Document:

Exhibit 10.4(d) Loan Agreement

 

 

 

LOAN AGREEMENT

 

 

CORNERSTONE EQUITY INVESTORS IV, L.P.,

BANKERS TRUST COMPANY, 

OAK INVESTMENT FUNDS AND AUGUST CAPITAL

(AS LENDERS)

 

 

 

WITH

 

MCMS, INC.

(BORROWER)

 

 

February 29, 2000

 

 

 

 

LOAN AGREEMENT

 

     Loan Agreement dated as of February 29, 2000 among MCMS, INC., a corporation organized under the laws of the State of Idaho ("Borrower"), Cornerstone Equity Investors IV, L.P., Bankers Trust Company, Oak
Investment Funds, August Capital and each other entity which is or which hereafter becomes a party hereto as a lender hereunder (collectively, the "Lenders" and individually a "Lender").

     IN CONSIDERATION of the mutual covenants and undertakings herein contained, Borrower and Lenders hereby agree as follows:

I.   DEFINITIONS.

     1.1.             Accounting Terms. As used in this Agreement, the Note, or any certificate, report or other document made or delivered
pursuant to this Agreement, accounting terms not defined in Section 1.2 or elsewhere in this Agreement and accounting terms partly defined in Section 1.2 to the extent not defined, shall have the respective meanings given to them under GAAP; provided,
however, whenever such accounting terms are used for the purposes of determining compliance with financial covenants in this Agreement, such accounting terms shall be defined in accordance with GAAP as applied in preparation of the audited financial
statements of Borrower for the fiscal year ended September 2, 1999.

     1.2.            General Terms. For purposes of this Agreement the following terms shall have the following meanings:

                    "Accountants" shall have the meaning set forth in Section 9.7 hereof.

                    "Advances" shall mean and include the Advances as set forth in Section 2.1(a).

                    "Affiliate" of any Person shall mean (a) any Person which, directly or indirectly, is in control of, is
controlled by, or is under common control with such Person, or (b) any Person who is a director or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person described in clause (a) above. For purposes of this definition,
control of a Person shall mean the power, direct or indirect, (x) to vote 10% or more of the securities having ordinary voting power for the election of directors of such Person, or (y) to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise.

                     "Baan Project" shall mean the implementation by Borrower of a resource planning system.

                    "Borrower" shall have the meaning set forth in the preamble to this Agreement and shall extend to all
permitted successors and assigns of such Person.

                    "Business Day" shall mean any day other than Saturday or Sunday or a legal holiday on which commercial banks
are authorized or required by law to be closed for business in New York, New York and, if the applicable Business Day relates to any Eurodollar Rate Loans, such day must also be a day on which dealings are carried on in the London interbank market.

                    "CEI" shall mean Cornerstone Equity Investors IV, L.P., a Delaware limited partnership.

                    "CERCLA" shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. SS 9601 et seq.

                    "Charges" shall mean all taxes, charges, fees, imposts, levies or other assessments, including, without
limitation, all net income, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp,
occupation and property taxes, custom duties, fees, assessments, liens, claims and charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts, imposed by any taxing or other authority, domestic or
foreign (including, without limitation, the Pension Benefit Guaranty Corporation or any environmental agency or superfund), upon the Collateral or Borrower.

                    "Closing Date" shall mean February 29, 2000 or such other date as may be agreed to by the parties hereto.

                    "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time and the regulations
promulgated thereunder.

                    "Commitment Percentage" of any Lender shall mean the percentage set forth below such Lender's name on the
signature page hereof as same may be adjusted upon any assignment by a Lender pursuant to Section 15.3(b) hereof.

                    "Commitment Transfer Supplement" shall mean a document in the form of Exhibit 15.3 hereto, properly completed
and otherwise in form and substance satisfactory to the Lenders by which the Purchasing Lender purchases and assumes a portion of the obligation of Lenders to make Advances under this Agreement.

                    "Consents" shall mean all filings and all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and other third parties, domestic or foreign, necessary to carry on Borrower's business, including, without limitation, any Consents required under all applicable federal, state or other applicable law.

                    "Continuing Directors" shall mean (a) the directors of Borrower as of the Closing Date and each other
director if such director's nomination for election to the board of directors of Borrower was approved by the affirmative vote of a majority of the Continuing Directors who were members of the board of directors at the time of such nomination or election
or (b) any director of Borrower who is a designee of CEI or was nominated by CEI or any designee of CEI on the Board of Directors.

                    "Controlled Group" shall mean all members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together with Borrower, are treated as a single employer under Section 414 of the Code.

                    "Customer" shall mean and include the account debtor with respect to any Receivable and/or the prospective
purchaser of goods, services or both with respect to any contract or contract right, and/or any party who enters into any contract or other arrangement with Borrower, pursuant to which Borrower is to deliver any personal property or perform any services.

                    "Default" shall mean an event which, with the giving of notice or passage of time or both, would constitute
an Event of Default.

                    "Default Rate" shall have the meaning set forth in Section 3.1 hereof.

                    "Documents" shall have the meaning set forth in Section 8.1(c) hereof.

                    "Dollar" and the sign "$" shall mean lawful money of the United States of America.

                     "Earnings Before Interest and Taxes" shall mean for any period the sum of (i) net income (or loss) of
Borrower on a consolidated basis for such period (excluding extraordinary, unusual or nonrecurring gains and charges and losses including any unrealized losses and gains for such period resulting from marking to market of hedging or swap agreements and
foreign currency transaction gains or losses in respect of intercompany payments to or from a foreign Subsidiary of Borrower), plus (ii) all interest expense of Borrower on a consolidated basis for such period, plus (iii) all charges against income of
Borrower on a consolidated basis for such period for federal, state and local taxes actually paid.

                     "EBITDA" shall mean for any period the sum of (i) Earnings Before Interest and Taxes for such period
plus (ii) depreciation expenses for such period, plus (iii) amortization expenses for such period plus (iv) other non-cash charges (including, without limitation, non-cash charges in connection with the granting of options, warrants or other equity
interests and any write-off of deferred financing costs existing as of the Closing Date but excluding write-offs of Inventory to the extent such write-offs are deemed to be non-cash charges or Inventory reserves, plus (v) transaction costs incurred by
Borrower in connection with acquisitions and investments entered into by Borrower after the Closing Date which are permitted under Section 7.4 hereof not to exceed the aggregate amount of $5,000,000 in any fiscal year. In addition EBITDA shall be
calculated without giving effect to (x) non-cash purchase accounting adjustments required or permitted by Account Principles Board Opinion Nos. 16 (including non-cash write-ups and non-cash charges), in each case arising in connection with any acquisition
entered into by Borrower after the Closing Date which is permitted by Section 7.4 hereof) and 17 (including non-cash charges relating to intangibles and good will arising in connection with any such permitted acquisition), and (y) any non-cash gains or
losses recognized in determining consolidated net income (or net loss) for such period in respect of post-retirement benefits as a result of the application of FASB 106.

