Document:

EXHIBIT 10.5

                           LOAN AND SECURITY AGREEMENT

                                     between

                                  ACCOM, INC.,
                             A Delaware Corporation

                                    Borrower

                                       and

                               THE PROVIDENT BANK,
                           An Ohio Banking Institution

                                     Lender

                     $2,000,000.00 REVOLVING LINE OF CREDIT

                            Dated: February 10, 2000
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                                TABLE OF CONTENTS

ARTICLE 1
DEFINITIONS....................................................................1
  Section 1.1.      Account Debtor.............................................1
  Section 1.2.      Accounts, Chattel Paper, Documents, Equipment, Fixtures,
                    General Intangibles, Goods, Instruments and Investment
                    Property...................................................1
  Section 1.3.      Affiliate. ................................................2
  Section 1.4.      Agreement. ................................................2
  Section 1.5.      Borrowing Base.............................................2
  Section 1.6.      Business Day. .............................................2
  Section 1.7.      Capital Adequacy Requirement. .............................2
  Section 1.8.      Capital Expenditures.......................................2
  Section 1.9.      Capital Lease. ............................................3
  Section 1.10.     Capital Lease Obligations. ................................3
  Section 1.11.     Closing. ..................................................3
  Section 1.12.     Code. .....................................................3
  Section 1.13.     Collateral. ...............................................3
  Section 1.14.     Collection Account. .......................................3
  Section 1.15.     Commercial Account. .......................................3
  Section 1.16.     Default. ..................................................3
  Section 1.17.     Dollar Cap. ...............................................4
  Section 1.18.     EBITDA.....................................................4
  Section 1.19.     Eligible Accounts. ........................................4
  Section 1.20.     Employee Benefit Plan. ....................................5
  Section 1.21.     Environmental Laws. .......................................5
  Section 1.22.     EPA Permit. ...............................................6
  Section 1.23.     ERISA. ....................................................6
  Section 1.24.     ERISA Affiliate. ..........................................6
  Section 1.25.     ERISA Liabilities. ........................................6
  Section 1.26.     Event Of Default. .........................................6
  Section 1.27.     Facilities. ...............................................6
  Section 1.28.     Fiscal Year. ..............................................6
  Section 1.29.     G.A.A.P. ..................................................6
  Section 1.30.     Guaranteed Pension Plan. ..................................6
  Section 1.31.     Indebtedness. .............................................7
  Section 1.32.     Insolvency Proceedings. ...................................7
  Section 1.33.     Interest Rate Protection Agreement. .......................7
  Section 1.34.     Interest Coverage Ratio....................................7
  Section 1.35.     Interest Expense...........................................7
  Section 1.36.     Inventory. ................................................7
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  Section 1.37.     Laws. .....................................................8
  Section 1.38.     Lender Expenses. ..........................................8
  Section 1.39.     Letters Of Credit. ........................................8
  Section 1.40.     Loan. .....................................................8
  Section 1.41.     Loan Documents. ...........................................8
  Section 1.42.     Lock Box. .................................................9
  Section 1.43.     Material Adverse Event. ...................................9
  Section 1.44.     Maximum Revolving Loan Amount. ............................9
  Section 1.45.     Multiemployer Plan. .......................................9
  Section 1.46.     Note. .....................................................9
  Section 1.47.     Obligations. ..............................................9
  Section 1.48.     Permitted Liens. .........................................10
  Section 1.49.     Person. ..................................................10
  Section 1.50.     Receivables. .............................................10
  Section 1.51.     Records. .................................................10
  Section 1.52.     Regulated Substance. .....................................10
  Section 1.53.     Release. .................................................10
  Section 1.54.     Restricted Payment. ......................................11
  Section 1.55.     Revolving Loan. ..........................................11
  Section 1.56.     Revolving Loan Note. .....................................11
  Section 1.57.     Solvent. .................................................11
  Section 1.58.     Subordinated Debt.........................................11
  Section 1.59.     Subsidiary. ..............................................11
  Section 1.60.     Tangible Net Worth........................................12
  Section 1.61.     Termination Event. .......................................12

ARTICLE 2
TERMS OF LOAN.................................................................12
  Section 2.1.      Agreement To Extend Revolving Loan........................12
    Section 2.1.1.    Conditions Precedent To Each Advance....................13
    Section 2.1.2.    Interest And Lender's Records...........................13
    Section 2.1.3.    Commitment Fee..........................................14
    Section 2.1.4.    Facility Fee............................................14
    Section 2.1.5.    Monitoring Fee. ........................................14
    Section 2.1.6.    Term....................................................14
    Section 2.1.7.    Purpose.................................................14
  Section 2.2.      Letters Of Credit.........................................14
    Section 2.2.1.    Issuance Of Letters Of Credit. .........................14
    Section 2.2.2.    Rights And Remedies Of The Lender. .....................15
    Section 2.2.3.    Indemnification. .......................................15
    Section 2.2.4.    Reimbursement Obligations. .............................15
    Section 2.2.5.    Fees, Charges And Other Terms. .........................16
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  Section 2.3.      Capital Adequacy. ........................................16
  Section 2.4.      Payments. ................................................16
  Section 2.5.      Advancements. ............................................16
  Section 2.6.      Termination. .............................................17

ARTICLE 3
SECURITY FOR THE OBLIGATIONS..................................................17
  Section 3.1.      Grant Of Security Interest. ..............................17
  Section 3.2.      Proceeds And Products. ...................................18
  Section 3.3.      Priority Of Security Interests. ..........................18
  Section 3.4.      Future Advances. .........................................18
  Section 3.5.      Receivable Collections. ..................................18
  Section 3.6.      Collection Of Receivables By Lender. .....................18
  Section 3.7.      Maintenance Of Principal Accounts.........................19
  Section 3.8.      Further Assurances. ......................................19
  Section 3.9.      Fair Labor Standards Act. ................................20

ARTICLE 4
REPRESENTATIONS AND WARRANTIES................................................20
  Section 4.1.      Accuracy Of Information. .................................20
  Section 4.2.      No Litigation. ...........................................20
  Section 4.3.      No Liability Or Adverse Change. ..........................20
  Section 4.4.      Title To Collateral. .....................................21
  Section 4.5.      Authority; Approvals And Consents.........................21
    Section 4.5.1.    Authority. .............................................21
    Section 4.5.2.    Approvals. .............................................21
    Section 4.5.3.    Consents. ..............................................21
  Section 4.6.      Binding Effect Of Documents, Etc. ........................21
  Section 4.7.      Other Names. .............................................22
  Section 4.8.      No Events Of Default. ....................................22
  Section 4.9.      Taxes. ...................................................22
  Section 4.10.     Compliance With Laws. ....................................22
  Section 4.11.     Chief Place Of Business. .................................22
  Section 4.12.     Location Of Inventory. ...................................22
  Section 4.13.     No Subsidiaries. .........................................22
  Section 4.14.     No Labor Agreements. .....................................22
  Section 4.15.     Eligible Accounts. .......................................23
  Section 4.16.     Approvals. ...............................................23
  Section 4.17.     Financial Statements. ....................................23
  Section 4.18.     Solvency. ................................................23
  Section 4.19.     Fair Labor Standards Act. ................................23
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  Section 4.20.     Employee Benefit Plans....................................23
    Section 4.20.1.   Compliance. ............................................23
    Section 4.20.2.   Absence Of Termination Event. ..........................23
    Section 4.20.3.   Actuarial Value. .......................................24
    Section 4.20.4.   No Withdrawal Liability. ...............................24
  Section 4.21.     Environmental Conditions..................................24
    Section 4.21.1.   Existence Of Permits. ..................................24
    Section 4.21.2.   Compliance With Permits. ...............................24
    Section 4.21.3.   No Litigation. .........................................24
    Section 4.21.4.   No Releases. ...........................................24
    Section 4.21.5.   Transportation. ........................................24
    Section 4.21.6.   No Violation Notices. ..................................25
    Section 4.21.7.   No Notice Of Violations. ...............................25

ARTICLE 5
AFFIRMATIVE COVENANTS.........................................................25
  Section 5.1.      Payment. .................................................25
  Section 5.2.      Insurance. ...............................................25
  Section 5.3.      Books And Records. .......................................25
  Section 5.4.      Collection Of Accounts; Sale Of Inventory. ...............26
  Section 5.5.      Notice Of Litigation And Proceedings. ....................26
  Section 5.6.      Payment Of Liabilities To Third Persons. .................26
  Section 5.7.      Notice Of Change Of Business Location.....................26
  Section 5.8.      Payment Of Taxes. ........................................26
  Section 5.9.      Inspections Of Records. ..................................27
  Section 5.10.     Notice Of Events Affecting Collateral; Compromise Of
                    Receivables; Returned Or Repossessed Goods. ..............27
  Section 5.11.     Documentation Of Collateral. .............................27
  Section 5.12.     Reporting Requirements. ..................................28
    Section 5.12.1.   Receivables And Accounts Payable Reports. ..............28
    Section 5.12.2.   Borrowing Base Report. .................................28
    Section 5.12.3.   Quarterly Financial Statements. ........................28
    Section 5.12.4.   Monthly Financial Statements. ..........................28
    Section 5.12.5.   Annual Financial Statements. ...........................28
    Section 5.12.6.   SEC And Other Filings...................................29
    Section 5.12.7.   Management Letters. ....................................29
    Section 5.12.8.   Certificates Of No Default. ............................29
    Section 5.12.9.   Reports To Other Creditors. ............................29
    Section 5.12.10.  Management Changes. ....................................30
    Section 5.12.11.  General Information.....................................30
  Section 5.13.     Employee Benefit Plans And Guaranteed Pension Plans. .....30
  Section 5.14.     Maintenance Of Fixed Assets. .............................30
  Section 5.15.     Consignments. ............................................30
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  Section 5.16.     Federal Assignment Of Claims Act. ........................31
  Section 5.17.     Compliance With Laws. ....................................31
  Section 5.18.     Tangible Net Worth........................................32
  Section 5.19.     EBITDA....................................................32
  Section 5.20.     Interest Coverage Ratio...................................32

ARTICLE 6
NEGATIVE COVENANTS............................................................32
  Section 6.1.      No Change Of Name, Merger, Etc. ..........................32
  Section 6.2.      No Sale Or Transfer Of Assets. ...........................33
  Section 6.3.      No Encumbrance Of Assets. ................................33
  Section 6.4.      No Indebtedness. .........................................33
  Section 6.5.      Restricted Payments. .....................................33
  Section 6.6.      Transactions With Affiliates. ............................33
  Section 6.7.      Loans, Investments And Sale-Leasebacks. ..................33
  Section 6.8.      No Acquisition Of Equity In Or Assets Of Third Persons. ..33
  Section 6.9.      No Assignment. ...........................................33
  Section 6.10.     No Alteration Of Structure Or Operations..................33
  Section 6.11.     Unpermitted Uses Of Loan Proceeds. .......................33
  Section 6.12.     Long Term Contracts. .....................................34
  Section 6.13.     Changes In Fiscal Year. ..................................34
  Section 6.14.     Limitation On Issuance Of Equity Interests. ..............34
  Section 6.15.     Capital Expenditures......................................34

ARTICLE 7
EVENTS OF DEFAULT.............................................................34
  Section 7.1.      Failure To Pay. ..........................................34
  Section 7.2.      Violation Of Covenants. ..................................34
  Section 7.3.      Representation Or Warranty. ..............................35
  Section 7.4.      Default Under Loan Documents. ............................35
  Section 7.5.      Cross-Default. ...........................................35
  Section 7.6.      Judgments.................................................35
  Section 7.7.      Levy By Judgment Creditor. ...............................35
  Section 7.8.      Failure To Pay Liabilities................................35
  Section 7.9.      Involuntary Insolvency Proceedings. ......................35
  Section 7.10.     Voluntary Insolvency Proceedings. ........................35
  Section 7.11.     Material Adverse Event. ..................................35
  Section 7.12.     ERISA. ...................................................35
  Section 7.13.     Transfer Of Equity Interests. ............................36
  Section 7.14.     Indictment Of Borrower. ..................................36
  Section 7.15.     Injunction. ..............................................36
  Section 7.16.     Notice And Cure Rights. ..................................36
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ARTICLE 8
RIGHTS AND REMEDIES ON THE OCCURRENCEOF AN EVENT OF DEFAULT...................36
   Section 8.1.     Lender's Specific Rights And Remedies. ...................36
   Section 8.2.     Automatic Acceleration. ..................................37
   Section 8.3.     Sale Of Collateral. ......................................37
   Section 8.4.     Letters Of Credit. .......................................38
   Section 8.5.     Remedies Cumulative. .....................................38

ARTICLE 9
GENERAL CONDITIONS AND TERMS..................................................38
  Section 9.1.      Obligations Are Unconditional. ...........................38
  Section 9.2.      Indemnity. ...............................................38
  Section 9.3.      Lender Expenses. .........................................39
  Section 9.4.      Authorization To Obtain Financial Information. ...........39
  Section 9.5.      Incorporation; Construction Of Inconsistent Provisions. ..39
  Section 9.6.      Waivers. .................................................39
  Section 9.7.      Continuing Obligation Of Borrower. .......................39
  Section 9.8.      Choice Of Law. ...........................................39
  Section 9.9.      Submission To Jurisdiction; Venue; Actions Against Lender.39
    Section 9.9.1.    Jurisdiction. ..........................................40
    Section 9.9.2.    Venue.   40
    Section 9.9.3.    Waiver Of Objections To Venue. .........................40
  Section 9.10.     Notices. .................................................40
  Section 9.11.     Participations. ..........................................41
  Section 9.12.     Miscellaneous Provisions. ................................41
  Section 9.13.     Waiver Of Trial By Jury. .................................42

Schedules
---------

Schedule 1.48       Permitted Liens
Schedule 4.2        Pending Litigation
Schedule 4.7        Other Names
Schedule 4.11       Chief Place Of Business
Schedule 4.12       Location Of Inventory
Schedule 4.13       No Subsidiaries
Schedule 4.17       Liabilities And Obligations Not Disclosed In Financial
                      Statements
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                           LOAN AND SECURITY AGREEMENT

         THIS LOAN AND  SECURITY  AGREEMENT  is dated as of February 10, 2000 by
and between ACCOM, INC., a Delaware  corporation  ("BORROWER") and THE PROVIDENT
BANK, an Ohio chartered banking institution ("LENDER").

                                    RECITALS

         The  BORROWER  has  requested  that the LENDER  extend  various  credit
accommodations  to the BORROWER.  The LENDER is willing to provide the requested
credit  accommodations  upon the terms and  conditions of this Loan And Security
Agreement,  and upon the  granting by the BORROWER to the LENDER of the security
interests,  liens, and other assurances of payment provided for in this Loan And
Security Agreement.

         NOW,  THEREFORE,  in consideration of these premises and other good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged, the parties hereto agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

         As used in this  Loan And  Security  Agreement,  the terms set forth in
this Article 1 have the meanings set forth below, unless the specific context of
this Loan And Security  Agreement  clearly requires a different  meaning.  Terms
defined in this Article 1 or elsewhere in this Loan And Security  Agreement  are
in all capital letters throughout this Loan And Security Agreement. The singular
use of any defined  term  includes  the plural and the plural use  includes  the
singular.

         Section  1.1.   Account  Debtor.   The  term  "ACCOUNT   DEBTOR"  means
collectively  each  PERSON:  (a) to or for whom the BORROWER has provided or has
agreed to provide any goods or services;  or (b) which owes the BORROWER any sum
of money as a result of goods sold or services provided by the BORROWER;  or (c)
which is the maker or  endorser  on any  INSTRUMENT  payable to the  BORROWER or
otherwise  owes the  BORROWER  any sum of money on  account of any loan or other
payment  obligation.  With  respect to each  RECEIVABLE  which is payable by any
governmental  authority,  "ACCOUNT DEBTOR"  includes,  without  limitation,  the
agency,  instrumentality  or official which has the duty of remitting or causing
the remittance of the amounts owing on such ACCOUNT or other RECEIVABLE.

         Section 1.2. Accounts, Chattel Paper, Documents,  Equipment,  Fixtures,
General  Intangibles,  Goods,  Instruments  and Investment  Property.  The terms
"ACCOUNTS," "CHATTEL PAPER," "DOCUMENTS,"  "EQUIPMENT,"  "GENERAL  INTANGIBLES,"
"GOODS," "INSTRUMENTS," and "INVESTMENT PROPERTY" shall have the same respective
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meanings  as are given to those  terms in the  Uniform  Commercial  Code-Secured
Transactions,  Title 9, Commercial Law Article,  Annotated Code of Maryland,  as
amended.  The term "FIXTURES"  shall have the meaning provided by the common law
of the state in which the fixtures are located.

         Section 1.3.  Affiliate.  The term "AFFILIATE"  means  collectively any
PERSON:  (a) that directly or  indirectly,  through one or more  intermediaries,
controls or is  controlled  by, or is under common  control  with the  BORROWER,
including,  without  limitation,  the  officers,  managers and  directors of the
BORROWER;  (b) that directly or beneficially  owns or holds ten percent (10%) or
more of any equity  interests in the BORROWER;  or (c) ten percent (10%) or more
of whose equity  interests are owned directly or controlled by the BORROWER.  As
used herein, the term "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with") shall mean possession, directly
or  indirectly,  of the power to direct the  management or policies of a PERSON,
whether through ownership of equity interests, by contract or otherwise.

         Section  1.4.  Agreement.  The term  "AGREEMENT"  means  this  Loan And
Security Agreement,  as amended,  extended, or modified from time to time by the
parties hereto, as well as all schedules, exhibits and attachments hereto.

         Section 1.5.  Borrowing Base. The term "BORROWING BASE" means an amount
equal to: (a) eighty  percent (80%) of the face amount (less maximum  discounts,
credits and allowances  which may be taken by or are granted to ACCOUNT  DEBTORS
in connection  therewith) of billed ELIGIBLE  ACCOUNTS;  minus (b) the aggregate
stated amount of all outstanding LETTERS OF CREDIT and unsatisfied reimbursement
obligations  of the BORROWER  arising out of LETTERS OF CREDIT and such reserves
as the LENDER deems appropriate from time to time, including without limitation,
reserves  determined  by the LENDER to be  appropriate  with respect to bankers'
acceptances,  GUARANTY INDEBTEDNESS,  INTEREST RATE PROTECTION  AGREEMENTS,  and
other obligations of the BORROWER.

         Section 1.6.  Business Day. The term "BUSINESS DAY" means any day other
than a Saturday,  Sunday, or other day on which commercial banking  institutions
in the State of Maryland are required to be closed.

         Section 1.7. Capital Adequacy  Requirement.  The term "CAPITAL ADEQUACY
REQUIREMENT"  means any LAW imposing  any capital  adequacy  requirement  or any
other similar  requirement  (including  but not limited to the capital  adequacy
regulations contained in Parts 3, 208 and 225 of Title 12 of the Code of Federal
Regulations,  as amended),  any change in such LAWS or in the  interpretation or
application  thereof,  and any request or directive  regarding  capital adequacy
(whether  or not having the force of law) from any  central  bank or  government
authority.

         Section 1.8.  Capital  Expenditures.  The term  "CAPITAL  EXPENDITURES"
means, for any period,  the aggregate of all expenditures  (whether paid in cash
or  accrued  as  liabilities  and  including   expenditures  for  CAPITAL  LEASE
OBLIGATIONS) by the BORROWER during such period that are required by G.A.A.P. to
be included in or reflected by the property, plant, equipment or similar capital
asset accounts in the consolidated balance sheet of the BORROWER.

                                       2
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         Section 1.9. Capital Lease. The term "CAPITAL LEASE" means a lease with
respect to which the lessee's obligations  thereunder should, in accordance with
G.A.A.P.,  be  capitalized  and reflected as a liability on the balance sheet of
the lessee.

         Section  1.10.  Capital  Lease  Obligations.  The term  "CAPITAL  LEASE
OBLIGATIONS"  means any indebtedness  incurred as a lessee pursuant to a CAPITAL
LEASE.

         Section  1.11.  Closing.  The term  "CLOSING"  means the  execution and
delivery of this AGREEMENT,  the NOTES,  and various other LOAN  DOCUMENTS.  The
date of CLOSING is the date written above as the date of this AGREEMENT.

         Section 1.12.  Code. The term "CODE" means the Internal Revenue Code of
1986,  as  amended,  and all  Treasury  regulations,  revenue  rulings,  revenue
procedures or announcements issued thereunder.

         Section  1.13.  Collateral.  The  term  "COLLATERAL"  means  all of the
tangible and intangible assets of the BORROWER,  wherever  located,  whether now
owned or hereafter  acquired by the BORROWER,  together  with all  substitutions
therefor,  and all  replacements  and  renewals  thereof,  and  all  accessions,
additions,   replacement  parts,  manuals,  warranties  and  packaging  relating
thereto,  including  but not limited to the  following  tangible and  intangible
assets and property rights of the BORROWER: (a) ACCOUNTS; (b) CHATTEL PAPER; (c)
DOCUMENTS; (d) EQUIPMENT; (e) FIXTURES; (f) GENERAL INTANGIBLES;  (g) GOODS; (h)
INSTRUMENTS;  (i)  INVENTORY,   including  returned,  rejected,  or  repossessed
INVENTORY  and rights of  reclamation  and  stoppage in transit  with respect to
INVENTORY;  (j) INVESTMENT PROPERTY; (k) RECEIVABLES;  (l) deposit accounts; (m)
letter of credit rights; (n) copyrights,  trademarks,  patents,  and all pending
applications  thereof;  and (o) all RECORDS  relating to or pertaining to any of
the above listed COLLATERAL.

         Section 1.14. Collection Account. The term "COLLECTION ACCOUNT" means a
bank account  designated  by the LENDER from which the LENDER alone has power of
access and withdrawal.

         Section 1.15.  Commercial Account.  The term "COMMERCIAL ACCOUNT" means
the commercial checking account to be established and maintained by the BORROWER
with the LENDER and which may be utilized as the means of advancing  funds under
the LOAN.

         Section 1.16. Default.  The term "DEFAULT" means any event,  occurrence
or omission  which,  with the giving of notice,  the  passage of time,  or both,
would constitute an EVENT OF DEFAULT.

         Section  1.17.  Dollar Cap. The term "DOLLAR CAP" shall mean the sum of
One Million Five Hundred  Thousand  Dollars  ($1,500,000.00);  provided that the
DOLLAR  CAP shall  increase  from One  Million  Five  Hundred  Thousand  Dollars

                                       3
<PAGE>
($1,500,000.00) to Two Million Dollars  ($2,000,000.00) after March 31, 2000, if
the  BORROWER'S  financial  statements  for the  quarter  ending  March 31, 2000
submitted  pursuant to Section 5.12  demonstrates that the BORROWER'S EBITDA for
the quarter ending March 31, 2000 was not less than One Hundred Thousand Dollars
($100,000.00). The DOLLAR CAP shall not increase until such time after March 31,
000 as the  LENDER  has  received  the  quarterly  financial  statements  of the
BORROWER,  together with any supporting statements and information,  as required
by the LENDER to verify that the BORROWER'S  EBITDA for the quarter ending March
31, 2000 has not been less than One Hundred Thousand Dollars ($100,000.00),  and
the LENDER has  confirmed in writing  that the  condition to the increase in the
DOLLAR CAP has been satisfied.

         Section  1.18.  EBITDA.  The term "EBITDA"  means,  with respect to any
period of  determination,  the earnings of the referenced PERSON for such period
of determination before interest,  taxes,  depreciation,  and amortization,  and
without  regard to gains or losses  arising from asset sales not in the ordinary
course of  business  (including,  without  limitation,  the sale of the  virtual
production line in January, 2000), all as determined in accordance with G.A.A.P.

