      Other
      than (a) in accordance with the Reverse Merger or (b) the transactions for
      which
      Shareholder Approval is being obtained, if the Company, at any time while this
      Warrant is outstanding: (A) pays a stock dividend or otherwise make a
      distribution or distributions on shares of its Common Stock or any other equity
      or equity equivalent securities payable in shares of Common Stock (which, for
      avoidance of doubt, shall not include any shares of Common Stock issued by
      the
      Company upon exercise of this Warrant), (B) subdivides outstanding shares of
      Common Stock into a larger number of shares, (C) combines (including by way
      of
      reverse stock split) outstanding shares of Common Stock into a smaller number
      of
      shares, or (D) issues by reclassification of shares of the Common Stock any
      shares of capital stock of the Company, then in each case the Exercise Price
      shall be multiplied by a fraction of which the numerator shall be the number
      of
      shares of Common Stock (excluding treasury

     

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

    shares,
      if any) outstanding immediately before such event and of which the denominator
      shall be the number of shares of Common Stock outstanding immediately after
      such
      event and the number of shares issuable upon exercise of this Warrant shall
      be
      proportionately adjusted. Any adjustment made pursuant to this Section 3(a)
      shall become effective immediately after the record date for the determination
      of stockholders entitled to receive such dividend or distribution and shall
      become effective immediately after the effective date in the case of a
      subdivision, combination or re-classification.

     

    b)    Subsequent
      Equity Sales.
      If the
      Company or any Subsidiary thereof, as applicable, at any time while this Warrant
      is outstanding, shall sell or grant any option to purchase or sell or grant
      any
      right to reprice its securities, or otherwise dispose of or issue (or announce
      any offer, sale, grant or any option to purchase or other disposition) any
      Common Stock or Common Stock Equivalents entitling any Person to acquire shares
      of Common Stock, at an effective price per share less than the then Exercise
      Price (such lower price, the “Base
      Share Price”
and
      such issuances collectively, a “Dilutive
      Issuance”)
      (if
      the holder of the Common Stock or Common Stock Equivalents so issued shall
      at
      any time, whether by operation of purchase price adjustments, reset provisions,
      floating conversion, exercise or exchange prices or otherwise, or due to
      warrants, options or rights per share which are issued in connection with such
      issuance, be entitled to receive shares of Common Stock at an effective price
      per share which is less than the Exercise Price, such issuance shall be deemed
      to have occurred for less than the Exercise Price on such date of the Dilutive
      Issuance), then the Exercise Price shall be reduced and only reduced to equal
      the Base Share Price and the number of Warrant Shares issuable hereunder shall
      be increased such that the aggregate Exercise Price payable hereunder, after
      taking into account the decrease in the Exercise Price, shall be equal to the
      aggregate Exercise Price prior to such adjustment. Such adjustment shall be
      made
      whenever such Common Stock or Common Stock Equivalents are issued.
      Notwithstanding the foregoing, no adjustments shall be made, paid or issued
      under this Section 3(b) in respect of an Exempt Issuance. The Company shall
      notify the Holder in writing, no later than the Trading Day following the
      issuance of any Common Stock or Common Stock Equivalents subject to this Section
      3(b), indicating therein the applicable issuance price, or applicable reset
      price, exchange price, conversion price and other pricing terms (such notice
      the
“Dilutive
      Issuance Notice”).
      For
      purposes of clarification, whether or not the Company provides a Dilutive
      Issuance Notice pursuant to this Section 3(b), upon the occurrence of any
      Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
      entitled to receive a number of Warrant Shares based upon the Base Share Price
      regardless of whether the Holder accurately refers to the Base Share Price
      in
      the Notice of Exercise.

     

    c)    Subsequent
      Rights Offerings.
      If the
      Company, at any time while the Warrant is outstanding, shall issue rights,
      options or warrants to all holders of Common Stock (and not to Holders)
      entitling them to subscribe for or purchase shares of Common Stock at a price
      per share less than the VWAP at the record date mentioned below, then the
      Exercise Price shall be multiplied by a fraction, of which the denominator
      shall
      be the number of shares of the Common Stock outstanding on the date of issuance
      of such rights or warrants plus the number of additional shares of Common Stock
      offered for subscription or purchase, and of which the numerator shall be the
      number of shares of the

     

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

    

    Common
      Stock outstanding on the date of issuance of such rights or warrants plus the
      number of shares which the aggregate offering price of the total number of
      shares so offered (assuming receipt by the Company in full of all consideration
      payable upon exercise of such rights, options or warrants) would purchase at
      such VWAP. Such adjustment shall be made whenever such rights or warrants are
      issued, and shall become effective immediately after the record date for the
      determination of stockholders entitled to receive such rights, options or
      warrants. 