                    "Environmental Laws" shall mean all federal, state and local laws, statutes, ordinances and codes relating to
the protection of the environment and/or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of Hazardous Substances and the rules, regulations, and to the extent specifically relating to the
type of business conducted by Borrower or the facilities of Borrower and having the effect of law, policies, guidelines, interpretations, decisions, orders and directives of federal, state and local governmental agencies and authorities with respect thereto
 .

                    "Equipment" shall mean and include all of Borrower's goods (other than Inventory) whether now owned or
hereafter acquired and wherever located including, without limitation, all equipment, machinery, apparatus, motor vehicles, fittings, furniture, furnishings, fixtures, parts, accessories and all replacements and substitutions therefor or accessions thereto.

                    "Equipment Loans" shall have the meaning set forth in Section 2.4 of the Senior Credit Facility.

                    "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time and the
rules and regulations promulgated thereunder.

                    "Event of Default" shall mean the occurrence of any of the events set forth in Article X hereof.

                    "Exchange Debentures" shall mean the 12 1/2% of subordinated exchange debentures due 2010, as amended or
supplemented from time to time to the extent permitted by this Agreement and which shall be issued pursuant to the Exchange Indenture.

                    "Exchange Indenture" shall mean that certain Indenture dated as of February 26, 1998 between Borrower and
Trustee relating to the Exchange Debentures as amended, modified, restated or supplemented from time to time to the extent not prohibited by Section 7.18 hereof.

                    "Extraordinary Receipts" shall mean the net proceeds received by Borrower in connection with (a) the sale of
capital stock of Borrower, (b) a public offering of securities issued by Borrower or (c) a cash equity contribution to Borrower.

                    "Federal Funds Rate" shall mean, for any day, the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or if such rate is
not so published for any day which is a Business Day, the average of quotations for such day on such transactions received by Bankers Trust Company from three Federal funds brokers of recognized standing selected by Bankers Trust Company.

                    "Fixed Charge Coverage Ratio" shall mean and include for Borrower on a consolidated basis, with respect to
any fiscal period, the ratio of (a) the sum of (i) EBITDA for such period plus (ii) capitalized lease payments during such period, minus the sum of (x) non-financed capitalized expenditures made during such period plus (y) permitted cash dividends paid on
the Preferred Stock during such period plus (z) cash taxes during such period paid during such period to (b) the sum of (i) all Senior Debt Payments made during such period plus (ii) all Subordinated Debt Payments made during such period. For purposes of
this definition, (a) capital expenditures made in connection with the Baan Project not to exceed $12,000,000 to the extent that such capital expenditures are not made with the proceeds of an Equipment Loan or (b) capital expenditures made solely out of
the proceeds of the disposition of assets (other than Equipment purchased with the proceeds of an Equipment Loan), insurance losses (other than losses received with respect to Equipment which was purchased with the proceeds of an Equipment Loan) or
Extraordinary Receipts, shall not be included in the calculation of clause (a)(ii)(x) of the definition hereof. 

                    "Fixed Rate Notes" shall mean, collectively, the 9 3/4% senior subordinated term securities due 2008, as
amended or supplemented from time to time to the extent permitted by this Agreement, in the aggregate original principal amount not to exceed $145,000,000 issued by Borrower pursuant to the Indenture.

                    "Floating Rate Notes" shall mean, collectively, the floating interest rate subordinated term securities, as
amended or supplemented from time to time to the extent permitted by this Agreement, in the aggregate original principal amount not to exceed $30,000,000 issued by Borrower pursuant to the Indenture.

                    "GAAP" shall mean generally accepted accounting principles in the United States of America in effect from
time to time.

                    "Governmental Body" shall mean any nation or government, any state or other political subdivision thereof or
any entity exercising the legislative, judicial, regulatory or administrative functions of or pertaining to a government.

                    "Guarantor" shall mean MCMS Customer Services, Inc., an Idaho corporation, MCMS Holdings LLC, an Idaho
limited liability company, and any other Person who may hereafter guarantee payment or performance of the whole or any part of the Obligations and "Guarantors" means collectively, all such Persons.

                     "Guaranty" shall mean any guaranty of the obligations of Borrower executed by a Guarantor in favor of
the Lenders.

                     "Hazardous Substance" shall mean, without limitation, any flammable explosives, radon, radioactive
materials, asbestos, polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous materials, Hazardous Wastes, hazardous or toxic substances as defined in CERCLA, the Hazardous Materials Transportation Act, TSCA as amended (49 U.S.C.
Sections 1801, et seq.), RCRA, or any other applicable Environmental Law.

                    "Hazardous Wastes" shall mean all waste materials subject to regulation under RCRA or any other applicable
Federal and state laws now in force or hereafter enacted relating to hazardous waste management and disposal.

                    "Indebtedness" of a Person at a particular date shall mean all obligations for money borrowed of such Person
which in accordance with GAAP would be classified upon a balance sheet as liabilities for money borrowed (except capital stock and surplus earned or otherwise) and in any event, without limitation by reason of enumeration, shall include all indebtedness,
debt and other similar monetary obligations of such Person whether direct or guaranteed, and all premiums, if any, due at the required prepayment dates of such indebtedness, and all indebtedness secured by a Lien on assets owned by such Person, whether or
not such indebtedness actually shall have been created, assumed or incurred by such Person. Any indebtedness of such Person resulting from the acquisition by such Person of any assets subject to any Lien shall be deemed, for the purposes hereof, to be the
equivalent of the creation, assumption and incurring of the indebtedness secured thereby, whether or not actually so created, assumed or incurred.

                    "Indenture" shall mean that certain Indenture dated as of February 26, 1998 between Borrower and Trustee
relating to the Subordinated Notes as amended, modified, restated or supplemented from time to time to the extent not prohibited by Section 7.18 hereof.

                    "Ineligible Security" shall mean any security which may not be underwritten or dealt in by member banks of
the Federal Reserve System under Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.

                    "Interest Rate" shall mean, for any day, a rate per annum equal to the Eurodollar Rate (as defined in the
Senior Credit Facility) applicable to a 90-day Interest Period in effect on such day plus 3.25%; provided that, if the rates provided for in the Senior Credit Facility are increased, then the Interest Rate shall be adjusted to equal the rate then used for
the greatest amount of borrowings under the Senior Credit Facility plus 1.0%.

                    "Inventory" shall mean and include all of Borrower's now owned or hereafter acquired goods, merchandise and
other personal property, wherever located, to be furnished under any contract of service or held for sale or lease, all raw materials, work in process, finished goods and materials and supplies of any kind, nature or description which are or might be used
or consumed in Borrower's business or used in selling or furnishing such goods, merchandise and other personal property, and all documents of title or other documents representing them.