         Section 1.19.  Eligible  Accounts.  The term "ELIGIBLE  ACCOUNTS" means
those ACCOUNTS which are acceptable to the LENDER.  The criteria for eligibility
may be fixed and revised from time to time by the LENDER in its  discretion.  An
ACCOUNT in no event shall be deemed eligible unless: (a) the ACCOUNT arises from
goods  sold or leased  or from  services  performed  in the  ordinary  course of
business of the BORROWER;  (b) the delivery of the goods or the  performance  of
the services has been completed;  (c) no return,  rejection, or repossession has
occurred;  (d) the goods  delivered or the services  performed have been finally
and unconditionally  accepted by the ACCOUNT DEBTOR without dispute,  objection,
complaint,  offset,  defense,  counterclaim,  adjustment or  allowance;  (e) the
ACCOUNT DEBTOR'S  obligation to pay the ACCOUNT is not subject to any repurchase
obligation or return right,  as with sales made on a  bill-and-hold,  guaranteed
sale,  sale-and-return,  sale on approval  (except  with  respect to ACCOUNTS in
connection with which ACCOUNT DEBTORS are entitled to return INVENTORY solely on
the basis of the quality of such  INVENTORY) or consignment  basis;  (f) no more
than ninety (90) days have  elapsed from the billing or invoice date and no more
than sixty (60) days have  elapsed from the due date unless such ACCOUNT has the
benefit of credit  insurance and is owed by an ACCOUNT DEBTOR located outside of
the United  States of America,  in which case the ACCOUNT shall not be more than
one  hundred  fifty  (150)  days due from the  date of  invoice;  (g) no  prior,
contemporaneous,  or subsequent  assignment,  claim, lien, or security interest,
other than that of the LENDER,  applies to the  ACCOUNT;  (h) no  bankruptcy  or
insolvency  proceedings or payment moratoriums of any kind apply to the ACCOUNT;
(i) the ACCOUNT  DEBTOR is not, in the LENDER'S  sole  opinion,  unlikely to pay
because of death, incompetency, disappearance, potential bankruptcy, insolvency,
damage to or disposition of the goods,  default, or any other reason whatsoever;
(j) the  LENDER  has not,  by  notice  to the  BORROWER,  in the  LENDER'S  sole
discretion,  deemed the ACCOUNT  unsatisfactory  for any reason;  (k) no bonding
company or surety  asserts or has the ability to assert any claim based upon the
legal  doctrine of  equitable  subrogation,  or under any other right to claim a
lien into or right to payment of the  ACCOUNT;  (l) the  ACCOUNT  does not arise

                                       4
<PAGE>
from or pertain to any  transaction  with any AFFILIATE;  (m) the ACCOUNT is not
payable from any ACCOUNT DEBTOR located outside of the geographic  boundaries of
the United States of America (unless or to the extent such ACCOUNT is secured by
a letter of  credit  or credit  insurance  acceptable  to the  LENDER);  (n) the
BORROWER is legally  empowered to collect the ACCOUNT against the ACCOUNT DEBTOR
in the  jurisdiction in which the ACCOUNT DEBTOR is located;  (o) the ACCOUNT is
not  payable by an ACCOUNT  DEBTOR with  respect to which more than  twenty-five
percent (25%) of the dollar amount of that ACCOUNT  DEBTOR'S  RECEIVABLES to the
BORROWER fail to comply with Subsection 1.19.(f) above; (p) the ACCOUNT does not
arise from any contract or agreement with any federal,  state,  local or foreign
government unless such governmental authority is the United States of America or
an agency or representative  thereof and the LENDER has obtained full compliance
to its  complete  satisfaction  with all  provisions  necessary  to protect  the
LENDER'S  interests under The Assignment of Claims Act of 1940, as amended,  and
all  regulations  promulgated  thereunder,  and  all  other  applicable  federal
procurement  laws and  regulations;  and (q) the  LENDER has a  perfected  first
priority  security interest  therein.  An ACCOUNT which otherwise  satisfies the
LENDER'S  criteria  for  eligibility  shall  also be  subject  to the  following
eligibility  limitations:  (i) if the ACCOUNT is payable by an ACCOUNT DEBTOR to
whom the BORROWER  owes money,  only the portion of the ACCOUNT in excess of the
amount owed by the BORROWER to the ACCOUNT  DEBTOR may be eligible;  (ii) if the
ACCOUNT is due from an ACCOUNT DEBTOR whose ACCOUNTS in the aggregate constitute
in excess of ten percent (10%) of all of the ACCOUNTS of the BORROWER,  only the
portion of the aggregate  amount of the ACCOUNTS from that ACCOUNT  DEBTOR which
does not exceed ten percent  (10%) of all of the ACCOUNTS of the BORROWER may be
eligible;  and (iii) to the extent the  ACCOUNT  includes  a  separately  billed
finance charges, such finance charges are not eligible.

         Section 1.20.  Employee Benefit Plan. The term "EMPLOYEE  BENEFIT PLAN"
means an "employee benefit plan" as defined in Section 3(3) of ERISA.

         Section 1.21.  Environmental Laws. The term "ENVIRONMENTAL  LAWS" means
individually or collectively  any local,  state or federal LAW,  statute,  rule,
regulation,  order, ordinance,  common law, permit or license term or condition,
or state superlien or environmental  clean-up or disclosure  statutes pertaining
to the environment or to environmental  contamination,  regulation,  management,
control,   treatment,   storage,  disposal,   containment,   removal,  clean-up,
reporting,  or  disclosure,  including,  but not limited  to, the  Comprehensive
Environmental  Response,  Compensation  and  Liability  Act of  1980,  as now or
hereafter amended (including,  but not limited to, the Superfund  Amendments and
Reauthorization  Act);  the Resource  Conservation  and Recovery  Act, as now or
hereafter amended (including,  but not limited to, the Hazardous and Solid Waste
Amendments  of 1984);  the Toxic  Substances  Control  Act, as now or  hereafter
amended;  the Clean Water Act, as now or hereafter  amended;  the Safe  Drinking
Water  Act,  as now or  hereafter  amended;  or the  Clean  Air  Act,  as now or
hereafter amended.

         Section 1.22.  EPA Permit.  The term "EPA PERMIT" has the meaning given
that term in Section 4.21 of this AGREEMENT.

                                       5
<PAGE>
         Section 1.23.  ERISA.  The term "ERISA"  means the Employee  Retirement
Income Security Act of 1974 and regulations issued  thereunder,  as amended from
time to time and any successor statute.

         Section 1.24. ERISA  Affiliate.  The term "ERISA  AFFILIATE"  means, in
relation to any  PERSON,  any trade or  business  (whether or not  incorporated)
which is a member of a group of which that PERSON is a member and which is under
common control within the meaning of the regulations  promulgated  under Section
414 of the CODE.

         Section 1.25. ERISA Liabilities. The term "ERISA LIABILITIES" means the
aggregate of all unfunded  vested  benefits under any employee  pension  benefit
plan,  within the meaning of Section 3(2) of ERISA, of the BORROWER or any ERISA
AFFILIATE  of the  BORROWER  under  any  plan  covered  by  ERISA  that is not a
MULTIEMPLOYER PLAN and all potential  withdrawal  liabilities of the BORROWER or
any ERISA AFFILIATE under all MULTIEMPLOYER PLANS.

         Section 1.26.  Event Of Default.  The term "EVENT OF DEFAULT" means any
of the  events  set forth in  Article  7 of this  AGREEMENT,  provided  that any
requirement  for the giving of notice,  the lapse of time, or both, or any other
expressly stated condition, has been satisfied.

         Section 1.27. Facilities. The term "FACILITIES" means all real property
and the  improvements  thereon  used or  occupied  or leased by the  BORROWER or
otherwise  used at any time by the BORROWER in the  operation of its business or
for the manufacture, storage, or location of any of the COLLATERAL.

         Section 1.28. Fiscal Year. The term "FISCAL YEAR" means the fiscal year
of the  BORROWER  which is the twelve (12) month  accounting  period  commencing
January 1 and ending December 31 of each calendar year.

         Section 1.29.  G.A.A.P.  The term "G.A.A.P." means, with respect to any
date of determination,  generally accepted accounting  principles as used by the
Financial  Accounting Standards Board and/or the American Institute of Certified
Public Accountants  consistently  applied and maintained  throughout the periods
indicated.

         Section 1.30.  Guaranteed  Pension Plan. The term  "GUARANTEED  PENSION
PLAN" means any pension plan maintained by the BORROWER or an ERISA AFFILIATE of
the BORROWER, or to which the BORROWER or an ERISA AFFILIATE  contributes,  some
or all of the benefits  under which are  guaranteed by the United States Pension
Benefit Guaranty Corporation.

         Section 1.31.  Indebtedness.  The term "INDEBTEDNESS"  means, as to any
referenced PERSON  (determined  without  duplication):  (a) indebtedness of such
PERSON for  borrowed  money  (whether by loan or the  issuance  and sale of debt
securities),  or for the deferred  purchase or acquisition  price of property or
services  (other  than  accounts  payable  incurred  in the  ordinary  course of
business);  (b)  obligations  of such  PERSON in respect of letters of credit or
similar instruments issued or accepted by financial institutions for the account

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<PAGE>
of such PERSON  (whether or not such  obligations are  contingent);  (c) CAPITAL
LEASE  OBLIGATIONS of such PERSON;  (d)  obligations of such PERSON to redeem or
otherwise retire equity interests in such PERSON; and (e) indebtedness of others
of the type  described in clause (a), (b), (c) or (d) above secured by a lien on
any of the property of such PERSON,  whether or not the respective obligation so
secured has been assumed by such PERSON.

         Section 1.32. Insolvency Proceedings. The term "INSOLVENCY PROCEEDINGS"
means, with respect to any referenced PERSON,  any case or proceeding  commenced
by or against such PERSON,  under any provision of the United States  Bankruptcy
Code, as amended,  or under any other federal or state  bankruptcy or insolvency
law,  or any  assignments  for the  benefit  of  creditors,  formal or  informal
moratoriums,  receiverships,   compositions  or  extensions  with  some  or  all
creditors with respect to any indebtedness of such PERSON.

         Section 1.33.  Interest Rate Protection  Agreement.  The term "INTEREST
RATE PROTECTION  AGREEMENT"  means,  with respect to any referenced  PERSON,  an
interest  rate swap,  hedge,  cap or collar  agreement  or  similar  arrangement
between such PERSON and one or more  financial  institutions  providing  for the
transfer or  mitigation  of interest  risks either  generally or under  specific
contingencies.

         Section 1.34.  Interest  Coverage  Ratio.  The term "INTEREST  COVERAGE
RATIO" means the ratio of EBITDA to INTEREST EXPENSE.

         Section 1.35.  Interest Expense.  The term "INTEREST EXPENSE" means, as
of any determination  date, all interest paid or accrued by the BORROWER and its
SUBSIDIARIES on any INDEBTEDNESS  during the fiscal year of the BORROWER through
the fiscal quarter ending on such date.

         Section  1.36.  Inventory.  The term  "INVENTORY"  shall  have the same
meaning  as  provided  to such  term in the  Uniform  Commercial  Code - Secured
Transactions,  Title 9, Commercial Law Article,  Annotated Code of Maryland,  as
amended, together with all of the BORROWER'S goods, merchandise,  materials, raw
materials,  goods in process,  finished  goods,  work in  progress,  bindings or
component  materials,  packaging and shipping  materials  and other  tangible or
intangible personal property,  now owned or hereafter acquired and held for sale
or lease or  furnished or to be  furnished  under  contracts of service or which
contribute to the finished products or the sale, promotion, storage and shipment
thereof,  whether located at facilities owned or leased by the BORROWER,  in the
course of transport to or from ACCOUNT DEBTORS,  used for demonstration,  placed
on consignment, or held at storage locations.

         Section 1.37.  Laws.  The term "LAWS" means all  ordinances,  statutes,
rules, regulations,  orders, injunctions,  writs or decrees of any government or
political  subdivision  or  agency  thereof,  or any  court  or  similar  entity
established by any thereof.

         Section 1.38.  Lender  Expenses.  The term "LENDER  EXPENSES" means the
out-of-pocket  expenses  or  costs  incurred  by  the  LENDER  arising  out  of,
pertaining  to, or in any way connected  with this  AGREEMENT,  any of the other
LOAN  DOCUMENTS or the  OBLIGATIONS,  or any  documents  executed in  connection

                                       7
<PAGE>
herewith or transactions  hereunder.  The term "LENDER  EXPENSES" shall include,
without  limitation:  (a)  the  costs  or  expenses  required  to be paid by the
BORROWER pursuant to this AGREEMENT or any of the LOAN DOCUMENTS;  (b) taxes and
insurance  premiums  advanced or otherwise paid by the LENDER in connection with
the  COLLATERAL  or on behalf of the  BORROWER;  (c)  filing,  recording,  title
insurance,  environmental and consulting fees, audit fees, search fees and other
expenses  paid or  incurred  by the  LENDER  in  connection  with  the  LENDER'S
transactions with the BORROWER; (d) costs and expenses incurred by the LENDER in
the  collection  of the  ACCOUNTS  (with or  without  the  institution  of legal
action), or to enforce any provision of this AGREEMENT, or in gaining possession
of, maintaining,  handling, evaluating,  preserving, storing, shipping, selling,
preparing  for sale  and/or  advertising  to sell the  COLLATERAL  or any  other
property of the  BORROWER  whether or not a sale is  consummated;  (e) costs and
expenses of litigation  incurred by the LENDER, or any participant of the LENDER
in any of the  OBLIGATIONS,  in  enforcing or  defending  this  AGREEMENT or any
portion  hereof  or  in  collecting  any  of  the  OBLIGATIONS;  (f)  reasonable
attorneys' fees and expenses  incurred by the LENDER in obtaining  advice or the
services  of  its  attorneys   with  respect  to  the   structuring,   drafting,
negotiating,  reviewing, amending,  terminating,  enforcing or defending of this
AGREEMENT,  or any portion  hereof or any  agreement or matter  related  hereto,
whether or not litigation is instituted;  (g) reasonable travel expenses related
to any of the foregoing;  and (h) audit and examination fees and expenses in the
amount of Seven  Hundred  Fifty  Dollars  ($750.00)  per  person  per day,  plus
reasonable out-of-pocket expenses for travel, hotel costs, and meals.

         Section  1.39.  Letters Of Credit.  The term  "LETTERS OF CREDIT" means
collectively  letters of credit  issued  from time to time by the LENDER for the
account or benefit of the BORROWER.

         Section 1.40. Loan. The term "LOAN" means the REVOLVING LOAN.

         Section  1.41.  Loan  Documents.  The term "LOAN  DOCUMENTS"  means all
agreements,   instruments  and  documents,  including  without  limitation  each
document  listed as a "Loan  Document" on a Closing Index of even date herewith,
together  with all other loan  agreements  (including  without  limitation  this
AGREEMENT),   notes  (including  without   limitation  the  NOTE),   guarantees,
subordination agreements,  intercreditor agreements, pledges, affidavits, powers
of attorney,  consents,  assignments,  landlord and mortgage waivers,  opinions,
collateral assignments,  reimbursement agreements,  contracts,  notices, leases,
financing  statements,  mortgages,  deeds  of  trusts,  assignments  of rents or
contract proceeds, intellectual property security agreements, pledges, letter of
credit applications,  INTEREST RATE PROTECTION AGREEMENTS, and all other written
matter,  whether  heretofore,  now or hereafter  executed by or on behalf of the
BORROWER,  any of the GUARANTORS,  or by any other PERSON in connection with any
of the OBLIGATIONS.

         Section 1.42.  Lock Box. The term "LOCK BOX" has the meaning given that
term in Section 3.5 of this AGREEMENT.

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<PAGE>
         Section 1.43. Material Adverse Event. The term "MATERIAL ADVERSE EVENT"
means the  occurrence of any event,  condition,  or omission which the LENDER in
the good faith reasonable exercise of the LENDER'S  discretion  determines could
be expected to have a material adverse effect upon: (a) the condition (financial
or  otherwise),   results  of  operations,   properties,   assets,   liabilities
(including, without limitation, tax liabilities, liabilities under ENVIRONMENTAL
LAWS, and ERISA LIABILITIES),  businesses, operations,  capitalization,  equity,
licenses,  franchises  or  prospects  of the  BORROWER;  (b) the  ability of the
BORROWER to perform any of the OBLIGATIONS  when and as required by the terms of
the LOAN DOCUMENTS; (c) the rights and remedies of the LENDER as provided by the
LOAN DOCUMENTS; or (d) the value, condition,  use, or availability of any of the
COLLATERAL or upon any of the LENDER'S liens and security interests securing the
OBLIGATIONS.

         Section  1.44.   Maximum  Revolving  Loan  Amount.  The  term  "MAXIMUM
REVOLVING LOAN AMOUNT" means the lesser of the BORROWING BASE or the DOLLAR CAP.

         Section 1.45. Multiemployer Plan. The term "MULTIEMPLOYER PLAN" means a
"multiemployer  plan"  as  defined  in  Section  4001(a)(3)  of  ERISA  which is
maintained  for  employees  of the  BORROWER,  or  any  ERISA  AFFILIATE  of the
BORROWER.

         Section 1.46. Note. The term "NOTE" means the REVOLVING LOAN NOTE.

         Section 1.47.  Obligations.  The term "OBLIGATIONS"  means collectively
all of the obligations of the BORROWER to pay to the LENDER: (a) sums due to the
LENDER  arising out of or in connection  with the LOAN or otherwise  pursuant to
the terms of the LOAN DOCUMENTS;  (b)  indemnification  obligations  owed by the
BORROWER to the LENDER in accordance with the terms of the LOAN  DOCUMENTS;  (c)
LENDER  EXPENSES;  (d)  overdrafts  of the BORROWER  upon any accounts  with the
LENDER;  (e) payments,  duties or obligations owed to the LENDER arising from or
with respect to INTEREST RATE PROTECTION AGREEMENTS, foreign exchange facilities
or currency  transactions,  existing or arising from time to time;  (f) any sums
owed  to  the  LENDER  arising  out of or  relating  to any  LETTERS  OF  CREDIT
including,   without   limitation,   all   reimbursement   and   indemnification
obligations,  and  obligations  to pay  fees;  (g)  all  other  indebtedness  or
liability of the BORROWER to the LENDER,  whether  direct or indirect,  joint or
several, absolute or contingent, contemplated or not presently contemplated, now
existing or hereafter  arising;  and (h) any indebtedness or liability which may
exist or arise as a result  of any  payment  made by or for the  benefit  of the
BORROWER  being  avoided  or  set  aside  for  any  reason  including,   without
limitation, any payment being avoided as a preference under Sections 547 and 550
of the  United  States  Bankruptcy  Code,  as  amended,  or under  any state law
governing insolvency or creditors' rights.

         Section 1.48.  Permitted Liens.  The term "PERMITTED  LIENS" means: (a)
liens for taxes, assessments, or similar charges incurred in the ordinary course
of business that are not yet due and payable;  (b) liens in favor of the LENDER;
(c) any existing liens  specifically  described on Schedule 1.48 hereof; (d) any
lien on  specifically  allocated  money or securities to secure  payments  under
workmen's  compensation,  unemployment  insurance,  social  security  and  other

                                       9
<PAGE>
similar LAWS, or to secure the performance of bids,  tenders or contracts (other
than for the repayment of borrowed money) or to secure statutory  obligations or
appeal bonds, or to secure indemnity,  performance or other similar bonds in the
ordinary course of business; (e) purchase money security interests for EQUIPMENT
not to exceed in aggregate  amount  outstanding at any one time the sum of Fifty
Thousand  Dollars  ($50,000.00),  provided  that such  purchase  money  security
interests  do not  attach to any  assets  other  than the  specific  item(s)  of
EQUIPMENT  acquired with the proceeds of the loan secured by such purchase money
security  interests;  and (f)  subsequently  arising  liens which are  expressly
approved in advance of the creation of any such liens by the LENDER in writing.

         Section  1.49.   Person.   The  term  "PERSON"  means  any  individual,
corporation,  partnership,  limited liability company, association,  joint-stock
company,  trust,  estate,  unincorporated  organization,  joint venture,  court,
government or political subdivision or agency thereof, or other legal entity.

         Section  1.50.  Receivables.  The term  "RECEIVABLES"  means all of the
ACCOUNTS,  INSTRUMENTS,  DOCUMENTS,  GENERAL INTANGIBLES,  CHATTEL PAPER, notes,
notes receivable,  drafts,  acceptances,  and choses in action, of the BORROWER,
now  existing or hereafter  created or  acquired,  and all proceeds and products
thereof,  and all  rights  thereto,  arising  from  the  sale or lease of or the
providing of INVENTORY,  GOODS, or services by the BORROWER to ACCOUNT  DEBTORS,
as well as all other rights,  contingent or  non-contingent,  of any kind of the
BORROWER to receive payment, benefit, or credit from any PERSON.

         Section  1.51.  Records.  The  term  "RECORDS"  means   correspondence,
memoranda,  tapes,  discs,  papers,  books and other  documents,  or transcribed
information  of any type,  whether  expressed in  ordinary,  computer or machine
language.

         Section 1.52. Regulated Substance. The term "REGULATED SUBSTANCE" means
any  substance  which,  pursuant to any  ENVIRONMENTAL  LAW, is  identified as a
hazardous  substance  (or other term  having  similar  import)  or is  otherwise
subject  to  special   requirements  in  connection   with  the  use,   storage,
transportation, disposition or other handling thereof.

         Section 1.53. Release.  The term "RELEASE" means a "release" as defined
in Section 101(22) of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as now or hereafter amended.

         Section 1.54.  Restricted Payment.  The term "RESTRICTED PAYMENT" means
collectively:  (a) any  dividend  or other  payment or  distribution,  direct or
indirect,  on account of any equity  interest in the  BORROWER  now or hereafter
outstanding,  except a dividend or distribution payable solely in the same class
or type of  equity  interest  to the  holders  of that  class or  type;  (b) any
redemption,  conversion,  exchange, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect,  by the BORROWER of
any equity  interest  in the  BORROWER  now or  hereafter  outstanding;  (c) any
payment  made by the  BORROWER  to retire,  or to obtain the  surrender  of, any
outstanding warrants, options or other rights to acquire equity interests in the
BORROWER now or hereafter outstanding; or (d) any payment by the BORROWER of any

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<PAGE>
management,  consulting or similar fees which are not salary payments in amounts
comparable  to sums paid in the  marketplace  for similar  services to unrelated
employees for services actually performed.

         Section  1.55.  Revolving  Loan.  The term  "REVOLVING  LOAN" means the
revolving  credit facility  extended by the LENDER to the BORROWER in accordance
with the terms set forth in this AGREEMENT.

         Section  1.56.  Revolving  Loan Note.  The term  "REVOLVING  LOAN NOTE"
means,  the  Revolving  Loan  Promissory  Note of even  date  herewith  from the
BORROWER  as maker  thereof  which is  payable to the order of the LENDER in the
stated principal amount of Two Million Dollars ($2,000,000.00).

         Section 1.57.  Solvent.  The term "SOLVENT" means, as to any referenced
PERSON,  that as of the  date of  determination  both:  (a)  (i) the  then  fair
saleable  value of the  property of such PERSON is greater than the total amount
of liabilities (including contingent liabilities) of such PERSON and is not less
than the amount that will be required to pay the  probable  liabilities  on such
PERSON'S then existing debts as they become absolute and matured considering all
financing  alternatives and potential asset sales  reasonably  available to such
PERSON;  (ii) such PERSON'S capital is not unreasonably small in relation to its
business or any  contemplated or undertaken  transaction;  and (iii) such PERSON
does not intend to incur, or believe (nor should it reasonably  believe) that it
will incur,  debts  beyond its ability to pay such debts as they become due; and
(b) such  PERSON is  "solvent"  within the  meaning  given that term and similar
terms under  applicable laws relating to fraudulent  transfers and  conveyances.
For purposes of this definition,  the amount of any contingent  liability at any
time  shall be  computed  as the  amount  that,  in light of all the  facts  and
circumstances  existing at such time,  represents the amount that can reasonably
be expected to become an actual or matured liability.

         Section 1.58. Subordinated Debt. The term "SUBORDINATED DEBT" means the
BORROWER'S  INDEBTEDNESS which has been subordinated to the OBLIGATIONS pursuant
to a written  agreement which has either been executed by the LENDER or approved
by the LENDER in writing.

         Section 1.59. Subsidiary.  The term "SUBSIDIARY" means, with respect to
any PERSON,  any other PERSON of which  securities or other ownership  interests
representing  an aggregate of fifty  percent  (50%) of more of the equity or the
ordinary  voting power are, at the time as of which any  determination  is being
made,  owned  or  controlled  directly,   or  indirectly  through  one  or  more
intermediaries, by such PERSON.

         Section 1.60.  Tangible Net Worth. The term "TANGIBLE NET WORTH" means,
as of the date of  determination,  the amount equal to: (a) the  BORROWER'S  net
worth as of December 31, 1999, as determined in accordance with G.A.A.P.  and as
set  forth  in the  BORROWER'S  audited  fiscal  year-end  financial  statements
delivered to the LENDER; plus (b) ninety percent (90%) of the BORROWER'S pre-tax
income (if such income is positive) for the period  between  January 1, 2000 and
the date of  determination;  plus (c)  SUBORDINATED  DEBT;  minus (d) intangible

                                       11
<PAGE>
assets  of the  BORROWER;  and  minus  (e) the gain on the sale of assets of the
BORROWER  outside of the ordinary  course of business at any time after December
31, 1999  (including,  but not limited to, the gain from the sale of the virtual
production line in January, 2000).

         Section 1.61.  Termination  Event. The term "TERMINATION  EVENT" means:
(a) a "Reportable  Event" described in Section 4043 of ERISA and the regulations
issued thereunder,  but not including any such event for which the 30-day notice
requirement has been waived by applicable regulation;  (b) the withdrawal of the
BORROWER or an ERISA  AFFILIATE of the BORROWER  from a GUARANTEED  PENSION PLAN
during a plan  year in which  it was a  "substantial  employer"  as  defined  in
Section 4001(a)(2) of ERISA; (c) the filing of a notice of intent to terminate a
GUARANTEED  PENSION PLAN or the treatment of a GUARANTEED PENSION PLAN amendment
as a termination under Section 4041 of ERISA; (d) the institution of proceedings
to  terminate  a  GUARANTEED  PENSION  PLAN  by  the  Pension  Benefit  Guaranty
Corporation;  (e) the  withdrawal  or partial  withdrawal  of the BORROWER or an
ERISA  AFFILIATE of the BORROWER  from a  MULTIEMPLOYER  PLAN;  or (f) any other
event or condition  which might  reasonably  be expected to  constitute  grounds
under  ERISA  for  the  termination  of,  or the  appointment  of a  trustee  to
administer, any GUARANTEED PENSION PLAN.

                                    ARTICLE 2
                                  TERMS OF LOAN

         Section 2.1.  Agreement To Extend Revolving Loan.  Subject to the terms
and conditions stated herein,  the LENDER agrees to extend the REVOLVING LOAN to
the  BORROWER.  The LENDER shall advance  proceeds of the REVOLVING  LOAN to the
BORROWER by depositing  into the COMMERCIAL  ACCOUNT or in accordance  with such
other  procedures as may be agreed to between the LENDER and the BORROWER,  such
sums as the  BORROWER  may  request,  provided  that the  aggregate  outstanding
principal  balance  of the  REVOLVING  LOAN shall  never  exceed at any time the
MAXIMUM  REVOLVING  LOAN AMOUNT.  The  BORROWER  shall not request or permit any
advance of proceeds of the REVOLVING LOAN which would cause the aggregate amount
of advances made to or for the BORROWER and outstanding under the LOAN DOCUMENTS
to exceed the MAXIMUM  REVOLVING  LOAN AMOUNT.  In the event that the  principal
balance  outstanding under the REVOLVING LOAN ever exceeds the MAXIMUM REVOLVING
LOAN AMOUNT,  the  BORROWER  shall  immediately,  upon the demand of the LENDER,
reduce the principal  balance of the REVOLVING LOAN to an amount which is not in
excess of the MAXIMUM  REVOLVING LOAN AMOUNT.  Any  termination of the REVOLVING
LOAN by the LENDER shall  relieve the LENDER of the LENDER'S  obligation to lend
money  or to  make  financial  accommodations  to or for  the  BORROWER  and the
BORROWER'S accounts, and shall in no way release, terminate, discharge or excuse
the BORROWER from its absolute duty to pay or perform the OBLIGATIONS.

