Document:

<PAGE>

                                  EXHIBIT 10.1

APOGEE TECHNOLOGY, INC. HAS OMITTED FROM THIS EXHIBIT 10.1 PORTIONS OF THE
AGREEMENT FOR WHICH APOGEE TECHNOLOGY, INC. HAS REQUESTED CONFIDENTIAL TREATMENT
FROM THE SECURITIES AND EXCHANGE COMMISSION. THE PORTIONS OF THE AGREEMENT FOR
WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED ARE MARKED WITH BRACKETS AND AN
ASTERISK AND SUCH CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.

                               LICENSE AGREEMENT
                               -----------------

This LICENSE AGREEMENT is made as of February 2, 2001 (the "Effective Date")
between APOGEE TECHNOLOGY, INC., a corporation organized and existing under the
laws of the State of Delaware (hereafter "Apogee"), and STMICROELECTRONICS, NV,
a corporation organized and existing under the laws of The Netherlands, having
its principal place of business at Strawinskylaan 1725, Tower B 17th floor, 1077
XX Amsterdam, The Netherlands (hereafter "ST").

                                    RECITALS
                                    --------

Whereas, ST is a global independent semiconductor company which designs,
develops, manufactures and markets a broad range of integrated circuits and
discrete devices based on semiconductors used in a wide variety of
microelectronic applications, including telecommunication systems, computer
systems, consumer products, automotive products and industrial automation and
control systems.

Whereas, Apogee has expertise in the design and development of, and owns certain
intellectual property rights related to digital high efficiency audio
amplification.

Whereas, ST desires to have access to certain intellectual property rights owned
or controlled by Apogee, and Apogee is willing to license the same to ST as
provided herein.

NOW, THEREFORE, in furtherance of the foregoing Recitals and in consideration of
the mutual covenants and obligations set forth in this Agreement, the Parties
agree as follows:

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

    1.1  Unless the provisions of this Agreement otherwise provide, the
following capitalized terms used in this Agreement shall have the meaning set
out below.

         1.1.1  Agreement shall mean the present license agreement, together
                ---------
with all Exhibits hereto, as the same may be hereafter amended, modified or
supplemented from time to time.

         1.1.2  Affiliates shall mean an entity controlling, controlled by,
                ----------
or under common control as of the Effective Date or thereafter during the term
of this Agreement with ST, provided that such entity shall be considered an
Affiliate only for the time during which such control exists.  For purposes of
this definition "control" shall mean ownership or control, either directly or
indirectly, of greater than 50% of the voting rights of such entity.
<PAGE>

         1.1.3  Confidential Information shall mean the terms of this Agreement
                ------------------------
as well as any proprietary information and data of either Party, contained in
written or tangible form which is marked as "Internal Use Only", "Proprietary",
"Confidential", or similar words. One Party's, including its Affiliates
("Disclosing Party") Confidential Information shall also include its
confidential information and data orally disclosed to the other Party including
its Affiliates ("Receiving Party") if related to written material marked as
confidential or otherwise identified as such during the course of the
discussions. However, Confidential Information shall not include any data or
information which:

                (a)  Is or becomes publicly available through no fault of the
Receiving Party;

                (b) Is already in the rightful possession of the Receiving Party
prior to its receipt of such data or information;

                (c) Is independently developed by the Receiving Party without
reference to the Confidential Information of the Disclosing Party;

                (d)  Is rightfully obtained by the Receiving Party from a third
party or in the public domain;

                (e)  Is disclosed with the written consent of the Party whose
information it is; or

                (f)  Is disclosed pursuant to court order or other legal
compulsion, after providing prior notice to the Disclosing Party of the
intended disclosure.

         1.1.4  [      ***      ]

         1.1.5  [      ***      ]

         1.1.6  [      ***      ]

         1.1.7  [      ***      ]

         1.1.8  [      ***      ]

         1.1.9  [      ***      ]

         1.1.10 [      ***      ]

         1.1.11 [      ***      ]

         1.1.12 [      ***      ]

         1.1.13 [      ***      ]

         1.1.14 [      ***      ]

         1.1.15 Licensee shall mean ST and its Affiliates.
                --------

                                                                               2
<PAGE>

         1.1.16 [      ***      ]

         1.1.17 Mask Works shall have the meanings set forth in section
                ----------
901(a)(2) of the Semiconductor Chip Protection Law(s).

         1.1.18 [      ***      ]

         1.1.19 Parties means ST and Apogee together.
                -------

         1.1.20 Party means one of the Parties.
                -----

         1.1.21 [      ***      ]

         1.1.22 Semiconductor Chip Protection Law(s) shall mean the
                ------------------------------------
semiconductor Chip Protection Act of 1984 in the United States and any
associated regulations and any amendments or revisions to these such law or
regulations, or any corresponding law and regulations in a country other than
the United States.

         1.1.23 Term shall mean the term of this Agreement as set forth in
                ----
Section 7 below.

    1.2  Exhibits.  The exhibits hereto shall be taken, read and construed as
         ---------
essential parts of this Agreement and are incorporated herein by reference.

    1.3  Headings.  The headings in this Agreement are inserted for
         --------
convenience of reference only and shall not be taken, read or construed as
essential parts of this Agreement.

    1.4  Plural.  Words applicable to natural persons include any body of
         -------
persons, company, corporation, firm or partnership, corporate or incorporate,
and vice versa. Words importing the masculine gender shall include the feminine
and neuter genders, and vice versa. Words importing the singular number shall
include the plural number, and vice versa.

  2. License
     -------

     2.1  [      ***      ]

     2.2  [      ***      ]

     2.3  Upon ST's request, the Parties shall discuss in good faith the
possible license by Apogee to Licensee (and related reasonable terms and
conditions) of the Licensed Technology for other applications out of the Field
of Exclusivity.

     2.4  ST shall make apparent on each Product unit the DDX logo along with
ST's brand and/or other trademarks and identification system of ST.
Consequently, subject to the terms and conditions of this Agreement, Apogee
hereby grants to Licensee a non-exclusive, worldwide, royalty-free license to
use the DDX logo in connection with Products. The placement and size of such DDX
logo shall be reasonable in relation to the size of the Product and other
inscriptions on the Product.

     2.5  Apogee shall deliver to ST the Licensed Technology in accordance to
the schedule attached as part of Exhibit 3 with respect to the Existing
Products. With respect to Future Products, once the development is completed in
accordance with an applicable Statement of Work (as defined in the Development
Agreement) Apogee shall inform ST and shall deliver to ST the Licensed

                                                                               3
<PAGE>

Technology in accordance with the schedule agreed upon in good faith between the
Parties. Apogee shall ensure that the media on which the Licensed Technology is
provided is free of defects, contains all of the appropriate and necessary files
and information and otherwise, if necessary, promptly provide ST corrections,
free of charge.

     2.6  [      ***      ]

     2.7  [      ***      ]

     2.8  [      ***      ]

  3. Technical Assistance
     --------------------

     3.1  Apogee agrees to provide technical assistance regarding the use and
functionality of the Licensed Technology. The number of employees subject to and
the scope of such training will be agreed upon by the Parties on a case-by-case
basis.

     3.2  Apogee shall provide Licensee with support and maintenance in
accordance to the "Maintenance and Support Policy" attached as Exhibit 1.

  4. Compensation
     ------------

     4.1 In consideration for the license, delivery and services and support
provided by Apogee under this Agreement, ST shall pay to Apogee the following
license fee and royalties applicable on the Net Sale Price of each Product sold
by Licensee [      ***      ]. No royalty will accrue for any returns, warranty
or other replacement, and/or similar credit/debit situations.

     4.2 ST shall pay to Apogee a one-time license fee in the combined amount
of US$2,000,000.00 (Two million US Dollars), consisting of (i) an actual payment
of US$1,600,000.00 (One million and six hundred thousand US Dollars), and (ii) a
credit for design services (as the same shall be mutually agreed upon, on a case
by case basis, between the Parties) from ST to Apogee in the amount of
US$400,000.00 (Four hundred thousand US Dollars).

[      ***      ]

     4.3 With respect to Product, ST shall pay Apogee, unless otherwise
stated herein, a royalty equal to the lesser of the following formulas:

            Royalty =     [      ***      ]

     4.4 For the avoidance of doubt, the Parties agree that the royalty shall
only fall due in respect of a Product and not in the overall price of a system
into which a Product may be integrated. Only the initial sale of a Product shall
be subject to royalty and the limitations set forth in Section 4.1 above shall
apply.

ST shall inform Apogee whether a given Product is affected by royalty payments
to be made by ST to a third party.

     4.5 ST shall pay Apogee Royalty payments in the following manner: [ *** ].

All payments made hereunder shall be made in United States currency, by wire
transfer or other reasonable payment means and to such bank account(s) indicated
by Apogee in writing from time to time.

                                                                               4
<PAGE>

     4.6  Any income or other tax which ST is required by law to pay or withhold
on behalf of Apogee with respect to any license fees or royalties payable to
Apogee under this Agreement shall be deducted from the amount of such royalties
otherwise due, provided, however, that in regard to any such deduction, ST shall
give Apogee such reasonable assistance as may be necessary to enable or assist
Apogee to claim exemption therefrom, or credit therefor, and shall upon request
furnish to Apogee such certificates and other evidence of deduction and payment
thereof as Apogee may properly require.

     4.7  [      ***      ]

     4.8  [      ***      ]

     4.9  ST shall submit to Apogee a royalty report [      ***      ].

     4.10 Upon twenty (20) days written notice and not more than once per
year, Apogee shall have the right to appoint a well known firm of independent
accountants to which ST shall not unreasonably object  (the "Auditors"), to
make an examination and audit of records and accounts as may under recognized
accounting practices contain information relevant to the calculation of
royalties payable to Apogee hereunder and the number of Products sold by ST.
The Auditors shall be required to signed an appropriate non disclosure
agreement, and shall perform their task at times agreed in advance between the
Parties during normal business hours, and not more frequently than once per
calendar year during the time ST is required to make royalty payments to Apogee
hereunder, and for one year thereafter. The Auditors will report to Apogee only
on whether the royalties paid to Apogee and the royalty reports provided to
Apogee by ST were or were not correct, and if incorrect, what the correct amount
of royalties is and what the correct royalty report data is. ST shall be
supplied with a copy from any report prepared by the Auditors. The decision of
the Auditors shall (in the absence of clerical or manifest error) be final and
binding on the Parties. Such audit shall be at Apogee's expense, unless it
proves that ST's royalty calculation was incorrect by more than ten (10)
percent, in which case ST shall reimburse Apogee the reasonable costs of the
audit, or settle them direct.