                    "Investment Property" shall mean and include all of Borrower's now owned or hereafter acquired securities
(whether certificated or uncertificated), securities entitlements, securities accounts, commodities contracts and commodities accounts.

                    "Lender" and "Lenders" shall have the meaning ascribed to such term in the preamble to this Agreement
and shall include each Person which becomes a transferee, successor or assign of any Lender.

                    "Lien" shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, security interest, lien
(whether statutory or otherwise), Charge, claim or encumbrance, or preference, priority or other security agreement or preferential arrangement held or asserted in respect of any asset of any kind or nature whatsoever including, without limitation, any
conditional sale or other title retention agreement, any lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code or comparable law of
any jurisdiction.

                    "Loan Year" shall mean each period of twelve (12) consecutive months commencing on the Closing Date and on
each anniversary thereof.

                    "Management Services Agreement" shall mean that certain Management Services Agreement dated February 26, 1998
between CEI and Borrower, as amended, modified, restated or supplemented from time to time to the extent not prohibited by Section 7.18 hereof.

                    "Material Adverse Effect" shall mean a material adverse effect on (a) the condition, operations, assets or
business of Borrower, (b) Borrower's ability to pay the Obligations in accordance with the terms thereof or (c) the practical realization of the benefits of each Lender's rights and remedies under this Agreement and the Other Documents taken as a whole.

                    "MEI" shall mean Micron Electronics, Inc., a Minnesota corporation.

                    "MTI" shall mean Micron Technology, Inc., a Delaware corporation.

                    "Multiemployer Plan" shall mean a "multiemployer plan" as defined in Sections 3(37) and 4001(a)(3) of ERISA.

                    "Note" shall mean, collectively, the promissory notes referred to in Section 2.1(a) hereof.

                    "Obligations" shall mean and include any and all loans, advances, debts, liabilities, obligations, covenants
and duties owing by Borrower to Lenders of any kind or nature, present or future (including, without limitation, any interest accruing thereon after maturity, or after the filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding relating to Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether or not evidenced by any note, guaranty or other instrument, arising under this Agreement and
the Other Documents whether or not for the payment of money, whether arising by reason of an extension of credit, opening of a letter of credit, loan, equipment lease or guarantee, under any interest or currency swap, future, option or other similar
agreement, or in any other manner, whether arising out of overdrafts or deposit or other accounts or electronic funds transfers (whether through automated clearing houses or otherwise) or out of any Lenders' non-receipt of or inability to collect funds or
otherwise not being made whole in connection with depository transfer check or other similar arrangements, whether direct or indirect (including those acquired by assignment or participation), absolute or contingent, joint or several, due or to become
due, now existing or hereafter arising, contractual or tortious, liquidated or unliquidated, regardless of how such indebtedness or liabilities arise or by what agreement or instrument they may be evidenced or whether evidenced by any agreement or
instrument, including, but not limited to, any and all of Borrower's Indebtedness and/or liabilities under this Agreement or the Other Documents and any amendments, extensions, renewals or increases and all costs and expenses of the Lenders and any Lender
incurred in the documentation, negotiation, modification, enforcement, collection or otherwise in connection with any of the foregoing, including but not limited to reasonable attorneys' fees and expenses and all obligations of Borrower to Lenders to
perform acts or refrain from taking any action.

                    "Original Owners" shall mean, collectively, CEI and the shareholders listed on Schedule A hereto.

                    "Other Documents" shall mean the Note, the Questionnaire, the Guaranty, and any and all other agreements,
instruments and documents, including, without limitation, guaranties, pledges, powers of attorney, consents, and all other writings heretofore, now or hereafter executed by Borrower or any Guarantor and/or delivered to any Lender in respect of the
transactions contemplated by this Agreement.

                    "Parent" of any Person shall mean a corporation or other entity owning, directly or indirectly at least 50%
of the shares of stock or other ownership interests having ordinary voting power to elect a majority of the directors of the Person, or other Persons performing similar functions for any such Person.

                    "Participant" shall mean each Person who shall be granted the right by any Lender to participate in any of
the Advances and who shall have entered into a participation agreement in form and substance satisfactory to such Lender.

                    "PBGC" shall mean the Pension Benefit Guaranty Corporation.

                    "Pension Benefit Plan" shall mean an employee pension benefit plan subject to Title IV of ERISA.

                    "Permitted Encumbrances" shall mean (a) intentionally omitted; (b) Liens for taxes, assessments or
other Charges not delinquent or being contested in good faith and by appropriate proceedings and with respect to which proper reserves have been taken by Borrower; (c) Liens disclosed in the financial statements referred to in Section 5.5, the existence
of which the Lenders have consented to in writing; (d) deposits or pledges to secure obligations under worker's compensation, social security or similar laws, or under unemployment insurance; (e) deposits or pledges to secure bids, tenders, contracts
(other than contracts for the payment of borrowed money), leases, statutory obligations, surety and appeal bonds and other obligations of like nature arising in the ordinary course of Borrower's business; (f) judgment Liens that have been stayed or bonded
or otherwise would not result in an Event of Default and mechanics', workers', landlord's, materialmen's, warehousemen's, carriers' or other like Liens arising in the ordinary course of Borrower's business with respect to obligations which are not due or
which are being contested in good faith by Borrower and by appropriate proceedings and with respect to which proper reserves have been taken by Borrower; (g) Liens placed upon fixed assets hereafter acquired to secure a portion of the purchase price
thereof, provided that (x) any such lien shall not encumber any other property of Borrower; (h) Liens disclosed on Schedule 1.2; (i) zoning and municipal ordinances, easements, rights-of-way, restrictions and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of business of Borrower or such other matters
affecting Real Property as the Lenders may consent to in writing; (j) Liens arising from precautionary UCC financing statements regarding operating leases or consignments; (k) Liens securing hedge agreements entered into by Borrower to the extent such
agreements are permitted by Section 7.8 hereof; (l) Liens on property or assets acquired pursuant to an acquisition or investment permitted under Section 7.4 hereof, provided that (x) such Liens are not incurred in connection with or in anticipation of such permitted acquisition or permitted investment, (y) do not attach to any other asset of the Borrower, and (z) the aggregate amount of Indebtedness secured by
such Liens incurred as a result of such permitted investment or permitted acquisition during any fiscal year shall not exceed the amount provided for in Section 7.4 hereof; (m) Liens consisting of rights of set-off of a customary nature or bankers' liens
on amounts on deposit arising by operation of law or contract, incurred in the ordinary course of business; (n) Liens encumbering customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage
accounts incurred in the ordinary course of business to the extent such Liens secure investments which are permitted under Section 7.4 hereof; (o) Liens solely on any cash earnest money deposits made by Borrower in connection with any letter of intent or
purchase agreement entered into by it in compliance with acquisitions or investments permitted by Section 7.4 hereof; (p) any interest or title of a licensor under any license permitted by this Agreement provided that such interest shall not extend to the
proceeds of such license; (q) the ownership interest and title of a lessor or sublessor under any operating lease which is permitted by this Agreement; and (r) Liens incurred by Borrower with respect to liabilities and obligations of Borrower to any
Person (other than for Indebtedness for money borrowed) which do not exceed $500,000 in the aggregate at any time; and (s) Liens under the Senior Credit Facility.