                                       12
<PAGE>
              Section  2.1.1.   Conditions   Precedent  To  Each  Advance.   The
obligation  of the  LENDER  to make  any  advances  under  the  REVOLVING  LOAN,
including  the  initial  advance,  shall  be  subject  to each of the  following
conditions precedent:

                   a . No  Defaults  Or Events Of  Default.  No event shall have
occurred  on or  prior to such  date  and be  continuing  on such  date,  and no
condition  shall  exist on such date,  which  constitutes  a DEFAULT or EVENT OF
DEFAULT.

                   b . Continuing  Accuracy Of  Representations  And Warranties.
Each of the  representations and warranties made by or on behalf of the BORROWER
and the GUARANTORS to the LENDER in the LOAN DOCUMENTS shall be true and correct
in all material  respects  when made and shall be deemed to be repeated as true,
accurate and complete as of the date of the BORROWER'S request for each advance.

                   c . Receipt Of Reports. The LENDER shall be in receipt of all
reports,  financial statements,  financial information and financial disclosures
required by the LOAN DOCUMENTS,  except to the extent that the LENDER has waived
the receipt thereof.

                   d . No Illegalities.  It shall not be unlawful for the LENDER
to perform any of the agreements or  obligations  imposed upon the LENDER by any
of the LOAN  DOCUMENTS or for the BORROWER to perform any of its  agreements  or
obligations as provided by the LOAN DOCUMENTS.

                   e . No Material  Adverse  Event.  No MATERIAL  ADVERSE  EVENT
shall have occurred and be then continuing.

              Section 2.1.2.  Interest And Lender's  Records.  All sums advanced
under the  REVOLVING  LOAN  shall be  evidenced  by,  and  shall be repaid  with
interest in accordance with, the provisions of the REVOLVING NOTE, the terms and
conditions of which are incorporated  herein by reference.  The date and amounts
of each advance  made by the LENDER and each payment made by the BORROWER  shall
be  recorded  by the  LENDER on the books and  records  of the  LENDER,  but any
failure to record such dates or amounts  shall not  relieve the  BORROWER of its
duties and  obligations  under the LOAN  DOCUMENTS.  Interest  accrued  upon the
REVOLVING  LOAN shall be computed on  outstanding  balances as  reflected on the
LENDER'S books and records.

              Section 2.1.3.  Commitment  Fee. For each calendar year or portion
thereof  during  which  the  REVOLVING  LOAN is in  existence  and has not  been
terminated,  until the termination of the REVOLVING LOAN, the BORROWER shall pay
to the LENDER a  commitment  fee of one-half  of one percent  (.5%) per annum on
that sum obtained by subtracting the average daily disbursed  principal  balance
of the  REVOLVING  LOAN during such  calendar  year or portion  thereof from the
DOLLAR CAP. The commitment fee shall be payable monthly in arrears, on the first
day of  each  succeeding  month  or on the  last  day of a  portion  of a  month
commencing  with the first of such  payments  to be made on March 1,  2000.  The
commitment  fee is not to be  considered a fee being paid by the BORROWER to the
LENDER  as an  inducement  to the  LENDER  to make  advances,  nor  shall  it be

                                       13
<PAGE>
considered  to  modify or limit  the  ability  of the  LENDER  to  terminate  in
accordance  with the provisions of this AGREEMENT the ability of the BORROWER to
borrow  under  the  REVOLVING  LOAN,  but is  instead  intended  as  part of the
compensation which is earned by the LENDER for agreeing to provide the REVOLVING
LOAN in accordance with the terms of the LOAN DOCUMENTS.

              Section 2.1.4.  Facility Fee. The BORROWER shall pay to the LENDER
on or before  CLOSING a  non-refundable  and  unconditional  facility fee of Ten
Thousand  Dollars  ($10,000.00),  which  shall be the  absolute  property of the
LENDER upon payment. The facility fee shall not be considered to be a payment of
any of the LENDER'S  expenses incurred in connection with the REVOLVING LOAN and
shall be paid  independent  of the  amount of  proceeds  of the  REVOLVING  LOAN
ultimately advanced to the BORROWER, even if that amount is less than the stated
principal amount of the REVOLVING LOAN.

              Section  2.1.5.  Monitoring  Fee.  The  BORROWER  shall pay to the
LENDER a monthly  monitoring fee of One Thousand  Dollars  ($1,000.00)  for each
calendar  month  or  portion  thereof  during  which  the  REVOLVING  LOAN is in
existence and has not been  terminated,  until the  termination of the REVOLVING
LOAN. The monitoring fee shall be payable  monthly in arrears,  on the first day
of each succeeding  month or on the last day of a portion of a month  commencing
with the first of such payments to be made on March 1, 2000.

              Section  2.1.6.  Term. All sums due under the REVOLVING LOAN shall
be paid in full on March 1, 2003.

              Section 2.1.7.  Purpose.  The proceeds of the REVOLVING LOAN shall
be used by the BORROWER  solely for  refinancing  existing  debt and funding the
general working capital needs of the BORROWER.

         Section 2.2. Letters Of Credit.

              Section  2.2.1.  Issuance Of Letters Of Credit.  The LENDER may in
its  discretion  issue LETTERS OF CREDIT as requested by the BORROWER,  provided
that no DEFAULT or EVENT OF DEFAULT has occurred and is continuing  and provided
that the aggregate  amount of all LETTERS OF CREDIT issued and  outstanding  and
any  reimbursement  obligations owed to the LENDER arising out of any LETTERS OF
CREDIT do not exceed Two Hundred  Thousand Dollars  ($200,000.00).  No LETTER OF
CREDIT shall have an expiry date which occurs after the stated  maturity date or
termination  date of either of the  LOANS.  Any  amounts  paid by the  LENDER in
connection  with any LETTER OF CREDIT shall be treated as an advance of proceeds
of the REVOLVING LOAN, shall be secured by all of the COLLATERAL, and shall bear
interest  (including  the default rate of  interest)  and be payable at the same
rate and in the same manner as the REVOLVING LOAN.

              Section  2.2.2.  Rights And  Remedies Of The Lender.  In the event
that,  coincident  with or  subsequent  to the  occurrence  of,  and  during the
continuance  of, a DEFAULT or an EVENT OF DEFAULT,  the LENDER  becomes aware of
the possibility of a draw, or enforcement of the LENDER'S obligations, under a

                                       14
<PAGE>
LETTER OF CREDIT, the LENDER, at its option,  may, but shall not be required to,
pay the BORROWER'S  obligations  to the  beneficiary or holder of such LETTER OF
CREDIT directly to such beneficiary or holder, and, in such event, the amount of
any such  payment made by the LENDER shall be treated for all purposes and shall
have the same force and effect as if such  amount had been  loaned by the LENDER
to the  BORROWER  as an advance of  proceeds  of the  REVOLVING  LOAN,  shall be
secured by all of the  COLLATERAL  and shall bear interest and be payable at the
same rate (including the default rate of interest) and in the same manner as the
REVOLVING  LOAN.  If any  LETTER  OF  CREDIT  is  drawn  upon to  discharge  any
obligation of the BORROWER to the beneficiary of such LETTER OF CREDIT, in whole
or in  part,  the  LENDER  shall  be  fully  subrogated  to the  rights  of such
beneficiary  with  respect  to the  obligations  owed  by the  BORROWER  to such
beneficiary discharged with the proceeds of the LETTER OF CREDIT.

              Section 2.2.3.  Indemnification.  The BORROWER unconditionally and
irrevocably  agrees to indemnify the LENDER and to hold the LENDER harmless from
any and all losses,  claims or  liabilities  arising  from any  transactions  or
occurrences  relating  to  LETTERS  OF  CREDIT  issued,  established,  opened or
accepted  for the  account  of the  BORROWER,  and  any  drafts  or  acceptances
thereunder,  and all OBLIGATIONS  incurred in connection  therewith,  other than
losses,  claims  or  liabilities  arising  from the gross  negligence  or wanton
misconduct of the LENDER.

              Section 2.2.4. Reimbursement  Obligations.  The BORROWER agrees to
reimburse  the  LENDER on the day of  drawing  (or upon such  later  date as the
BORROWER  receives  notice of the payment of the presented  draft by the LENDER)
upon any  LETTER OF CREDIT  (either  with the  proceeds  of the  REVOLVING  LOAN
obtained hereunder or otherwise) in same day funds in the amount of the drawing.
If the BORROWER fails to reimburse the LENDER as provided  herein or as provided
in any separate letter of credit application agreements or other LOAN DOCUMENTS,
the unreimbursed  amount of such drawing shall bear interest at a per annum rate
equal to the highest  interest  rate  (including  the default  rate of interest)
applicable to the  REVOLVING  LOAN.  The  BORROWER'S  reimbursement  obligations
hereunder  shall  be  absolute  and   unconditional   under  all   circumstances
irrespective  of any rights of set-off,  counterclaim  or defense to payment the
BORROWER may claim or have against the LENDER,  the beneficiary of the LETTER OF
CREDIT or any other PERSON, including,  without limitation, any defense based on
any failure of the BORROWER to receive consideration or the legality,  validity,
regularity or  unenforceability of the LETTER OF CREDIT or any irregularities in
the presentment of the draft presented upon the LETTER OF CREDIT.

              Section 2.2.5.  Fees,  Charges And Other Terms. The BORROWER shall
pay to the LENDER  such  issuance,  amendment,  extension  and other fees as the
LENDER quotes from time to time with respect to each LETTER OF CREDIT, and shall
execute such applications,  reimbursement  agreements, or other documents as the
LENDER  requires  from time to time with  respect  to the  issuance,  extension,
amendment,  or any other  requested  or required  action  concerning a LETTER OF
CREDIT.

                                       15
<PAGE>
         Section 2.3.  Capital  Adequacy.  If the LENDER  determines at any time
that the adoption or implementation of any CAPITAL ADEQUACY REQUIREMENT,  or the
compliance   therewith  by  the  LENDER  or  any  corporation  or  other  PERSON
controlling  the LENDER,  affects the amount of capital to be  maintained by the
LENDER or any  PERSON  controlling  the  LENDER  as a result of its  obligations
hereunder,  or reduces  the  effective  rate of return on the  LENDER'S  or such
controlling  PERSON'S  capital  to a level  below  that which the LENDER or such
controlling PERSON would have achieved but for such CAPITAL ADEQUACY REQUIREMENT
as a consequence of its obligations  hereunder  (taking into  consideration  the
LENDER'S  or  such  controlling   PERSON'S  policies  with  respect  to  capital
adequacy),  then after  submission  by the LENDER to the  BORROWER  of a written
request  therefor  and a  statement  of the  basis for such  determination,  the
BORROWER shall pay to the LENDER such additional  amounts as will compensate the
LENDER or the  controlling  PERSON  for the cost of  maintaining  the  increased
capital or for the  reduction  in the rate of return on capital,  together  with
interest  thereon at the highest rate of interest  then in effect under the NOTE
from the date the LENDER  requests such  additional  amounts until those amounts
are paid in full.

         Section 2.4. Payments. All payments received by the LENDER which are to
be applied to reduce the OBLIGATIONS  shall be credited to the balances due from
the BORROWER pursuant to the normal and customary  practices of the LENDER,  but
shall be  provisional  and shall not be  considered  final unless and until such
payment is not subject to avoidance  under any  provision  of the United  States
Bankruptcy  Code, as amended,  including  Sections 547 and 550, or any state law
governing  insolvency  or  creditors'  rights.  If any payment is avoided or set
aside  under any  provision  of the United  States  Bankruptcy  Code,  including
Sections  547 and 550,  or any  state law  governing  insolvency  or  creditors'
rights,  the payment shall be considered  not to have been made for all purposes
of this  AGREEMENT  and the LENDER  shall adjust its records to reflect the fact
that the  avoided  payment  was not made and has not been  credited  against the
OBLIGATIONS.  The BORROWER  irrevocably  authorizes the LENDER to  automatically
debit from either the COMMERCIAL ACCOUNT or the COLLATERAL ACCOUNT all sums owed
by the BORROWER to the LENDER under the LOAN and the LOAN  DOCUMENTS when and as
such sums are due and payable.

         Section 2.5. Advancements.  If the BORROWER fails to perform any of its
agreements or covenants  contained in this AGREEMENT or if the BORROWER fails to
protect or preserve  the  COLLATERAL  or the status and priority of the security
interest  of the  LENDER in the  COLLATERAL,  the LENDER  may make  advances  to
perform the same on behalf of the BORROWER to protect or preserve the COLLATERAL
or the  status  and  priority  of the  security  interest  of the  LENDER in the
COLLATERAL,  and all sums so advanced  shall  immediately  upon  advance  become
secured by the security  interests  granted in this AGREEMENT,  and shall become
part of the principal  amount owed to the LENDER with interest to be assessed at
the  applicable  rate  thereon and subject to the terms and  provisions  of this
AGREEMENT and all of the LOAN DOCUMENTS.  The BORROWER shall repay on demand all
sums so advanced on the BORROWER'S  behalf,  plus all expenses or costs incurred
by the LENDER,  including  reasonable  legal fees, with interest  thereon at the
highest rate authorized in the NOTE. The provisions of this Section shall not be
construed  to prevent the  institution  of the rights and remedies of the LENDER

                                       16
<PAGE>
upon the occurrence of an EVENT OF DEFAULT. The authorization  contained in this
Section  is not  intended  to impose  any duty or  obligation  on the  LENDER to
perform  any action or make any  advancement  on behalf of the  BORROWER  and is
intended to be for the sole benefit and protection of the LENDER.

         Section  2.6.  Termination.  In  the  event  the  BORROWER  repays  the
REVOLVING  LOAN with the  intention  of making no further  borrowings  under the
REVOLVING LOAN (which  intention  shall be presumed if the BORROWER has not made
any borrowings  under the REVOLVING LOAN for six (6) consecutive  months) at any
time prior to March 1, 2003, the BORROWER shall pay a termination  fee of Twenty
Thousand Dollars ($20,000.00)

                                    ARTICLE 3
                          SECURITY FOR THE OBLIGATIONS

         The payment,  performance and satisfaction of the OBLIGATIONS  shall be
secured by the following assurances of payment and security.

         Section  3.1.  Grant Of  Security  Interest.  In order  to  secure  the
repayment  and  performance  of all  OBLIGATIONS,  both  currently  existing and
arising  in the  future,  the  BORROWER  grants to the LENDER an  immediate  and
continuing  security  interest in and to the  COLLATERAL.  The BORROWER  further
pledges, hypothecates and grants to the LENDER a continuing security interest in
and to, all  amounts  that may be owing at any time and from time to time by the
LENDER to the BORROWER in any capacity, including but not limited to any balance
or share  belonging  to the  BORROWER of any deposit or other  account  with the
LENDER,  which security  interest shall be independent of and in addition to any
right of set-off to which the LENDER may be entitled.  The LENDER shall have the
right to require  the  BORROWER  to pledge and grant a security  interest to the
LENDER in such  additional  security as the LENDER may request from time to time
in the event that the LENDER deems itself to be insecure.

         Section 3.2.  Proceeds And Products.  The LENDER'S  security  interests
provided for herein shall apply to the  proceeds,  including  but not limited to
insurance proceeds, and the products of the COLLATERAL.

         Section  3.3.  Priority Of  Security  Interests.  Each of the  security
interests,  pledges, and liens granted by the BORROWER to the LENDER pursuant to
any of the LOAN DOCUMENTS shall be perfected first priority security  interests,
pledges, and liens.

         Section 3.4.  Future  Advances.  The  security  interests,  liens,  and
pledges  granted by the  BORROWER to the LENDER  pursuant to the LOAN  DOCUMENTS
shall  secure  all  current  and all future  advances  made by the LENDER to the
BORROWER,  or for the  account or benefit  of the  BORROWER,  and the LENDER may
advance or  readvance  upon  repayment by the BORROWER all or any portion of the
sums loaned to the BORROWER  and any such  advance or  readvance  shall be fully
secured  by the  security  interests,  liens,  and  pledges  created by the LOAN
DOCUMENTS.

                                       17
<PAGE>
         Section 3.5.  Receivable  Collections.  The BORROWER shall deposit into
the COMMERCIAL  ACCOUNT,  immediately  upon receipt thereof,  all cash,  checks,
drafts, and other instruments for the payment of money, properly endorsed, which
have been received by the BORROWER in full or partial payment of any RECEIVABLE;
provided, the BORROWER shall, if requested in writing by the LENDER at any time,
deposit or cause to be deposited into the  COLLECTION  ACCOUNT all of such items
of payment  immediately upon receipt  thereof.  Prior to any such deposit by the
BORROWER into either the COMMERCIAL  ACCOUNT or the COLLECTION  ACCOUNT,  as the
case may be, the BORROWER will not  commingle  such items of payment with any of
its other  funds or property  but will hold them  separate  and apart.  Upon the
written  request of the LENDER the  BORROWER  shall  instruct all of its ACCOUNT
DEBTORS to make all payments on the BORROWER'S  RECEIVABLES to a post office box
in which the LENDER alone shall have sole access ("LOCK BOX"). If payment of the
BORROWER'S  RECEIVABLES  is paid  into the LOCK BOX the  LENDER  shall,  on each
BUSINESS  DAY,  withdraw the items of payment from the LOCK BOX and deposit them
into either the COLLECTION ACCOUNT or the COMMERCIAL  ACCOUNT,  as determined by
the LENDER.  The  LENDER,  from time to time,  shall apply all of the  collected
funds held in the  COLLECTION  ACCOUNT  toward payment of all or any part of the
OBLIGATIONS, whether or not then due, in such order of application as the LENDER
may determine. The LENDER shall have no obligation to provide any provisional or
other credit for any deposited  funds which are not collected  funds free of any
rights of return.

         Section 3.6. Collection Of Receivables By Lender. The LENDER shall have
the right during any  continuing  DEFAULT or EVENT OF DEFAULT to send notices of
assignment or notices of the LENDER'S  security  interest to any and all ACCOUNT
DEBTORS  or any third  party  holding  or  otherwise  concerned  with any of the
COLLATERAL,  and  thereafter the LENDER shall have the sole right to collect the
RECEIVABLES  and to take  possession  of the  COLLATERAL  and  RECORDS  relating
thereto.  All of the  LENDER'S  collection  expenses  shall  be  charged  to the
BORROWER'S accounts and added to the OBLIGATIONS.  During any continuing DEFAULT
or EVENT OF DEFAULT the LENDER shall have the right to receive,  indorse, assign
and  deliver in the  LENDER'S  name or the  BORROWER'S  name any and all checks,
drafts  and  other  instruments  for  the  payment  of  money  relating  to  the
RECEIVABLES,  and the BORROWER hereby waives notice of presentment,  protest and
non-payment  of any  instrument  so endorsed.  If the LENDER is  collecting  the
RECEIVABLES, the BORROWER hereby constitutes the LENDER or the LENDER'S designee
as its  attorney-in-fact  with power with  respect  to the  RECEIVABLES:  (a) to
indorse its name upon all notes,  acceptances,  checks,  drafts, money orders or
other  evidences  of  payment  of  COLLATERAL  that may come  into the  LENDER'S
possession;  (b) to  sign  its  name  on  any  invoices  relating  to any of the
RECEIVABLES,  drafts against ACCOUNT DEBTORS,  assignments and  verifications of
RECEIVABLES  and  notices  to  ACCOUNT  DEBTORS;  (c) to send  verifications  of
RECEIVABLES to any ACCOUNT  DEBTOR;  (d) to notify the Post Office to change the
address for  delivery of mail  addressed to it to such address as the LENDER may
designate;  (e) to  receive  and  open all mail  addressed  to it and to  remove
therefrom all cash,  checks,  drafts and other payments of money;  and (f) to do
all other acts and things  necessary,  proper,  or  convenient  to carry out the
terms and conditions and purposes and intent of this AGREEMENT. All acts of such

                                       18
<PAGE>
attorney or designee are hereby  ratified  and  approved,  and such  attorney or
designee shall not be liable for any acts of omission or commission, nor for any
error of judgment or mistake of fact or law in accordance  with this  AGREEMENT,
with the  exception  of acts  arising  from  actual  fraud or gross  and  wanton
negligence.  The  power  of  attorney  hereby  granted,  being  coupled  with an
interest, is irrevocable while any of the OBLIGATIONS remain unpaid. The LENDER,
without  notice  to or  consent  from the  BORROWER,  may sue upon or  otherwise
collect,  extend the time of payment of or compromise or settle for cash, credit
or  otherwise  upon  any  terms,  any of  the  RECEIVABLES  or  any  securities,
instruments or insurances applicable thereto or release the obligor thereon. The
LENDER is authorized and empowered to accept the return of the goods represented
by any of the  RECEIVABLES,  without  notice to or consent by the BORROWER,  all
without  discharging or in any way affecting the liability of the BORROWER under
the LOAN DOCUMENTS. The LENDER does not, by anything herein or in any assignment
or otherwise,  assume any of the  obligations of the BORROWER under any contract
or agreement  assigned to the LENDER, and the LENDER shall not be responsible in
any way for the  performance  by the BORROWER of any of the terms and conditions
thereof.

         Section 3.7. Maintenance Of Principal Accounts. As further security for
the OBLIGATIONS,  the BORROWER shall maintain its principal transaction accounts
with the LENDER.

         Section 3.8.  Further  Assurances.  The BORROWER  will, at its expense,
promptly execute and deliver all further  instruments and documents and take all
further action that may be necessary or desirable or that the LENDER may request
from time to time in order: (a) to perfect and protect the security interests to
be created  hereby;  (b) to enable the LENDER to exercise and enforce its rights
and remedies hereunder in respect of the COLLATERAL;  or (c) otherwise to effect
the purposes of this  AGREEMENT,  including,  without  limitation:  (i) upon the
BORROWER'S  acquisition  thereof,  delivering to the LENDER each item of CHATTEL
PAPER of the BORROWER,  (ii) if any  RECEIVABLES  are evidenced by an INSTRUMENT
delivering  and  pledging  to the  LENDER  such  INSTRUMENT  duly  endorsed  and
accompanied by executed  instruments of transfer or assignment,  all in form and
substance  satisfactory to the LENDER, (iii) executing and filing such financing
statements  or  amendments  thereto as may be necessary or desirable or that the
LENDER may  request in order to perfect  and  preserve  the  security  interests
purported to be created hereby,  (iv) upon the acquisition after the date hereof
by the BORROWER of any EQUIPMENT covered by a certificate of title or ownership,
cause the LENDER to be listed as the lienholder on such certificate of title and
within sixty (60) days of the acquisition  thereof deliver  evidence of the same
to the LENDER,  and (v) upon the acquisition  after the date hereof of any asset
for which an assignment,  pledge,  mortgage, or other document is required to be
filed in order to grant or perfect a lien therein for the benefit of the LENDER,
execute and deliver to the LENDER such assignment,  pledge,  mortgage,  or other
INSTRUMENT within thirty (30) days of the acquisition  thereof.  If the BORROWER
fails to execute any  instrument  or document  described  above  within five (5)
BUSINESS  DAYS of being  requested to do so by the LENDER,  the BORROWER  hereby
appoints the LENDER or any officer of the LENDER as the  BORROWER'S  attorney in
fact for purposes of executing  such  instruments or documents in the BORROWER'S

                                       19
<PAGE>
name,  place and stead,  which power of attorney  shall be considered as coupled
with an interest and irrevocable.

         Section  3.9.  Fair Labor  Standards  Act. As further  security for the
OBLIGATIONS,  the BORROWER  shall comply in all material  respects with the Fair
Labor Standards Act of 1938, as amended.

                                    ARTICLE 4
                         REPRESENTATIONS AND WARRANTIES

         To  induce  the  LENDER  to  extend  the LOAN and to  enter  into  this
AGREEMENT,  the BORROWER makes the  representations  and warranties set forth in
this Article 4. The BORROWER acknowledges the LENDER'S justifiable right to rely
upon these representations and warranties.

         Section 4.1. Accuracy Of Information.  All information  submitted by or
on behalf of the BORROWER in  connection  with any of the  OBLIGATIONS  is true,
accurate and  complete in all material  respects as of the date made and contain
no knowingly false, incomplete or misleading statements.

         Section   4.2.   No   Litigation.   There   are  no   actions,   suits,
investigations,  or  proceedings  pending or, to the  knowledge of the BORROWER,
threatened  against  the  BORROWER  or the  assets  of the  BORROWER,  except as
specifically disclosed on Schedule 4.2 attached hereto.

         Section 4.3. No Liability Or Adverse Change. The BORROWER has no direct
or contingent  liability  known to the BORROWER and not previously  disclosed to
the  LENDER,  nor does the  BORROWER  know of or have any  reason to expect  any
material  adverse  change in the  BORROWER'S  assets,  liabilities,  properties,
business, or condition, financial or otherwise.

         Section 4.4. Title To Collateral.  The BORROWER has good and marketable
title to the COLLATERAL.  The liens granted by the BORROWER to the LENDER in the
COLLATERAL will have the priority required by the LOAN DOCUMENTS.