     

    d)    Pro
      Rata Distributions.
      If the
      Company, at any time prior to the Termination Date, shall distribute to all
      holders of Common Stock (and not to Holders of the Warrants) evidences of its
      indebtedness or assets (including cash and cash dividends) or rights or warrants
      to subscribe for or purchase any security other than the Common Stock (which
      shall be subject to Section 3(b)), then in each such case the Exercise Price
      shall be adjusted by multiplying the Exercise Price in effect immediately prior
      to the record date fixed for determination of stockholders entitled to receive
      such distribution by a fraction of which the denominator shall be the VWAP
      determined as of the record date mentioned above, and of which the numerator
      shall be such VWAP on such record date less the then per share fair market
      value
      at such record date of the portion of such assets or evidence of indebtedness
      so
      distributed applicable to one outstanding share of the Common Stock as
      determined by the Board of Directors in good faith. In either case the
      adjustments shall be described in a statement provided to the Holder of the
      portion of assets or evidences of indebtedness so distributed or such
      subscription rights applicable to one share of Common Stock. Such adjustment
      shall be made whenever any such distribution is made and shall become effective
      immediately after the record date mentioned above.

     

    e)    Fundamental
      Transaction.
      If, at
      any time while this Warrant is outstanding, (A) the Company effects any merger
      or consolidation of the Company with or into another Person, (B) the Company
      effects any sale of all or substantially all of its assets in one or a series
      of
      related transactions, (C) any tender offer or exchange offer (whether by the
      Company or another Person) is completed pursuant to which holders of Common
      Stock are permitted to tender or exchange their shares for other securities,
      cash or property, or (D) the Company effects any reclassification of the Common
      Stock or any compulsory share exchange pursuant to which the Common Stock is
      effectively converted into or exchanged for other securities, cash or property
      (each “Fundamental
      Transaction”),
      then,
      upon any subsequent exercise of this Warrant, the Holder shall have the right
      to
      receive, for each Warrant Share that would have been issuable upon such exercise
      immediately prior to the occurrence of such Fundamental Transaction, the number
      of shares of Common Stock of the successor or acquiring corporation or of the
      Company, if it is the surviving corporation, and any additional consideration
      (the “Alternate
      Consideration”)
      receivable as a result of such merger, consolidation or disposition of assets
      by
      a Holder of the number of shares of Common Stock for which this Warrant is
      exercisable immediately prior to such event. For purposes of any such exercise,
      the determination of the Exercise Price shall be appropriately adjusted to
      apply
      to such Alternate Consideration based on the amount of Alternate Consideration
      issuable in respect of one share of Common Stock in such Fundamental
      Transaction, and the Company shall apportion the Exercise Price among the
      Alternate Consideration in a

    
      
         

      

      
        -8-

        
          

        

      

      
         

      

    

    reasonable
      manner reflecting the relative value of any different components of the
      Alternate Consideration. If holders of Common Stock are given any choice as
      to
      the securities, cash or property to be received in a Fundamental Transaction,
      then the Holder shall be given the same choice as to the Alternate Consideration
      it receives upon any exercise of this Warrant following such Fundamental
      Transaction. To the extent necessary to effectuate the foregoing provisions,
      any
      successor to the Company or surviving entity in such Fundamental Transaction
      shall issue to the Holder a new warrant consistent with the foregoing provisions
      and evidencing the Holder’s right to exercise such warrant into Alternate
      Consideration. The terms of any agreement pursuant to which a Fundamental
      Transaction is effected shall include terms requiring any such successor or
      surviving entity to comply with the provisions of this Section 3(e) and insuring
      that this Warrant (or any such replacement security) will be similarly adjusted
      upon any subsequent transaction analogous to a Fundamental Transaction.
      Notwithstanding anything to the contrary, in the event of a Fundamental
      Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction”
as defined in Rule 13e-3 under the Securities Exchange Act of 1934, as amended,
      or (3) a Fundamental Transaction involving a person or entity not traded on
      a
      national securities exchange, the Nasdaq Global Select Market, the Nasdaq Global
      Market, the Nasdaq Capital Market, the Company or any successor entity shall
      pay
      at the Holder’s option, exercisable at any time concurrently with or within 30
      days after the consummation of the Fundamental Transaction, an amount of cash
      equal to the value of this Warrant as determined in accordance with the
      Black-Scholes option pricing formula using an expected volatility equal to
      the
      100 day historical price volatility obtained from the HVT function on Bloomberg
      L.P. as of the trading day immediately prior to the public announcement of
      the
      Fundamental Transaction. Notwithstanding anything contained herein to the
      contrary, neither the Reverse Merger nor any action taken as a result of the
      obtaining of Shareholder Approval shall be deemed a Fundamental
      Transaction.