                    "Person" shall mean any individual, sole proprietorship, partnership, corporation, business trust, joint
stock company, trust, unincorporated organization, association, limited liability company, institution, public benefit corporation, joint venture, entity or government (whether Federal, state, county, city, municipal or otherwise, including any
instrumentality, division, agency, body or department thereof).

                    "Plan" shall mean any employee benefit plan within the meaning of Section 3(3) of ERISA other than a
Multiemployer Plan, maintained for employees of Borrower or any member of the Controlled Group or any such Plan to which Borrower or any member of the Controlled Group is required to contribute on behalf of any of its employees.

                    "Preferred Stock" shall mean, collectively, the 12 1/2% senior exchangeable preferred stock of Borrower, of
which 274,632 shares are issued and outstanding as of the Closing Date.

                    "Pro Forma Balance Sheet" shall have the meaning set forth in Section 5.5(a) hereof.

                    "Pro Forma Financial Statements" shall have the meaning set forth in Section 5.5(b) hereof.

                    "Projections" shall have the meaning set forth in Section 5.5(b) hereof.

                    "Purchasing Lender" shall have the meaning set forth in Section 15.3 hereof.

                    "Questionnaire" shall mean the Documentation Information Questionnaire and the responses thereto provided by
Borrower and delivered to the Lenders.

                    "RCRA" shall mean the Resource Conservation and Recovery Act, 42 U.S.C. SS 6901 et seq., as same may be
amended from time to time.

                    "Real Property" shall mean all of Borrower's right, title and interest in and to the owned and leased
premises identified on Schedule 4.19 hereto.

                    "Receivables" shall mean and include all of Borrower's accounts, contract rights, instruments (including
those evidencing indebtedness owed to Borrower by its Affiliates), documents, chattel paper, general intangibles relating to accounts, drafts and acceptances, and all other forms of obligations owing to Borrower arising out of or in connection with the
sale or lease of Inventory or the rendition of services, all guarantees and other security therefor, whether secured or unsecured, now existing or hereafter created, and whether or not specifically sold or assigned to Lenders hereunder.

                    "Release" shall have the meaning set forth in Section 5.7(c)(i) hereof.

                    "Reportable Event" shall mean a reportable event described in Section 4043(b) of ERISA or the regulations
promulgated thereunder.

                    "Required Lenders" shall mean Lenders holding at least sixty-six and two-thirds (66 2/3%) of the Advances
and, if no Advances are outstanding, shall mean Lenders holding at least sixty-six and two-thirds percent (66 2/3%) of the Commitment Percentages.

                    "Senior Credit Facility" shall mean the Revolving Credit, Equipment Loan and Security Agreement, dated as of
February 26, 1999, by and among Borrower, PNC Bank, National Association (as lender and as agent in such capacity as agent, the "Agent") and the Lenders from time to time a party thereto, as same may be amended, modified, restated or supplemented from time to time;

                    "Senior Debt Payments" shall mean and include all cash actually expended by Borrower to make (a) interest
payments on any Advances hereunder, plus, (b) payments for all fees, commissions and charges set forth herein and with respect to any Advances, plus (c) capitalized lease payments, plus (d) payments with respect to any other Indebtedness for borrowed
money other than with respect to the Subordinated Notes.

                    "Settlement Date" shall mean the Closing Date and thereafter Wednesday of each week unless such day is not a
Business Day in which case it shall be the next succeeding Business Day.

                    "Subordinated Debt Payments" shall mean and include all cash actually expended to make payments of principal
and interest on the Subordinated Notes.

                    "Subordinated Loan" shall mean the loan evidenced by the Subordinated Notes.

                    "Subordinated Notes" shall mean, collectively, the Fixed Rate Notes and the Floating Rate Notes.

                    "Subordinated Note Documentation" shall mean, collectively, the Subordinated Notes, the Exchange Debentures,
the Indenture and the Exchange Indenture.

                    "Subordination Agreement" shall mean the provisions of Article 10 of each of the Indenture and the Exchange
Indenture.

                    "Subsidiary" of any Person shall mean a corporation or other entity of whose shares of stock or other
ownership interests having ordinary voting power (other than stock or other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the directors of such corporation, or other Persons performing
similar functions for such entity, are owned, directly or indirectly, by such Person.

                    "Subsidiary Stock" shall mean all of the issued and outstanding shares of stock or membership interests owned
by Borrower of its direct Subsidiaries listed on Schedule 5.2(b).

                    "Term" shall have the meaning set forth in Section 13.1 hereof.

                    "Termination Event" shall mean (i) a Reportable Event with respect to any Plan or Multiemployer Plan; (ii)
the withdrawal of Borrower or any member of the Controlled Group from a Plan or Multiemployer Plan during a plan year in which such entity was a "substantial employer" as defined in Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to
terminate a Plan in a distress termination described in Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v) any event or condition (a) which would constitute grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer, any Plan or Multiemployer Plan, or (b) that results in termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or complete withdrawal
within the meaning of Sections 4203 and 4205 of ERISA, of Borrower or any member of the Controlled Group from a Multiemployer Plan.

                    "Transactions" shall have the meaning set forth in Section 5.5 hereof.

                    "Transferee" shall have the meaning set forth in Section 15.3(b) hereof.

                    "Trustee" shall mean the United States Trust Company of New York and shall include its successors and assigns.

                    "Week" shall mean the time period commencing with the opening of business on a Wednesday and ending on the
end of business the following Tuesday.

     1.3.            Uniform Commercial Code Terms. All terms used herein and defined in the Uniform Commercial Code as adopted in the State of
New York shall have the meaning given therein unless otherwise defined herein.

     1.4.            Certain Matters of Construction. The terms "herein", "hereof" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular section, paragraph or subdivision. Any pronoun used shall be deemed to cover all genders. Wherever appropriate in the context, terms used herein in the singular also include the plural and vice versa.
All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations. Unless otherwise provided, all references to any instruments or agreements to which Lenders are a party, including, without
limitation, references to any of the Other Documents, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof.

II.   ADVANCES, PAYMENTS.

     2.1.     (a)     Advances. Subject to the terms and conditions set forth in this Agreement, on the Closing Date each Lender, severally and not
jointly, will make Advances to Borrower in aggregate amounts equal to such Lender's Commitment Percentage of $8,700,000. The Advances shall be evidenced by one or more secured promissory notes (collectively, the "Note") substantially in the form attached
hereto as Exhibit 2.1(a).