         Section 4.5. Authority; Approvals And Consents.

              Section 4.5.1. Authority.  The BORROWER has the legal authority to
enter into each of the LOAN  DOCUMENTS  and to perform,  observe and comply with
all of the BORROWER'S agreements and obligations thereunder,  including, without
limitation the borrowings contemplated hereby.

              Section  4.5.2.  Approvals.  The  execution  and  delivery  by the
BORROWER of each of the LOAN  DOCUMENTS,  the performance by the BORROWER of all
of its agreements and obligations  under the LOAN DOCUMENTS,  and the borrowings
contemplated  by this  AGREEMENT,  have been duly  authorized  by all  necessary
action on the part of the  BORROWER and do not and will not (i)  contravene  any

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provision of the organizational  documents of the BORROWER;  (ii) conflict with,
or result in a breach of the terms, conditions or provisions of, or constitute a
default under, or result in the creation of any lien upon any of the property of
the  BORROWER  under any  agreement,  trust deed,  indenture,  mortgage or other
instrument  to which the  BORROWER  is a party or by which the  BORROWER  or any
property of the BORROWER is bound or affected  (except for liens created for the
benefit of the LENDER);  (iii) violate or  contravene  any provision of any LAW,
rule or regulation (including,  without limitation,  Regulations G, T, U or X of
the Board of Governors of the Federal  Reserve  System) or any order,  ruling or
interpretation  thereunder  or any  decree,  order of  judgment  of any court or
governmental or regulatory  authority,  bureau,  agency or official (all as from
time to time in effect and  applicable  to the  BORROWER);  or (iv)  require any
waivers, consents or approvals by any of the creditors of the BORROWER.

              Section  4.5.3.  Consents.   Other  than  filings  and  recordings
required to perfect the  security  interests  and liens  granted  hereunder,  no
approval,  consent, order,  authorization or license by, or giving notice to, or
taking  any other  action  with  respect  to,  any  governmental  or  regulatory
authority or agency is required for the  execution  and delivery by the BORROWER
of the LOAN  DOCUMENTS  or for the  performance  by the  BORROWER  of any of the
agreements and obligations thereunder.

         Section  4.6.  Binding  Effect  Of  Documents,  Etc.  Each of the  LOAN
DOCUMENTS  which the BORROWER has executed  and  delivered as  contemplated  and
required  to be  executed  and  delivered  as of the  date  of  CLOSING  by this
AGREEMENT,  has been duly  executed  and  delivered  by the  BORROWER and is the
legal, valid and binding  obligation of the BORROWER and is enforceable  against
the BORROWER in accordance with all stated terms.

         Section 4.7. Other Names.  The BORROWER has not changed its name,  been
the surviving entity in a merger, or changed the location of its chief executive
office within the last twelve (12) years, except as is disclosed on Schedule 4.7
attached hereto. The BORROWER does not trade under any trade or fictitious names
except as set forth on Schedule 4.7.

         Section 4.8. No Events Of Default.  There is not currently existing any
action, event, or condition which presently constitutes a DEFAULT or an EVENT OF
DEFAULT

         Section 4.9. Taxes. The BORROWER:  (a) has filed all federal, state and
local tax returns  and other  reports  which the  BORROWER is required by LAW to
file  prior to the date  hereof  and which are  material  to the  conduct of the
business  of the  BORROWER;  (b)  has  paid or  caused  to be  paid  all  taxes,
assessments and other governmental charges that are due and payable prior to the
date hereof;  and (c) has made adequate provision for the payment of such taxes,
assessments or other charges  accruing but not yet payable.  The BORROWER has no
knowledge of any  deficiency  or additional  assessment  in connection  with any
taxes,  assessments  or charges  not  provided  for on the  BORROWER'S  books of
account or reflected in the BORROWER'S financial statements.

                                       21
<PAGE>
         Section 4.10.  Compliance  With Laws.  The BORROWER has complied in all
material respects with all applicable LAWS,  including,  but not limited to, all
LAWS  with  respect  to:  (a)  all   restrictions,   specifications,   or  other
requirements  pertaining  to  products  that  it  sells  or to the  services  it
performs;  (b) the conduct of its business;  and (c) the use,  maintenance,  and
operation  of the real and  personal  properties  owned or  leased  by it in the
conduct of its business.

         Section  4.11.  Chief Place Of Business.  The chief  executive  office,
chief  place of  business,  and the place where the  BORROWER  keeps its RECORDS
concerning the COLLATERAL is set forth on Schedule 4.11 attached hereto.

         Section 4.12. Location Of Inventory. The INVENTORY is and shall be kept
solely at the BORROWER'S  locations set forth on Schedule 4.12 attached  hereto,
and shall not be moved, sold or otherwise disposed of without prior notification
to the LENDER,  except for sales of INVENTORY to ACCOUNT DEBTORS in the ordinary
course of the  BORROWER'S  business.  None of the INVENTORY is stored with or in
the possession of any bailee,  warehouseman,  or other similar PERSON, except as
specifically disclosed on Schedule 4.12 attached hereto.

         Section 4.13. No Subsidiaries. The BORROWER has no SUBSIDIARIES, except
as specifically disclosed on Schedule 4.13 attached hereto.

         Section 4.14. No Labor  Agreements.  The BORROWER is not subject to any
collective  bargaining  agreement or any  agreement,  contract,  decree or order
requiring  it to  recognize,  deal with or employ  any  PERSONS  organized  as a
collective bargaining unit or other form of organized labor.

         Section  4.15.  Eligible  Accounts.  Each  ACCOUNT  which the  BORROWER
contends  should be included in the  calculation of the BORROWING BASE from time
to time will be an ELIGIBLE ACCOUNT. At the time each ELIGIBLE ACCOUNT is listed
on or included in (whether  singularly or in the aggregate  with other  ELIGIBLE
ACCOUNTS)  a schedule  or report  delivered  to the LENDER to be included in the
calculation of the BORROWING BASE, all of such ELIGIBLE  ACCOUNTS will have been
generated  in  compliance   with  the  BORROWER'S   normal  credit  policies  as
historically in effect (or as modified from time to time on prior written notice
of the LENDER),  or on such other  reasonable  terms disclosed in writing to the
LENDER in advance of the  creation  of such  ACCOUNTS,  and such terms  shall be
expressly set forth on the face of all invoices.

         Section  4.16.  Approvals.   The  BORROWER  possesses  all  franchises,
approvals,   licenses,   contracts,   merchandising  agreements,   merchandising
contracts and governmental approvals, registrations and exemptions necessary for
it lawfully to conduct its business and operation as presently  conducted and as
anticipated to be conducted after CLOSING.

         Section 4.17.  Financial  Statements.  The financial  statements of the
BORROWER  which  have been  delivered  to the  LENDER  prior to the date of this
AGREEMENT,  fairly  present the  financial  condition  of the BORROWER as of the
respective  dates thereof and the results and operations of the BORROWER for the

                                       22
<PAGE>
fiscal periods ended on such respective  dates,  all in accordance with G.A.A.P.
The BORROWER has no direct or contingent  liability or  obligation  known to the
BORROWER and not disclosed on the financial  statements  delivered to the LENDER
or disclosed on Schedule  4.17 hereto.  There has been no adverse  change in the
financial  condition of the BORROWER since the audited  financial  statements of
the BORROWER  dated December 31, 1998, and the BORROWER does not know of or have
any reason to expect any  material  adverse  change in the assets,  liabilities,
properties, business, or condition, financial or otherwise, of the BORROWER.

         Section  4.18.  Solvency.  The BORROWER will be SOLVENT both before and
after  CLOSING,  after  giving  full  effect to the  OBLIGATIONS  and all of the
BORROWER'S liabilities.

         Section 4.19.  Fair Labor  Standards  Act. The BORROWER has complied in
all material respects with the Fair Labor Standards Act of 1938, as amended.

         Section 4.20. Employee Benefit Plans.

              Section 4.20.1.  Compliance. The BORROWER and its ERISA AFFILIATES
are in compliance in all material  respects  with all  applicable  provisions of
ERISA  and the  regulations  thereunder  and of the  CODE  with  respect  to all
EMPLOYEE BENEFIT PLANS.

              Section 4.20.2. Absence Of Termination Event. No TERMINATION EVENT
has occurred or is reasonably  expected to occur with respect to any  GUARANTEED
PENSION PLAN.

              Section 4.20.3.  Actuarial Value. The actuarial  present value (as
defined in Section  4001 of ERISA) of all  benefit  commitments  (as  defined in
Section  4001 of ERISA) under each  GUARANTEED  PENSION PLAN does not exceed the
assets of that plan.

              Section 4.20.4. No Withdrawal Liability.  Neither the BORROWER nor
any of its ERISA  AFFILIATES  has  incurred or  reasonably  expects to incur any
withdrawal liability under ERISA in connection with any MULTIEMPLOYER PLANS.

         Section 4.21. Environmental Conditions.

              Section  4.21.1.  Existence Of Permits.  The BORROWER has obtained
all legally  required  permits,  licenses,  variances,  clearances and all other
necessary approvals (collectively,  the "EPA PERMITS") for use of the FACILITIES
and the  operation  and conduct of its  business  from all  applicable  federal,
state,   and   local    governmental    authorities,    utility   companies   or
development-related  entities  including,  but  not  limited  to,  any  and  all
appropriate Federal or State environmental  protection agencies and other county
or city  departments,  public water works and public  utilities in regard to the
use of the  FACILITIES,  the  operation  and  conduct of its  business,  and the
handling,  transporting,  treating, storage, disposal,  discharge, or RELEASE of
REGULATED SUBSTANCES,  if any, into, on or from the environment (including,  but
not limited to, any air, water, or soil).

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<PAGE>
              Section 4.21.2. Compliance With Permits. Each issued EPA PERMIT is
in full force and effect, has not expired or been suspended,  denied or revoked,
and is not under  challenge by any PERSON.  The BORROWER is in compliance in all
material aspects with each issued EPA PERMIT.

              Section 4.21.3. No Litigation. Neither the BORROWER nor any of the
FACILITIES  are subject to any  private or  governmental  litigation,  or to the
knowledge  of  the  BORROWER,   threatened  litigation,   lien  or  judicial  or
administrative  notice,  order or action  involving  the  BORROWER or any of the
FACILITIES   relating  to  REGULATED   SUBSTANCES  or  environmental   problems,
impairments or liabilities.

              Section  4.21.4.  No  Releases.  To  the  best  knowledge  of  the
BORROWER,  there has been no RELEASE into, on or from any of the  FACILITIES and
no REGULATED SUBSTANCES are located on or have been treated, stored,  processed,
disposed  of,  handled  or  transported  to or from,  any of the  FACILITIES  in
violation of any ENVIRONMENTAL  LAWS. To the best knowledge of the BORROWER,  no
REGULATED SUBSTANCES have been treated,  stored,  disposed,  RELEASED,  located,
discharged, possessed, managed, processed, or otherwise handled in the operation
or conduct of the BORROWER'S  business in violation of any  ENVIRONMENTAL  LAWS.
The BORROWER has complied in all material respects with all  ENVIRONMENTAL  LAWS
affecting the FACILITIES and the BORROWER'S businesses.

              Section 4.21.5.  Transportation.  The BORROWER does not transport,
in any manner,  any REGULATED  SUBSTANCES  except in the ordinary  course of the
BORROWER'S business in material compliance with all ENVIRONMENTAL LAWS.

              Section  4.21.6.  No  Violation  Notices.  The  BORROWER  has  not
received any notices that any REGULATED SUBSTANCES transported from any FACILITY
have been disposed of in violation of any ENVIRONMENTAL LAWS.

              Section  4.21.7.  No Notice Of  Violations.  The  BORROWER has not
received written notice of any circumstances  which would be likely to result in
any  obligation  under any  ENVIRONMENTAL  LAW to  investigate  or remediate any
REGULATED SUBSTANCES in, on or under any of the FACILITIES.

                                    ARTICLE 5
                              AFFIRMATIVE COVENANTS

         The BORROWER  agrees  during the term of this  AGREEMENT  and while any
OBLIGATIONS  are  outstanding  and unpaid to do and perform each of the acts and
promises set forth in this Article 5:

         Section 5.1. Payment. All OBLIGATIONS shall be paid in full when and as
due.

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<PAGE>
         Section 5.2.  Insurance.  The BORROWER  shall obtain and maintain  such
insurance  coverages as are  reasonable,  customary  and prudent for  businesses
engaged  in  activities  similar to the  business  activities  of the  BORROWER.
Without limitation to the foregoing,  the BORROWER shall maintain for all of its
assets and properties,  whether real,  personal,  or mixed and including but not
limited to the  COLLATERAL,  fire and extended  coverage  casualty  insurance in
amounts  satisfactory  to the LENDER and sufficient to prevent any  co-insurance
liability  (which  amount  shall be the full  insurable  value of the assets and
properties  insured  unless the LENDER in  writing  agrees to a lesser  amount),
naming  the  LENDER as sole loss payee  with  respect  to the  COLLATERAL,  with
insurance  companies and upon policy forms containing standard mortgagee clauses
which are acceptable to and approved by the LENDER. The BORROWER shall submit to
the LENDER the  originals of the casualty  insurance  policies and paid receipts
evidencing  payment of the  premiums  due on the same.  The  casualty  insurance
policies shall be endorsed so as to make them noncancellable  unless thirty (30)
days prior notice of cancellation is provided to the LENDER. The proceeds of any
insured loss shall be applied by the LENDER to the OBLIGATIONS, in such order of
application  as  determined  by the  LENDER,  unless  the  LENDER  in  its  sole
discretion  permits  the use thereof to repair or replace  damaged or  destroyed
COLLATERAL.

         Section 5.3. Books And Records. The BORROWER shall notify the LENDER in
writing if the BORROWER  modifies or changes its method of  accounting or enters
into, modifies,  or terminates any agreement presently existing,  or at any time
hereafter  entered into with any third party accounting firm for the preparation
and/or storage of the BORROWER'S accounting records.

         Section 5.4.  Collection Of Accounts;  Sale Of Inventory.  The BORROWER
shall only collect its RECEIVABLES and sell its INVENTORY in the ordinary course
of the BORROWER'S business.

         Section 5.5. Notice Of Litigation And  Proceedings.  The BORROWER shall
give  prompt  notice to the LENDER of any  action,  suit,  citation,  violation,
direction,  notice or proceeding  before any court or  governmental  department,
commission,  board,  bureau,  agency or  instrumentality,  domestic  or foreign,
affecting  the  BORROWER,  or  the  assets  or  properties  thereof,  which,  if
determined adversely to the BORROWER: (a) could require the BORROWER to pay over
more than Fifty  Thousand  Dollars  ($50,000.00)  or deliver assets the value of
which  exceeds that sum (whether or not the claim is considered to be covered by
insurance);  or (b) could  reasonably  be  expected  to have a material  adverse
effect upon the financial condition or business operations of the BORROWER.

         Section 5.6.  Payment Of  Liabilities  To Third  Persons.  The BORROWER
shall pay when and as due, or within  applicable grace periods,  all liabilities
due to third persons,  except when the amount thereof is being contested in good
faith by appropriate  proceedings and with adequate  reserves therefor being set
aside by the BORROWER.

         Section 5.7. Notice Of Change Of Business Location.  The BORROWER shall
notify the LENDER thirty (30) days in advance of: (a) any change in the location
of its existing offices or place of business;  (b) the establishment of any new,
or the discontinuation of any existing, place of business; and (c) any change in

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<PAGE>
or addition to the locations at which the  COLLATERAL  is kept.  Prior to moving
any COLLATERAL to any location not owned by the BORROWER  (other than deliveries
to ACCOUNT  DEBTORS of sold or leased  items),  the  BORROWER  shall  obtain and
deliver to the LENDER an  agreement,  in form and  substance  acceptable  to the
LENDER,  pursuant to which the owner of such location shall: (a) subordinate any
rights which it may have, or thereafter may obtain,  in any of the COLLATERAL to
the rights and security interests of the LENDER in the COLLATERAL; and (b) allow
the LENDER access to the COLLATERAL in order to remove the COLLATERAL  from such
location.  In the event any  COLLATERAL is stored with a  warehousemen  or other
bailee,  and the COLLATERAL is evidenced by a negotiable  document of title, the
BORROWER shall immediately deliver the document of title to the LENDER.

         Section 5.8.  Payment Of Taxes.  The BORROWER  shall pay or cause to be
paid when and as due all taxes,  assessments  and charges or levies imposed upon
it or on any of its property or which it is required to withhold and pay over to
the taxing authority or which it must pay on its income,  except where contested
in good  faith,  by  appropriate  proceedings  and at its own cost and  expense;
provided,  however,  that the BORROWER  shall not be deemed to be  contesting in
good faith by appropriate  proceedings  unless: (a) such proceedings  operate to
prevent the taxing  authority from attempting to collect the taxes,  assessments
or charges; (b) the COLLATERAL is not subject to sale, forfeiture or loss during
such proceedings;  (c) the BORROWER'S contest does not subject the LENDER to any
claim by the taxing authority or any other person; (d) the BORROWER  establishes
appropriate reserves, satisfactory to the LENDER in its sole discretion, for the
payment of all taxes, assessments,  charges, levies, legal fees, court costs and
other  expenses for which the BORROWER  would be liable if  unsuccessful  in the
contest;  (e) the  BORROWER  prosecutes  the contest  continuously  to its final
conclusion; and (f) at the conclusion of the proceedings,  the BORROWER promptly
pays all  amounts  determined  to be payable,  including  but not limited to all
taxes, assessments, charges, levies, legal fees and court costs.

         Section  5.9.   Inspections  Of  Records.  The  BORROWER  shall  permit
representatives  of the LENDER access to the BORROWER'S  places of business,  at
intervals  and at such  times  as  determined  by the  LENDER,  to  inspect  the
COLLATERAL  and to review and make extracts from or photocopies of the books and
records of the BORROWER. The BORROWER agrees to pay to the LENDER the audit fees
and other expenses incurred by the LENDER in connection with such inspections.

         Section  5.10.  Notice Of Events  Affecting  Collateral;  Compromise Of
Receivables;  Returned Or Repossessed  Goods. The BORROWER shall promptly report
to the LENDER:  (a) any  reclamation,  return or repossession of goods;  (b) all
claims or disputes  asserted by any ACCOUNT DEBTOR or other obligor involving in
excess of Fifty Thousand Dollars  ($50,000.00);  and (c) all matters  materially
affecting the value,  enforceability or collectibility of any of the COLLATERAL.
Without the LENDER'S consent, the BORROWER shall not compromise or adjust any of
the RECEIVABLES which have been included by the BORROWER in the determination of
the BORROWING BASE, extend the time for payment thereof, or grant any additional
discounts,  allowances or credits thereon; provided,  however, that the BORROWER

                                       26
<PAGE>
may grant, in the ordinary course of business,  to any party obligated on any of
the RECEIVABLES,  any rebate,  refund,  or adjustment to which such party may be
lawfully entitled, and may accept, in connection therewith, the return of goods,
sale, or lease of which shall have given rise to such RECEIVABLES. If any goods,
the sale of which has  resulted  in  RECEIVABLES  included  in  determining  the
BORROWING  BASE, are returned by the ACCOUNT DEBTOR for credit or repossessed by
the BORROWER,  the BORROWER shall receive and hold such goods as trustee for the
LENDER and as additional  security for the payment of the OBLIGATIONS,  and make
disposition thereof as required by the LENDER.

         Section 5.11.  Documentation  Of Collateral.  The BORROWER  agrees that
upon the request of the LENDER,  the BORROWER will provide the LENDER with:  (a)
written statements or schedules  identifying and describing the COLLATERAL,  and
all additions,  substitutions,  and replacements  thereof, in such detail as the
LENDER  may  require;  (b)  copies  of  ACCOUNT  DEBTORS'  invoices  or  billing
statements;  (c) evidence of shipment or delivery of goods or  merchandise to or
performance of services for ACCOUNT  DEBTORS;  and (d) such other  schedules and
information as the LENDER reasonably may require. The items to be provided under
this Section shall be in form  satisfactory to the LENDER and are to be executed
and  delivered  to the  LENDER  from  time  to  time  solely  for  the  LENDER'S
convenience  in  maintaining  RECORDS  of the  COLLATERAL.  The  failure  of the
BORROWER to give any of such items to the LENDER  shall not  affect,  terminate,
modify or otherwise limit the LENDER'S security interests in the COLLATERAL. The
LENDER  shall have the right,  at any time and from time to time,  to verify the
eligibility of the BORROWER'S  RECEIVABLES,  including obtaining verification of
the RECEIVABLES directly from ACCOUNT DEBTORS.

         Section 5.12.  Reporting  Requirements.  The BORROWER  shall submit the
following items to the LENDER:

              Section 5.12.1.  Receivables And Accounts Payable  Reports.  On or
before the tenth (10th) day of each calendar month: (i) a RECEIVABLES report and
aging;  and (ii) an accounts  payable report and aging,  both in form reasonably
acceptable  to the  LENDER and  containing  such  information  as the LENDER may
specify from time to time.  Such reports shall be  accompanied  by such reports,
copies of sales journals,  remittance  reports,  and other  documentation as the
LENDER may reasonably request from time to time.

              Section 5.12.2. Borrowing Base Report. Once each calendar week, or
more frequently if requested by the LENDER, a collateral and loan report in such
form and context as may be specified by the LENDER from time to time.

              Section  5.12.3.  Quarterly  Financial  Statements.   As  soon  as
available and in any event within forty-five (45) calendar days after the end of
each of the first three  quarters of each FISCAL YEAR, the BORROWER shall submit
to the LENDER a consolidated and consolidating balance sheet of the BORROWER and
its SUBSIDIARIES as of the end of such quarter, a consolidated and consolidating
statement of income and retained  earnings of the BORROWER and its  SUBSIDIARIES
for the period commencing at the end of the previous FISCAL YEAR and ending with
the end of such quarter, and a consolidated and consolidating  statement of cash

                                       27
<PAGE>
flow of the  BORROWER  and its  SUBSIDIARIES  for the portion of the FISCAL YEAR
ended with the last day of such quarter, all in reasonable detail and stating in
comparative form the respective  consolidated and consolidating  figures for the
corresponding  date and period in the  previous  FISCAL YEAR and all prepared in
accordance  with G.A.A.P.  and certified by the chief  financial  officer of the
BORROWER (subject to year-end adjustments).

              Section 5.12.4. Monthly Financial Statements. As soon as available
and in any event within thirty (30) calendar days after the end of each calendar
month, the BORROWER shall submit to the LENDER a consolidated and  consolidating
balance sheet of the BORROWER and its  SUBSIDIARIES  as of the end of such month
and a consolidated and  consolidating  statement of income and retained earnings
of the BORROWER and its  SUBSIDIARIES  for such month,  and a  consolidated  and
consolidating  statement of cash flow of the BORROWER and its  SUBSIDIARIES  for
such  month,  all in  reasonable  detail  and  stating in  comparative  form the
respective consolidated and consolidating figures for the corresponding date and
period in the previous  FISCAL YEAR and all prepared in accordance with G.A.A.P.
and  certified  by the Chief  Financial  Officer  of the  BORROWER  (subject  to
year-end adjustment).

                  Section  5.12.5.  Annual  Financial  Statements.  As  soon  as
available  and in any event within  ninety (90)  calendar  days after the end of
each FISCAL YEAR of the  BORROWER,  the  BORROWER  shall  submit to the LENDER a
consolidated   and   consolidating   balance  sheet  of  the  BORROWER  and  its
SUBSIDIARIES  as  of  the  end  of  such  FISCAL  YEAR  and a  consolidated  and
consolidating  statement of income and retained earnings of the BORROWER and its
SUBSIDIARIES  for  such  FISCAL  YEAR,  and  a  consolidated  and  consolidating
statement  of cash flow of the  BORROWER  and its  SUBSIDIARIES  for such FISCAL
YEAR, all in reasonable  detail and stating in  comparative  form the respective
consolidated and consolidating  figures for the corresponding date and period in
the  prior  FISCAL  YEAR  and all  prepared  in  accordance  with  G.A.A.P.  and
accompanied  by  an  audited  opinion  thereon   acceptable  to  the  LENDER  by
independent accountants selected by the BORROWER and acceptable to the LENDER.

                  Section  5.12.6.  SEC And Other Filings.  Within five (5) days
after the sending,  filing,  or receipt  thereof,  copies of: (a) all  financial
statements, reports, notices and proxy statements that the BORROWER sends to its
shareholders;  and (b) all regular,  periodic and special reports,  registration
statements  and  prospectuses  that the  BORROWER  renders  to or files with the
Securities  And  Exchange  Commission  or  any  national  securities   exchange,
including  without  limitation  each of the  Forms  10-K and  10-Q  filed by the
BORROWER with the Securities And Exchange Commission.

              Section 5.12.7. Management Letters. Promptly upon receipt thereof,
the BORROWER  shall submit to the LENDER copies of any reports  submitted to the
BORROWER or any  SUBSIDIARY  by  independent  certified  public  accountants  in
connection with the  examination of the financial  statements of the BORROWER or
any SUBSIDIARY made by such accountants.