     

    f)    Calculations.
      All
      calculations under this Section 3 shall be made to the nearest cent or the
      nearest 1/100th of a share, as the case may be. For purposes of this Section
      3,
      the number of shares of Common Stock deemed to be issued and outstanding as
      of a
      given date shall be the sum of the number of shares of Common Stock (excluding
      treasury shares, if any) issued and outstanding.

     

    g)    Voluntary
      Adjustment By Company.
      The
      Company may at any time during the term of this Warrant reduce the then current
      Exercise Price to any amount and for any period of time deemed appropriate
      by
      the Board of Directors of the Company.

     

    h)    Notice
      to Holder.
      

     

    i.    Adjustment
      to Exercise Price.
      Whenever the Exercise Price is adjusted pursuant to any provision of this
      Section 3, the Company shall promptly mail to the Holder a notice setting forth
      the Exercise Price after such adjustment and setting forth a brief statement
      of
      the facts requiring such adjustment. If the Company issues a variable rate
      security, despite the prohibition thereon in the Purchase Agreement, the Company
      shall be deemed to have issued Common Stock or Common Stock Equivalents
      at

     

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

    the
      lowest possible conversion or exercise price at which such securities may be
      converted or exercised in the case of a Variable Rate Transaction (as defined
      in
      the Purchase Agreement).

     

    ii.    Notice
      to Allow Exercise by Holder.
      If (A)
      the Company shall declare a dividend (or any other distribution in whatever
      form) on the Common Stock; (B) the Company shall declare a special nonrecurring
      cash dividend on or a redemption of the Common Stock; (C) the Company shall
      authorize the granting to all holders of the Common Stock rights or warrants
      to
      subscribe for or purchase any shares of capital stock of any class or of any
      rights; (D) the approval of any stockholders of the Company shall be required
      in
      connection with any reclassification of the Common Stock, any consolidation
      or
      merger to which the Company is a party, any sale or transfer of all or
      substantially all of the assets of the Company, of any compulsory share exchange
      whereby the Common Stock is converted into other securities, cash or property
      (other than in connection with the Reverse Merger or Shareholder Approval);
      (E)
      the Company shall authorize the voluntary or involuntary dissolution,
      liquidation or winding up of the affairs of the Company; then, in each case,
      the
      Company shall cause to be mailed to the Holder at its last address as it shall
      appear upon the Warrant Register of the Company, at least 20 calendar days
      prior
      to the applicable record or effective date hereinafter specified, a notice
      stating (x) the date on which a record is to be taken for the purpose of such
      dividend, distribution, redemption, rights or warrants, or if a record is not
      to
      be taken, the date as of which the holders of the Common Stock of record to
      be
      entitled to such dividend, distributions, redemption, rights or warrants are
      to
      be determined or (y) the date on which such reclassification, consolidation,
      merger, sale, transfer or share exchange is expected to become effective or
      close, and the date as of which it is expected that holders of the Common Stock
      of record shall be entitled to exchange their shares of the Common Stock for
      securities, cash or other property deliverable upon such reclassification,
      consolidation, merger, sale, transfer or share exchange; provided that the
      failure to mail such notice or any defect therein or in the mailing thereof
      shall not affect the validity of the corporate action required to be specified
      in such notice. The Holder is entitled to exercise this Warrant during the
      20-day period commencing on the date of such notice to the effective date of
      the
      event triggering such notice.