  5. Representations and Warranties
     ------------------------------

     5.1  Apogee represents and warrants to ST that (a) Apogee has full power
and authority to enter into this Agreement, (b) the terms and conditions of this
Agreement, and Apogee's obligations hereunder, do not conflict with or violate
any terms or conditions of any other agreement or commitment to which Apogee is
a signatory or by which its is bound, (c) it owned or controlled the Licensed
Technology that will be licensed and delivered to Licensee under this Agreement
and (d) it will defend and indemnify Licensee against any third party claims
arising out of or related to these warranties and representations. [ *** ]

     5.2  Apogee shall use its best efforts to verify the accuracy of the
Licensed Technology delivered to Licensee hereunder. In the case there should be
any mistake or error in such Licensed Technology, Apogee shall promptly support
ST with corrected Licensed Technology, free of charge.

     5.3  ST represents and warrants to Apogee that the terms and conditions of
this Agreement, and the Licensee's obligations hereunder, do not conflict with
or violate any terms or conditions of any other agreement or commitment to which
ST is a signatory or by which its is bound.

                                                                               5
<PAGE>

     5.4  EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES
ANY WARRANTIES OR CONDITIONS, EXPRESS, STATUTORY, IMPLIED, OR OTHERWISE, WITH
RESPECT TO ANY LICENSED TECHNOLOGY OR CONTRIBUTIONS HEREUNDER, AND EACH PARTY
HEREBY DISCLAIMS THE IMPLIED WARRANTIES AND CONDITIONS OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT THERETO.

  6. Indemnification
     ---------------

     6.1  Apogee shall indemnify and hold Licensee and their respective
officers, directors, employees and agents (hereafter referred individually or
collectively as "Licensee Indemnitees") harmless and shall pay all costs,
damages, and reasonable attorneys' fees and expenses relating to Licensee
Indemnitees defense resulting from any suit, claim, demand, action by a third
party against Licensee Indemnitees based upon a finding that any Licensed
Technology infringes the IP Rights of a third party ("Licensee Infringement
Claim"), provided that: (i) Licensee gives written notice to Apogee within
twenty (20) business days of notice of such Licensee Infringement Claim; (ii) ST
allows Apogee at its expense through attorneys of its own choice, to exclusively
defend or control the defense of any Licensee Infringement Claim; and (iii)
Licensee assists Apogee in all reasonable aspects in such investigation and
defense, and is reimbursed by Apogee for all the reasonable costs incurred in
collaborating in such investigation and defense. The foregoing indemnity
obligations shall specifically not apply to any claim excluded under Section 6.2
below. If, as a result of a Licensee Infringement Claim, Licensee Indemnitees
are enjoined from using the Licensed Technology, or selling Products, Apogee may
in its sole discretion, (i) procure for Licensee Indemnitees the right to use
the Licensed Technology under the same terms and conditions set forth in this
Section 6.1 or (ii) provide Licensee Indemnitees with modified Licensed
Technology that are non-infringing while still meeting substantially the same
functional specifications as the Licensed Technology.

     6.2  Apogee shall have no obligation under Section 6.1 above for any
Licensee Infringement Claim which results from: (a) the combination of a Product
with other products if the Licensee Infringement would have not existed but for
the combination; (b) the modification of the Licensed Technology by parties
other than Apogee (or not authorized by Apogee); (c) the Improvement of the
Licensed Technology by or for ST.

  7. Term and Termination
     --------------------

     7.1  [      ***      ]

     7.2  [      ***      ]

     7.3  Notwithstanding anything to the contrary herein, no expiration or
termination of this Agreement shall diminish the rights of any Customer who has
purchased Product and/or Derivatives to continue to use and/or sell or otherwise
dispose of the same.

     7.4  The following provisions shall survive any termination or expiration
of this Agreement: Section 1 ("Definitions"), Section 2 ("License") but only to
the extend described in Section 7.5 below, Section 4 ("Compensation"), Section 5
("Representations and Warranties"), Section 6 ("Indemnification"), Section 7
("Term and Termination"), Section 8 ("Confidentiality"), Section 9 ("Limitation
of Liability"), Section 10 ("Apogee Purchases"), and Section 11 ("General
Provisions").

     7.5  [      ***      ]

                                                                               6
<PAGE>

  8. Confidentiality
     ---------------

     8.1  The Receiving Party shall, during the term of the Agreement, and for a
period of five (5) years thereafter, subject to the exclusions set forth in
Section 1.1.3 ("Confidential Information"), hold all Confidential Information of
the Disclosing Party in confidence, not disclose such Confidential Information
to any third parties except those with a need to know in connection with or
during the performance of this Agreement (including, as necessary,
subcontractors) who have executed a confidentiality agreement with terms at
least as restrictive with regard to the Disclosing Party's information as those
set forth herein, and in general use the same degree of care to protect the
confidentiality of the Disclosing Party's Confidential Information as it uses
with respect to its own information of a similar nature.

     8.2  Neither Apogee nor Licensee shall use the other Party's Confidential
Information for another or other purpose than for the purposes set forth in this
Agreement.

     8.3  Except as otherwise provided for the application of Section 7.4
above, upon termination of this Agreement all of the Disclosing Party`s
Confidential Information and all copies thereof in the Receiving Party's
possession or control shall be immediately returned to the Disclosing Party or
destroyed by the Receiving Party at the Disclosing Party's instruction. The
Receiving Party shall then certify the same in writing and that no copies have
been retained by the Receiving Party, its employees, Affiliates, contractors, or
other parties to whom such information is provided.

  9. Limitation of Liability
     -----------------------

     9.1 IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER OR TO ANY THIRD
PARTY FOR ANY SPECIAL, INDIRECT, PUNITIVE, INCIDENTAL OR CONSEQUENTIAL DAMAGES
(INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS), CAUSED BY ANY BREACH OF ITS
OBLIGATIONS TO THE OTHER ARISING OUT OF OR RELATING TO THIS AGREEMENT,
REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT OR IN TORT, EVEN IF THE
BREACHING PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

     9.2 IN ANY EVENT, THE LIABILITY OF EITHER PARTY TO THE OTHER (WITH THE
EXCEPTION OF LIABILITY FOR SUMS DUE HEREUNDER) IN RESPECT OF AN EVENT OR SERIES
OF CONNECTED EVENTS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, WHETHER
IN CONTRACT, WARRANTY, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, SHALL IN NO
CASE EXCEED AN AMOUNT EQUAL TO THE TOTAL AMOUNT OF PAYMENTS MADE (OR OWING) BY
ST TO APOGEE HEREUNDER. NOTWITHSTANDING THE FOREGOING, THE LIMITATION OF
LIABILITY IN THIS SECTION 9.2 SHALL NOT BE APPLICABLE TO INDEMNIFICATION
OBLIGATIONS UNDER SECTION 6 ABOVE.

  10. Apogee Purchases; Restricted Sales.
      -----------------------------------

      10.1        [      ***      ]

      10.2        [      ***      ]

      10.3        [      ***      ]

                                                                               7
<PAGE>

  11. General Provisions
      ------------------

      11.1  Assignment. Unless for ST to its Affiliates, this Agreement may not
            -----------
be assigned by either Party, nor any of such Party's rights or obligations
hereunder, to any third party including without limitation through a U.S.
Bankruptcy Code Chapter 11 reorganization, without prior written consent of the
other Party (which shall not be unreasonably withheld). In the event that this
Agreement is assigned effectively to a third party, this Agreement shall bind
upon successors and assigns of the Parties hereto.

      11.2 [      ***      ]

      11.3 Affiliates. Apogee acknowledges that ST conducts its business in
           -----------
whole or in part through Affiliates. Accordingly, Apogee agrees that the rights
and benefits granted by Apogee through this Agreement shall inure to ST and the
Affiliates.

      11.4 Force majeure. Neither Party shall be liable to the other Party for
           --------------
failure of or delay in performance of any obligation under this Agreement,
directly or indirectly, owing to acts of God, war, war-like condition,
embargoes, riots, strike and other events beyond its reasonable control. In the
event that such failure or delay occurs, the affected Party shall notify the
other Party of the occurrence thereof as soon as possible and the Parties shall
discuss the best way to resolve the event of force majeure.

      11.5 Notices. All notices provided for in connection with this Agreement
           -------
shall be given in writing and shall be effective (i) upon receipt, when served
by personal delivery; or (ii) the next day following the date of transmittal
when transmitted by facsimile; or (iii) on the third day following the date of
transmittal when transmitted by express mail or Federal Express mail; or (iv) on
the 7th day following the date of mailing when sent by registered airmail of the
sender's country with postage prepaid, addressed to the Party as follows, or to
a changed address as the Party shall have specified by prior written notice:

          ST:     STMicroelectronics NV,
                  ICC Bloc A
                  Route de Pre-bois 20,
                  1215 Geneva 15, Switzerland
                  Attention: General Counsel
          and

          Apogee: Apogee Technology, Inc.,
                  129 Morgan Drive
                  Norwood, Massachusetts 02062, USA
                  Phone:   (781) 551-9450
                  Fax: (781) 440-9528
                  Attention: David Spiegel

      11.6 Waiver.  The waiver by either Party of the remedy for the other
          -------
Party's breach of or its right under this Agreement will not constitute a waiver
of the remedy for any other similar or subsequent breach or right.

      11.7 Severability.  If any provision of this Agreement is or becomes, at
           ------------
any time or for any reason, unenforceable or invalid, no other provision of this
Agreement shall be affected thereby, and the remaining provisions of this
Agreement shall continue with the same force and effect as if such unenforceable
or invalid provisions had not been inserted in this Agreement.

                                                                               8
<PAGE>

      11.8 Press Release. Neither Party shall make any announcement or press
           --------------
release regarding this Agreement or any terms thereof without the other Party's
prior written consent.

      11.9 Amendment.  No changes, modifications or alterations to this
           ----------
Agreement shall be valid unless reduced to writing and duly signed by the
respective authorized representative of each Party.

      11.10 Governing Law.  This Agreement shall be interpreted, construed and
            --------------
enforced in accordance with the laws of the State of Delaware without respect to
its conflict of law provisions. Any dispute arising in connection with this
Agreement shall be finally settled under the Rules of Conciliation and
Arbitration of the International Chamber of Commerce by one or more arbitrators
appointed in accordance with the said Rules. Such arbitration shall take place
in Chicago, and shall be conducted in English.