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              Section  5.12.8.  Certificates  Of No Default.  Within thirty (30)
calendar  days after the end of each of the  quarters of each FISCAL YEAR of the
BORROWER,  the BORROWER  shall submit to the LENDER a  certificate  of the chief
financial officer of the BORROWER in the form of Exhibit 5.12.8 attached hereto,
certifying  that:  (i) there  exists no  DEFAULT  or EVENT OF  DEFAULT,  or if a
DEFAULT or an EVENT OF DEFAULT exists, specifying the nature thereof, the period
of existence  thereof and what action the BORROWER proposes to take with respect
thereto;  (ii)  no  material  adverse  change  in the  condition,  financial  or
otherwise,  business,  property or results of  operations  of the  BORROWER  has
occurred since the previous  certificate  was sent to the LENDER by the BORROWER
or, if any such  change has  occurred,  specifying  the nature  thereof and what
action the BORROWER has taken or proposes to take with  respect  thereto;  (iii)
all  insurance  premiums  then due have been paid;  (iv) all taxes then due have
been paid or, for those taxes which have not been paid, a statement of the taxes
not  paid  and a  description  of  the  BORROWER'S  rationale  therefor;  (v) no
litigation,  investigation  or proceedings,  or injunction,  writ or restraining
order is  pending  or  threatened  or,  if any such  litigation,  investigation,
proceeding, injunction, writ or order is pending, describing the nature thereof;
and (vi) stating whether or not the BORROWER is in compliance with the covenants
in this  AGREEMENT,  including a calculation  of the financial  covenants in the
schedule  attached to such officers'  certificates  in form  satisfactory to the
LENDER.

              Section  5.12.9.  Reports To Other  Creditors.  Promptly after the
furnishing  thereof,  the  BORROWER  shall  submit to the  LENDER  copies of any
statement or report  furnished to any other PERSON  pursuant to the terms of any
indenture, loan, or credit or similar agreement and not otherwise required to be
furnished to the LENDER pursuant to any other provisions of this AGREEMENT.

              Section 5.12.10. Management Changes. The BORROWER shall notify the
LENDER  immediately  of any changes in the  personnel  holding the  positions of
either President or Chief Financial Officer of the BORROWER.

              Section 5.12.11. General Information. In addition to the items set
forth in  subparagraphs  5.12.1 through  5.12.10 above,  the BORROWER  agrees to
submit  to the  LENDER  such  other  information  respecting  the  condition  or
operations, financial or otherwise, of the BORROWER as the LENDER may reasonably
request from time to time.

         Section 5.13.  Employee Benefit Plans And Guaranteed Pension Plans. The
BORROWER will,  and will cause each of its ERISA  AFFILIATES to: (a) comply with
all requirements imposed by ERISA and the CODE,  applicable from time to time to
any of its GUARANTEED  PENSION PLANS or EMPLOYEE  BENEFIT  PLANS;  (b) make full
payment when due of all amounts which,  under the provisions of EMPLOYEE BENEFIT
PLANS or under applicable LAW, are required to be paid as contributions thereto;
(c) not permit to exist any material accumulated funding deficiency,  whether or
not waived;  (d) file on a timely basis all reports,  notices and other  filings
required by any governmental agency with respect to any of its EMPLOYEE BENEFITS
PLANS;  (e) make any payments to  MULTIEMPLOYER  PLANS required to be made under
any agreement relating to such MULTIEMPLOYER  PLANS, or under any LAW pertaining
thereto;  (f) not amend or otherwise  alter any  GUARANTEED  PENSION PLAN if the
effect would be to cause the actuarial present value of all benefit  commitments

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<PAGE>
under  any  GUARANTEED  PENSION  PLAN to be less than the  current  value of the
assets of such  GUARANTEED  PENSION PLAN allocable to such benefit  commitments;
(g) furnish to all  participants,  beneficiaries  and employees under any of the
EMPLOYEE  BENEFIT  PLANS,  within the periods  prescribed  by LAW,  all reports,
notices and other  information to which they are entitled under  applicable LAW;
and (h) take no action  which would cause any of the EMPLOYEE  BENEFIT  PLANS to
fail to meet any qualification  requirement imposed by the CODE. As used in this
Section,  the term "accumulated funding deficiency" has the meaning specified in
Section  302 of ERISA  and  Section  412 of the CODE,  and the terms  "actuarial
present  value",  "benefit  commitments"  and  "current  value" have the meaning
specified in Section 4001 of ERISA.

         Section 5.14.  Maintenance Of Fixed Assets. The BORROWER shall maintain
and preserve all of its fixed  assets in a state of good and  efficient  working
order.

         Section 5.15. Consignments. The BORROWER shall advise the LENDER of all
PERSONS to whom it has consigned or assigned INVENTORY for sale or distribution,
and the location of the INVENTORY  subject to any such consignment or assignment
arrangement. The BORROWER shall: (a) duly and properly file financing statements
in all  applicable  places  of  public  record  with  respect  to  each  of such
consignments  or  assignments,  which filings shall comply with Section 9-114 of
the 1972 version of the Uniform  Commercial Code and with all other requirements
necessary  for the BORROWER to protect its interests  therein  under  applicable
LAWS;  (b) supply  the LENDER  with  prior  evidence  of such  filing and with a
financing  statement,  judgment and tax lien search in the name of the consignee
or assignee in all applicable  places of public record;  and (c) provide written
notification  to any holder of any security  interests  in the  inventory of the
consignee  or assignee who has filed a financing  statement  before the BORROWER
files its  financing  statement,  which  notice  shall  state that the  BORROWER
expects to deliver  goods or  assignments,  shall  describe the goods by item or
type and which notification shall be received by any such holder within five (5)
years before the consignee receives possession of the goods and at five (5) year
intervals thereafter.

         Section  5.16.  Federal  Assignment  Of Claims Act. The BORROWER  shall
notify the  LENDER if any  RECEIVABLE  arises out of a contract  with the United
States of America,  or any department,  agency or instrumentality  thereof,  and
shall execute all documents or  instruments  and shall take all steps or actions
required  by the  LENDER  so that all  monies  due or to become  due under  such
contract  are  assigned  to the LENDER and  notice  given  thereof to the United
States in accordance with the  requirements of the Federal  Assignment of Claims
Act, as amended.

         Section 5.17.  Compliance  With Laws.  The BORROWER shall comply in all
material respects with all applicable LAWS,  including,  but not limited to, all
LAWS  with  respect  to:  (a)  all   restrictions,   specifications,   or  other
requirements  pertaining  to  products  that  it  sells  or to the  services  it
performs;  (b) the  conduct  of its  business;  (c) the  use,  maintenance,  and
operation  of the real and  personal  properties  owned or  leased  by it in the
conduct of its business;  and (d) the obtaining and maintenance of all necessary
licenses,  franchises,  permits and governmental  approvals,  registrations  and

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exemptions necessary to engage in its business.  Without limiting the generality
of the  preceding  Section,  the  BORROWER  shall:  (i)  comply in all  material
respects with, and ensure such compliance by all tenants and subtenants, if any,
with,  all applicable  ENVIRONMENTAL  LAWS and obtain and comply in all material
respects with and maintain,  and ensure that all tenants and  subtenants  obtain
and comply with and maintain,  any and all licenses,  approvals,  notifications,
registrations or permits required by applicable ENVIRONMENTAL LAWS; (ii) conduct
and  complete  all  investigations,  studies,  sampling  and  testing,  and  all
remedial,  removal and other actions  required  under  ENVIRONMENTAL  LAWS,  and
promptly  comply  with all lawful  orders  and  directives  of any  governmental
authority  regarding  ENVIRONMENTAL  LAWS; and (iii) defend,  indemnify and hold
harmless the LENDER, and its employees, agents, officers and directors, from and
against  any  claims,  demands,  penalties,  fines,  liabilities,   settlements,
damages,  costs  and  expenses  of  whatever  kind or nature  known or  unknown,
contingent or otherwise, arising out of, or in any way relating to the violation
of,  noncompliance  with or liability under any ENVIRONMENTAL LAWS applicable to
the  operations  of the  BORROWER,  or any  orders,  requirements  or demands of
governmental  authorities  related  thereto,   including,   without  limitation,
reasonable attorney's and consultant's fees,  investigation and laboratory fees,
response costs, court costs and litigation  expenses,  except to the extent that
any of the  foregoing  directly  result  from the gross  negligence  or  willful
misconduct of the party seeking indemnification therefor. The BORROWER agrees to
promptly  notify the LENDER of any  RELEASE of a REGULATED  SUBSTANCE  on, to or
from any  FACILITY  in  violation  of any  ENVIRONMENTAL  LAWS or of any  notice
received by the BORROWER  that the BORROWER or any FACILITY is not in compliance
with any ENVIRONMENTAL LAWS.

         Section  5.18.  Tangible  Net  Worth.  The  BORROWER  shall  maintain a
TANGIBLE NET WORTH of not less than: (a) Two Million Dollars  ($2,000,000.00) as
of March 31, 2000; (b) Two Million Six Hundred Thousand Dollars  ($2,600,000.00)
as  of  June  30,  2000;  (c)  Three  Million  Four  Hundred   Thousand  Dollars
($3,400,000.00)  as of  September  30,  2000;  (d) Four  Million  Eight  Hundred
Thousand Dollars  ($4,800,000.00) as of December 31, 2000 and as of the last day
of each calendar quarter after December 31, 2000.

         Section  5.19.  EBITDA.  The BORROWER  shall have an EBITDA of not less
than: (a) One Hundred  Thousand  Dollars  ($100,000.00)  for the three (3) month
period ending March 31, 2000; (b) One Hundred Thousand Dollars ($100,000.00) for
the four (4) month  period  ending  April 30,  2000;  (c) Two  Hundred  Thousand
Dollars  ($200,000.00)  for the five (5) month period  ending May 31, 2000;  (d)
Seven Hundred Thousand Dollars ($700,000.00) for the six (6) month period ending
June 30, 2000; (e) Eight Hundred  Thousand Dollars  ($800,000.00)  for the seven
(7) month  period  ending July 31,  2000;  (f) One Million Two Hundred  Thousand
Dollars  ($1,200,000.00)  for the eight (8) month period ending August 31, 2000;
(g) Two Million  Dollars  ($2,000,000.00)  for the nine (9) month period  ending
September   30,   2000;   (h)  Two  Million  Five   Hundred   Thousand   Dollars
($2,500,000.00) for the ten (10) month period ending October 31, 2000; (i) Three
Million Dollars ($3,000,000.00) for the eleven (11) month period ending November
30, 2000;  (j) Four Million  Dollars  ($4,000,000.00)  for the twelve (12) month
period ending  December 31, 2000; and (k) Four Million  Dollars  ($4,000,000.00)
for each twelve  (12) month  period  ending on the last day of a calendar  month
after December 31, 2000.

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<PAGE>
         Section 5.20.  Interest  Coverage Ratio. The BORROWER shall maintain an
INTEREST COVERAGE RATIO of not less than: (a) 1.0 to 1.0 for the three (3) month
period ending March 31, 2000; (b) 2.0 to 1.0 for the six (6) month period ending
June 30, 2000; (c) 5.0 to 1.0 for the nine (9) month period ending September 30,
2000; (d) 5.0 to 1.0 for the twelve (12) month period ending  December 31, 2000;
and (e) 5.0 to 1.0 for each twelve (12) month period ending on the last day of a
fiscal quarter after December 31, 2000.

                                    ARTICLE 6
                               NEGATIVE COVENANTS

         The BORROWER covenants while any OBLIGATIONS are outstanding and unpaid
not to do or to permit to be done or to occur any of the acts or occurrences set
forth in this Article 6 without the prior written authorization of the LENDER.

         Section 6.1. No Change Of Name,  Merger,  Etc.  The BORROWER  shall not
change  its name or enter  into any  merger,  consolidation,  reorganization  or
recapitalization.

         Section  6.2.  No Sale Or Transfer Of Assets.  The  BORROWER  shall not
sell, transfer, lease or otherwise dispose of all or any part of the COLLATERAL,
or all or any part of any of its other assets, except that: (a) INVENTORY may be
sold to ACCOUNT DEBTORS in the ordinary course of the BORROWER'S  business;  and
(b) whether or not there is a DEFAULT,  the BORROWER  may use the "MONEY  MARKET
FUNDS" to pay (i) up to Three  Hundred  Thousand  Dollars  ($300,000.00)  of the
expenses  relating to the sale of the BORROWER'S  virtual  production  line, and
(ii) up to Eight Hundred Thousand Dollars  ($800,000.00) in final payment of the
note issued in connection  with the  acquisition of the assets of Scitex Digital
Video, Inc. As used herein,  the term "MONEY MARKET FUNDS" means the monies held
by the BORROWER in Account Number 1890670308 at Comerica Bank.

         Section 6.3. No Encumbrance Of Assets. The BORROWER shall not mortgage,
pledge,  grant or permit to exist a security interest in or lien upon any of its
assets of any kind, now owned or hereafter acquired, except for PERMITTED LIENS.

         Section 6.4. No  Indebtedness.  The BORROWER  shall not incur,  create,
assume, or permit to exist any INDEBTEDNESS except: (a) the OBLIGATIONS; and (b)
INDEBTEDNESS secured by PERMITTED LIENS.

         Section  6.5.  Restricted  Payments.  The  BORROWER  shall not make any
RESTRICTED PAYMENTS.

         Section 6.6. Transactions With Affiliates.  The BORROWER shall not make
any contract for the purchase of any items from any AFFILIATE or the performance
of any services (including  employment  services) by any AFFILIATE,  unless such
contract is on terms which  fairly  represent  generally  available  terms to be
obtained in transactions of a similar nature with independent third PERSONS.

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<PAGE>
         Section 6.7. Loans, Investments And Sale-Leasebacks. The BORROWER shall
not make any advance,  loan,  investment,  or material  acquisition of assets or
enter into any sale-leaseback transactions.

         Section 6.8. No  Acquisition  Of Equity In Or Assets Of Third  Persons.
The BORROWER shall not acquire any equity  interests in, or all or substantially
all of the assets of, any PERSON.

         Section 6.9. No Assignment. The BORROWER shall not assign or attempt to
assign its rights under this AGREEMENT.

         Section 6.10. No  Alteration Of Structure Or  Operations.  The BORROWER
shall not amend or change  materially its capital structure or its line or scope
of business,  nor shall it engage in business ventures other than those in which
it is presently engaged.

         Section 6.11. Unpermitted Uses Of Loan Proceeds. The BORROWER shall not
use any  part of the  proceeds  of the  LOAN  hereunder  for any  purpose  which
constitutes a violation of, or is inconsistent with, regulations of the Board of
Governors of the Federal  Reserve  System,  including  without  limitation,  the
purchase or carrying of (or refinancing of indebtedness  originally  incurred to
purchase or carry) margin securities.

         Section 6.12.  Long Term  Contracts.  The BORROWER shall not enter into
any   management   contract,    employment   contract,    consulting   contract,
non-competition contract,  service contract or the like, having a term in excess
of thirteen  (13) months or requiring  the payment of any monies by the BORROWER
on a date  occurring  more  than  thirteen  (13)  months  after the date of such
contract with any AFFILIATE.

         Section 6.13. Changes In Fiscal Year. The BORROWER shall not change its
FISCAL YEAR.

         Section 6.14. Limitation On Issuance Of Equity Interests.  The BORROWER
shall not issue or sell any equity  interest in the BORROWER  that, by its terms
or by the terms of any security into which it is  convertible  or  exchangeable,
is,  or upon  the  happening  of an event  or  passage  of time  would  be:  (a)
convertible or exchangeable into a liability of the BORROWER; or (b) required to
be redeemed or repurchased,  including at the option of the holder,  in whole or
in part,  or has,  or upon the  happening  of an event or  passage of time would
have, a redemption or similar payment due.

         Section 6.15.  Capital  Expenditures.  The BORROWER  shall not make any
CAPITAL  EXPENDITURES  in excess of: (a) Three  Hundred Fifty  Thousand  Dollars
($350,000.00)  in the  aggregate  during the three (3) month period ending March
31, 2000; (b) Six Hundred Thousand Dollars ($600,000.00) in the aggregate during
the six (6) month period ending June 30, 2000;  (c) Seven Hundred Fifty Thousand
Dollars  ($750,000.00)  in the aggregate during the nine (9) month period ending
September  30, 2000;  (d) Nine Hundred  Thousand  Dollars  ($900,000.00)  in the

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<PAGE>
aggregate  during the twelve (12) month period ending  December 31, 2000; or (e)
Nine Hundred Thousand  Dollars  ($900,000.00) in the aggregate during any twelve
(12) month period ending on the last day of a fiscal  quarter after December 31,
2000.

                                    ARTICLE 7
                                EVENTS OF DEFAULT

         Subject to the notice and cure  provisions  set forth in Section  7.16,
the  occurrence  of any of the  following  events shall  constitute  an EVENT OF
DEFAULT.

         Section 7.1.  Failure To Pay. The failure by the BORROWER to pay any of
the OBLIGATIONS when and as due.

         Section  7.2.  Violation Of  Covenants.  The failure by the BORROWER to
perform or a violation of any of the  covenants or  agreements  provided in this
AGREEMENT or in any of the other LOAN DOCUMENTS.

         Section  7.3.   Representation   Or   Warranty.   The  failure  of  any
representation  or  warranty  made by the  BORROWER  to be true in any  material
respect, as of the date made.

         Section 7.4.  Default Under Loan  Documents.  A breach of or default by
the BORROWER under the terms,  covenants,  and conditions set forth in any other
LOAN DOCUMENT.

         Section  7.5.  Cross-Default.  A breach of or default  under the terms,
covenants, or conditions of any agreement,  loan, guaranty, or other transaction
of the BORROWER with the LENDER or with any other lender.

         Section 7.6.  Judgments.  The BORROWER shall suffer final judgments for
the  payment  of  money   aggregating  in  excess  of  Fifty  Thousand   Dollars
($50,000.00)  and shall not  discharge  the same  within a period of thirty (30)
days unless, pending further proceedings, execution has not been commenced or if
commenced has been effectively stayed.

         Section  7.7.  Levy By Judgment  Creditor.  A judgment  creditor of the
BORROWER  shall  obtain  possession  of  any  of the  COLLATERAL  by any  means,
including but not limited to levy,  distraint,  replevin or  self-help,  and the
BORROWER  shall not remedy same within  thirty (30) days  thereof;  or a writ of
garnishment  is served on the  LENDER  relating  to any of the  accounts  of the
BORROWER maintained by the LENDER.

         Section 7.8. Failure To Pay Liabilities. The BORROWER shall fail to pay
any of its debts, in any material amount,  due any third PERSON and such failure
shall  continue  beyond any  applicable  grace  period,  unless  the  applicable
BORROWER  holds a good faith  defense to  payment  and has set aside  reasonable
reserves for the payment thereof.

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<PAGE>
         Section 7.9.  Involuntary  Insolvency  Proceedings.  The institution of
involuntary  INSOLVENCY  PROCEEDINGS against the BORROWER and the failure of any
such INSOLVENCY PROCEEDINGS to be dismissed before the earliest to occur of: (a)
the date which is ninety  (90) days  after the  institution  of such  INSOLVENCY
PROCEEDINGS;  (b) the entry of any order for relief in the INSOLVENCY PROCEEDING
or any order adjudicating the BORROWER  insolvent;  or (c) the impairment (as to
validity,  priority or otherwise) of any security interest or lien of the LENDER
in any of the COLLATERAL.

         Section 7.10. Voluntary Insolvency Proceedings. The commencement by the
BORROWER of INSOLVENCY PROCEEDINGS.

         Section 7.11.  Material  Adverse  Event.  The  occurrence of a MATERIAL
ADVERSE EVENT.

         Section 7.12. ERISA. If any TERMINATION EVENT shall occur and as of the
date thereof or any subsequent  date, the sum of the various  liabilities of the
BORROWER  and  its  ERISA  AFFILIATES  (such  liabilities  to  include,  without
limitation,  any liability to the Pension Benefit  Guaranty  Corporation (or any
successor  thereto) or to any other party under Sections 4062,  4063, or 4064 of
ERISA or any other provision of LAW and to be calculated  after giving effect to
the tax consequences  thereof) resulting from or otherwise  associated with such
event exceeds Fifty Thousand Dollars ($50,000.00); or the BORROWER or any of its
ERISA AFFILIATES as an employer under any  MULTIEMPLOYER  PLAN shall have made a
complete  or  partial  withdrawal  from  such  MULTIEMPLOYER  PLANS and the plan
sponsors  of such  MULTIEMPLOYER  PLANS  shall have  notified  such  withdrawing
employer  that such  employer has incurred a  withdrawal  liability  requiring a
payment in an amount exceeding Fifty Thousand Dollars ($50,000.00).

         Section 7.13. Transfer Of Equity Interests.  The transfer of any equity
interests  in the  BORROWER  from the  ownership  existing  as of  CLOSING,  the
dissolution of the BORROWER,  the pledge of any equity interests of the BORROWER
except to the LENDER,  or the  issuance of  additional  equity  interests in the
BORROWER which issuance has the effect of diluting the existing interests of the
existing equity holders in the BORROWER.

         Section 7.14.  Indictment Of Borrower.  The  indictment of the BORROWER
for a felony under any federal, state or other LAW.

         Section 7.15.  Injunction.  The issuance of any injunction  against the
BORROWER which enjoins or restrains the BORROWER from  continuing to conduct any
material part of the BORROWER'S business affairs.

         Section 7.16. Notice And Cure Rights.  Notwithstanding any provision to
the contrary set forth in any of the LOAN  DOCUMENTS,  an EVENT OF DEFAULT shall
not be deemed  to have  occurred  with  respect  to:  (a) the  failure  to pay a
monetary  amount due to the LENDER  pursuant to the terms of the LOAN  DOCUMENTS
until five (5)  calendar  days after the  LENDER  has  forwarded  notice of such
failure to pay to the  BORROWER  and the  BORROWER has failed to pay such unpaid

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<PAGE>
amount;  and  (b)  with  respect  to the  violation  of any  other  covenant  or
requirement  of the LOAN  DOCUMENTS,  excepting the specific  provisions of this
AGREEMENT excluded in the next succeeding sentence of this Section,  until after
the  LENDER has  forwarded  notice of such  violation  to the  BORROWER  and the
BORROWER has failed to correct such  violation  within thirty (30) calendar days
after  the  date  of the  sending  of such  notice.  A  violation  of any of the
following  Sections of this AGREEMENT shall  immediately  constitute an EVENT OF
DEFAULT  without the BORROWER  having any notice or cure rights:  Sections  7.3,
7.6, 7.7, 7.8, 7.9, 7.10, 7.11, 7.13, and 7.15.

                                    ARTICLE 8
                      RIGHTS AND REMEDIES ON THE OCCURRENCE
                             OF AN EVENT OF DEFAULT

         Section 8.1. Lender's Specific Rights And Remedies.  In addition to all
other  rights and  remedies  provided  by LAW and the LOAN  DOCUMENTS,  upon the
occurrence  of any EVENT OF DEFAULT,  the LENDER may:  (a)  accelerate  and call
immediately  due and  payable  all or any  part  of the  OBLIGATIONS;  (b)  seek
specific  performance  or  injunctive  relief  to  enforce  performance  of  the
undertakings,  duties, and agreements provided in the LOAN DOCUMENTS, whether or
not a remedy at law  exists or is  adequate;  and (c)  exercise  any rights of a
secured  creditor under the Uniform  Commercial  Code, as adopted and amended in
Maryland,  including the right to take possession of the COLLATERAL  without the
use of  judicial  process or  hearing  of any kind and the right to require  the
BORROWER to assemble the COLLATERAL at such place as the LENDER may specify.

         Section 8.2. Automatic Acceleration. Upon the occurrence of an EVENT OF
DEFAULT as described in Sections 7.9 or 7.10 of this AGREEMENT,  the OBLIGATIONS
shall be  automatically  accelerated  and due and  payable  without  any notice,
demand or action of any type on the part of the LENDER.

         Section  8.3.  Sale Of  Collateral.  In  addition  to any other  remedy
provided herein,  upon the occurrence of an EVENT OF DEFAULT,  the LENDER,  in a
commercially reasonable fashion, may sell at public or private sale or otherwise
realize upon, in Baltimore,  Maryland, or elsewhere,  the whole or, from time to
time, any part of all  COLLATERAL  which is personal  property,  or any interest
which the BORROWER  may have  therein.  Pending any such action,  the LENDER may
collect and liquidate the COLLATERAL.  After deducting from the proceeds of sale
or other disposition of such COLLATERAL all expenses, including all expenses for
legal services,  the LENDER shall apply such proceeds toward the satisfaction of
the OBLIGATIONS. Any remainder of the proceeds after satisfaction in full of the
OBLIGATIONS  shall be distributed as required by applicable  LAW.  Notice of any
sale or other disposition  (other than sales or other dispositions of COLLATERAL
which is  perishable  or  threatens  to decline  speedily  in value or of a type
customarily sold on a recognized market) shall be given to the BORROWER not less
than ten (10)  calendar  days before the time of any intended  public sale or of
the time after  which any  intended  private  sale or other  disposition  of the
COLLATERAL is to be made, which the BORROWER hereby agrees shall be commercially
reasonable  notice  of such  sale  or  other  disposition.  The  BORROWER  shall

                                       36
<PAGE>
assemble,  or shall cause to be assembled,  at the BORROWER'S  own expense,  the
COLLATERAL  at such place or places as the LENDER shall  designate.  At any such
sale or other  disposition,  the LENDER  may,  to the extent  permissible  under
applicable law, purchase the whole or any part of the COLLATERAL,  free from any
right of redemption  on the part of the  BORROWER,  which right is hereby waived
and released to the extent lawfully  permitted.  Without limiting the generality
of any of the rights and remedies  conferred upon the LENDER under this Section,
the LENDER may, to the full extent  permitted by applicable  law: (a) enter upon
the  premises of the  BORROWER,  exclude  therefrom  the  BORROWER or any PERSON
connected  therewith,  and take immediate  possession of the COLLATERAL,  either
personally  or  by  means  of a  receiver  appointed  by a  court  of  competent
jurisdiction,  using all necessary  force to do so; (b) at the LENDER'S  option,
use,  operate,  manage,  and control the  COLLATERAL in any lawful  manner;  (c)
collect  and  receive  all  income,  revenue,   earnings,  issues,  and  profits
therefrom;  and (d) maintain,  alter or remove the  COLLATERAL as the LENDER may
determine in the LENDER'S discretion.