     

    Section
      4.    Transfer
      of Warrant.

     

    a)    Transferability.
      Subject
      to compliance with any applicable securities laws and the conditions set forth
      in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase
      Agreement, this Warrant and all rights hereunder (including, without limitation,
      any registration rights) are transferable, in whole or in part, upon surrender
      of this Warrant at the principal office of the Company or its designated agent,
      together with a written assignment of this Warrant substantially in the form
      attached hereto duly

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

    executed
      by the Holder or its agent or attorney and funds sufficient to pay any transfer
      taxes payable upon the making of such transfer. Upon such surrender and, if
      required, such payment, the Company shall execute and deliver a new Warrant
      or
      Warrants in the name of the assignee or assignees and in the denomination or
      denominations specified in such instrument of assignment, and shall issue to
      the
      assignor a new Warrant evidencing the portion of this Warrant not so assigned,
      and this Warrant shall promptly be cancelled. A Warrant, if properly assigned,
      may be exercised by a new holder for the purchase of Warrant Shares without
      having a new Warrant issued. 

     

    b)    New
      Warrants.
      This
      Warrant may be divided or combined with other Warrants upon presentation hereof
      at the aforesaid office of the Company, together with a written notice
      specifying the names and denominations in which new Warrants are to be issued,
      signed by the Holder or its agent or attorney. Subject to compliance with
      Section 4(a), as to any transfer which may be involved in such division or
      combination, the Company shall execute and deliver a new Warrant or Warrants
      in
      exchange for the Warrant or Warrants to be divided or combined in accordance
      with such notice.

     

    c)    Warrant
      Register.
      The
      Company shall register this Warrant, upon records to be maintained by the
      Company for that purpose (the “Warrant
      Register”),
      in
      the name of the record Holder hereof from time to time. The Company may deem
      and
      treat the registered Holder of this Warrant as the absolute owner hereof for
      the
      purpose of any exercise hereof or any distribution to the Holder, and for all
      other purposes, absent actual notice to the contrary.

     

    d)    Transfer
      Restrictions.
      If,
      at the
time
      of
      the surrender of this Warrant in connection with any transfer of this Warrant,
      the transfer of this Warrant shall not be registered pursuant to an effective
      registration
      statement under the Securities Act
      and
under
      applicable state securities or blue sky laws, the Company may require, as a
      condition of allowing such transfer, that (i) the Holder or transferee of this
      Warrant, as the case may be, furnish to the Company a written opinion of counsel
      (which opinion shall be in form, substance and scope customary for opinions
      of
      counsel in comparable transactions) to the effect that such transfer may be
      made
      without
      registration under
      the
      Securities Act and under applicable state securities or blue sky laws, and
      (ii)
      the Holder or transferee execute and deliver to the Company an investment letter
      in form and substance acceptable to the Company, and (iii) the transferee be
      an
“accredited
      investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8)
      promulgated under the Securities Act or a “qualified institutional buyer” as
      defined in Rule 144A(a) promulgated under the Securities Act.

     

    Section
      5.    Miscellaneous.

     

    a)    No
      Rights as Shareholder Until Exercise.
      This
      Warrant does not entitle the Holder to any voting rights or other rights as
      a
      shareholder of the Company prior to the exercise hereof as set forth in Section
      2(e)(ii). 

     

    b)    Loss,
      Theft, Destruction or Mutilation of Warrant.
      The
      Company covenants that upon receipt by the Company of evidence reasonably
      satisfactory to it of

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    

    the
      loss,
      theft, destruction or mutilation of this Warrant or any stock certificate
      relating to the Warrant Shares, and in case of loss, theft or destruction,
      of
      indemnity or security reasonably satisfactory to it (which, in the case of
      the
      Warrant, shall not include the posting of any bond), and upon surrender and
      cancellation of such Warrant or stock certificate, if mutilated, the Company
      will make and deliver a new Warrant or stock certificate of like tenor and
      dated
      as of such cancellation, in lieu of such Warrant or stock
      certificate.

     

    c)    Saturdays,
      Sundays, Holidays, etc.
      If the
      last or appointed day for the taking of any action or the expiration of any
      right required or granted herein shall not be a Business Day, then such action
      may be taken or such right may be exercised on the next succeeding Business
      Day.

     

    d)    Authorized
      Shares.
      