      11.11 No Partnership. In giving effect to this Agreement, no Party shall
            --------------
be or be deemed to be an agent or employee of another Party for any purpose, and
that their relationship to each other shall be that of independent contractors.
Nothing in this Agreement shall constitute a partnership or a joint venture
between the Parties. No Party shall have the right to enter into contracts or
pledge the credit of or incur expenses or liability on behalf of the other
Party.

      11.12 Entire Agreement.  This Agreement constitutes the entire agreement
            ----------------
between the Parties and supersedes all prior proposal(s) and discussions
relative to the subject matter of this Agreement and neither of the Parties
shall be bound by any conditions, definitions, warranties, understandings or
representations with respect to the subject matter other than as expressly
provided herein. The terms and conditions contained herein and the Exhibits
attached hereto constitute the entire agreement between the parties and shall
supersede all previous communications either oral or written between the parties
with respect to the subject matter hereof. No oral explanation or oral
information by either party hereto shall alter the meaning or interpretation of
this Agreement.

                                                                               9
<PAGE>

IN WITNESS THEREOF, the Parties hereto have executed this Agreement on the
Effective Date.

For STMicroelectronics, NV              For Apogee Technology, Inc.

Name:__________________________         Name:_______________________

Title:_________________________         Title:______________________

Date:__________________________         Date:_______________________

Signature:_____________________         Signature:__________________

                                                                              10
<PAGE>

                                   EXHIBIT 1
                                   ---------

                         Maintenance and Support Policy
                         ------------------------------

                               [      ***      ]

                                                                              11
<PAGE>

                                   EXHIBIT 2
                                   ---------

                               [      ***      ]

                                                                              12
<PAGE>

                                   EXHIBIT 3
                                   ---------

                               [      ***      ]

                                                                              13
<PAGE>

                                   EXHIBIT 4
                                   ---------

                                ESCROW AGREEMENT

     This Escrow Agreement is entered into the ______ day of ________, 2001,
between and among: STMicroelectronics, NV (hereinafter "ST"), a Dutch
corporation with its principal place of business at Strawinskylaan 1725, Tower B
17th floor, 1077 XX Amsterdam, The Netherlands; Apogee Technology, Inc.
(hereinafter "Apogee"), a Delaware corporation, with its principal place of
business at 129 Morgan Drive, Norwood, MA 02062, USA; and the "Escrow Agent" set
forth at the end of this Agreement.

     WHEREAS, Apogee and ST have entered into a License Agreement dated
__________ (the "License Agreement"), whereby ST is authorized to use certain
Apogee technology and to use, in object code form, certain Apogee software
development tools to develop, make, have made, and sell certain integrated
circuit products ("Licensed Products");

     WHEREAS, Apogee is willing to provide assurance to ST that, in the event of
certain conditions specified herein, access to the software source code
described in Exhibit A (the "Source Codes") may be obtained for the sole purpose
of creating or supporting the Licensed Products pursuant to the License
Agreement;

     WHEREAS, Apogee is willing to enter into an escrow arrangement with ST to
provide for the deposit of the Source Codes to be held by the Escrow Agent
pursuant to the terms and conditions of this Agreement;

     WHEREAS, the Escrow Agent is willing to act as escrow agent for Apogee and
ST on the terms and conditions hereinafter set forth;

     NOW, THEREFORE, in consideration of the mutual covenants, agreements and
conditions set forth herein, the parties agree as follows:

     1.  Appointment.  Apogee and ST hereby appoint Escrow Agent as the escrow
         ------------
holder under this Escrow Agreement, and the Escrow Agent accepts such
appointment on the terms and conditions set forth in this Escrow Agreement.

     2.  Deposit of Escrow Materials.  Apogee agrees to deposit with the Escrow
         ---------------------------
Agent, within sixty (60) days after the date hereof, one copy of the Source
Codes (the "Escrow Materials").  Further, Apogee agrees to deposit updated
versions, if any, of the Source Codes every six (6) months during the term of
this Agreement.  Escrow Agent shall hold and dispose of the Escrow Materials
only in accordance with the terms of this Escrow Agreement.

     3.  Purpose.  The Escrow Materials shall constitute a reserve, to be held
         -------
by the Escrow Agent, for the purpose of making them available to ST, under the
terms of this Escrow Agreement, only in the events set forth in Section C of
Exhibit 1 of the License Agreement.

     4.  Escrow Release.  Subject to the provisions of Sections 5, 6, and 7
         --------------
below, the Escrow Agent is hereby authorized to release the Escrow Materials to
ST upon receiving written authorization from ST certifying that ST is entitled
to the Escrow Materials (the "Notice") pursuant to Section 3 above.  ST shall
provide a copy of each Notice to Apogee.

     5.  Counternotice.  Within three (3) business days after receipt of the
         -------------
Notice, the Escrow Agent shall deliver to Apogee a copy of the Notice and shall
confirm such delivery in writing to ST.  If the Escrow Agent, within ten (10)
business days after the Effective Date of transmitting to Apogee the Notice (as
such Effective Date is determined in accordance with Section 10(b)), does not

                                                                              14
<PAGE>

receive (a) a written statement from ST withdrawing such Notice, or (b) a
counternotice (the "Counternotice") from Apogee, then the Escrow Agent shall
promptly deliver the Escrow Materials to ST.  For purposes of this Agreement, a
"business day" shall mean each day other than a Saturday, Sunday, or legal U.S.
holiday.

     6.  Disputed Notice.  If Apogee disputes the existence of the conditions
         ---------------
upon which the Notice is based, then Apogee shall, within then (10) business
days following the  the Effective Date of transmittal of the Notice by Escrow
Agent (as such Effective Date is determined in accordance with Section 10(b)),
submit a Counternotice to the Escrow Agent.  If the Counternotice is received by
the Escrow Agent before the close of business on the tenth (10th) business day
following the date on which the Notice was transmitted to Apogee by the Escrow
Agent, then the Escrow Agent shall, within three (3) business days after receipt
of any such Counternotice, serve a copy of the Counternotice on ST and withhold
delivery of the Escrow Materials pending receipt of (a) a decision evidencing
the outcome of the arbitration provided for in Section 7 below, or (b) other
written instructions signed by both Apogee and ST.  Upon receipt of said
decision or other instruction, the Escrow Agent shall deliver a copy of the
Escrow Materials only in accordance with decision or instruction.

     7.  Arbitration of Disputed Notice.  Apogee and ST agree that, if the
         -------------------------------
Counternotice is given by Apogee pursuant to Section 5 above, officers of each
company shall negotiate for a period of ten (10) business days to attempt to
resolve the dispute.  At the end of such ten (10) business day period, if the
parties have not resolved the dispute, then said parties shall submit to
arbitration in accordance with the rules of the International Chamber of
Commerce to resolve the dispute promptly and shall commence the hearing before a
panel of arbitrators (the "Board") in Geneva, Switzerland, as soon as
practicable after receipt of the Counternotice by the Escrow Agent.  The Board
shall consist of three (3) members one each of whom shall be selected by ST and
Apogee and the third member selected by the International Chamber of Commerce.
The question before the Board shall be whether or not there existed, at the time
ST transmitted the Notice to the Escrow Agent under Section 4 above, or at the
time of the hearing before the Board, the conditions specified in Section 3.
The parties agree that the decision of the Board shall be final and binding and
that such decision shall be immediately delivered to the parties to the
arbitration and to the Escrow Agent.  If the Board finds that the Notice was
properly given by ST on the basis of the existence of the conditions specified
in Section 3 above, then the Escrow Agent shall promptly deliver the Escrow
Materials to ST.  If the Board finds to the contrary, then the Escrow Agent
shall not release the Escrow Materials.  All fees and charges by the
International Chamber of Commerce shall be paid by the non-prevailing parting in
the arbitration; provided, however, that each party shall be responsible for the
payment of all fees and expenses connected with the presentation of its
respective case.

     8.  Use of Escrow Materials.  ST upon the release of the Escrow Materials
         -----------------------
to ST, ST shall have a right and license to use such Escrow Materials in
accordance with the terms and conditions of Sections 2.1 and 2.2 of the License
Agreement, and such use shall otherwise be subject to ST's other obligations
under the License Agreement, including royalty obligations.

     9.  Termination.  This Escrow Agreement and the escrow established pursuant
         -----------
to this Escrow Agreement shall terminate upon expiration or termination of the
License Agreement, and all materials comprising the Escrow Materials shall
thereupon be returned to Apogee.

                                                                              15
<PAGE>
     10. Notices.
         -------

     (a) It is understood that the Escrow Agent will incur no liability for
acting upon any instruction, notice, direction or other document believed by it
in good faith to be genuine and to have been made, signed, sent or presented by
the person or person authorized to perform such act under the terms of this
Escrow Agreement.

     (b) All notices, instructions, deliveries and other communications required
or permitted to be given hereunder or necessary or convenient in connection
herewith shall be in writing and shall be deemed to have been given and shall be
deemed effective (the "Effective Date") (i) when personally delivered, on the
date of delivery, (ii) when transmitted by facsimile, on the next business day
after the date of the facsimile confirmation; and (iii) when transmitted by
recognized overnight carrier, on the date two business days after the day of
delivery to such carrier.  Such notices, instructions, deliveries and other
communications shall be addressed as follows (provided that notice of change of
address shall be deemed given only when received):

To Escrow Agent:  To the address set forth at the end of this Agreement, and to
the attention of the person signing this Escrow Agreement on behalf of Escrow
Agent.

To Apogee:  To the address first set forth above;

To ST:  To the following address: STMicroelectronics NV, ICC Bloc A, Route de
Pre-bois 20, 1215 Geneva 15, Switzerland;

or to such other name of address as the Escrow Agent, Apogee or ST, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this section.

     11. Liability of Escrow Agent.  The duties and obligations of the Escrow
         -------------------------
Agent shall be determined solely by the express provisions of this Escrow
Agreement, and the Escrow Agent shall not be liable except for the performance
of such duties and obligations as are specifically set forth in this Escrow
Agreement.  In the event of any controversy hereunder or with respect to any
questions as to the construction of this Escrow Agreement or any action to be
taken by the Escrow Agent, the Escrow Agent may consult with counsel selected
and employed by it, and the Escrow Agent shall incur no liability for any action
taken or suffered in good faith in accordance with the opinion of such counsel.
The Escrow Agent shall not be responsible in any manner whatsoever for any
failure or inability of Apogee, ST, or for anyone else, to perform or comply
with any of the provisions of this Escrow Agreement.