     2.2.           Intentionally Omitted 

     2.3.           Disbursement of Advance Proceeds. All Advances shall be made available to Borrower on the Closing Date by wire transfer to
the account designated by Borrower, in immediately available federal funds or other immediately available funds.

     2.4.           Repayment of Advances.

 

          (a)      The Advances shall be due and payable in full on the last day of the Term subject to earlier prepayment as herein provided solely to the
extent that all amounts due under the Senior Credit Facility have been paid in full in cash and the Senior Credit Facility and all commitments to lend thereunder have been irrevocably terminated. No amounts prepaid or repaid shall be permitted to be
reborrowed.

          

          (b)     Intentionally Omitted

          (c)     All payments of principal, interest and other amounts payable hereunder, or under any of the Other Documents shall be made to the Lenders
by wire transfer to accounts designated by them, not later than 2:00 P.M. (New York time) on the due date therefor in lawful money of the United States of America in federal funds or other funds immediately available to the Lenders. 

          (d)     Borrower shall pay principal, interest, and all other amounts payable hereunder, or under any related agreement, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or counterclaim.

 

III.     INTEREST AND FEES.

     3.1.     Interest. Interest on Advances shall accrue on the last day of each fiscal month and shall be payable in arrears on the last day of the Term; provided that if the
Fixed Charge Coverage Ratio for any fiscal month (measured on the last day of such fiscal month and calculated after giving effect to any cash interest payment) exceeds 1.1 to 1, then interest accrued during such fiscal month shall be payable on the first
day of the following fiscal month so long as no "Default" or "Event of Default" has occurred under and as defined in the Senior Credit Facility or would occur as a result of the payment by Borrower of such cash interest payment. Interest charges shall be
computed on the aggregate principal amount of Advances and accrued and unpaid interest outstanding during the month at a rate per annum equal to the Interest Rate. Upon and after the occurrence of an Event of Default, and during the continuation thereof,
(i) the Obligations shall bear interest at the applicable Interest Rate plus two percent (2%) per annum (the "Default Rate").

     3.2.     Intentionally Omitted.

     3.3.     Intentionally Omitted. 

     3.4.     Intentionally Omitted. 

     3.5.     Computation of Interest and Fees. Interest and fees hereunder shall be computed on the basis of a year of 360 days and for the actual number of days elapsed. If any
payment to be made hereunder becomes due and payable on a day other than a Business Day, the due date thereof shall be extended to the next succeeding Business Day and interest thereon shall be payable at the Interest Rate during such extension.

     3.6.     Maximum Charges. In no event whatsoever shall interest and other charges charged hereunder exceed the highest rate permissible under law. In the event interest and
other charges as computed hereunder would otherwise exceed the highest rate permitted under law, such excess amount shall be first applied to any unpaid principal balance owed by Borrower, and if the then remaining excess amount is greater than the
previously unpaid principal balance, Lenders shall promptly refund such excess amount to Borrower and the provisions hereof shall be deemed amended to provide for such permissible rate.

IV.     Intentionally Omitted

 

V.     REPRESENTATIONS AND WARRANTIES.

     Borrower represents and warrants as follows:

     5.1.     Authority. Borrower has full power, authority and legal right to enter into this Agreement and the Other Documents and to perform all its Obligations hereunder and
thereunder. This Agreement and the Other Documents constitute the legal, valid and binding obligation of Borrower enforceable in accordance with their terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, moratorium
or similar laws affecting creditors' rights generally. The execution, delivery and performance of this Agreement and of the Other Documents (a) are within Borrower's corporate powers, have been duly authorized, are not in contravention of law or the terms
of Borrower's by-laws, certificate of incorporation or other applicable documents relating to Borrower's formation or to the conduct of Borrower's business or of any material agreement or undertaking to which Borrower is a party or by which Borrower is
bound (including, without limitation, the Subordinated Note Documentation and the Senior Credit Facility), and (b) will not conflict with nor result in any breach in any of the provisions of or constitute a default under or result in the creation of any
Lien except Permitted Encumbrances upon any asset of Borrower under the provisions of any agreement, charter document, instrument, by-law, or other instrument to which Borrower is a party or by which it or its property may be bound.

     5.2.     Formation and Qualification. (a) Borrower is duly incorporated and in good standing under the laws of the state of Idaho and is qualified to do business and is in
good standing in the states listed on Schedule 5.2(a) which constitute all states in which qualification and good standing are necessary for Borrower to conduct its business and own its property and where the failure to so qualify could reasonably be expected to have a Material
Adverse Effect on Borrower. Borrower has delivered to Lenders true and complete copies of its certificate of incorporation and by-laws and will promptly notify Lenders of any amendment or changes thereto.

          (b)     The only Subsidiaries of Borrower are listed on Schedule 5.2(b).

     5.3.     Survival of Representations and Warranties. All representations and warranties of Borrower contained in this Agreement and the Other Documents shall be true at the
time of Borrower's execution of this Agreement and the Other Documents, and shall survive the execution, delivery and acceptance thereof by the parties thereto and the closing of the transactions described therein or related thereto but shall not survive
the termination of this Agreement. 

     5.4.     Tax Returns. Borrower's federal tax identification number is 82-0480109. Borrower has filed all federal, state and local tax returns and other material reports it is
required by law to file and has paid all taxes, assessments, fees and other governmental charges that are due and payable except to the extent that Borrower shall be contesting or disputing such taxes, assessments, fees and other governmental charges in
good faith, by expeditious protest, administrative or judicial appeal or similar proceedings and, provided, further, that (i) (a) a stay of enforcement of any related tax lien is in effect and (b) sufficient reserves are established by Borrower to the reasonable satisfaction of Lenders or (ii) any related tax lien falls within the basket
permitted by clause (r) of the definition of Permitted Encumbrances. Federal, state and local income tax returns of Borrower have been examined and reported upon by the appropriate taxing authority or closed by applicable statute and satisfied for all
fiscal years prior to and including the fiscal year ending August 31, 1993. The provision for taxes on the books of Borrower is adequate for all years not closed by applicable statutes, and for its current fiscal year, and Borrower has no knowledge of any
deficiency or additional assessment in connection therewith not provided for on its books.

     5.5.     Financial Statements.

          (a)     The pro forma balance sheet of Borrower (the "Pro Forma Balance Sheet") furnished to Lenders on the Closing Date reflects the consummation of
the transactions contemplated under this Agreement (the "Transactions") and is, in Borrower's good faith judgment, accurate, complete and correct and fairly reflects in all material respects the financial condition of Borrower as of the Closing Date after
giving effect to the Transactions. The Pro Forma Balance Sheet has been certified as accurate, complete and correct in all material respects by the Chief Financial Officer of Borrower. 