     

    The
      Company covenants that during the period the Warrant is outstanding, it will
      reserve from its authorized and unissued Common Stock a sufficient number of
      shares to provide for the issuance of the Warrant Shares upon the exercise
      of
      any purchase rights under this Warrant. The Company further covenants that
      its
      issuance of this Warrant shall constitute full authority to its officers who
      are
      charged with the duty of executing stock certificates to execute and issue
      the
      necessary certificates for the Warrant Shares upon the exercise of the purchase
      rights under this Warrant. The Company will take all such reasonable action
      as
      may be necessary to assure that such Warrant Shares may be issued as provided
      herein without violation of any applicable law or regulation, or of any
      requirements of the Trading Market upon which the Common Stock may be listed.
      

     

    Except
      and to the extent as waived or consented to by the Holder, the Company shall
      not
      by any action, including, without limitation, amending its certificate of
      incorporation or through any reorganization, transfer of assets, consolidation,
      merger, dissolution, issue or sale of securities or any other voluntary action,
      avoid or seek to avoid the observance or performance of any of the terms of
      this
      Warrant, but will at all times in good faith assist in the carrying out of
      all
      such terms and in the taking of all such actions as may be necessary or
      appropriate to protect the rights of Holder as set forth in this Warrant against
      impairment. Without limiting the generality of the foregoing, the Company will
      (a) not increase the par value of any Warrant Shares above the amount payable
      therefor upon such exercise immediately prior to such increase in par value,
      (b)
      take all such action as may be necessary or appropriate in order that the
      Company may validly and legally issue fully paid and nonassessable Warrant
      Shares upon the exercise of this Warrant, and (c) use commercially reasonable
      efforts to obtain all such authorizations, exemptions or consents from any
      public regulatory body having jurisdiction thereof as may be necessary to enable
      the Company to perform its obligations under this Warrant.

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

    Before
      taking any action which would result in an adjustment in the number of Warrant
      Shares for which this Warrant is exercisable or in the Exercise Price, the
      Company shall obtain all such authorizations or exemptions thereof, or consents
      thereto, as may be necessary from any public regulatory body or bodies having
      jurisdiction thereof.

     

    e)    Jurisdiction.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Warrant shall be determined in accordance with the provisions of the
      Purchase Agreement.

     

    f)    Restrictions.
      The
      Holder acknowledges that the Warrant Shares acquired upon the exercise of this
      Warrant, if not registered, will have restrictions upon resale imposed by state
      and federal securities laws.

     

    g)    Nonwaiver
      and Expenses.
      No
      course of dealing or any delay or failure to exercise any right hereunder on
      the
      part of Holder shall operate as a waiver of such right or otherwise prejudice
      Holder’s rights, powers or remedies, notwithstanding the fact that all rights
      hereunder terminate on the Termination Date. If the Company willfully and
      knowingly fails to comply with any provision of this Warrant, which results
      in
      any material damages to the Holder, the Company shall pay to Holder such amounts
      as shall be sufficient to cover any costs and expenses including, but not
      limited to, reasonable attorneys’ fees, including those of appellate
      proceedings, incurred by Holder in collecting any amounts due pursuant hereto
      or
      in otherwise enforcing any of its rights, powers or remedies
      hereunder.

     

    h)    Notices.
      Any
      notice, request or other document required or permitted to be given or delivered
      to the Holder by the Company shall be delivered in accordance with the notice
      provisions of the Purchase Agreement.

     

    i)    Limitation
      of Liability.
      No
      provision hereof, in the absence of any affirmative action by Holder to exercise
      this Warrant to purchase Warrant Shares, and no enumeration herein of the rights
      or privileges of Holder, shall give rise to any liability of Holder for the
      purchase price of any Common Stock or as a stockholder of the Company, whether
      such liability is asserted by the Company or by creditors of the
      Company.

     

    j)    Remedies.
      Holder,
      in addition to being entitled to exercise all rights granted by law, including
      recovery of damages, will be entitled to specific performance of its rights
      under this Warrant. The Company agrees that monetary damages would not be
      adequate compensation for any loss incurred by reason of a breach by it of
      the
      provisions of this Warrant and hereby agrees to waive and not to assert the
      defense in any action for specific performance that a remedy at law would be
      adequate.