     12. Governing Law: Forum Selection. This Escrow Agreement shall be governed
         ------------------------------
by the laws of Delaware, USA, without reference to its conflict of laws
principles.

     13. Entire Agreement.  This Escrow Agreement sets forth the entire
         ----------------
understanding of the parties hereto with respect to the subject matter hereof
and cannot be changed, modified, or terminated orally.

     14. Validity.  No action taken by the Escrow Agent in accordance with the
         --------
terms and provisions hereof shall be deemed to constitute a representation of
the Escrow Agent as to the validity or value of any documents or instructions
held by, or delivered to, it.

     15. Resignation/Replacement.
         -----------------------

     (a) Upon sixty (60) days' prior written notice given to Apogee and ST, the
Escrow Agent may resign.  Within fifteen (15) days after the giving of such
notice, Apogee and ST shall mutually designate a successor Escrow Agent.  Such
successor Escrow Agent shall be bound by the terms and provisions of this Escrow
Agreement.  In the event that no such agreement is reached within such fifteen
(15) day period, the Escrow Agent shall continue to hold the Escrow Materials

                                                                              16
<PAGE>

then held by it and shall take nor further actions and shall have no further
obligations hereunder except as required by the last sentence of this Section
16(a).  The Escrow Agent named herein shall cooperate with its successor in
order to effectuate the transfer of its duties to the successor Escrow Agent.

     (b) Upon notice, Apogee and ST may replace Escrow Agent with a successor,
who shall replace Escrow Agent and be bound by all the terms and conditions of
this Agreement.

     16. Fees and Expenses.  ST agrees to pay the fees of the Escrow Agent for
         -----------------
its services hereunder during the term of this Agreement.  Such fees shall
consist of periodical escrow maintenance charges, at Escrow Agent's standard
rates, and fees charged for carrying out its duties hereunder.

     17. Indemnification.  ST and Apogee jointly and severally agree to
         ---------------
indemnify the Escrow Agent from and against any and all liabilities,
obligations, penalties, actions, judgments, suits, costs, expenses, taxes or
disbursements of any kind or nature whatsoever which may be imposed on, or
incurred by, or asserted against, the Escrow Agent in any way relating to, or
arising out of, this Agreement, or any action taken or omitted by the Escrow
Agent under this Agreement, provided that neither ST nor Apogee shall be liable
for the portion of any such indemnification amount resulting from the Escrow
Agent's gross negligence, recklessness, or willful misconduct or violation by
the Escrow Agent of any terms or provisions of this Escrow Agreement.  The
parties liability under this Section 18 shall be limited to the amount of fees
payable by ST to the Escrow Agent hereunder.

IN WITNESS WHERE OF, the parties by their duly authorized representatives have
executed this Agreement as of the date set forth above.

APOGEE TECHNOLOGY, INC.             STMICROELECTRONICS, NV

By:                                 By:
Print Name:                         Print Name:
Title:                              Title:

                     ESCROW AGENT:

                     Name:

                     Address:

                                                                              17<PAGE>

                      LIMITED WAIVER AND AMENDMENT NO. 4

          This Limited Waiver and Amendment No. 4 (the "Agreement") is entered
into as of April 12, 2001 by and among:

     Cybex International, Inc., a New York corporation, having a place of
     business at 10 Trotter Drive, Medway, Massachusetts 02053 (the "BORROWER");

     Cybex Financial Corp., Eagle Performance Systems, Inc., General Medical
     Equipment, Ltd., Lumex Bed Systems, Inc., Cybex Fitness Gerate Vertriebs
     GmBH, and Tectrix Fitness Equipment, Inc.  (individually, a "GUARANTOR" and
     collectively, the "GUARANTORS");

     The Lenders party to the Credit Agreement (defined below) (hereinafter
     collectively, the "LENDERS")

     First Union National Bank, as Administrative Agent for the Lenders
     (hereinafter, in such capacity, the "ADMINISTRATIVE AGENT"), having a
     principal place of business at One First Union Center, 301 South College
     Street, TW-5, Charlotte, North Carolina 28288-0537;

in consideration of the mutual covenants herein contained and benefits to be
derived herefrom.

                                  WITNESSETH:

1.   BACKGROUND.  On May 21, 1998, the Administrative Agent, the Lenders, the
     Borrower and the Guarantors, among others, entered into a Credit Agreement,
     pursuant to which the Lenders established, subject to the terms therein
     contained, revolving credit, letter of credit and term loan facilities in
     favor of the Borrower. The Credit Agreement was thereafter modified
     pursuant to the terms of various amendments thereto (the Credit Agreement
     as so amended shall hereinafter be referred to as the "CREDIT AGREEMENT").

     The Borrower's Obligations to the Administrative Agent and the Lenders are
     secured by perfected (x) security interests in and to all of the Borrower's
     personal property, including, without limitation, all of the Borrower's
     accounts, chattel paper, inventory, equipment, fixtures, general
     intangibles, instruments, investment property, copyrights, trademarks, and
     patents, and (y) mortgage interests in certain of the Borrower's real
     estate, (all of the foregoing, collectively, the "COLLATERAL").  In
     addition, the Guarantors have unconditionally guarantied the payment and
     performance of the Borrower's Obligations (the "GUARANTIES") and to secure
     their respective guaranties have granted the Administrative Agent for the
     benefit of the Lenders perfected security interests in and to all of their
     personal property, including, without limitation, all of their accounts,
     chattel paper, inventory, equipment, fixtures, general intangibles,
     instruments, investment
<PAGE>

    property, copyrights, trademarks, and patents (the "GUARANTORS'
    COLLATERAL").

    Various Events of Default have arisen under the Credit Agreement, and the
    Borrower and the Guarantors have requested that the Administrative Agent
    and the Lenders waive such Events of Default and further amend the Credit
    Agreement, in each case on the terms set forth herein.

2.  DEFINITIONS.

    a.  All capitalized terms used herein and not otherwise defined shall have
        the same meaning herein as in the Credit Agreement.

    b.  "EXISTING DEFAULTS" means those Events of Defaults existing as of the
        date hereof and described on SCHEDULE 1 hereto.

    c.  "LIMITED WAIVER PERIOD" means the period commencing on the date hereof
        and ending May 1, 2002.

3.  OUTSTANDING OBLIGATIONS.

    a.  The Borrower and the Guarantors each acknowledge and agree that, as
        of April 12, 2001, they are jointly and severally obligated to the
        Lenders as follows:

                                REVOLVING LOANS

          Principal:                                   $13,500,000.00

                                   TERM LOAN

          Principal:                                   $16,750,000.00

    b.  In addition, the Borrower and Guarantors each acknowledge and agree that
        they are jointly and severally obligated to the Issuing Lender and the
        Lenders on account of the IRB Letter of Credit and the other Letters of
        Credit listed on SCHEDULE 2 hereto, and any amounts due under the
        Reimbursement Agreements relating thereto.

    c.  The Borrower and Guarantors each acknowledge and agree that they are
        jointly and severally obligated to the Administrative Agent, the Issuing
        Lender and the Lenders, as applicable, for Administrative Agent's Fees,
        Commitment Fees, Letter of Credit Fees, Issuing Lender Fees, interest,
        and costs and expenses,
<PAGE>

        including, without limitation, attorneys' fees, appraisal fees, and
        commercial finance examination fees, all whether heretofore incurred,
        accrued or now due or hereafter incurred, accruing or becoming due. The
        Administrative Agent shall furnish the Borrower with an estimate of all
        such third party costs and expenses as soon as reasonably practicable.

    d.  The Borrower and the Guarantors each further acknowledge and agree that
        they do not have any offsets, defenses, or counterclaims against the
        Administrative Agent, the Issuing Lender, or the Lenders with respect to
        the Credit Agreement, the Guaranties, any other Credit Documents, or
        otherwise. To the extent that any such offsets, defenses or
        counterclaims may exist, the Borrower and each Guarantor hereby WAIVES
        and RELEASES the Administrative Agent, the Issuing Lender, the Lenders
        and their respective officers, representatives, counsel, trustees, and
        directors from any and all actions, causes of action, claims, demands,
        damages, and liabilities of whatever kind or nature, in law or in
        equity, now known or unknown, suspected or unsuspected. The Borrower and
        each Guarantor shall execute and deliver to the Administrative Agent,
        the Issuing Lender and each Lender such releases as the Administrative
        Agent, the Issuing Lender or any Lender may request to confirm the
        foregoing.

    e.  The Borrower and each Guarantor hereby ratifies and confirms that the
        Obligations (as modified hereby) are, and will continue to be, secured
        by the Collateral and the Guarantor Collateral.

4.  LIMITED WAIVER.  The Administrative Agent and the Lenders hereby waive the
    Existing Defaults during the Limited Waiver Period only. The waiver provided
    herein is a one-time waiver of the Existing Defaults and is not a continuing
    waiver or a waiver of any other provisions of the Credit Agreement and other
    Credit Documents. Nothing contained herein shall (a) obligate the
    Administrative Agent or the Lenders to extend the limited waiver provided
    herein beyond the Limited Waiver Period (in that regard, upon the expiration
    of the Limited Waiver Period, the Existing Defaults will be immediately
    reinstated and the Administrative Agent and the Lenders may exercise any or
    all of their rights and remedies on account thereof), or (b) limit any other
    rights of the Administrative Agent, the Issuing Lender, or the Lenders
    during the Limited Waiver Period upon the occurrence of any other Event of
    Default (the Administrative Agent, the Issuing Lender and the Lenders
    reserving the right to take such action, at such times, on account thereof
    as they deem appropriate).