          (b)     The twelve-month cash flow projections of Borrower and its projected balance sheets as of the Closing Date, copies of which are annexed hereto
as Exhibit 5.5(b) (the "Projections") were prepared by the Chief Financial Officer of Borrower, are based in Borrower's good faith judgment on underlying assumptions which provide a reasonable basis for the projections contained therein which are based on
circumstances existing at the time made. The cash flow Projections together with the Pro Forma Balance Sheet, are referred to as the "Pro Forma Financial Statements".

            (c)     The consolidated and consolidating balance sheets of Borrower, its Subsidiaries and such other Persons described therein (including
the accounts of all Subsidiaries for the respective periods during which a subsidiary relationship existed) as of September 3, 1998, and the related statements of income, changes in stockholder's equity, and changes in cash flow for the period ended on
such date, all accompanied by reports thereon containing opinions without qualification by independent certified public accountants, copies of which have been delivered to Lenders, have been prepared in accordance with GAAP, consistently applied (except
for changes in application in which such accountants concur and present fairly in all material respects the financial position of Borrower and its Subsidiaries at such date and the results of their operations for such period. Except as set forth on Schedule 5.5(c), since December 3, 1998 there has been no change in the condition, financial or otherwise, of Borrower and its Subsidiaries as shown on the consolidated balance sheet as of such date and no change in the aggregate value of
machinery, equipment and Real Property owned by Borrower and its Subsidiaries, except changes in the ordinary course of business, none of which individually or in the aggregate has been materially adverse.

     5.6.     Corporate Name. Except as set forth on Schedule 5.6, Borrower has not been known by any other corporate name in the past five years and does not sell
Inventory under any other name, nor has Borrower been the surviving corporation of a merger or consolidation or acquired all or substantially all of the assets of any Person during the preceding five (5) years.

     5.7.     O.S.H.A. and Environmental Compliance.

          (a)     Borrower has duly complied with, and its facilities, business, assets, property, leaseholds and Equipment are in compliance in all material
respects with, the provisions of the Federal Occupational Safety and Health Act, the Environmental Protection Act, RCRA and all other Environmental Laws except as set forth on Schedule 5.7 hereto or where the failure to so comply could not reasonably be expected to result in a Material Adverse Effect; there are no outstanding citations, notices or orders of non-compliance issued to Borrower or relating to its business,
assets, property, leaseholds or Equipment under any such laws, rules or regulations which could reasonably be expected to result in a Material Adverse Effect.

          (b)     Borrower has been issued all required federal, state and local licenses, certificates or permits relating to all applicable Environmental Laws
except where failure to have such licenses, certificates or permits could not reasonably be expected to result in a Material Adverse Effect.

          (c)     Except as set forth on Schedule 5.7(c) or where the presence of any Hazardous Substances could not reasonably be expected to result in a
Material Adverse Effect, (i) there are no visible signs of releases, spills, discharges, leaks or disposal (collectively referred to as "Releases") of Hazardous Substances at, upon, under or within any Real Property or any premises leased by Borrower;
(ii) there are no underground storage tanks or polychlorinated biphenyls on the Real Property or any premises leased by Borrower; (iii) to the best of Borrower's knowledge following diligent inquiry, neither the Real Property nor any premises leased by
Borrower has ever been used as a treatment, storage or disposal facility of Hazardous Waste; and (iv) no Hazardous Substances are present on the Real Property or any premises leased by Borrower, excepting such quantities as are handled in accordance with
all applicable manufacturer's instructions and governmental regulations and in proper storage containers and as are necessary for the operation of the commercial business of Borrower or of its tenants.

 

     5.8.     Solvency; No Litigation, Violation, Indebtedness or Default.

          (a)     After giving effect to the Transactions, Borrower will be solvent, able to pay its debts as they mature, have capital sufficient to carry on
its business and all businesses in which it is about to engage, and (i) as of the Closing Date, the fair present saleable value of its assets, calculated on a going concern basis, is in excess of the amount of its liabilities and (ii) subsequent to the
Closing Date, the fair saleable value of its assets (calculated on a going concern basis) will be in excess of the amount of its liabilities.

          (b)     Except as disclosed in Schedule 5.8(b), Borrower has no (i) pending or threatened litigation, arbitration, actions or proceedings which
are reasonably likely to have a Material Adverse Effect on Borrower, and (ii) indebtedness for borrowed money other than the Obligations or as permitted by Section 7.8 hereof.

          (c)     Borrower is not in violation of any applicable statute, regulation or ordinance in any respect which could reasonably be expected to have a
Material Adverse Effect, nor is Borrower in violation of any order of any court, governmental authority or arbitration board or tribunal which could reasonably be expected to have a Material Adverse Effect.

          (d)     Borrower does not maintain or contribute to any Multiemployer Plan or any Pension Benefit Plan other than those listed on Schedule 5.8(d)
 hereto. Except as set forth in Schedule 5.8(d) or as could not reasonably be expected to result in a Material Adverse Effect, (i) no Plan has incurred any "accumulated funding deficiency," as defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code, whether or not
waived, and Borrower and each member of the Controlled Group has met all applicable minimum funding requirements under Section 302 of ERISA in respect of each Plan, (ii) each Plan which is intended to be a qualified plan under Section 401(a) of the Code
as currently in effect has been determined by the Internal Revenue Service to be qualified under Section 401(a) of the Code (or a request for determination has been made within the applicable remedial period) and the trust related thereto is exempt from
federal income tax under Section 501(a) of the Code, (iii) Borrower has not incurred any liability to the PBGC which could reasonably be expected to result in a Material Adverse Effect other than for the payment of premiums, and there are no premium
payments which have become due which are unpaid, (iv) no Plan that is subject to Title IV of ERISA has been terminated by the plan administrator thereof nor by the PBGC, and there is no occurrence which would reasonably be expected to cause the PBGC to
institute proceedings under Title IV of ERISA to terminate any such Plan, (v) the current value of the assets of each Plan that is subject to Title IV of ERISA equals or exceeds the present value of the accrued benefits and other liabilities of such Plan
and neither Borrower nor to the best of Borrower's knowledge, any member of the Controlled Group knows of any facts or circumstances which would materially change the value of such assets and accrued benefits and other liabilities, (vi) neither Borrower
nor to the best of Borrower's knowledge, any member of the Controlled Group has breached any of the responsibilities, obligations or duties imposed on it by ERISA with respect to any Plan, (vii) neither Borrower nor to the best of Borrower's knowledge,
any member of a Controlled Group has incurred any liability for any excise tax arising under Section 4972 or 4980B of the Code, and to the best of Borrower's knowledge no fact exists which would give rise to any such liability, (viii) neither Borrower nor
to the best of Borrower's knowledge, any member of the Controlled Group nor any fiduciary of, nor any trustee to, any Plan, has engaged in a "prohibited transaction" described in Section 406 of the ERISA or Section 4975 of the Code nor taken any action
which could reasonably be expected to constitute or result in a Termination Event with respect to any such Plan which is subject to ERISA, (ix) Borrower has made all contributions due and payable with respect to each Plan which is subject to Title IV of
ERISA, (x) there exists no event described in Section 4043(b) of ERISA, for which the thirty (30) day notice period contained in 29 CFR S2615.3 has not been waived, (xi) neither Borrower nor any member of the Controlled Group has any fiduciary
responsibility for investments with respect to any plan existing for the benefit of persons other than employees or former employees of Borrower and any member of the Controlled Group, and (xii) neither Borrower nor any member of the Controlled Group has
withdrawn, completely or partially, from any Multiemployer Plan which would impose liability upon Borrower under the Multiemployer Pension Plan Amendments Act of 1980.