     

    k)    Successors
      and Assigns.
      Subject
      to applicable securities laws, this Warrant and the rights and obligations
      evidenced hereby shall inure to the benefit of and be binding upon the
      successors of the Company and the successors and permitted assigns of Holder.
      The provisions of this Warrant are intended to be for the benefit of all
      Holders

    
      
         

      

      
        -13-

        
          

        

      

      
         

      

    

    from
      time
      to time of this Warrant and shall be enforceable by any such Holder or holder
      of
      Warrant Shares.

     

    l)    Amendment.
      This
      Warrant may be modified or amended or the provisions hereof waived with the
      written consent of the Company and the Holder.

     

    m)    Severability.
      Wherever possible, each provision of this Warrant shall be interpreted in such
      manner as to be effective and valid under applicable law, but if any provision
      of this Warrant shall be prohibited by or invalid under applicable law, such
      provision shall be ineffective to the extent of such prohibition or invalidity,
      without invalidating the remainder of such provisions or the remaining
      provisions of this Warrant.

     

    n)    Headings.
      The
      headings used in this Warrant are for the convenience of reference only and
      shall not, for any purpose, be deemed a part of this Warrant.

     

    ********************

    
      
         

      

      
        -14-

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
      officer thereunto duly authorized as of the date first above
      indicated.

     

    

     

    
      	
              PACE
                HEALTH MANAGEMENT SYSTEMS, INC.

            
	 
	 
	
              By:__________________________________________

              Name:
                John Pappajohn

              Title:
                President & Chief Executive
                Officer

            

    

    
 

    
      
         

      

      
        -15-

        
          

        

      

      
         

      

    

     

    NOTICE
      OF EXERCISE

    

    TO:_______________________

    

    (1)    The
      undersigned hereby elects to purchase ________ Warrant Shares of the Company
      pursuant to the terms of the attached Warrant (only if exercised in full),
      and
      tenders herewith payment of the exercise price in full, together with all
      applicable transfer taxes, if any.

     

    (2)    Payment
      shall take the form of (check applicable box):

     

    [
      ]
      lawful money of the United States; or

     

    [
      ] [if
      permitted] the cancellation of such number of Warrant Shares as is necessary,
      in
      accordance with the formula set forth in subsection 2(c), to exercise this
      Warrant with respect to the maximum number of Warrant Shares purchasable
      pursuant to the cashless exercise procedure set forth in subsection
      2(c).

     

    (3)    Please
      issue a certificate or certificates representing said Warrant Shares in the
      name
      of the undersigned or in such other name as is specified below:

     

    _______________________________

     

    

    The
      Warrant Shares shall be delivered to the following DWAC Account Number or by
      physical delivery of a certificate to:

    

    _______________________________

     

    _______________________________

     

    _______________________________

    

    (4)    Accredited
      Investor.
      The
      undersigned is an “accredited investor” as defined in Regulation D promulgated
      under the Securities Act of 1933, as amended.

    

    [SIGNATURE
      OF HOLDER]

     

    Name
      of
      Investing Entity:
      ________________________________________________________________________

    Signature
      of Authorized Signatory of Investing Entity:
      _________________________________________________

    Name
      of
      Authorized Signatory:
      ___________________________________________________________________

    Title
      of
      Authorized Signatory:
      ____________________________________________________________________

    Date:
      ________________________________________________________________________________________

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    ASSIGNMENT
      FORM

    

    (To
      assign the foregoing warrant, execute

    this
      form
      and supply required information. 

    Do
      not
      use this form to exercise the warrant.)

    

    

    

    FOR
      VALUE
      RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all
      rights evidenced thereby are hereby assigned to

     

    

    _______________________________________________
      whose address is

    

    _______________________________________________________________.

    
 

    _______________________________________________________________

    

    Dated:
      ______________, _______

    

    

    Holder’s
      Signature:_____________________________

    

    Holder’s
      Address:_____________________________

     

    _____________________________

    

    

    

    Signature
      Guaranteed: ___________________________________________

    

    

    NOTE:
      The
      signature to this Assignment Form must correspond with the name as it appears
      on
      the face of the Warrant, without alteration or enlargement or any change
      whatsoever, and must be guaranteed by a bank or trust company. Officers of
      corporations and those acting in a fiduciary or other representative capacity
      should file proper evidence of authority to assign the foregoing
      Warrant.

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