         Section 8.4. Letters Of Credit.  Upon the request of the LENDER, at any
time after the occurrence of an EVENT OF DEFAULT, the BORROWER shall immediately
deposit in a cash  collateral  account at the LENDER,  over which the LENDER has
sole access,  an amount equal to the aggregate then undrawn and unexpired amount
of all LETTERS OF CREDIT.  Amounts held in such cash collateral account shall be
applied by the LENDER to the payment of drafts  drawn  under  LETTERS OF CREDIT,
and the unused portion thereof after all LETTERS OF CREDIT shall have expired or
been fully drawn upon shall be applied to repay the other OBLIGATIONS. After all
LETTERS OF CREDIT shall have expired or have been fully drawn upon and all other
OBLIGATIONS  shall have been paid in full,  the  balance,  if any,  in such cash
collateral account shall be returned to the BORROWER.  In the event the BORROWER
fails to deposit  into the cash  collateral  account an amount equal to the then
undrawn  and  unexpired  amount of all  LETTERS OF CREDIT,  the LENDER  shall be
authorized  to  deposit  into such cash  collateral  account  proceeds  from the
liquidation  of the  COLLATERAL  until the  balance in such  account  equals the
aggregate then undrawn and unexpired amount of all LETTERS OF CREDIT.

         Section 8.5. Remedies  Cumulative.  The rights and remedies provided in
this  AGREEMENT and in the other LOAN  DOCUMENTS or otherwise  under  applicable
LAWS shall be  cumulative  and the  exercise of any  particular  right or remedy
shall not  preclude the exercise of any other rights or remedies in addition to,
or as an alternative of, such right or remedy.

                                    ARTICLE 9
                          GENERAL CONDITIONS AND TERMS

         Section 9.1. Obligations Are Unconditional. The payment and performance
of the OBLIGATIONS shall be the absolute and  unconditional  duty and obligation
of the  BORROWER,  and shall be  independent  of any  defense  or any  rights of
set-off,  recoupment or  counterclaim  which the BORROWER  might  otherwise have
against the LENDER.  The BORROWER  shall pay the payments of the  principal  and
interest to be made upon the  OBLIGATIONS,  free of any  deductions  and without

                                       37
<PAGE>
abatement,  diminution  or set-off other than those herein  expressly  provided.
Until  such time as the  OBLIGATIONS  have been fully  paid and  performed,  the
BORROWER shall not: (a) suspend or discontinue any payments required by the LOAN
DOCUMENTS;  and (b) fail to perform and observe all of the BORROWER'S  covenants
and agreements set forth in the LOAN DOCUMENTS.

         Section 9.2.  Indemnity.  The BORROWER agrees to defend,  indemnify and
hold harmless the LENDER and the entities  affiliated with the LENDER and all of
the  LENDER'S  and its  affiliated  entities'  employees,  agents,  officers and
directors,  from  and  against  any  losses,   penalties,   fines,  liabilities,
settlements, damages, costs and expenses, suffered in connection with any claim,
investigation,  litigation or other proceeding  (whether or not the LENDER or an
affiliated  entity is a party thereto) and the prosecution and defense  thereof,
arising out of or in any way connected with any LOAN DOCUMENT, including without
limitation  reasonable  attorneys' and consultant's  fees,  except to the extent
that any of the foregoing  directly result from the gross  negligence or willful
misconduct of the party seeking  indemnification  therefor.  Notwithstanding any
termination of this AGREEMENT or payment and performance of the OBLIGATIONS, the
indemnities  provided  for herein  shall  continue  in full force and effect and
shall protect all of the  above-described  PERSONS  against events arising after
such termination, payment or performance as well as before.

         Section 9.3. Lender Expenses.  All LENDER EXPENSES shall be paid by the
BORROWER,  whether  incurred  prior to or after  CLOSING,  such that the subject
transactions shall at all times be cost free to the LENDER.

         Section  9.4.  Authorization  To  Obtain  Financial  Information.   The
BORROWER hereby irrevocably authorizes its accounting firm to provide the LENDER
from time to time with such  information as may be requested by the LENDER,  and
hereby  authorizes the LENDER to contact  directly such accounting firm in order
to obtain such information.

         Section 9.5.  Incorporation;  Construction Of Inconsistent  Provisions.
The terms and conditions of the LOAN DOCUMENTS are incorporated by reference and
made a  part  hereof,  as if  fully  set  forth  herein.  In  the  event  of any
inconsistency  between  this  AGREEMENT  and  any  other  LOAN  DOCUMENT,   such
inconsistency shall be construed, interpreted, and resolved so as to benefit the
LENDER, independent of whether this AGREEMENT or another LOAN DOCUMENT controls,
and the LENDER'S  election of which  interpretation  or  construction is for the
LENDER'S benefit shall govern.

         Section 9.6.  Waivers.  The LENDER at any time or from time to time may
waive all or any rights under this AGREEMENT or any other LOAN DOCUMENT, but any
waiver or  indulgence  by the  LENDER at any time or from time to time shall not
constitute a future waiver of performance or exact performance by the BORROWER.

         Section 9.7. Continuing Obligation Of Borrower. The terms,  conditions,
and covenants set forth herein and in the LOAN DOCUMENTS  shall survive  CLOSING
and shall  constitute a continuing  obligation of the BORROWER during the course
of the transactions contemplated herein. The security interests, liens and other
security  provided  by this  AGREEMENT  shall  remain  in  effect so long as any
OBLIGATION, whether direct or contingent, is outstanding, unpaid or unsatisfied.

                                       38
<PAGE>
         Section  9.8.  Choice  Of  Law.  The  laws  of the  State  of  Maryland
(excluding,  however, conflict of law principles) shall govern and be applied to
determine all issues  relating to this AGREEMENT and the rights and  obligations
of the parties hereto, including the validity, construction, interpretation, and
enforceability of this AGREEMENT and its various provisions and the consequences
and legal effect of all  transactions and events which resulted in the execution
of this  AGREEMENT  or which  occurred  or were to occur as a direct or indirect
result of this AGREEMENT having been executed.

         Section 9.9. Submission To Jurisdiction; Venue; Actions Against Lender.
For  purposes of any  action,  in law or in equity,  which is based  directly or
indirectly on this  AGREEMENT,  any other LOAN DOCUMENT or any matter related to
this AGREEMENT or any other LOAN DOCUMENT,  including any action for recognition
or  enforcement  of any of the LENDER'S  rights under the LOAN  DOCUMENTS or any
judgment obtained by the LENDER in respect thereof, the BORROWER hereby:

              Section   9.9.1.   Jurisdiction.   Irrevocably   submits   to  the
non-exclusive  general  jurisdiction of the courts of the State of Maryland and,
if a basis for federal jurisdiction exists at any time, the courts of the United
States of America for the District of Maryland.

              Section  9.9.2.  Venue.  Agrees  that venue shall be proper in the
Circuit Court for Baltimore City, Maryland,  the Circuit Court for any county in
the state of  Maryland,  as selected by the LENDER,  and, if a basis for federal
jurisdiction exists, the courts of the United States of America for the District
of Maryland.

              Section 9.9.3.  Waiver Of Objections To Venue. Waives any right to
object to the maintenance of any suit in any of the courts  specified in Section
9.9.2 above on the basis of improper venue or convenience of forum. The BORROWER
further  agrees that it shall not institute any suit or other action against the
LENDER,  in law or in equity,  which is based  directly  or  indirectly  on this
AGREEMENT,  any other LOAN DOCUMENT or any matter  related to this  AGREEMENT or
any other LOAN  DOCUMENT,  in any court other than a court  specified in Section
9.9.2  above;  provided,  that in any  instance in which there is then pending a
suit instituted by the LENDER against the BORROWER in a court other than a court
specified  in  Section  9.9.2  above,  the  BORROWER  may file in such  suit any
counterclaim  which it has against the LENDER but only if such counterclaim is a
compulsory  counterclaim  and would be barred if not filed as a counterclaim  in
such suit.  The  BORROWER  agrees that any suit brought by it against the LENDER
not  in  accordance  with  this  paragraph  should  be  forthwith  dismissed  or
transferred to a court specified in Section 9.9.2 above.

         Section  9.10.  Notices.  Any notice  required  or  permitted  by or in
connection  with  this  AGREEMENT  shall  be in  writing  and  shall  be made by
facsimile  (confirmed  on the date  the  facsimile  is sent by one of the  other
methods of giving notice  provided for in this Section) or by hand delivery,  by
Federal Express,  or other similar overnight  delivery service,  or by certified

                                       39
<PAGE>
mail,  unrestricted  delivery,   return  receipt  requested,   postage  prepaid,
addressed  to the LENDER or the  BORROWER at the  appropriate  address set forth
below or to such other address as may be hereafter  specified by written  notice
by the LENDER or the BORROWER.  Notice shall be considered  given as of the date
of the facsimile or the hand  delivery,  one (1) calendar day after  delivery to
Federal Express or similar  overnight  delivery  service,  or three (3) calendar
days after the date of mailing,  independent  of the date of actual  delivery or
whether delivery is ever in fact made, as the case may be, provided the giver of
notice can  establish  the fact that  notice was given as  provided  herein.  If
notice is tendered  pursuant to the provisions of this Section and is refused by
the intended recipient thereof, the notice, nevertheless, shall be considered to
have been given and shall be effective as of the date herein provided.

         If to the LENDER:          THE PROVIDENT BANK
                                          One East Fourth Street, 249A
                                          Cincinnati, Ohio 45202
                                          Attn: Jose V. Garde, Vice President
                                          Facsimile: (513) 639-1588

         If to the BORROWER:        ACCOM, INC.
                                          1490 O'Brien Drive
                                          Menlo Park, California 94025
                                          Attn: Don McCauley, CFO
                                          Facsimile: _____________________

         With A Courtesy Copy To:   Gibson, Dunn & Crutcher LLP
                                          1530 Page Mill Road
                                          Palo Alto, California 94304-1125
                                          Attn.: Gregory Toll Davidson
                                          Fax No.: (____) _______________

The failure of the LENDER to send the above  courtesy  copy shall not impair the
effectiveness of notice given to the BORROWER in the manner provided herein.

         Section 9.11.  Participations.  The LENDER reserves the right to assign
all or any  portion  of its  interests  in any of the  OBLIGATIONS  or the  LOAN
DOCUMENTS  or  to  participate  with  other  lending  institutions  any  of  the
OBLIGATIONS and the LOAN DOCUMENTS on such terms and at such times as the LENDER
may  determine  from time to time,  all without  any  consent  thereto or notice
thereof  to the  BORROWER.  The  BORROWER  hereby  grants to each  participating
lending institution, to the full extent of the OBLIGATIONS, the right to set off
deposit  accounts  maintained  by the BORROWER  with such  institution,  and the
BORROWER  agrees to pay the LENDER  EXPENSES of any such  participating  lending
institution  which  arise or are  incurred as a result of the  occurrence  of an
EVENT OF DEFAULT.

         Section 9.12.  Miscellaneous  Provisions.  The parties agree that:  (a)
this  AGREEMENT  shall  be  effective  as  of  the  date  first  above  written,
independent  of the date of execution  or delivery  hereof;  (b) this  AGREEMENT
shall be binding upon the parties and their successors and assigns, contains the

                                       40
<PAGE>
final and entire agreement and understanding of the parties,  and may neither be
amended  or  altered  except by a writing  signed  by the  parties;  (c) time is
strictly of the essence of this  AGREEMENT;  (d) as used  herein,  the  singular
includes the plural and the plural includes the singular,  the use of any gender
applies to all genders;  (e) the captions  contained  herein are for purposes of
convenience  only  and  are  not  a  part  of  this  AGREEMENT;  (f)  a  carbon,
photographic,  photocopy  or  other  reproduction  of a  security  agreement  or
financing  statement  shall be  sufficient  as a financing  statement;  (g) this
AGREEMENT  may be  delivered  by  facsimile,  and a  facsimile  of  any  party's
signature  to this  AGREEMENT  shall be deemed  an  original  signature  for all
purposes;  and (h) this AGREEMENT may be executed in several counterparts,  each
of which shall be an  original,  but all of which,  when taken  together,  shall
constitute one and the same document.

         Section  9.13.  Waiver Of Trial By Jury.  Each party to this  AGREEMENT
agrees that any suit,  action,  or  proceeding,  whether claim or  counterclaim,
brought or  instituted  by either party hereto or any successor or assign of any
party on or with respect to this  AGREEMENT or any other LOAN  DOCUMENT or which
in any way relates,  directly or  indirectly,  to the  OBLIGATIONS or any event,
transaction,  or occurrence  arising out of or in any way connected  with any of
the OBLIGATIONS,  or the dealings of the parties with respect thereto,  shall be
tried only by a court and not by a jury. EACH PARTY HEREBY  EXPRESSLY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION, OR PROCEEDING.

         IN WITNESS WHEREOF, the LENDER and the BORROWER have duly executed this
AGREEMENT under seal as of the date first above written.

WITNESS/ATTEST:                         THE PROVIDENT BANK,
                                        An Ohio Chartered Banking Institution

                                        By: /s/ J.DAVID KOMMALAN     (SEAL)
                                            --------------------
                                            J. David Kommalan,
                                            Vice President

                                        ACCOM, INC.,
                                        A Delaware Corporation

                                        By: /s/ DONALD K. MCCAULEY    (SEAL)
-------------------------------             ----------------------
                                            Donald K. McCauley,
                                            Senior Vice President and CFO
<PAGE>
                                  Schedule 1.48

                                 Permitted Liens
<PAGE>
                                  Schedule 4.2

                               Pending Litigation

Niaid Environmental  Corporation v. Accom, Inc. and Does 1 to 50, inclusive Case
No.  409220  filed  on June 1,  1999  in the  Superior  Court  of the  State  of
California, County of San Mateo
<PAGE>
                                  Schedule 4.7

                                   Other Names

                               Accom of California

                              Merged Into Borrower

                                Axial Corporation
                           Scitex Digital Video, Inc.
<PAGE>
                                  Schedule 4.11

                             Chief Place Of Business

                               1490 O'Brien Drive,
                          Menlo Park, California 94025

                               Collateral Records

                               1490 O'Brien Drive,
                          Menlo Park, California 94025

                          431 Crown Point Circle, #150
                         Grass Valley, California 95945
<PAGE>
                                  Schedule 4.12

                              Location Of Inventory

                               1490 O'Brien Drive,
                          Menlo Park, California 94025

                          431 Crown Point Circle, #150
                         Grass Valley, California 95945
<PAGE>
                                  Schedule 4.13

                                  Subsidiaries

                                Accom Europe Ltd.
                            Accom International, Inc.
                           Accom Virtual Studio, Inc.
                               Accom Asia-Pacific
<PAGE>
                                  Schedule 4.17

Liabilities And Obligations Not Disclosed In Financial Statements
<PAGE>
Baltimore, Maryland                                                $2,000,000.00
February 10, 2000

                         REVOLVING LOAN PROMISSORY NOTE

         FOR  VALUE  RECEIVED,   the  undersigned,   ACCOM,   INC.,  a  Delaware
corporation ("BORROWER"), promises to pay to the order of THE PROVIDENT BANK, an
Ohio Chartered Banking Institution,  ("LENDER"),  at the LENDER'S offices at One
East Fourth Street, Cincinnati, Ohio 45202 or at such other places as the holder
of this Promissory  Note may from time to time  designate,  the principal sum of
Two Million Dollars ($2,000,000.00), or so much as may have been advanced to the
BORROWER  as  proceeds  of the  "REVOLVING  LOAN," as such term is  defined  and
described in the Loan And Security Agreement ("AGREEMENT") of even date herewith
between the LENDER and the BORROWER,  together with interest thereon at the rate
or rates hereafter specified until paid in full and any and all other sums which
may be owing to the holder of this Promissory  Note by the BORROWER  pursuant to
this Promissory Note. The following terms shall apply to this Promissory Note.

1. Interest Rate.  Interest shall accrue on the unpaid principal balance of this
Promissory  Note until paid in full at the annual  fluctuating  rate of interest
which  shall  equal the rate  obtained  by adding  One and  One-Quarter  percent
(1.25%)  to the  "Prime  Rate,  " in effect  from time to time.  As used in this
Promissory Note, the term "PRIME RATE" means the rate of interest announced from
time to time by the LENDER as its prime commercial lending rate of interest,  it
being  understood  that such  announced  rate bears no  inference,  implication,
representation,  or  warranty  that  such  announced  rate  is  charged  to  any
particular  customer  or  customers  of the  LENDER.  Changes in the  applicable
interest  rate shall be made as of the  occurrence  of each  change in the PRIME
RATE.

2. Calculation Of Interest. Interest shall be calculated on the basis of a three
hundred  sixty  (360) days per year  factor  applied to the actual days on which
there exists an unpaid balance hereunder.

3.  Repayment.  Accrued and unpaid  interest,  plus any then due applicable late
payment  charges  or  default  interest,  shall be paid in  consecutive  monthly
payments beginning on March 1, 2000, and continuing on the first calendar day of
each  succeeding  month  until  March 1, 2003,  which is the final and  absolute
maturity date of this Promissory Note, at which time all sums due hereunder that
remain unpaid, including principal, interest, charges and fees, shall be paid in
full.

4. Late  Payment  Charge.  If any payment  due  hereunder,  including  any final
installment,  is not received by the holder  within  fifteen (15)  calendar days
after its due date,  the BORROWER  shall pay a late payment charge equal to five
percent (5%) of the amount then due (including both principal and interest). The
late  payment  charge  shall be due  whether  or not the  holder  declares  this
Promissory Note in default or accelerates and demands  immediate  payment of the
sums due  hereunder.  The existence of the right by the holder to receive a late
payment  charge shall not  constitute a grace period or provide any right in the
BORROWER to make a payment other than on its due date.
<PAGE>
5.  Application Of Payments.  All payments made hereunder shall be applied first
to late  payment  charges  or other  sums owed to the  holder,  next to  accrued
interest,  and then to  principal,  or in such other order or  proportion as the
holder, in the holder's sole discretion, may elect from time to time.

6. Prepayment.  The BORROWER may prepay this Promissory Note in whole or in part
at any time without premium or additional  interest.  All prepayments  made upon
the unpaid  principal  balance of this  Promissory  Note shall be applied to the
unpaid principal balance in the inverse order of scheduled maturities.

7. Rights Upon  Occurrence  Of An Event Of Default.  Upon the  occurrence  of an
"EVENT OF DEFAULT," as such term is defined in the AGREEMENT, the holder of this
Promissory Note shall have the following rights in addition to such other rights
and remedies as are  authorized by the  AGREEMENT or otherwise  available to the
holder under applicable laws:

         7.1  Acceleration.  The holder of this Promissory Note, in the holder's
sole discretion and without notice or demand, may accelerate and declare due and
immediately  owing the entire unpaid principal balance plus accrued interest and
all other sums payable to the holder in accordance  with the terms of any of the
"LOAN DOCUMENTS," as such term is defined in the AGREEMENT.

         7.2 Default  Interest Rate. The holder of this Promissory  Note, in the
holder's sole  discretion  and without  notice or demand,  may raise the rate of
interest  accruing on the unpaid principal  balance by two (2) percentage points
above the rate of  interest  otherwise  applicable,  independent  of whether the
holder elects to  accelerate  the unpaid  principal  balance as a result of such
default,  unless prior to the  imposition  of the default rate of interest,  the
BORROWER  cures  such  event  to the  satisfaction  of the  holder  hereof.  Any
individual  waiver of the holder's  right to impose the default rate of interest
shall not be  considered  a waiver of this  section or any  future  right of the
holder to impose the default rate of interest pursuant to this Section.

         7.3  Confession  Of  Judgment.  The  BORROWER  authorizes  any attorney
admitted to practice  before any court of record in the United  States to appear
on its  behalf in any  court in one or more  proceedings,  or  before  any clerk
thereof or prothonotary or other court official, and to confess judgment against
the BORROWER in favor of the holder of this  Promissory  Note in the full amount
due on this Promissory Note (including  principal,  accrued interest and any and
all charges, fees and costs) plus attorneys' fees equal to fifteen percent (15%)
of the amount due, plus court costs,  all without prior notice or opportunity of
the BORROWER for prior hearing.  The BORROWER agrees and consents that venue and
jurisdiction  shall be proper in the Circuit Court of any County of the State of
Maryland or of Baltimore City, Maryland,  or in the United States District Court
for the District of Maryland.  The BORROWER  waives the benefit of any and every
statute,  ordinance,  or rule of court which may be lawfully  waived  conferring
upon  it any  right  or  privilege  of  exemption,  homestead  rights,  stay  of
execution, or supplementary proceedings, or other relief from the enforcement or
immediate  enforcement of a judgment or related  proceedings on a judgment.  The
authority and power to appear for and enter judgment  against the BORROWER shall

<PAGE>

not be exhausted by one or more exercises thereof,  or by any imperfect exercise
thereof, and shall not be extinguished by any judgment entered pursuant thereto;
such  authority and power may be exercised on one or more occasions from time to
time, in the same or different jurisdictions,  as often as the holder shall deem
necessary,  convenient,  or proper. In the event that the holder receives,  as a
result of execution on a judgment  confessed  hereunder,  attorneys'  fees which
exceed  the actual  legal fees  incurred  by the holder in  connection  with the
unpaid balance due to the holder  pursuant to this Promissory  Note,  then, upon
full and final payment of all other sums due and owing to the holder pursuant to
this Promissory  Note and payment of the actual  attorneys' fees incurred by the
holder,  the holder  shall remit such excess  amount of  attorneys'  fees to the
BORROWER.

8. Expenses Of Collection And Attorneys'  Fees.  Should this  Promissory Note be
referred  to an  attorney  for  collection,  whether  or not  judgment  has been
confessed  or suit has been filed,  the  BORROWER  shall pay all of the holder's
costs,  fees and  expenses,  including  attorneys'  fees,  resulting  from  such
referral.

9. Waiver Of Defenses.  In the event any one or more holders of this  Promissory
Note  transfer  this  Promissory  Note for value,  the BORROWER  agrees that all
subsequent holders of this Promissory Note who take for value and without actual
knowledge of a claim or defense of the BORROWER against a prior holder shall not
be subject to any claims or defenses which the BORROWER may have against a prior
holder,  all of which are waived as to the subsequent  holder, and that all such
subsequent  holders shall have all rights of a holder in due course with respect
to the  BORROWER  even  though  the  subsequent  holder may not  qualify,  under
applicable  law,  absent this section,  as a holder in due course.  The BORROWER
shall retain all rights and claims  which the  BORROWER  may have against  prior
holders  despite any such transfers and the waiver of defenses  provided in this
section as to subsequent holders.

10. Waiver Of Protest.  The BORROWER,  and all other parties to this  Promissory
Note,  whether  maker,  indorser,  or guarantor,  waive  presentment,  notice of
dishonor and protest.

11. Extensions Of Maturity.  All parties to this Promissory Note, whether maker,
indorser, or guarantor,  agree that the maturity of this Promissory Note, or any
payment due hereunder,  may be extended at any time or from time to time without
releasing, discharging, or affecting the liability of such party.

12.  Manner And Method Of Payment.  All payments  called for in this  Promissory
Note shall be made in lawful money of the United  States of America.  If made by
check, draft, or other payment  instrument,  such check, draft, or other payment
instrument  shall  represent   immediately  available  funds.  In  the  holder's
discretion,  any payment made by a check,  draft,  or other  payment  instrument
<PAGE>
shall  not be  considered  to have  been  made  until  such  time  as the  funds
represented  thereby have been collected by the holder.  Should any payment date
fall on a  non-banking  day,  the  BORROWER  shall make the  payment on the next
succeeding banking day.

13.  Maximum  Rate Of  Interest.  Any  provision  contained  in any of the  LOAN
DOCUMENTS to the contrary  notwithstanding,  the holder of this  Promissory Note
shall not be entitled to receive or collect, nor shall the BORROWER be obligated
to pay, interest  hereunder in excess of the maximum rate of interest  permitted
by the laws of any state determined to be applicable  thereto or the laws of the
United States of America applicable to loans in such applicable state or states,
and if any  provisions  of  this  Promissory  Note or of any of the  other  LOAN
DOCUMENTS  shall ever be  construed  or held to permit or require the  charging,
collection  or payment of any amount of interest in excess of that  permitted by
such laws applicable thereto, the provisions of this paragraph shall control and
shall  override any contrary or  inconsistent  provision.  The  intention of the
parties is to at all times conform  strictly with all applicable usury laws, and
other  applicable  laws  regulating  the rates of interest which may be lawfully
charged upon the credit facility evidenced by this Promissory Note. The interest
to be paid in accordance  with the terms of this  Promissory  Note shall be held
subject to reduction to the amount  allowed under any usury or other laws as now
or hereafter construed by the courts having jurisdiction,  and any sums of money
paid in excess of the interest rate allowed by law shall be applied in reduction
of the principal amounts owing under this Promissory Note.

14. Notices. Any notice or demand required or permitted by or in connection with
this Promissory Note shall be given in the manner specified in the AGREEMENT for
the giving of  notices  under the  AGREEMENT.  Notwithstanding  anything  to the
contrary,  all notices and demands for payment from the holder actually received
in writing by the BORROWER  shall be considered to be effective upon the receipt
thereof by the  BORROWER  regardless  of the  procedure  or method  utilized  to
accomplish delivery thereof to the BORROWER.

15.  Assignability.  This  Promissory  Note may be assigned by the LENDER or any
holder at any time or from time to time  without  notice to or consent  from the
BORROWER.

16. Binding  Nature.  This  Promissory Note shall inure to the benefit of and be
enforceable by the LENDER and the LENDER'S  successors and assigns and any other
person to whom the LENDER or any holder may grant an interest in the  BORROWER'S
obligations hereunder, and shall be binding and enforceable against the BORROWER
and the BORROWER'S successors and assigns.