5.  AMENDMENTS TO CREDIT AGREEMENT.  The Credit Agreement is hereby amended as
    follows:

    a.  Amendments to Section 1.  The provisions of Section 1 of the Credit
        Agreement are hereby amended as follows:

                                       3
<PAGE>

    i.  Applicable Commitment Fee Percentage.  The definition of "Applicable
        Commitment Fee Percentage" is hereby deleted in its entirety and the
        following substituted in its stead:

                    "Applicable Commitment Fee Percentage" means one-half of one
                    percent (0.50%) per annum.

    ii. Applicable Interest Rate Percentage.   The definition of "Applicable
        Interest Rate Percentage" is hereby deleted in its entirety and the
        following substituted in its stead:

        "Applicable Interest Rate Percentage" means the following percentages
        for the Loans:

<TABLE>
<CAPTION>

        Nature of Loan                                  Applicable Interest Rate       Applicable
                                                           Percentage Through         Interest Rate
                                                           September 30, 2001        Percentage From
                                                                                    and After October
                                                                                        1, 2001
        ---------------------------------------------------------------------------------------------
        <S>                                            <C>                         <C>

        Revolving Loans (excluding Overadvance)                 1.00%                3.00%
        ---------------------------------------------------------------------------------------------
        Overadvance Portion of Revolving Loans                  2.00%                3.00%
        ---------------------------------------------------------------------------------------------
        Term Loan                                               1.50%                3.00%
        ---------------------------------------------------------------------------------------------
</TABLE>

        For purposes of calculating the Applicable Interest Rate Percentage of
        the Revolving Loans, the Overadvance shall be deemed to be the first
        amounts advanced and the last amounts repaid.

iii.    Authorized Signatory. The definition of "Authorized Signatory" is hereby
        amended by deleting the names "William S. Hurley" and "Peter Haines" and
        substituting the names "Paul Horgan" and John Aglialoro" respectively in
        their stead.

iv.     EBITDA. The definition of "EBITDA" is hereby deleted in its entirety and
        the following substituted in its stead:

                    "EBITDA": of any Person for any period, net income for such
                    period, plus (i) Interest Expense to the extent deducted in
                    determining such net income, plus (ii) depreciation,
                    amortization

                                       4
<PAGE>

                    and all other non-cash charges deducted in determining such
                    net income, all determined in accordance with GAAP
                    consistently applied, plus (iii) Restructuring Costs, minus
                    (iv) extraordinary non-cash income (including, for the
                    purposes hereof, gain from the sale of assets in the
                    ordinary course of business, such as obsolete equipment),
                    plus (v) income taxes to the extent deducted to determine
                    net income, plus (vi) non-cash purchase accounting
                    adjustments and losses from the sale of assets in the
                    ordinary course of business, such as obsolete equipment).

v.  Excess Cash Flow.  The definition of "Excess Cash Flow" is hereby deleted in
    its entirety and the following substituted in its stead:

                    "Excess Cash Flow": with respect to any fiscal quarter of
                    the Borrower and Subsidiaries on a consolidated basis, an
                    amount equal to (i) Consolidated EBITDA for such period,
                    minus (ii) Consolidated Capital Expenditures for such
                    period, minus (iii) Consolidated Interest Expense for such
                    period, minus (iv) taxes actually paid during such period,
                    minus (v) principal payments on Consolidated Total Funded
                    Debt (other than voluntary or mandatory prepayments) minus
                    (vi) any increase in net working capital, minus (vii) any
                    earn-out payments paid to the Seller pursuant to Section
                    2(a) of the Purchase Agreement, minus (viii) Restructuring
                    Costs..

vi. Interest Payment Date.  The definition of "Interest Payment Date" is hereby
    amended by deleting clause (a) thereof and substituting the following in its
    stead:

                    (a) as to any Base Rate Loan, the last Business Day of each
                    calendar month to occur while such Loan is outstanding.

vii. Leverage Ratio.  The definition of "Leverage Ratio" is hereby deleted in
     its entirety and the following substituted in its stead:

                    "Leverage Ratio": as of the last day of any fiscal quarter,
                    the ratio  (x) of Consolidated Total Funded Debt as of the
                    last day of such fiscal quarter to (y) pro forma
                    Consolidated EBITDA for the subject fiscal year determined
                    by annualizing the actual Consolidated EBITDA of the subject
                    fiscal year to date.

viii. Net Sales Proceeds.  The definition of "Net Sales Proceeds" is hereby
      deleted in its entirety and the following substituted in its stead:

                                       5
<PAGE>

                    "Net Sales Proceeds": the gross cash proceeds (including
                    cash by way of deferred payment pursuant to a promissory
                    note, receivable or otherwise, but only as and when
                    received) received from the sale, lease, conveyance,
                    disposition or other transfer of assets or from a Recovery
                    Event, net of (i) reasonable transaction costs payable to
                    third parties, and (ii) Indebtedness (other than
                    Indebtedness of the Lenders pursuant to this Agreement and
                    the other Credit Documents) which is secured by first
                    priority Liens on the assets which are the subject of such
                    event to the extent such Indebtedness is paid with a portion
                    of the proceeds therefrom.

ix.  Termination Date.  The definition of "Termination Date" is hereby deleted
     in its entirety and the following substituted in its stead:

                    "Termination Date": The earlier of (a) May 1, 2002, or (b)
                    the date on which the Revolving Commitments shall terminate
                    in accordance with the provisions of this Agreement.

x.  New Definitions: The following new definitions are hereby inserted into
    Section 1 of the Credit Agreement in appropriate alphabetical order:

    (1)  "Accounts": "Accounts" as defined in the UCC, and also all: accounts,
         accounts receivable, receivables, and rights to payment (whether or not
         earned by performance): for property that has been or is to be sold,
         leased, licensed, assigned, or otherwise disposed of; for services
         rendered or to be rendered; arising out of the use of a credit or
         charge card or information contained on or used with that card; and
         also all reclaimed, returned, rejected or repossessed Inventory (if
         any) the sale of which gave rise to any Account.

    (2)  "Borrowing Base": As of any date of determination, an amount equal to
         the sum of (a) fifty percent (50%) (or such lesser percentage as the
         Administrative Agent may establish from time to time to reflect its
         review of the results of any commercial finance examination and other
         factors as it deems appropriate which in the judgment of the
         Administrative Agent indicates a deterioration of the Borrower's
         financial condition or Inventory) of the lesser of cost or market value
         (determined in accordance with GAAP) of the Borrower's Eligible
         Inventory, minus such reserves as the Administrative Agent may
         reasonably establish, plus (b) seventy-five percent (75%) (or such
         lesser percentage as the Administrative Agent may establish from time
         to time to reflect its review of the results of any commercial finance
         examination and other factors as it deems appropriate which in the
         judgment of the Administrative

                                       6
<PAGE>

         Agent indicates a deterioration of the Borrower's financial condition
         or Accounts) of the face amount of the Borrower's Eligible Accounts,
         plus (c) the Overadvance, plus (d) the Temporary A/R O/A.

(3)      "Eligible Accounts":  Those of the Borrower's Accounts in which the
         Administrative Agent and the Lenders have a valid and perfected first
         priority security interest and which the Administrative Agent deems
         eligible for borrowing, but excluding, without limitation, each of the
         following Accounts:

                         (a) Any Account which has been outstanding for more
                    than ninety (90) days from its invoice date.

                         (b) Any Account which is owed by any account debtor if
                    twenty-five percent (25%) or more of the Accounts due from
                    such account debtor exceed the limitations on eligibility
                    described in Subparagraph (a), above.

                         (c) Any Account to the extent that the subject account
                    debtor claims any offset or contra or is otherwise disputed.

                         (d) Any Account as to which the principal place of
                    business of the subject account debtor is not within the
                    United States of America unless such Account is supported by
                    a letter of credit from a financial institution and
                    otherwise on terms acceptable to the Administrative Agent..

                         (e) Any Account which arises out of any sale made on a
                    basis other than upon terms usual to the business of the
                    Borrower.

                         (f) Any Account which is owed by any Subsidiary or
                    other Affiliate of the Borrower.

                         (g) Any Account as to which the account debtor has
                    filed a petition for relief under the Bankruptcy Code or
                    made an assignment for the benefit of creditors; or if any
                    petition or other application for relief under the
                    Bankruptcy Code has been filed against the account debtor;
                    or if the account debtor has failed, suspended its business
                    operations, become insolvent, or suffered a receiver or
                    trustee to be appointed for any of its assets or affairs; or
                    if the account debtor is generally not paying its debts as
                    they become due.

                                       7
<PAGE>

                         (h) Any Account which is on a bill-and-hold, sale and
                    return, sale on approval, consignment, or any other
                    repurchase or return basis.

                         (i) Any Account as to which the Administrative Agent
                    believes the collection of such Account is insecure or that
                    such Account may not be paid by reason of the account
                    debtor's financial inability to pay.

                         (j) Any Account as to which the account debtor is the
                    United States of America or any department, agency, or
                    instrumentality thereof.

(4)  "Eligible Inventory":  Such of the Borrower's inventory (other than
     packaging, advertising, shipping materials, supplies, and work-in-process)
     in which the Administrative Agent and the Lenders have a valid and
     perfected first priority security interest, which is not obsolete or
     unmerchantable, and which the Administrative Agent from time to time deems
     eligible for borrowing in its reasonable discretion.

(5)  "Inventory": "Inventory" as defined in the UCC and also all: (a) goods
     which are leased by a Person as lessor; are held by a Person for sale or
     lease or to be furnished under a contract of service; are furnished by a
     Person under a contract of service; or consist of raw materials, work in
     process, or materials used or consumed in a business; and (b) packaging,
     advertising, and shipping materials related to any of the foregoing.

(6)  "Overadvance": Subject to reduction as required under Section 2.7(b)(ii)
     hereof, the following amounts for the periods indicated:

<TABLE>
<CAPTION>

Period                                                   Overadvance
-------------------------------------------------------------------------
<S>                                                 <C>
Through December 30, 2001                                   $6,578,081.00
-------------------------------------------------------------------------
December 31, 2001 through March 30, 2002                    $5,578,081.00
-------------------------------------------------------------------------
March 31, 2002 through April 30, 2002                       $4,578,081.00
-------------------------------------------------------------------------
From and after May 1, 2002                                  $           0
-------------------------------------------------------------------------
</TABLE>

                                       8
<PAGE>

(7)  "Restructuring Costs": Costs and expenses incurred by the Borrower in
     connection with or pursuant to Limited Waiver and Amendment No. 4 for
     amendment fees, appraisal fees, consultant fees, commercial finance
     examination fees, and attorney's fees.

(8)  "Temporary A/R O/A": At any time of calculation, an amount equal to the
     lesser of (a) $2,000,000.00 or (b) (i) the difference between (A)
     $8,600,000.00 and (B) the "Advances against Eligible Accounts" reflected on
     Line 5 of the Borrowing Base Certificate minus (ii) any increase after
     March 31, 2001 in the "Advances against Eligible Accounts" reflected on
     Line 5 of the Borrowing Base Certificate, provided that any reduction in
     the Temporary A/R O/A from that existing as of March 31, 2001 by virtue of
     an increase after March 31, 2001 in the "Advances against Eligible
     Accounts" shall be a permanent reduction and the Temporary A/R O/A shall
     not thereafter be increased.