 

     5.9.     Patents, Trademarks, Copyrights and Licenses. All patents, patent applications, trademarks, trademark applications, service marks, service mark applications,
copyrights, copyright applications, design rights and assumed names which are registered with any state or federal agency and which are owned or utilized by Borrower and all licenses (except for licenses of commercially available software) and tradenames
owned or held by Borrower are set forth on Schedule 5.9, are valid and have been duly registered or filed with all appropriate governmental authorities, if applicable, except to the extent that the failure of any such intellectual property rights, either singly or in the aggregate, to be
valid or registered could not reasonably be expected to result in a Material Adverse Effect and together with all trade secrets owned or utilized by Borrower constitute all of the intellectual property rights which are necessary for the operation of its
business except to the extent the failure to so possess any such intellectual property rights could not reasonably be expected to result in a Material Adverse Effect; there is no objection to or pending challenge to the validity of any such patent,
trademark, copyright, design right, tradename, trade secret or license. Each patent, patent application, patent license, trademark, trademark application, trademark license, service mark, service mark application, service mark license, design right,
copyright, copyright application and copyright license owned or held by Borrower and all trade secrets used by Borrower consist of original material or property developed by Borrower or was lawfully acquired by Borrower from the proper and lawful owner
thereof unless failure to do so could not reasonably be expected to result in a Material Adverse Effect. Each of such items has been maintained so as to preserve the value thereof from the date of creation or acquisition thereof. Except as set forth on Schedule 5.9 hereto, with respect to all software used by Borrower where the failure to possess any source and object codes or hold any license agreement from the software owner to use such software could reasonably be expected to result in a
Material Adverse Effect, Borrower is in possession of all such source and object codes related to each piece of such software or is the beneficiary of a source code escrow agreement or holds a license agreement from the software owner to use such
software, including all source and object codes related thereto.

     5.10.     Licenses and Permits. Except as set forth in Schedule 5.10, Borrower is in compliance with and has procured and is now in possession of, all material
licenses or permits required by any applicable federal, state or local law or regulation for the operation of its business in each jurisdiction wherein it is now conducting or proposes to conduct business and where the failure to be in compliance or
procure such licenses or permits could reasonably be expected to have a Material Adverse Effect on Borrower.

     5.11.     Default of Indebtedness. As of the Closing Date, Borrower is not in default in the payment of the principal of or interest on any Indebtedness or under any
instrument or agreement under or subject to which any Indebtedness has been issued and no event has occurred under the provisions of any such instrument or agreement which with or without the lapse of time or the giving of notice, or both, constitutes or
would constitute an event of default thereunder.

     5.12.     No Default. Borrower is not in default in the performance of any of its contractual obligations which could reasonably be expected to result in a Material Adverse
Effect and no Default has occurred.

     5.13.     No Burdensome Restrictions. Borrower is not party to any contract or agreement the performance of which could reasonably be expected to have a Material Adverse
Effect on Borrower. Borrower has not agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien which is not a Permitted
Encumbrance.

     5.14.     No Labor Disputes. Borrower is not involved in any labor dispute; there are no strikes or walkouts or union organization of Borrower's employees threatened or in
existence and no labor contract is scheduled to expire during the Term, in each case other than as set forth on Schedule 5.14 hereto or as could not reasonably be expected to result in a Material Adverse Effect.

     5.15.     Margin Regulations. Borrower is not engaged, nor will it engage, principally or as one of its important activities, in the business of extending credit for the
purpose of "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. No part of the
proceeds of any Advance will be used for "purchasing" or "carrying" "margin stock" as defined in Regulation U of such Board of Governors.

     5.16.     Investment Company Act. Borrower is not an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended, nor is
it controlled by such a company.

     5.17.     Disclosure. No representation or warranty made by Borrower in this Agreement or in any financial statement, report, certificate or any other document (other than
projections, pro forma statements, budgets or estimates) furnished in connection herewith contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements herein or therein not misleading. There is no
fact known to Borrower or which reasonably should be known to Borrower which Borrower has not disclosed to Lenders in writing with respect to the transactions contemplated by this Agreement which could reasonably be expected to have a Material Adverse
Effect on Borrower.

     5.18.     [Intentionally Omitted]

     5.19.     Swaps. Except as set forth on Schedule 5.19 or as otherwise permitted pursuant to Article VII hereof, Borrower is not a party to, nor will it be a party to,
any swap agreement whereby Borrower has agreed or will agree to swap interest rates or currencies unless same provides that damages upon termination following an event of default thereunder are payable on an unlimited "two-way basis" without regard to
fault on the part of either party.

     5.20.     Conflicting Agreements. No provision of any mortgage, indenture, material contract, agreement, judgment, decree or order binding on Borrower or affecting the
Collateral conflicts with, or requires any Consent which has not already been obtained to, or would in any way prevent the execution, delivery or performance of, the terms of this Agreement or the Other Documents.

     5.21.     Application of Certain Laws and Regulations. Neither Borrower nor any Affiliate of Borrower is subject to any statute, rule or regulation which regulates the
incurrence of any Indebtedness, including without limitation, statutes or regulations relative to common or interstate carriers or to the sale of electricity, gas, steam, water, telephone, telegraph or other public utility services.

     5.22.     Business and Property of Borrower. Upon and after the Closing Date, Borrower does not propose to engage in any business other than providing electronics
manufacturing services to original electronics manufacturers in the networking, telecommunications, computer systems and other segments of the electronics industry and activities necessary to conduct the foregoing and other businesses and activities
reasonably related or ancillary thereto. On the Closing Date, Borrower will own or have the right to use all the property and possess all of the rights and Consents necessary for the conduct of the business of Borrower except to the extent that the
failure to so possess or own or have the right to use such property could not reasonably be expected to result in a Material Adverse Effect.

     5.23.     Year 2000. Borrower and its Subsidiaries have reviewed the areas within their business and operations which could be adversely affected by, and have developed or
are developing a program to address on a timely basis, the risk that certain computer applications used by Borrower or its Subsidiaries (or any of their respective suppliers, customers or vendors which are material to the operation of Borrower's business
as determined by Borrower in its good faith business judgment) may be unable to recognize and perform properly date-sensitive functions involving dates prior to and after December 31, 1999 (the "Year 2000 Problem"). To the best of Borrower's knowledge,
the Year 2000 Problem has not had and will not have a Material Adverse Effect on Borrower.