17.  Invalidity  Of Any Part.  If any provision or part of any provision of this
Promissory Note shall for any reason be held invalid,  illegal or  unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other  provisions of this  Promissory Note and this Promissory Note shall be
construed as if such invalid, illegal or unenforceable provision or part thereof
<PAGE>
had never  been  contained  herein,  but only to the  extent of its  invalidity,
illegality, or unenforceability.

18.  Choice  Of Law.  The laws of the  State of  Maryland  (excluding,  however,
conflict of law principles)  shall govern and be applied to determine all issues
relating to this  Promissory  Note and the rights and obligations of the parties
hereto, including the validity, construction, interpretation, and enforceability
of this  Promissory  Note and its various  provisions and the  consequences  and
legal effect of all  transactions  and events which  resulted in the issuance of
this  Promissory Note or which occurred or were to occur as a direct or indirect
result of this Promissory Note having been executed.

19. Consent To  Jurisdiction;  Agreement As To Venue.  The BORROWER  irrevocably
consents  to the  non-exclusive  jurisdiction  of the  courts  of the  State  of
Maryland and of the United States  District  Court for the District of Maryland,
if a basis for federal jurisdiction exists. The BORROWER agrees that venue shall
be proper in any circuit  court of the State of Maryland  selected by the LENDER
or in the United States  District  Court for the District of Maryland if a basis
for  federal  jurisdiction  exists  and  waives  any  right  to  object  to  the
maintenance  of a suit in any of the  state or  federal  courts  of the State of
Maryland on the basis of improper venue or of inconvenience of forum.

20. Unconditional Obligations.  The BORROWER'S obligations under this Promissory
Note shall be the unconditional duty and obligation of the BORROWER and shall be
independent  of any rights of  set-off,  recoupment  or  counterclaim  which the
BORROWER might  otherwise have against the holder of this  Promissory  Note. The
BORROWER  shall pay  absolutely  the payments of principal,  interest,  fees and
expenses  required  hereunder,  free of any  deductions  and without  abatement,
diminution or set-off.

21. Seal And Effective  Date.  This  Promissory  Note is an instrument  executed
under seal and is to be considered  effective and enforceable as of the date set
forth on the first page hereof,  independent of the date of actual execution and
delivery.

22. Tense; Gender; Defined Terms; Section Headings. As used herein, the singular
includes  the plural and the plural  includes the  singular.  A reference to any
gender also applies to any other gender.  Defined terms are entirely capitalized
throughout.  The section  headings are for convenience  only and are not part of
this Promissory Note.

23.  Actions  Against  Lender.  Any action  brought by the BORROWER  against the
LENDER which is based,  directly or indirectly,  on this  Promissory Note or any
matter in or related to this Promissory  Note,  including but not limited to the
making of the loan evidenced hereby or the administration or collection thereof,
shall be brought only in the courts of the State of  Maryland.  The BORROWER may
not file a  counterclaim  against  the  LENDER in a suit  brought  by the LENDER
against the  BORROWER in a state other than the State of Maryland  unless  under
<PAGE>
the rules of procedure  of the court in which the LENDER  brought the action the
counterclaim  is mandatory,  and not merely  permissive,  and will be considered
waived unless filed as a  counterclaim  in the action  instituted by the LENDER.
The  BORROWER  agrees  that any forum  other  than the State of  Maryland  is an
inconvenient forum and that a suit brought by the BORROWER against the LENDER in
a court of any state  other  than the  State of  Maryland  should  be  forthwith
dismissed  or  transferred  to a court  located in the State of Maryland by that
Court.

24. Waiver Of Jury Trial.  The BORROWER (by execution of this  Promissory  Note)
and the LENDER (by  acceptance  of this  Promissory  Note)  agree that any suit,
action, or proceeding,  whether claim or counterclaim,  brought or instituted by
or  against  the  BORROWER  or the  LENDER,  or any  successor  or assign of the
BORROWER or the LENDER, on or with respect to this Promissory Note or any of the
other LOAN DOCUMENTS,  or which in any way relates,  directly or indirectly,  to
the  obligations of the BORROWER to the LENDER under this Promissory Note or any
of the other  LOAN  DOCUMENTS,  or the  dealings  of the  parties  with  respect
thereto,  shall be tried only by a court and not by a jury. THE BORROWER AND THE
LENDER  HEREBY  EXPRESSLY  WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH  SUIT,
ACTION, OR PROCEEDING.

         IN WITNESS WHEREOF, the BORROWER has duly executed this Promissory Note
under seal as of the date first above written.

WITNESS/ATTEST:                     THE BORROWER:

                                        ACCOM, INC.
                                        A Delaware Corporation

                                        By: /s/ DONALD K. MCCAULEY   (SEAL)
----------------------------------          ----------------------
                                        Name: Donald K. McCauley
                                        Title: Senior Vice President

                        [Acknowledge on following page.]
<PAGE>
                                 ACKNOWLEDGMENT

STATE OF Maryland, CITY/COUNTY OF Baltimore, TO WIT:

         I HEREBY CERTIFY that on this 10th day of February, 2000 before me, the
undersigned Notary Public of the aforesaid State,  personally appeared Donald K.
McCauley,  and  acknowledged  himself  to be the  Senior  VP of Accom,  Inc.,  a
Delaware corporation, and that he, as such Senior VP, being authorized so to do,
executed the foregoing  instrument for the purposes therein contained by signing
the name of Accom, Inc. by himself as Senior VP.

         IN WITNESS MY Hand and Notarial Seal.

                                        LAURA BELL      (SEAL)
                                        ----------------
                                        NOTARY PUBLIC
My Commission Expires:

             3/1/2004EXECUTION VERSION

                               FOURTH AMENDMENT TO
                   THIRD AMENDED AND RESTATED CREDIT AGREEMENT

         THIS FOURTH  AMENDMENT TO THIRD AMENDED AND RESTATED  CREDIT  AGREEMENT
(this "Amendment"), dated as of December 8 1999, is entered into by and among:

                  (1)  BELL   MICROPRODUCTS   INC.,  a  California   corporation
         ("Borrower");

                  (2) Each of the financial institutions listed in Schedule I to
         the  Restated  Credit  Agreement  referred  to in Recital A below (such
         financial  institutions  to be referred to herein  collectively  as the
         "Existing Banks");

                  (3) CALIFORNIA BANK & TRUST, a California banking corporation,
         as   administrative   agent   for  the   Banks   (in   such   capacity,
         "Administrative Agent");

                  (4)  UNION  BANK  OF  CALIFORNIA,  N.A.,  a  national  banking
         association ("UBOC"), as collateral agent thereunder (in such capacity,
         "Collateral Agent"); and

                  (5) IBM CREDIT CORPORATION, a Delaware corporation,  that will
         become a Bank (as defined in the Restated Credit  Agreement)  under the
         Restated Credit Agreement pursuant to this Amendment (the "New Bank").

                                    RECITALS

         A. Borrower,  the Existing Banks,  Administrative  Agent and Collateral
Agent are parties to a Third Amended and Restated  Credit  Agreement dated as of
November  12,  1998,  as amended by (i) that  certain  First  Amendment to Third
Amended  and  Restated  Credit  Agreement  dated as of May 13,  1999,  (ii) that
certain Second Amendment to Third Amended and Restated Credit Agreement dated as
of July 21, 1999 and (iii) that certain  Third  Amendment  to Third  Amended and
Restated  Credit  Agreement  dated  as of  October  15,  1999 (as  amended,  the
"Restated Credit Agreement").

         B. Borrower has requested  Administrative  Agent,  Collateral Agent and
the  Existing  Banks to increase  the Total  Revolving  Loan  Commitment  and to
restructure and amend the Restated Credit Agreement in certain other respects.

         C. In addition, Borrower has requested that the New Bank become a party
to the Restated  Credit  Agreement  upon the terms and subject to the conditions
set forth below.

                                    AGREEMENT

         NOW,  THEREFORE,  in  consideration of the above recitals and for other
good and  valuable  consideration,  the receipt and adequacy of which are hereby
acknowledged,  Borrower,

<PAGE>

the Collateral Agent, the  Administrative  Agent, the Existing Banks and the New
Bank hereby agree as follows:

         1. Definitions, Interpretation. All capitalized terms defined above and
elsewhere in this Amendment shall be used herein as so defined. Unless otherwise
defined  herein,  all  other  capitalized  terms  used  herein  shall  have  the
respective  meanings given to those terms in the Restated Credit  Agreement,  as
amended by this Amendment.  The rules of construction  set forth in Section I of
the Restated Credit  Agreement  shall, to the extent not  inconsistent  with the
terms of this Amendment,  apply to this Amendment and are hereby incorporated by
reference.

         2.  Allocation of Outstanding  Revolving Loans Among Existing Banks and
New Bank.  Subject to the conditions  set forth in paragraph 5 below,  Borrower,
the Existing Banks,  the New Bank,  Collateral  Agent and  Administrative  Agent
hereby agree that on and after the Fourth  Amendment  Effective Date (as defined
herein),  each Existing Bank and the New Bank shall be a Bank under the Restated
Credit  Agreement and the other Credit Documents with Revolving Loan Commitments
as set forth on Schedule I of the Restated Credit Agreement (as amended pursuant
to this Amendment), with the rights, duties and obligations of such a Bank under
the Restated Credit Agreement and the other Credit Documents.  To effectuate the
foregoing,  on the Fourth Amendment  Effective Date  Administrative  Agent shall
calculate the Proportionate Share of each Existing Bank and the New Bank in each
Revolving Loan Borrowing then outstanding.  Based upon such calculation, the New
Bank shall  purchase  from the  Existing  Banks such  shares in the  outstanding
Revolving Loans as  Administrative  Agent  determines is necessary to cause each
Existing  Bank and the New  Bank to hold  Revolving  Loans  in each  outstanding
Revolving Loan Borrowing in a principal amount equal to such Existing Bank's and
such New Bank's Proportionate Share of such Revolving Loan Borrowings.

         3. Amendments to Restated Credit  Agreement.  Subject to the conditions
set forth in paragraph 5 below,  the Restated Credit Agreement is hereby amended
as follows:

                  (a) Paragraph  1.09 is hereby amended by adding a new sentence
         to the end thereof to read as follows:

                  Notwithstanding  references  herein  and in the  other  Credit
                  Documents to each of the  financial  institutions  listed from
                  time to time on Schedule I hereto as a "Bank," such references
                  are not intended to  indicate,  and should not be construed to
                  mean,  that each of such financial  institutions  is in fact a
                  federally regulated "bank".

                  (b)  Subparagraph  2.01(a) is hereby  amended by changing  the
         definition  of "Revolving  Loan  Maturity  Date" set forth therein from
         "October 31, 2000" to "May 31, 2001."

                  (c) Clause (i) of  Subparagraph  2.01(e) is hereby  amended by
         deleting the text "one (1),  two (2),  three (3) or six (6) months" set
         forth therein and replacing it with the following  text:  "thirty (30),
         sixty (60), ninety (90),  one-hundred  twenty (120),  one-hundred fifty
         (150) or one-hundred eighty (180) days."

                  (d)  Subparagraph  2.01(f)  is hereby  amended  to read in its
         entirety as follows:

                                       2

<PAGE>

                                    (f)  Scheduled   Revolving   Loan  Payments.
                           Borrower  shall  repay to each Bank on the  Revolving
                           Loan  Maturity  Date the unpaid  principal  amount of
                           each Revolving Loan made by such Bank. Borrower shall
                           pay accrued  interest on the unpaid  principal amount
                           of each  Revolving  Loan on the last  Business Day in
                           each  month  and  upon   prepayment  (to  the  extent
                           thereof) and at maturity.

                  (e) Clause (i) of  Subparagraph  2.02(a) is hereby  amended to
         read in its entirety as follows:

                           (i) The aggregate  principal  amount of all Revolving
                  Loans  outstanding at any time shall not exceed an amount (the
                  "Borrowing Base") equal to the lesser of:

                           (A)      The Total  Revolving Loan Commitment at such
                                    time; and

                           (B)      The sum at such time of:

                                    (1)  eighty   percent   (80%)  of   Eligible
                           Accounts; and

                                    (2) The lesser of (y) forty percent (40%) of
                           Eligible Inventory and (z) $60,000,000.

                  (f) Clause (iv) of  Subparagraph  5.01(a) is hereby amended by
         deleting the text  "fifteen  (15) days" and  substituting  therefor the
         text "twenty (20) days."

                  (g)  Subparagraph  5.01(c)  is hereby  amended  to read in its
         entirety as follows:

                           (c) Inspections.  Borrower and its Subsidiaries shall
                  permit any Person  designated by Collateral  Agent in its sole
                  discretion  (including  without  limitation  any Bank  that so
                  requests,  which  request shall not be  unreasonably  denied),
                  upon  reasonable  notice and during normal  business hours, to
                  visit  and  inspect  any  of the  properties  and  offices  of
                  Borrower and its Subsidiaries, to conduct audits of any or all
                  of the Collateral at Borrower's  expense, to examine the books
                  of account of Borrower and its Subsidiaries and to discuss the
                  affairs,   finances   and   accounts  of   Borrower   and  its
                  Subsidiaries  with, and to be advised as to the same by, their
                  officers,  auditors  and  accountants,  all at such  times and
                  intervals  as  Collateral   Agent  may   reasonably   request,
                  including, without limitation, an annual audit of the accounts
                  and inventory of Borrower and its  Subsidiaries,  the fees and
                  expenses  of which  shall be payable by  Borrower  pursuant to
                  Subparagraph  8.02(b).  Audit  fees  payable  by  Borrower  in
                  connection with audits of all or any portion of the Collateral
                  shall be  charged  at a rate of $750 per day per  person  plus
                  direct costs of travel, lodging and out-of-pocket expenses.

                  (h)  Paragraph  5.01 is  hereby  amended  by  adding  thereto,
         immediately  following clause (j) thereof,  a new clause (k) to read in
         its entirety as follows:

                                       3

<PAGE>

                           (k) Inventory  Appraisal.  Borrower covenants that it
                  will  complete  and  deliver to the  Collateral  Agent and the
                  Banks  an   inventory   appraisal,   in  form  and   substance
                  satisfactory to the Collateral Agent and the Banks,  within 90
                  days of the Fourth Amendment Effective Date.

                  (i)  Subparagraph  5.02(m)  is hereby  amended  to read in its
         entirety as follows:

                  (m) Financial Covenants. Borrower shall not permit:

                           (i) Its Quick  Ratio to be less than 0.50 to 1.00 for
                  any fiscal quarter;

                           (ii) Its Working Capital to be less than  $60,000,000
                  for any fiscal quarter;

                           (iii) Its Tangible Net Worth, for any fiscal quarter,
                  to be less  than the sum of (1)  $70,000,000  plus  (2)  fifty
                  percent  (50%) of the sum of  Borrower's  Net Income After Tax
                  for each quarter  (excluding  any quarter in which such amount
                  was negative)  beginning with the quarter ending June 30, 1998
                  plus  (3) one  hundred  percent  (100%)  of the  Net  Proceeds
                  derived  from any  issuance by  Borrower of Equity  Securities
                  minus (4) the net book value  assigned to the Almo Warrants in
                  accordance with GAAP;

                           (iv) Its  Leverage  Ratio to be greater  than 3.50 to
                  1.00 for any fiscal quarter;

                           (v) Its  Interest  Coverage  Ratio  (A) for the three
                  quarter  period  beginning  on April 1,  1998  and  ending  on
                  December  31,  1998 to be less than 2.00 to 1.00;  and (B) for
                  any consecutive four-quarter period thereafter to be less than
                  2:00 to 1:00; or

                           (vi) Its Net Operating Income or Net Income After Tax
                  to be (1) a loss in excess of $350,000  for any quarter or (2)
                  a loss of any amount for any consecutive two-quarter period.

                  (j) Section 7 is hereby amended by adding thereto, immediately
         following  Paragraph 7.09, a new Paragraph 7.10 to read in its entirety
         as follows:

                           7.10 Assignment and Delegation.  Collateral Agent may
                  from time to time (i) assign or transfer all or any portion of
                  its  rights,  benefits or  privileges  as  "collateral  agent"
                  hereunder or under any of the other Credit Documents to one or
                  more Banks and/or (ii)  delegate to or  subcontract  with,  or
                  authorize  or appoint  one or more Banks to perform all or any
                  portion  of  the  duties,   covenants  or  obligations  to  be
                  performed by Collateral  Agent in its capacity as  "collateral
                  agent"  hereunder or under any of the other Credit  Documents.
                  Any  such  other  Bank  shall  be   entitled  to  all  of  the
                  indemnities,  immunities and other protective  provisions that
                  Collateral  Agent is  entitled to  hereunder  as if such other
                  Bank were named as "Collateral  Agent"  hereunder.  Collateral
                  Agent shall not be  responsible to any other Agent or Bank for
                  the negligence or misconduct of any

                                       4

<PAGE>

                  such other Bank.

                  (k) Each of  Subparagraph  8.05(b),  Subparagraph  8.05(c) and
         Subparagraph  8.05(d) are hereby amended by deleting the text contained
         in  the  first  sentences  thereof  "in  the  ordinary  course  of  its
         commercial banking business" and substituting therefor the text "in the
         ordinary course of its commercial lending business."

                  (l)  Subparagraph  8.05(g) is hereby  amended by deleting  the
         text  contained   therein  "safe  and  sound  banking   practices"  and
         substituting therefor the text "safe and sound lending practices."

                  (m)  Schedule I is hereby  amended to read in its  entirety as
         set forth on Attachment 1 hereto.

                  (n)  Schedule II is hereby  amended to read in its entirety as
         set forth on Attachment 2 hereto.

                  (o) Schedule 1.01 of the Restated  Credit  Agreement is hereby
         amended by changing  the  definition  of "Agent's Fee Letter" set forth
         therein to read in its entirety as follows:

                           "Agent's Fee Letter" shall mean the letter  agreement
                  dated  as  of  the  Fourth  Amendment   Effective  Date  among
                  Borrower,  Administrative Agent, Collateral Agent and Comerica
                  Bank - California.

                  (p) Schedule 1.01 of the Restated  Credit  Agreement is hereby
         amended by adding thereto,  in the appropriate  alphabetical order, the
         following definition:

                  "Fourth Amendment Effective Date" shall mean December 8, 1999.

                  (q) Schedule 1.01 of the Restated  Credit  Agreement is hereby
         further  amended by deleting  therefrom  the  definitions  of the terms
         "Increased  Commitment  Period,"  "Senior  Leverage Ratio" and "Capital
         Event."

                  (r) Schedule 1.01 of the Restated  Credit  Agreement is hereby
         amended by changing clause (g) of the definition of "Eligible Accounts"
         set forth therein to read in its entirety as follows:

                           (g) Any  account  payable  by (i) the  United  States
                  government  or any  department,  agency  or other  subdivision
                  thereof  (except  to the  extent  Borrower  complies  with the
                  Federal Assignment of Claims Act of 1940, as amended),  (ii) a
                  Person located in any  jurisdiction  outside the United States
                  or Canada  (excluding  the  provinces  of  Newfoundland,  Nova
                  Scotia,   Prince  Edward  Island,   New  Brunswick,   Nunavut,
                  Manitoba,  Saskatchewan,  Alberta  and the  Yukon  Territory),
                  except to the extent secured by a letter of credit  acceptable
                  to Collateral Agent, or (iii) an Affiliate of Borrower;

                                       5

<PAGE>

                  (s) Schedule 1.01 of the Restated  Credit  Agreement is hereby
         also amended by further changing the definition of "Eligible  Accounts"
         by (i) deleting  the word "and" at the end of clause (i) thereof,  (ii)
         adding thereto,  immediately  following clause (i), a new clause (j) to
         read in its entirety as follows,  (iii) changing the designation of the
         current clause (j) to "(k)" and (iv) amending the  parenthetical at the
         end of the definition thereof to reflect such new designation:

                           (j) Any account payable by an account debtor in which
                  the total  accounts  payable from such account  debtor exceeds
                  twenty five percent  (25%) of the total amount of all Eligible
                  Accounts,  to the extent of such  excess  (except as  approved
                  from time to time by Collateral Agent); and

                  (t) Schedule 1.01 of the Restated  Credit  Agreement is hereby
         further   amended  by  changing  the  definition  of  "Revolving   Loan
         Commitment" set forth therein to read in its entirety as follows:

                           "Revolving Loan Commitment"  shall mean, with respect
                  to each Bank,  the amount set forth  opposite the name of such
                  Bank in Schedule I under the column  entitled  "Revolving Loan
                  Commitment"  or as  reduced  from  time  to time  pursuant  to
                  Paragraph 2.02 hereof.

                  (u) Schedule 1.01 of the Restated  Credit  Agreement is hereby
         further  amended by changing the  definition of "Total  Revolving  Loan
         Commitment" set forth therein to read in its entirety as follows:

                                    "Total Revolving Loan Commitment" shall mean
                           One Hundred Sixty Million Dollars  ($160,000,000) or,
                           if such amount is reduced  pursuant  to  Subparagraph
                           2.02(b), the amount to which so reduced and in effect
                           at such time.

                  (v)  Subparagraph  2(c) of  Exhibit  A is  hereby  amended  by
         deleting the term "months" set forth therein with replacing it with the
         term "days".

                  (w)  Subparagraph  2(c) of  Exhibit  B is  hereby  amended  by
         deleting the term  "months" set forth therein and replacing it with the
         term "days".

                  (x)  Subparagraph  2(c) of  Exhibit  C is  hereby  amended  by
         deleting the term  "months" set forth therein and replacing it with the
         term "days".

         4.  Representations  and  Warranties.  Borrower  hereby  represents and
warrants to Administrative  Agent,  Collateral Agent, the Existing Banks and the
New Bank that,  on the date of this  Amendment  and after  giving  effect to the
amendments set forth in paragraph 3 above on the Fourth Amendment Effective Date
(as defined below), the following are and shall be true and correct on each such
date:

                  (a) The  representations and warranties set forth in Paragraph
         4.01 of the  Restated  Credit  Agreement  are true and  correct  in all
         material respects;

                                       6

<PAGE>

                  (b) No  Event  of  Default  or  Default  has  occurred  and is
         continuing; and

                  (c) Each of the Credit Documents is in full force and effect.

         5.  Effective  Date.  The  addition  of the New  Bank as a party to the
Restated  Credit  Agreement  effected by paragraph 2 above and the amendments to
the  Restated  Credit  Agreement  effected by  paragraph  3 above  shall  become
effective on December 8, 1999 (the "Fourth Amendment  Effective Date"),  subject
to  receipt  by  the  Existing  Banks,  the  New  Bank,   Collateral  Agent  and
Administrative  Agent,  as  applicable,  on or  prior  to the  Fourth  Amendment
Effective Date of the following,  each in form and substance satisfactory to the
Existing Banks,  the New Bank,  Collateral  Agent and  Administrative  Agent and
their respective counsel, as applicable:

                  (a) This  Amendment  duly executed by Borrower,  each Existing
         Bank, the New Bank, Collateral Agent and Administrative Agent;

                  (b) The Assignment and Delegation  Agreement  substantially in
         the form  attached  hereto as  Attachment 3 duly executed by Collateral
         Agent and IBM  Credit  Corporation  and  acknowledged  and agreed to by
         Administrative Agent, each Bank and Borrower;

                  (c) An Agent's Fee Letter, in form and substance  satisfactory
         to the Agents, duly executed by Borrower and the Agents;

                  (d) New Revolving Loan Notes, appropriately completed and duly
         executed  by  Borrower,  payable  to the New Bank  and,  to the  extent
         required by changes in the Revolving  Loan  Commitments of the Existing
         Banks, the Existing Banks;

                  (e) A Certificate  of the Secretary or an Assistant  Secretary
         of Borrower, dated the Fourth Amendment Effective Date, certifying that
         (i) the Articles of Incorporation  and Bylaws of Borrower,  in the form
         delivered  to  Administrative  Agent on the Closing  Date,  are in full
         force and effect and have not been  amended,  supplemented,  revoked or
         repealed since such date, (ii) that the resolution of Borrower,  in the
         form delivered to Administrative  Agent on the Closing Date, is in full
         force and effect  and has not been  amended,  supplemented,  revoked or
         repealed  since such date,  and (iii) the  incumbency,  signatures  and
         authority of the officers of Borrower  authorized  to execute,  deliver
         and perform the Restated Credit  Agreement,  this Amendment,  the other
         Credit  Documents and all other  documents,  instruments  or agreements
         relating thereto executed or to be executed by Borrower;

                  (f) A letter in the form of Attachment 4 hereto  appropriately
         completed,  dated the Fourth Amendment Effective Date and duly executed
         by each Guarantor;

                  (g) An renewal fee of $60,000 to be shared  among the Existing
         Banks and New Bank pro rata in accordance with such Existing Banks' and
         New Bank's respective Proportionate Shares;

                  (h) A favorable written opinion of Wilson, Sonsini, Goodrich &
         Rosati, counsel to Borrower, dated the Fourth Amendment Effective Date,
         addressed to

                                       7

<PAGE>

         Administrative  Agent, the Existing Banks and the New Bank and covering
         such matters as are set forth on Attachment 5; and

                  (i) Such other evidence as  Administrative  Agent,  Collateral
         Agent,  any  Existing  Bank or the New Bank may  reasonably  request to
         establish  the accuracy and  completeness  of the  representations  and
         warranties and the compliance  with the terms and conditions  contained
         in this Amendment.