(9)  "UCC": The Uniform Commercial Code in effect from time to time under the
     laws of the State of New Jersey.

b.  Amendments to Section 2.    The provisions of Section 2 of the Credit
    Agreement are hereby amended as follows:

i.  The provisions of Section 2.1(a) are hereby deleted in their entirety and
    the following substituted in their stead:

               (a)   Commencing April 24, 2001 and thereafter during the
               remainder of the Commitment Period, subject to the terms and
               conditions hereof, each Lender severally agrees to make revolving
               credit loans ("Revolving Loans") to the Borrower from time to
               time for the purposes hereinafter set forth; provided, however,
               that (i) with regard to each Lender individually, the sum of such
               Lender's share of outstanding Revolving Loans plus such Lender's
               LOC Commitment Percentage of LOC Obligations shall not exceed
               such Lender's Revolving Committed Amount, and (ii)with regard to
               the Lenders collectively, the sum of the aggregate amount of
               outstanding Revolving Loans plus LOC Obligations shall not exceed
               the lesser of (x) $20,125,530.00 (as such aggregate maximum
               amount may be reduced from time to time as provided herein, the
               "Revolving Committed Amount"), or (y) the Borrowing Base.
               Revolving Loans may be repaid and reborrowed in accordance with
               the provisions hereof.

ii.  The provisions of Section 2.1(c) are hereby amended by adding the

                                       9
<PAGE>

following additional sentences at the beginning thereof :

                    The principal balance of the Revolving Loans shall be repaid
                    on April 12, 2001 by an amount equal to the Borrower's then
                    cash and cash equivalents.  The amounts so repaid may,
                    subject to the terms hereof, be reborrowed. Thereafter,
                    commencing April 24, 2001, the Borrower shall cause all
                    amounts deposited in the accounts described in Section 5.20
                    hereof (other than no more than $50,000.00 which may remain
                    in the deposit account established with any institution
                    which has executed and delivered a blocked account agreement
                    with the Administrative Agent pursuant to said Section 5.20)
                    to be transferred daily to such account as the
                    Administrative Agent may direct for application to the then
                    outstanding Revolving Loans; any amounts so applied to the
                    Revolving Loans may, subject to the other terms of this
                    Agreement, be reborrowed.

iii.  Elimination of LIBOR Rate Loans. The Credit Agreement is hereby amended to
      provide that from and after the date hereof, the Borrower shall not be
      entitled to elect to have any portion of the Loans bear interest by
      reference to the LIBOR Rate. Rather all Loans shall be Base Rate Loans.
      Any existing LIBOR Rate Loans shall immediately convert to Base Rate Loans
      and the Borrower shall pay `breakage costs", in accordance with the
      provisions of Section 2.15 of the Credit Agreement, for any Loans which
      are converted to Base Rate Loans on a day other than the last day of an
      Interest Period.

iv.   The provisions of Section 2.2(b) with respect to periods after March 31,
      2001 are hereby deleted in their entirety and the following substituted in
      their stead:

<TABLE>
<CAPTION>

      -----------------------------------------------------------------------------------------
      Payment Date                                                    Principal Payment
      -----------------------------------------------------------------------------------------
<S>                                                      <C>

      April 30, 2001 and the last day of each month              $416,667.00
      thereafter until the Termination Date

      Termination Date                                         Entire Outstanding Balance
      -----------------------------------------------------------------------------------------
</TABLE>

v.    The provisions of Section 2.3(a) are hereby amended

(1)  by deleting clause (i) of the proviso and substituting the following in its
     stead:

                                       10
<PAGE>

                    (i) the aggregate amount of LOC Obligations shall not exceed
                    $5,625,530.06 (the "LOC Committed Amount")

             (2)    by deleting clause (ii)

of the proviso and substituting the following in its stead:

                    (ii) the sum of the aggregate amount of Revolving Loans plus
                    LOC Obligations shall not at any time exceed the lesser of
                    the Revolving Committed Amount or the Borrowing Base then in
                    effect;

vi.  The provisions of Section 2.6(b) are hereby deleted in their entirety and
the following substituted in their stead:

                    (b) Upon the occurrence of an Event of Default, at the
                    election of the Lenders, all Obligations shall bear interest
                    at a rate per annum which is two percent (2%) in excess of
                    the rate which otherwise would be applicable thereto (as
                    well as after and before judgment).

vii.  The provisions of Section 2.7(a) are hereby amended by deleting the
      proviso in the first sentence thereto and substituting the following in
      its stead:

                    provided that after giving effect to any such voluntary
                    reduction, the sum of the Revolving Loans and LOC
                    Obligations then outstanding shall not exceed the lesser of
                    the Aggregate Revolving Committed Amount, as reduced or the
                    Borrowing Base then in effect.

viii. The provisions of Section 2.7(b)(i) are hereby deleted in their entirety
      and the following substituted in their stead:

                    (i) Net Sales Proceeds.  The Borrower shall make a
                    prepayment of the Loans in an amount equal to 100% of the
                    Net Sales Proceeds

                    from Asset Dispositions.  Any such required prepayment of
                    Net Sales Proceeds shall be made on the date of receipt
                    thereof by the Borrower and shall be applied, first, to the
                    outstanding principal balance on the Term Loan (in inverse
                    order of maturity) and second, to the outstanding principal
                    balance of the Revolving Loans and (after all Revolving
                    Loans have been repaid) to a cash collateral account in
                    respect of LOC Obligations.

ix.   The provisions of Section 2.7(b)(ii) are hereby deleted in their entirety
      and the following substituted in their stead:

                                       11
<PAGE>

                    (ii) Excess Cash Flow.  On the date 60 days after the end of
                    each fiscal quarter, commencing with the fiscal quarter
                    ending June 30, 2001, the Borrower shall make a prepayment
                    of the Loans in an amount equal to one hundred percent
                    (100%) of Excess Cash Flow in excess of $250,000.00 for the
                    immediately preceding fiscal quarter.  Any such prepayment
                    of Excess Cash Flow shall be applied FIRST to the
                    Overadvance in permanent reduction thereof, and SECOND,
                    after the Overadvance has been repaid in full to the
                    outstanding principal balance of the Term Loan (in inverse
                    order of maturity).

x.  The provisions of Section 2.7(b)(iii) are hereby deleted in their entirety
    and the following substituted in their stead:

                    (iii) Debt Issuance; Equity Transaction.  Immediately upon
                    receipt by the Borrower of net cash proceeds from any Debt
                    Issuance (other than any Debt Issuance relating to
                    Indebtedness permitted by  Section 6.1) or Equity
                    Transaction (other than any Equity Transaction relating to
                    the exercise of employee stock options in the ordinary
                    course of business), the Borrower shall make a prepayment of
                    the Loans in an amount equal to one hundred percent (100%)
                    of such proceeds.  Any such prepayments shall be applied,
                    first, to the outstanding principal balance on the Term Loan
                    (in inverse order of maturity) and second, to the
                    outstanding principal balance of the Revolving Loans and
                    (after all Revolving Loans have been repaid) to a cash
                    collateral account in respect of LOC Obligations.

xi.  The first sentence of Section 2.7(b)(iv) are hereby deleted in their
     entirety and the following substituted in their stead:

                    If, at any time, the aggregate amount of Revolving Loans and
                    LOC Obligations then outstanding shall exceed the lesser of
                    the Aggregate Revolving Committed Amount, as reduced from
                    time to time or the Borrowing Base then in effect, the
                    Borrower shall immediately make payment on the Revolving
                    Loans in an amount sufficient to eliminate the excess and
                    (after all Revolving Loans have been repaid) cash
                    collateralize the LOC Obligations, in an amount sufficient
                    to eliminate such excess.

xii.  Section 2.7(b) is hereby amended by adding the following new subsection:

                    (v) The aggregate Revolving Committed Amount shall be
                    reduced by the following amounts at the following times:

                                       12
<PAGE>

<TABLE>
<CAPTION>

Date                                                                     Reduction
----------------------------------------------------------------------------------------
<S>                                                                <C>
December 31, 2001                                                          $1,000,000.00
----------------------------------------------------------------------------------------
March 31, 2002                                                             $1,000,000.00
----------------------------------------------------------------------------------------
April 30, 2002                                                             $1,000,000.00
----------------------------------------------------------------------------------------
</TABLE>

xiii.  The provisions of Section 2.8(a) are hereby amended

       (1)  by deleting the word "quarter" wherever it appears in the first
            sentence and substituting the word "month" in its stead.

       (b)  by deleting the last sentence in its entirety and substituting the
            following therefor:

                         The Commitment Fee shall be payable monthly in arrears
                         on the last Business Day of each month and on the
                         Termination Date.

xiv. The provisions of Section 2.8(b) are hereby deleted in their entirety and
     the following substituted in their stead:

                    (b) Letter of Credit Fee.  In consideration of the LOC
                    Commitments, the Borrower agrees to pay to the Agent (for
                    the ratable benefit of the Lenders) a fee (the "Letter of
                    Credit Fee") equal to three and one-half percent (3.50%) per
                    annum calculated on the average daily maximum amount
                    available to be drawn under each Letter of Credit from the
                    date of issuance to the date of expiration thereof.  The
                    Agent shall promptly pay to the Lenders their pro rata
                    portion of the Letter of Credit Fee.  The Letter of Credit
                    Fee shall be payable monthly in arrears on the last Business
                    Day of each month and on the Termination Date.

xv.  The provisions of Section 2.8(c) are hereby amended by deleting the second
     sentence thereof in its entirety and substituting the following in its
     stead:

                    The fronting fee shall be payable monthly in arrears on the
                    last Business Day of each month and on the Termination Date.

                                       13
<PAGE>

xvi.  The provisions of Section 2.8 are hereby amended by adding the following
       new subsection:

                    (d) Amendment Fees.  On or before April 12, 2001, in
                    consideration of the Lenders' entering into the Limited
                    Waiver and Amendment of that date, the Borrower shall pay to
                    the Administrative Agent for the ratable benefit of the
                    Lenders an amendment fee in the sum of $90,000.00.  The
                    amendment fee is fully earned and is not subject to refund
                    or rebate under any circumstances. In addition, on October
                    1, 2001, unless all Obligations have been repaid in full,
                    all LOC Obligations cash collateralized to the satisfaction
                    of the Administrative Agent, and all Commitments of the
                    Lenders terminated, the Borrower shall pay a supplemental
                    amendment fee to the Administrative Agent for the ratable
                    benefit of the Lenders in an amount equal to two percent
                    (2.00%) of the sum of the Aggregate Revolving Committed
                    Amount and the principal balance of the Term Loan
                    immediately, in each case determined after giving effect to
                    the Limited Waiver and Amendment No. 4, provided that if the
                    Lenders shall have received a prepayment of the Term Loan in
                    the principal amount of at least $10,000,000.00 (in addition
                    to regularly scheduled installments) prior to October 1,
                    2001, the supplemental amendment fee shall be in an amount
                    equal to two percent (2.00%) of the sum of the Aggregate
                    Revolving Committed Amount and the principal balance of the
                    Term Loan, in each case as in effect on October 1, 2001. The
                    supplemental amendment fee is also fully earned and shall
                    not be subject to refund or rebate under any circumstances
                    except as provided in the preceding sentence.

c.  Amendments to Section 5.  The provisions of Section 5 of the Credit
    Agreement are hereby amended as follows:

    i.  The provisions of Section 5.1(c) are hereby deleted in their entirety
        and the following substituted in their stead:

                    (c) Annual Budget Plan.  As soon as available, but in any
                    event no more than 30 days prior to the end of each fiscal
                    year, a copy of the detailed annual budget or plan for the
                    next fiscal year set out by fiscal month, in form and detail
                    reasonably acceptable to the Administrative Agent and the
                    Majority Lenders, together with a summary of the material
                    assumptions made in the preparation of the budget or plan;

                                       14
<PAGE>

ii.  The provisions of Section 5.1 are hereby amended by adding the following
     new subparagraphs:

                    (d) Monthly Statements.  On or before the 15th day of each
                    month, (i) a balance sheet, income statement, and cash flow
                    statement for the immediately preceding month, prepared on a
                    consolidated basis, each of which shall include a comparison
                    of the actual results to the Borrower's budgeted
                    projections, and (ii) an accounts receivable aging and
                    inventory report.

                    (e) Weekly Projections.  On or before Wednesday of each
                    week, a rolling weekly cash flow projection, prepared on a
                    consolidated basis, for the subsequent thirteen week period.

                    (f) Borrowing Base Certificates.  On or before Wednesday of
                    each week, a Borrowing Base Certificate satisfactory in form
                    and substance to the Administrative Agent as of the end of
                    the immediately preceding week.

iii. The provisions of Section 5.1 are hereby amended by adding the following
     at the end thereof:

                    All financial information furnished pursuant to this Section
                    5.1 or otherwise under this Agreement shall be certified by
                    an Authorized Signatory as being true, accurate, and
                    complete.

iv.  The provisions of Section 5.2(b) are hereby amended be adding the words
     "and 5.1(d)" after the words "and 5.1(b)" in the second line thereof.

v.   The provisions of Section 5.6 are hereby amended by deleting the words "(at
     the Borrower's expense after the occurrence of a Default of Event of
     Default)" in the fourth and fifth lines thereof and substituting the words
     "(at the Borrower's expense whether or not a Default of Event of Default
     has occurred)" in their stead. The Administrative Agent shall furnish the
     Borrower with an estimate of all such costs and expenses as soon as
     reasonably practicable prior to the incurrence thereof.

vi.  The provisions of Section 5.8 are hereby amended by adding the following
     new subparagraph:

                    (d) Permit the Administrative Agent and the Lenders to
                    undertake environmental site assessments of the Borrower's
                    properties (at the

                                       15
<PAGE>

                    Borrower's expense whether or not a Default of Event of
                    Default has occurred) at such times, with such frequency
                    and, by Persons acceptable to the Administrative Agent and
                    the Lenders; and to reasonably cooperate with, and furnish
                    assistance to such Persons performing such site assessments.

vii.  The provisions of Section 5.9 are hereby deleted in their entirety for all
      periods from and after December 31, 2000 and the following substituted in
      their stead:

               (a) Leverage Ratio.  The Borrower will maintain, as of the end of
               each fiscal quarter shown, a Leverage Ratio of not greater than:

<TABLE>
<CAPTION>

Period                                                       Ratio
-----------------------------------------------------------------------
<S>                                                      <C>

March 31, 2001                                                 4.75:1.0
-----------------------------------------------------------------------
June 30, 2001                                                  4.50:1.0
-----------------------------------------------------------------------
September 30, 2001                                             4.25:1.0
-----------------------------------------------------------------------
December 31, 2001                                              2.50:1.0
-----------------------------------------------------------------------
</TABLE>

               The required Leverage Ratios for quarters ending after December
               31, 2001 shall be established by the Administrative Agent based
               upon the annual budget to be furnished pursuant to Section 5.1(c)
               hereof.

               (b) Consolidated EBITDA.  The Borrower will achieve Consolidated
               EBITDA, calculated on a cumulative basis, of at least the
               following amounts for the periods indicated:

<TABLE>
<CAPTION>

Period                                             Minimum Cumulative
                                                  Consolidated EBITDA
------------------------------------------------------------------------
<S>                                             <C>
Quarter ending March 31, 2001                                $ 2,200,000
------------------------------------------------------------------------
Two quarters ending June 30, 2001                            $ 4,075,000
------------------------------------------------------------------------
Three quarters ending September 30, 2001                     $ 6,165,000
------------------------------------------------------------------------
Four quarters ending December 31, 2001                       $13,020,000
------------------------------------------------------------------------
Five quarters ending March 31, 2002                          $15,000,000
------------------------------------------------------------------------
</TABLE>

                                       16
<PAGE>

               (c) Capital Expenditures.  The Borrower and its Subsidiaries
               shall not make Capital Expenditures, calculated on a cumulative
               basis, in excess of the following amounts for the periods
               indicated:

<TABLE>
<CAPTION>

Period                                             Maximum Cumulative
                                                  Capital Expenditures
------------------------------------------------------------------------
<S>                                             <C>

Quarter ending March 31, 2001                                 $  250,000
------------------------------------------------------------------------

Two quarters ending June 30, 2001                             $  750,000
------------------------------------------------------------------------

Three quarters ending September 30, 2001                      $1,250,000
------------------------------------------------------------------------
Four quarters ending December 31, 2001                        $2,500,000
------------------------------------------------------------------------
Five quarters ending March 31, 2002                           $3,000,000
------------------------------------------------------------------------
</TABLE>

viii. The provisions of Section 5.13 are hereby amended by deleting the words
      "(except with respect to the Medway Facility)" in the last sentence
      thereof.

ix.   The provisions of Section 5.15 are hereby amended by adding the following
      at the end thereof:

               Without limiting the foregoing, on or before April 23, 2001, the
               Borrower and the Guarantors shall (a) deliver, or cause to be
               delivered, to the Administrative Agent such landlord's and
               warehouseman's waivers as the Administrative Agent may request,
               and (b) cause to be filed appropriate UCC financing statements at
               all locations where goods of the Borrower and/or Guarantors are

                                       17
<PAGE>

               on consignment. The Borrower warrants and represents that all
               locations of the Borrower and Guarantors or where any property of
               the Borrower or Guarantors is located are set forth on Exhibit A
               to the Limited Waiver and Amendment No. 4.

x.  The provisions of Section 5 are hereby amended by adding the following new
    sections:

                    5.18   ENGAGEMENT OF CONSULTANTS.

                    (a)  On or before April 12, 2001, engage a business
                    consultant reasonably acceptable to the Lenders to provide
                    financial and business assistance to the Borrower and
                    Guarantors (including, without limitation to review, and
                    assist the Borrower in the preparation of, its business
                    plan).  The Borrower shall furnish the Administrative Agent
                    with a copy of the engagement letter with such Person and
                    the terms and scope of employment of such Person shall be
                    reasonably acceptable to the Lenders.  Without limiting the
                    foregoing, the engagement shall authorize the manager or
                    consultant to communicate directly with the Lenders and to
                    furnish the Lenders with such information as they may
                    reasonably request.

                    (b)  Without limiting the provisions of Sections 5.6,
                    5.18(a), and 9.5 of the Credit Agreement, the Administrative
                    Agent and the Lenders may engage a consultant (at the
                    Borrower's expense whether or not a Default of Event of
                    Default has occurred) to assist the Administrative Agent and
                    the Lenders in the review of the Borrower's and the
                    Guarantors' business plan, projections, results of
                    operations and such other matters as the Administrative
                    Agent and the Lenders may require.  The Borrower shall, and
                    shall cause the Guarantors to, reasonably cooperate with any
                    such consultant.

                    5.19     APPRAISALS.

                    Permit the Administrative Agent and the Lenders to undertake
                    appraisals of the Borrower's properties (at the Borrower's
                    expense whether or not a Default or Event of Default has
                    occurred), at such times, with such frequency and, by
                    Persons acceptable to the Administrative Agent and the
                    Lenders; and to reasonably cooperate with, and furnish
                    assistance to such Persons performing such appraisals.

                                       18
<PAGE>

                    5.20   CASH MANAGEMENT

                    Maintain all deposit accounts of the Borrower and the
                    Guarantors solely with a Lender or with a financial
                    institution which has executed and delivered to the
                    Administrative Agent a blocked account agreement the terms
                    of which are satisfactory to the Administrative Agent (such
                    blocked account agreement to permit an amount not to exceed
                    $50,000.00 to be maintained in each such blocked account);
                    and deposit, or cause to be deposited, all cash receipts
                    solely into an account maintained in accordance with the
                    provisions of this Section; provided that an Event of
                    Default shall not be deemed to have arisen hereunder by
                    virtue of the Borrower's and the Guarantors' failure to have
                    complied with the foregoing requirements if, (x) by April
                    30, 2001, the Borrower and the Guarantors shall have either
                    closed all deposit accounts not maintained with a Lender
                    and/or delivered such blocked account agreements to the
                    Administrative Agent, and (y) pending the satisfaction of
                    the provisions of clause (x), the amounts maintained in each
                    deposit account not maintained with a Lender do not exceed
                    $50,000.00 at any time.  Notwithstanding the foregoing, the
                    Borrower may maintain a payroll account (specifically so
                    designated and to be used for no other purpose) for its
                    Owatonna, Minnesota facility and may maintain a balance
                    therein for the then current payroll expense.

d.   Amendments to Section 6.  The provisions of Section 6 of the Credit
     Agreement are hereby amended as follows:

     i.  The provisions of Section 6.1 of the Credit Agreement are hereby
         amended:

         (1) to add the words "except that no such Indebtedness may be incurred
             from April 12, 2001 through the Termination Date" at the end of
             clauses (g) and (h) thereof.