         6.  Effect  of  this  Amendment.  On and  after  the  Fourth  Amendment
Effective Date,  each reference in the Restated  Credit  Agreement and the other
Credit Documents to the Restated Credit Agreement shall mean the Restated Credit
Agreement as amended  hereby.  Except as  specifically  amended  above,  (a) the
Restated  Credit  Agreement and the other Credit  Documents shall remain in full
force and effect and are hereby  ratified and confirmed  and (b) the  execution,
delivery and  effectiveness  of this  Amendment  shall not,  except as expressly
provided  herein,  operate  as a waiver of any  right,  power,  or remedy of the
Banks,  Collateral Agent or Administrative Agent, nor constitute a waiver of any
provision of the Restated Credit Agreement or any other Credit Document.

         7. Miscellaneous.

                  (a) Counterparts. This Amendment may be executed in any number
         of identical  counterparts,  any set of which signed by all the parties
         hereto shall be deemed to constitute a complete,  executed original for
         all purposes.

                  (b) Headings.  Headings in this Amendment are for  convenience
         of reference only and are not part of the substance hereof.

                  (c)  Governing  Law. This  Amendment  shall be governed by and
         construed  in  accordance  with  the laws of the  State  of  California
         without reference to conflicts of law rules.

                                       8

<PAGE>

         IN WITNESS WHEREOF, Borrower,  Collateral Agent,  Administrative Agent,
the Existing Banks and the New Bank have caused this Amendment to be executed as
of the day and year first above written.

BORROWER:                               BELL MICROPRODUCTS INC.

                                        By: /s/ W. Don Bell
                                            ------------------------------------
                                            Name: W. DON BELL
                                            Title: CHAIRMAN, PRESIDENT, & CEO

                                        By: /s/ Remo E. Canessa
                                            ------------------------------------
                                            Name: REMO E. CANESSA
                                            Title: VICE PRESIDENT OF FINANCE
                                                   & CFO

ADMINISTRATIVE AGENT:                   CALIFORNIA BANK & TRUST,
                                        As Administrative Agent

                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:

COLLATERAL AGENT:                       UNION BANK OF CALIFORNIA, N.A.,
                                        As Collateral Agent

                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                       9

<PAGE>

EXISTING BANKS:                         CALIFORNIA BANK & TRUST,
                                        As a Bank

                                        By: /s/ S. C. Bellicini
                                            ------------------------------------
                                            Name: S. C. BELLICINI
                                            Title: SENIOR VICE PRESIDENT

                                        By: /s/ Carmen Sanz
                                            ------------------------------------
                                            Name: Carmen Sanz
                                            Title: AVP

                                        UNION BANK OF CALIFORNIA, N.A.,
                                        As a Bank

                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                        SANWA BANK CALIFORNIA,
                                        As a Bank

                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                        COMERICA BANK - CALIFORNIA,
                                        As a Bank

                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                       10

<PAGE>

                                        U.S. BANK NATIONAL ASSOCIATION,
                                        As a Bank

                                        By: /s/ Michael Powell
                                            ------------------------------------
                                            Name: Michael Powell
                                            Title: Vice President

NEW BANK:                               IBM CREDIT CORPORATION,
                                        As a Bank

                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                       11

<PAGE>

                                  ATTACHMENT 1

                                   SCHEDULE I

                                      BANKS

                     Bank                              Revolving Loan Commitment

CALIFORNIA BANK & TRUST                                      $30,000,000

Applicable Lending Office:

465 California Street, First Floor
San Francisco, CA 94104

Address for Notices:

465 California Street, First Floor
San Francisco, CA 94104
Attn:  Relationship Manager
       Bell Microproducts
Telephone:    (415) 875-1445
Facsimile     (415) 875-1456

UNION BANK OF CALIFORNIA, N.A.                               $30,000,000

Applicable Lending Office:

99 Almaden Boulevard, 2nd Floor
San Jose, CA  95133

Address for Notices:

Northern California Commercial
Banking Group
350 California Street, 10th Floor
San Francisco, CA  94104
Attention:  William Hinch
            Vice President
Telephone:    (415) 705-7028
Facsimile     (415) 705-7111

                                      1-1

<PAGE>

COMERICA BANK - CALIFORNIA                                   $30,000,000

Applicable Lending Office:

California Corporate Banking
155 Grand Avenue, Suite 402
Oakland, CA 94612

Address for Notices:

California Corporate Banking
155 Grand Avenue, Suite 402
Oakland, CA 94612
Attn:  Scott Smith
Telephone:    (510) 645-2202
Facsimile     (510) 645-2220

SANWA BANK CALIFORNIA                                        $20,000,000

Applicable Lending Office:

San Jose CBC
220 Almaden Boulevard
San Jose, CA  95113-2003

Address for Notices:

220 Almaden Boulevard
San Jose, CA  95113-2003
Attn:  Clifford M. Wallace
Telephone:    (408) 297-6500
Facsimile     (408) 292-4092

                                      1-2

<PAGE>

U.S. BANK NATIONAL ASSOCIATION                               $20,000,000

Applicable Lending Office:

U.S. Bank National Association
Corporate Banking Center
2890 North Main Street
Walnut Creek, CA  94596

Address for Notices:

U.S. Bank National Association
California Corporate Banking
2890 North Main Street
Walnut Creek, CA  94596
Attn:  Michael Powell
Telephone:    (925) 942-9489
Facsimile     (925) 945-6919

IBM CREDIT CORPORATION                                       $30,000,000

Applicable Lending Office:

IBM Credit Corporation
5000 Executive Parkway, Suite 450
San Ramon, CA  94583

Address for Notices:

IBM Credit Corporation
5000 Executive Parkway, Suite 450
San Ramon, CA  94583
Attn:  Region Manager, West
Telephone:   (925) 277-5600
Facsimile:   (925) 277-5675

                                      1-3

<PAGE>

                                  ATTACHMENT 2

                                   SCHEDULE II

                                  PRICING GRID

                        LEVEL 1     LEVEL 2     LEVEL 3     LEVEL 4     LEVEL 5
                        PERIOD      PERIOD      PERIOD      PERIOD      PERIOD

APPLICABLE
MARGINS:                 1.45%       1.65%       1.85%       2.05%       2.25%

                                   EXPLANATION

1.       The  Applicable  Margin for each  Revolving  LIBOR Loan will be set for
         each Pricing Period and will vary depending upon whether such period is
         a Level 1 Period,  a Level 2 Period, a Level 3 Period, a Level 4 Period
         or a Level 5 Period.

2.       The first Pricing Period,  which commences on the November 12, 1998 and
         ends on February 28, 1999, will be a Level 3 Period.

3.       Each  Pricing  Period  thereafter  will be a Level 1 Period,  a Level 2
         Period,  a  Level  3  Period,  a Level  4  Period  or a Level 5  Period
         depending upon Borrower's Leverage Ratio (as calculated pursuant to the
         definition of "Leverage Ratio" set forth in Schedule 1.01) for the most
         recent  fiscal  quarter  period  ending  prior to the first day of such
         Pricing Period as follows:

         (a)      If, during any Pricing  Period,  Borrower's  Leverage Ratio is
                  less than 2.00 to 1.00,  Borrower's  pricing will be a Level 1
                  Period.

         (b)      If, during any Pricing  Period,  Borrower's  Leverage Ratio is
                  greater  than or equal to 2.00 to 1.00 but less  than or equal
                  to 2.50 to 1.00, Borrower's pricing will be a Level 2 Period.

         (c)      If, during any Pricing  Period,  Borrower's  Leverage Ratio is
                  greater  than  2.50 to 1.00 but less  than or equal to 3.00 to
                  1.00, Borrower's pricing will be a Level 3 Period.

         (d)      If, during any Pricing  Period,  Borrower's  Leverage Ratio is
                  greater  than  3.00 to 1.00 but less  than or equal to 3.25 to
                  1.00, Borrower's pricing will be a Level 4 Period.

         (e)      If, during any Pricing  Period,  Borrower's  Leverage Ratio is
                  greater than 3.25 to 1.00,  Borrower's pricing will be a Level
                  5 Period.

                                      2-1

<PAGE>

                                  ATTACHMENT 3

                   FORM OF ASSIGNMENT AND DELEGATION AGREEMENT

         THIS ASSIGNMENT AND DELEGATION  AGREEMENT (this "Agreement"),  dated as
of December 8, 1999,  is entered into by and between  UNION BANK OF  CALIFORNIA,
N.A., a national banking association,  in its capacity as collateral agent under
the Restated Credit Agreement  referred to in Recital A below (in such capacity,
"Collateral  Agent") and IBM CREDIT  CORPORATION,  a Delaware  corporation ("IBM
Credit").

                                    RECITALS

         A. Each of  Collateral  Agent and IBM Credit is a party to that certain
Third Amended and Restated  Credit  Agreement  dated as of November 12, 1998 (as
amended,  the "Restated  Credit  Agreement")  among Bell  Microproducts  Inc., a
California  corporation  ("Borrower"),  the financial  institutions from time to
time listed in Schedule I thereto  (the  "Banks"),  California  Bank & Trust,  a
California banking  association,  as administrative agent for the Banks (in such
capacity, "Administrative Agent") and Collateral Agent.

         B.  Pursuant  to  Paragraph  7.10  of the  Restated  Credit  Agreement,
Collateral  Agent is authorized  from time to time to (i) assign or transfer all
or any portion of its rights, benefits or privileges as "collateral agent" under
the Restated Credit  Agreement or under any of the other Credit Documents to one
or more Banks  and/or (ii)  delegate to or  subcontract  with,  or  authorize or
appoint any other Bank to perform all or any portion of the duties, covenants or
obligations  to be  performed  by  Collateral  Agent under the  Restated  Credit
Agreement or under any of the other Credit Documents.

         C. In order to  authorize  IBM Credit to assume  certain of  Collateral
Agent's  duties  and  responsibilities  with  respect  to  that  portion  of the
Collateral  consisting of or related to Inventory,  Collateral Agent has decided
to delegate,  subcontract  with,  authorize  and appoint IBM Credit to perform a
portion of the duties,  covenants or  obligations  to be performed by Collateral
Agent under the Restated  Credit  Agreement and the other Credit  Documents with
respect to such Collateral upon the terms and conditions herein set forth.

         D. In order to  enable  IBM  Credit  to assume  certain  of  Collateral
Agent's  duties  and  responsibilities  with  respect  to  that  portion  of the
Collateral  consisting of or relating to inventory,  IBM Credit has agreed, upon
the authorization,  direction and delegation of the Collateral Agent, to perform
a portion  of the  duties,  covenants  or  obligations  to be  performed  by the
Collateral  Agent  under the  Restated  Credit  Agreement  and the other  Credit
Documents with respect to such Collateral  upon the terms and conditions  herein
set forth.

                                    AGREEMENT

         NOW,  THEREFORE,  in  consideration of the above recitals and for other
good and  valuable  consideration,  the receipt and adequacy of which are hereby
acknowledged, the Collateral Agent and IBM Credit hereby agree as follows:

                                      3-1

<PAGE>

         1. Definitions, Interpretation. All capitalized terms defined above and
elsewhere in this Agreement shall be used herein as so defined. Unless otherwise
defined  herein,  all  other  capitalized  terms  used  herein  shall  have  the
respective  meanings given to those terms in the Restated Credit  Agreement,  as
amended. The rules of construction set forth in Section I of the Restated Credit
Agreement  shall,  to the  extent  not  inconsistent  with  the  terms  of  this
Agreement, apply to this Agreement and are hereby incorporated by reference.

         2.  Assignment  and  Delegation.  Collateral  Agent hereby  assigns and
transfers to IBM Credit,  and delegates to,  subcontracts  with,  authorizes and
appoints IBM Credit,  and IBM Credit hereby accepts and agrees,  to perform each
of the specific  duties and  responsibilities  set forth on  Attachment 1 hereto
that  Collateral  Agent is  otherwise  required  and/or  authorized  to  perform
pursuant  to the  Restated  Credit  Agreement  and the other  Credit  Documents,
together  with  all  such  duties  and  responsibilities  as may  be  reasonably
incidental  thereto.  In connection  with the  performance by IBM Credit of such
duties and responsibilities,  IBM Credit shall be entitled to receive in the way
of  reimbursement  any amounts that  Collateral  Agent is otherwise  entitled to
receive  under the Restated  Credit  Agreement  and the other Credit  Documents,
including  without  limitation  (i) amounts that  Collateral  Agent is otherwise
entitled  to  receive  pursuant  to  Paragraph  5.01(c) of the  Restated  Credit
Agreement  (but  only to the  extent  that  IBM  Credit  in fact  performs  such
inspections  and audits  provided for  therein) and (ii)  one-half of the annual
agent's fee that Collateral  Agent is otherwise  entitled to receive pursuant to
the Agent's Fee Letter.

         3.  Rights  of IBM  Credit.  Without  limiting  the  scope of any other
provision  contained  in the  Restated  Credit  Agreement  or the  other  Credit
Documents,  the undersigned acknowledge and agree that both Collateral Agent and
IBM  Credit  shall  be  entitled  to the  benefit  of  all  of the  indemnities,
immunities  and other  protective  rights  that any Bank  acting as  "Collateral
Agent" is entitled to receive under the Restated Credit  Agreement and the other
Credit Documents as if IBM Credit were named as "Collateral  Agent"  thereunder,
including by way of example but not by limitation,  those set forth in Paragraph
7.04 of the Restated Credit Agreement.

         4.  Limitation  on  Liability.  Neither  IBM  Credit  nor  any  of  its
directors,  officers, employees or agents shall be responsible to the Banks, the
Collateral Agent or the Administrative  Agent for any action taken or omitted to
be taken by it or them  hereunder  or under  any  other  Credit  Document  or in
connection  herewith or therewith,  except for its or their own gross negligence
or willful misconduct.

         5. Actions by IBM Credit. As to any matters not expressly  provided for
by this Assignment and Delegation Agreement, IBM Credit shall not be required to
take any action or exercise any  discretion,  but shall be required to act or to
refrain  from  acting  upon  instructions  (i) of the  Collateral  Agent (if the
Collateral  Agent has been so instructed  by the Required  Banks) or (ii) of the
Required  Banks,  and  shall in all  cases be fully  protected  by the  Banks in
acting,  or in  refraining  from  acting,  hereunder  or under any other  Credit
Document in accordance with any such instructions, and such instructions and any
action taken or failure to act pursuant thereto shall be binding upon all of the
Banks.

                                      3-2

<PAGE>

         6.  Re-Assignment  or  Re-Delegation  of Duties  and  Responsibilities.
Unless otherwise agreed to between  Collateral Agent and IBM Credit,  IBM Credit
may re-assign  and  re-delegate  to  Collateral  Agent all or any portion of the
duties and obligations assigned and delegated to it by Collateral Agent pursuant
to this  Agreement at any time by giving thirty (30) days prior  written  notice
thereof to Administrative Agent, Collateral Agent and the Banks. In addition, at
any time the  Required  Banks  may,  in their  sole  discretion,  re-assign  and
re-delegate  all or any  portion  of the  duties and  obligations  assigned  and
delegated  to IBM Credit  hereunder  to  Collateral  Agent or such other Bank as
Required Banks may designate. Upon any such re-assignment and re-delegation, all
of the rights,  duties and obligations of IBM Credit hereunder shall immediately
and without  further action be re-assumed by the Collateral  Agent or such other
Bank as  Required  Banks may  designate  except  that the  benefit of all of the
indemnities,  immunities and other protective provisions shall continue to apply
to any  actions  taken  by  IBM  Credit  prior  to any  such  re-assignment  and
re-delegation.

         7. Miscellaneous.

                  (a) Counterparts. This Agreement may be executed in any number
         of identical  counterparts,  any set of which signed by all the parties
         hereto shall be deemed to constitute a complete,  executed original for
         all purposes.

                  (b) Headings.  Headings in this Agreement are for  convenience
         of reference only and are not part of the substance hereof.

                  (c)  Governing  Law. This  Agreement  shall be governed by and
         construed  in  accordance  with  the laws of the  State  of  California
         without reference to conflicts of law rules.

                  (d)  Notices.  All  notices,   requests,   demands,  consents,
         instructions or other communications to or upon Collateral Agent or IBM
         Credit under this  Agreement  shall be given in the manner set forth in
         Paragraph 8.01 of the Restated Credit Agreement.

                                      3-3

<PAGE>

         IN WITNESS  WHEREOF,  Collateral  Agent and IBM Credit have caused this
Agreement to be executed as of the day and year first above written.

                                        UNION BANK OF CALIFORNIA, N.A., in its
                                        capacity as Collateral Agent

                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                        IBM CREDIT CORPORATION

                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:

Acknowledged and Agreed:

CALIFORNIA BANK & TRUST,
as Administrative Agent

By:
    ------------------------------------
Name:
Title:

By:
    ------------------------------------
Name:
Title:

                                      3-4

<PAGE>

CALIFORNIA BANK& TRUST,
As a Bank

By:
    ------------------------------------
Name:
Title:

By:
    ------------------------------------
Name:
Title:

UNION BANK OF CALIFORNIA, N.A.,
As a Bank

By:
    ------------------------------------
Name:
Title:

SANWA BANK CALIFORNIA,
As a Bank

By:
    ------------------------------------
Name:
Title:

COMERICA BANK - CALIFORNIA,
As a Bank

By:
    ------------------------------------
Name:
Title:

                                      3-5

<PAGE>

U.S. BANK NATIONAL ASSOCIATION,
As a Bank

By:
    ------------------------------------
Name:
Title:

IBM CREDIT CORPORATION,
As a Bank

By:
    ------------------------------------
Name:
Title:

BELL MICROPRODUCTS INC.

By:
    ------------------------------------
Name:
Title:

                                      3-6

<PAGE>

               Attachment 1 to Assignment and Delegation Agreement

                    Duties and Responsibilities of IBM Credit

         IBM Credit shall,  at the  direction  and request of Collateral  Agent,
upon proper notice and during normal  business hours visit and inspect  specific
properties and offices of Borrower and its Subsidiaries,  to conduct an audit of
any or all inventory.  Each such audit shall include by way of example,  but not
limitation  performing  a physical  count of  inventory,  requesting  a complete
inventory  report from Borrower,  selecting and testing  eligibility of a random
sample of inventory, and reviewing and testing discrepancies.

         FREQUENCY:  Each  inventory  audit  shall  take place at such times and
intervals  as  Collateral  Agent  may  reasonably  request,   including  without
limitation, an annual audit of the inventory of Borrower and its Subsidiaries.

         FEES: As set forth in Section 5.01(c) of the Third Amended and Restated
Credit Agreement, as it may be modified from time to time.

         SUMMARY:  At the  completion of each  inventory  audit IBM Credit shall
provide  Collateral  Agent with a written summary of such audit. If after review
of the summary and Collateral  Agent concludes that  additional  inventory audit
processes or sampling are required then Collateral  Agent,  upon 5 business days
prior  notice,  shall give  specific  and  detailed  direction  to IBM Credit to
conduct such additional processes or sampling.

                                      3-7

<PAGE>

                                  ATTACHMENT 4

                        FORM OF GUARANTOR CONSENT LETTER

                                December 8, 1999

TO:      ADMINISTRATIVE AGENT,
         As Administrative Agent for the Banks
         and the Agents under the
         Restated Credit Agreement referred to below

         1. Reference is made to the following:

                  (a) The Third Amended and Restated  Credit  Agreement dated as
         of November 12, 1998, among Borrower,  the Banks,  Administrative Agent
         and  Collateral  Agent,  as amended by that certain First  Amendment to
         Third Amended and Restated  Credit  Agreement dated as of May 13, 1999,
         that  certain  Second  Amendment to Third  Amended and Restated  Credit
         Agreement dated as of July 21, 1999 and that certain Third Amendment to
         Third  Amended and Restated  Credit  Agreement  dated as of October 15,
         1999 (as amended, the "Restated Credit Agreement");

                  (b) [The Bell Canada  Guaranty,  dated as of November 12, 1998
         (the " Bell Canada Guaranty"),] [The Bell-Tenex  Guaranty,  dated as of
         November 20, 1998 (the "Bell-Tenex  Guaranty"),]  [The Bell-Future Tech
         Guaranty,  dated as of  November  ____,  1999  (the  "Bell-Future  Tech
         Guaranty"),] executed by the undersigned  ("Guarantor") in favor of the
         Banks and Collateral Agent; and

                  (c) The Fourth  Amendment to Third Amended and Restated Credit
         Agreement,  dated as of December 8, 1999,  among  Borrower,  the Banks,
         Administrative Agent and Collateral Agent (the " Fourth Amendment");

         2. Guarantor  hereby  confirms that it is a wholly-owned  subsidiary of
[Bell Microproducts Inc., a California  corporation] [Bell Microproducts  Canada
Inc.,  a  California  corporation  ("Bell  Canada")  and that  Bell  Canada is a
wholly-owned subsidiary of Bell Microproducts Inc., a California corporation].

         3. Guarantor hereby consents to the Fourth Amendment, including without
limitation,  the extension of the Revolving  Loan Maturity Date from October 31,
2000 to May 31, 2001 and the  increase in the Total  Revolving  Loan  Commitment
from One Hundred  Thirty  Million  Dollars  ($130,000,000)  to One Hundred Sixty
Million  Dollars  ($160,000,000).  Guarantor  expressly  agrees  that the Fourth
Amendment shall in no way affect or alter the rights,  duties, or obligations of
Guarantor,  the Banks or  Collateral  Agent  under the  [Bell  Canada  Guaranty]
[Bell-Tenex Guaranty] [Bell-Future Tech Guaranty].

         4.  Pursuant  to  the  [Bell  Canada  Guaranty]  [Bell-Tenex  Guaranty]
[Bell-Future  Tech Guaranty],  Guarantor  continues to guaranty the payment when
due of, inter alia, all loans,  advances,  debts,  liabilities and  obligations,
however arising, owed by the Borrower to any Agent

                                      4-1

<PAGE>

or any Bank of every kind and  description  now  existing or  hereafter  arising
pursuant to the terms of the Restated Credit  Agreement as amended by the Fourth
Amendment or any of the other Credit Documents.

         5.  The  [Pledge]  [Security]  Agreement,  dated  as of  [November  20,
1998][November  ___,  1999]  executed by Guarantor in favor of Collateral  Agent
(the "[Pledge]  [Security]  Agreement")  and any other  security  granted to any
Agent or any of the Banks from time to time as security for the  obligations  of
Guarantor under the [Bell Canada Guaranty]  [Bell-Tenex  Guaranty]  [Bell-Future
Tech Guaranty] remains in full force and effect and unamended,  and the security
interests, mortgages, charges, liens, assignments, transfers and pledges granted
by  Guarantor  pursuant  to the  [Pledge]  [Security]  Agreement  and such other
documents (if any) continue to extend to all debts, liabilities and obligations,
present  or future,  direct or  indirect,  absolute  or  contingent,  matured or
unmatured, at any time due or accruing due, of Guarantor to any of the Banks and
any Agent arising under,  in connection  with or pursuant to the Restated Credit
Agreement and the other Credit Documents,  as acknowledged and confirmed by this
Guarantor Consent Letter,  notwithstanding  the amendment of the Restated Credit
Agreement by the Fourth Amendment.

         6. From and after the date hereof, the term "Restated Credit Agreement"
as used in the [Bell-Canada  Guaranty] [Bell-Tenex  Guaranty]  [Bell-Future Tech
Guaranty]  shall mean the Restated  Credit  Agreement,  as amended by the Fourth
Amendment.

         7.  Guarantor's  consent to the Fourth Amendment shall not be construed
(i) to have been required by the terms of the [Bell Canada Guaranty] [Bell-Tenex
Guaranty]  [Bell-Future  Tech Guaranty],  any other Credit Document or any other
document,  instrument  or  agreement  relating  thereto or (ii) to  require  the
consent of Guarantor  in  connection  with any future  amendment of the Restated
Credit Agreement or any other Credit Document.

                                      4-2

<PAGE>

         IN WITNESS  WHEREOF,  Guarantor  has executed  this  Guarantor  Consent
Letter as of the day and year first written above.

                                     [BELL/MICROPRODUCTS CANADA-TENEX DATA ULC]
                                     [BELL MICROPRODUCTS CANADA INC.]
                                     [BELL MICROPRODUCTS - FUTURE TECH, INC.]

                                     By:
                                        ----------------------------
                                        Name:
                                             -----------------------
                                        Title:
                                              ----------------------

                                      4-3

<PAGE>

                                  ATTACHMENT 5

                     MATTERS TO BE COVERED BY LEGAL OPINION

1.       Borrower (a) is a corporation duly incorporated and validly existing in
         good standing under the laws of its jurisdiction of  incorporation  and
         (b) has the requisite  corporate  power and authority to own, lease and
         operate its properties and carry on its business as now conducted.

2.       Borrower has the requisite  corporate power and authority to enter into
         the Amendment and to carry out the transactions  contemplated  thereby,
         and by the Restated Credit Agreement as amended by the Amendment.

3.       The  Amendment  has been duly  authorized,  executed  and  delivered by
         Borrower,  and the  Amendment  and the  Restated  Credit  Agreement  as
         amended by the Amendment,  each constitutes a legally valid and binding
         obligation of Borrower, enforceable against Borrower in accordance with
         its terms.

4.       The performance by Borrower of its obligations under the Amendment, and
         the Restated Credit Agreement as amended by the Amendment, will not (a)
         violate any provision of the Certificate of Incorporation or the bylaws
         of Borrower,  (b) to our  knowledge,  violate any provision of any law,
         rule,   regulation,   order,  writ,  judgement,   injunction,   decree,
         determination by a court having jurisdiction over Borrower,  (c) result
         in a breach of,  constitute a default under, or permit the acceleration
         of any obligation owed under any Reviewed  Agreement  listed on Annex A
         hereto  binding upon Borrower,  or (d) to our knowledge,  result in the
         attachment  of a Lien (other than a Permitted  Lien) upon any assets of
         Borrower.

                                      5-1

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