         (2) to delete the provisions of clause (d) thereof and substitute the
             following in its stead:

                    (d) Capital Leases for the financing of equipment which,
                    together with other Capital Expenditures made or incurred,
                    do not result in a breach of the provisions of Section
                    5.9(c) hereof.

     ii. The provisions of Section 6.2 of the Credit Agreement are hereby
         amended to add the words "provided that no Permitted Liens pursuant to
         clauses (iii) or (x) of the definition of Permitted Liens may be
         granted or

                                       19
<PAGE>

          arise from April 12, 2001 through the Termination Date" at the end
          thereof.

     iii. The provisions of Section 6.5(a) of the Credit Agreement are hereby
          amended to add the words "provided that no transaction described in
          clauses (a)(ii) or (a) (iv) may be consummated or agreed to from April
          12, 2001 through the Termination Date" immediately prior to the last
          sentence of Section 6.5(a).

     iv.  The provisions of Section 6.5(b) of the Credit Agreement are
          hereby amended to add the words "provided that no transaction
          described in clauses (b)(iii) or (b)(v) may be consummated or agreed
          to from April 12, 2001 through the Termination Date" at the end of
          said Section 6.5(b).

     v.   The provisions of Section 6.11 are hereby amended by deleting
          clause (iii) in its entirety.

e.   Miscellaneous Amendments.

     i.   The provisions of Section 8.9 are hereby amended to delete (A) the
          words "which successor agent shall be approved by the Borrower" in the
          fifth and sixth lines thereof, and (B) the words "with the approval of
          the Borrower" in the eighth line thereof.

     ii.  The provisions of Section 9.2 are hereby amended to modify the
          Person to whom notices are to be furnished at the Administrative Agent
          to read:

                    Attn:   Ron Ferguson
                    Telecopier:(704) 383-6249
                    Telephone: (704) 374-4560

     iii. The provisions of Section 9.5 are hereby amended to delete the words
          "in an amount not to exceed $40,000" at the end of subparagraph (a)
          thereof.

      iv. The provisions of Section 9.6(c) are hereby amended to delete the
          words "and, so long as no Event of Default has occurred and is
          continuing, with the consent of the Borrower" in the third fourth
          lines thereof.

       v. Schedule 2.1(a) is hereby deleted in its entirety and a new
          Schedule 2.1(a) reflecting the reduced Commitments of the Lenders
          shall be substituted in its stead.

6.  CONDITIONS TO EFFECTIVENESS. This Limited Waiver and Amendment No. 4shall
not be effective until each of the following conditions precedent have been
fulfilled to the

                                       20
<PAGE>

satisfaction of the Administrative Agent and the Lenders:

a.  This Limited Waiver and Amendment No. 4 shall have been duly executed and
    delivered by the respective parties hereto and shall be in form and
    substance satisfactory to the Administrative Agent and each of the Lenders.

b.  All action on the part of the Borrower and each Guarantor necessary for the
    valid execution, delivery and performance by the Borrower and each Guarantor
    of this Limited Waiver and Amendment No. 4 shall have been duly and
    effectively taken and evidence thereof satisfactory to the Administrative
    Agent and the Lenders shall have been provided to the Administrative Agent
    and each of the Lenders.

c.  The Borrower shall have paid to the Administrative Agent and Lenders all
    expenses (including reasonable attorneys fees, appraisal fees, environmental
    site assessment fees, and commercial finance examination fees) and other
    amounts then due and owing pursuant to this Limited Waiver and Amendment No.
    4 and the Credit Documents for which invoices have been presented as of the
    date of execution hereof.

d.  The Administrative Agent shall have received, and there shall have been
    filed and recorded, a mortgage or deed of trust on the Borrower's real
    property in Owatonna, Minnesota granting a first priority Lien thereon to
    secure the Obligations, in form and substance satisfactory to the
    Administrative Agent.

e.  Except for the Existing Defaults, no Default or Event of Default shall have
    occurred and be continuing.

f.  The Borrower and the Guarantors shall have provided such additional
    instruments and documents to the Administrative Agent and the Lenders as the
    Administrative Agent and the Administrative Agent's counsel may have
    reasonably requested.

7.  GENERAL.

a.  This Limited Waiver and Amendment No. 4 shall be binding upon the Borrower
    and the Guarantors and their respective successors and assigns and shall
    enure to the benefit of the Administrative Agent, the Lenders, and their
    respective successors and assigns.

b.  Any determination that any provision of this Limited Waiver and Amendment
    No. 4 or any application thereof is invalid, illegal, or unenforceable in
    any respect in any instance shall not affect the validity, legality, or
    enforceability of such provision in any other instance, or the validity,
    legality, or enforceability of any other provision of this Limited Waiver
    and Amendment No. 4.

                                       21
<PAGE>

c.  No delay or omission by the Administrative Agent or any Lender in exercising
    or enforcing any of its rights and remedies shall operate as, or constitute,
    a waiver thereof. No waiver by the Administrative Agent or any Lender of any
    of its rights and remedies on any one occasion shall be deemed a waiver on
    any subsequent occasion, nor shall it be deemed a continuing waiver.

d.  This Limited Waiver and Amendment No. 4 and all other documents,
    instruments, and agreements executed in connection herewith incorporate all
    discussions and negotiations among the Borrower, the Guarantors, the
    Administrative Agent and the Lenders, either express or implied, concerning
    the matters included herein and in such other instruments, any custom,
    usage, or course of dealings to the contrary notwithstanding. No such
    discussions, negotiations, custom, usage, or course of dealings shall limit,
    modify, or otherwise affect the provisions hereof. No modification,
    amendment, or waiver of any provision of this Limited Waiver and Amendment
    No. 4 or of any provision of any other agreement between the Borrower, the
    Guarantors, the Administrative Agent or any Lender shall be effective unless
    executed in writing by the party to be charged with such modification,
    amendment and waiver.

e.  Except as modified hereby, all terms and conditions of the Credit Agreement
    and the other Credit Documents remain in full force and effect and the
    Borrower and Guarantors shall continue to comply therewith.

f.  This Limited Waiver and Amendment No. 4 shall be deemed to constitute a
    "Credit Document" for all purposes under the Credit Agreement.

g.  The Borrower makes the following waiver knowingly, voluntarily, and
    intentionally, and understands that the Administrative Agent and the
    Lenders, in entering into this Limited Waiver and Amendment No. 4, are
    relying thereon. THE BORROWER AND EACH GUARANTOR, TO THE EXTENT OTHERWISE
    ENTITLED THERETO, HEREBY IRREVOCABLY WAIVES ANY PRESENT OR FUTURE RIGHT OF
    THE BORROWER OR ANY SUCH GUARANTOR TO A JURY IN ANY TRIAL OF ANY CASE OR
    CONTROVERSY IN WHICH THE ADMINISTRATIVE AGENT OR ANY LENDER IS OR BECOMES A
    PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE
    ADMINISTRATIVE AGENT OR ANY LENDER OR IN WHICH THE ADMINISTRATIVE AGENT OR
    ANY LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES
    OUT OF, OR IS IN RESPECT OF, ANY RELATIONSHIP BETWEEN THE BORROWER, ANY
    GUARANTOR OR ANY SUCH PERSON AND THE ADMINISTRATIVE AGENT OR ANY LENDER.

h.  The Borrower and each Guarantor shall execute such instruments and documents

                                       22
<PAGE>

    as the Administrative Agent and the Lenders may from time to time request in
    connection with the Credit Agreement and the other Credit Documents, this
    Agreement and the arrangements contemplated hereby.

  It is intended that this Agreement take effect as a sealed instrument.

                              CYBEX INTERNATIONAL, INC.

                              By          s/ John Aglialoro
                                     ---------------------------

                              Print Name:  John Aglialoro
                                          --------------------------

                              Title:      Chairman
                                     ---------------------------------

                              EAGLE PERFORMANCE SYSTEMS, INC.

                              By          s/ John Aglialoro
                                     ---------------------------

                              Print Name:  John Aglialoro
                                          --------------------------

                              Title:      Chairman
                                     ---------------------------------

                              GENERAL MEDICAL EQUIPMENT, LTD.

                              By          s/ John Aglialoro
                                     ---------------------------

                              Print Name:  John Aglialoro
                                          --------------------------

                              Title:      Chairman
                                     ---------------------------------

                              LUMEX BED SYSTEMS, INC.

                              By          s/ John Aglialoro
                                     ---------------------------

                              Print Name:  John Aglialoro
                                          --------------------------

                              Title:      Chairman
                                     ---------------------------------

                                       23
<PAGE>

                              CYBEX FITNESS GERATE VERTRIEBS, GMBH

                              By          s/ John Aglialoro
                                     ---------------------------

                              Print Name:  John Aglialoro
                                          --------------------------

                              Title:      Chairman
                                     ---------------------------------

                              TECTRIX FITNESS EQUIPMENT, INC.

                              By          s/ John Aglialoro
                                     ---------------------------

                              Print Name:  John Aglialoro
                                          --------------------------

                              Title:      Chairman
                                     ---------------------------------

AGREED AND ACCEPTED BY

FIRST UNION NATIONAL BANK

By:    s/ Ron R. Ferguson
       ------------------

Print Name:   Ron R. Ferguson
            -----------------

Title:  Senior Vice President
       ----------------------

FLEET NATIONAL BANK

By:   s/ Kevin M. Behan
      ------------------------

Print Name:   Kevin M. Behan
             ---------------

Title: Vice President
       -----------------

                                       24
<PAGE>

FIRST UNION NATIONAL BANK, AS ADMINISTRATIVE AGENT

By:   s/  Ron R. Ferguson
    ---------------------

Print Name:    Ron R. Ferguson
             --------------------

Title:  Senior Vice President
        ---------------------

                                       25
<PAGE>

                                   SCHEDULE 1

                           Existing Events of Default

Failure to comply with Sections 5.9(a), 5.9(b), and 5.9(c) of the Credit
Agreement as of December 31, 2000.

                                       26
<PAGE>

                                   SCHEDULE 2

                           Existing Letters of Credit

Letter of Credit in the amount of $2,772,106.00

Letter of Credit in the amount of $2,553,424.06

                                       27

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