     Borrower shall be permitted to amend the schedules to this Agreement at any time that the information contained in any such schedule is no longer true and correct at such time, provided, however
, that any such amended schedules shall not cure or waive any Default or Event of Default which may be reflected on such amended schedules nor will the Required Lenders' consent to any action or disclosure reflected on such amended schedules be deemed to
be implied solely as a result of Required Lenders' acceptance of such amended schedules.

 

V.     AFFIRMATIVE COVENANTS.

     Borrower shall, until payment in full of the Obligations (other than indemnity obligations with respect to which no claim has been made) and termination of this Agreement:

     6.1.     Payment of Fees. Pay to the Lenders on demand all usual and customary reasonable out-of-pocket expenses (including without limitation, all wire transfer charges)
which the Lenders incur in connection with the forwarding of Advance proceeds. 

      6.2.     Conduct of Business and Maintenance of Existence and Assets. (a) Conduct and operate its business according to good business practices and maintain all of its
properties which are necessary in its business in good working order and condition (reasonable wear and tear excepted and casualty damage excepted to the extent covered by insurance and except as may be disposed of in accordance with the terms of this
Agreement), including, without limitation, all licenses, patents, copyrights, design rights, tradenames, trade secrets and trademarks and take all actions necessary to enforce and protect the validity of any intellectual property right necessary in the
conduct or operation of Borrower's business or other right included in the Collateral; (b) keep in full force and effect its existence and comply in all material respects with the laws and regulations governing the conduct of its business where the
failure to do so could reasonably be expected to have a Material Adverse Effect on Borrower; and (c) make all such reports and pay all such franchise and other taxes and license fees and do all such other acts and things as may be lawfully required to
maintain its rights, licenses, leases, powers and franchises under the laws of the United States or any political subdivision thereof where the failure to do so could reasonably be expected to have a Material Adverse Effect on Borrower.

     6.3.     Violations. Promptly notify the Lenders in writing of any violation of any law, statute, regulation or ordinance of any Governmental Body, or of any agency thereof,
applicable to Borrower which could reasonably be expected to have a Material Adverse Effect on Borrower.

     6.4.     [Intentionally Omitted].

     6.5.     [Intentionally Omitted].

     6.6.     Execution of Supplemental Instruments. Execute and deliver to Lenders from time to time, promptly after demand, such supplemental agreements, statements, collateral
assignments and transfers, or instructions or documents relating to the Collateral, and such other instruments as Lenders may request, in order that the full intent of this Agreement may be carried into effect.

     6.7.     Payment of Indebtedness. Pay, discharge or otherwise satisfy at or before maturity (subject, where applicable, to specified grace periods and, in the case of the
trade payables, to normal payment practices) all its obligations and liabilities of whatever nature, except when the failure to do so could not reasonably be expected to have a Material Adverse Effect or when the amount or validity thereof is currently
being contested in good faith by appropriate proceedings and Borrower shall have provided for such reserves as Lenders may reasonably deem proper and necessary.

     6.8.     Standards of Financial Statements. Cause all financial statements referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 and 9.14 as to which GAAP is
applicable to be complete and correct in all material respects (subject, in the case of interim financial statements, to normal year-end audit adjustments and the absence of footnotes) and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except as concurred in by such reporting accountants or officer, as the case may be, and disclosed therein).

 

     6.9.     Appraisals. From time to time, upon the request of Lenders (which request shall not be made by Lenders more than one time in any calendar quarter unless a Default or
Event of Default has occurred and is continuing), obtain and deliver to Lenders, at Borrower's expense, appraisal reports in form and substance and from appraisers satisfactory to Lenders, stating the net recovery value of the Inventory.

 

VII.     NEGATIVE COVENANTS.

     Borrower shall not, until satisfaction in full of the Obligations (other than indemnity obligations with respect to which no claim has been made) and termination of this Agreement:

     7.1.     Merger, Consolidation, Acquisition and Sale of Assets.

          (a)     Enter into any merger, consolidation or other reorganization with or into any other Person other than any merger of a shell corporation with
Borrower being the surviving corporation of such merger for the purpose of reincorporating Borrower under a different state following written notice of same to Lenders ("Reincorporation Merger") or acquire all or a substantial portion of the assets or
stock of any Person other than as permitted by Section 7.4 hereof or permit any other Person to consolidate with or merge with it other than a Reincorporation Merger or in connection with an investment or acquisition which is permitted by Section 7.4
hereof and then only to the extent that Borrower is the surviving entity of any such merger consummated in connection with such permitted investment or acquisition.

          (b)     Sell, lease, transfer ownership or otherwise dispose of any of its properties or assets, except in the ordinary course of its business and as
otherwise permitted under the Senior Credit Facility.

     7.2.     Creation of Liens. Create or suffer to exist any Lien or transfer upon or against any of its property or assets now owned or hereafter acquired, except Permitted
Encumbrances.

     7.3.     Guarantees. Become liable upon the obligations of any Person by assumption, endorsement or guaranty thereof or otherwise (other than to Lenders) except (a) the
endorsement of checks in the ordinary course of business, (b) guarantees of obligations of Borrower's Subsidiaries to third parties, (c) contingent obligations in the form of customary indemnifications of agents, employees, consultants, officers and
directors of Borrower or any of its Subsidiaries in the ordinary course of business consistent with past practice, (d) contingent obligations in the form of customary and reasonable indemnification provisions or purchase price adjustments (based on post
closing audit adjustments) incurred in connection with acquisitions which are permitted under Section 7.4 hereof or sales of assets which are permitted by Section 7.1(b) hereof, (e) guaranties in respect to employment arrangements and other compensation
arrangements entered into in connection with an acquisition or investment is permitted under Section 7.4 hereof, (f) other guaranty obligations, provided, that the aggregate amount of obligations incurred under clauses (b) through (f) hereof shall not exceed $10,000,000 at any time outstanding, (g) pledges and deposits to the extent such pledges and deposits constitute "Permitted
Encumbrances" under clauses (d), (e), (n) or (o) of the definition thereof and (h) guaranteed obligations under the Senior Credit Facility.

     7.4.     Investments. Purchase or acquire obligations or stock of, or any other equity or ownership interest in, any Person, except (a) obligations issued or guaranteed by
the United States of America or any agency thereof, (b) commercial paper with maturities of not more than 360 days and a published rating of not less than A-1 or P-1 (or the equivalent rating), (c) certificates of time deposit and bankers' acceptances
having maturities of not more than 360 days and repurchase agreements backed by United States government securities of a commercial bank if (i) such bank has a combined capital and surplus of at least $500,000,000, or (ii) its debt obligations, or those
of a holding company of which it is a Subsidiary, are rated not less than A (or the equivalent rating) by a nationally recognized investment rating agency, and (d) U.S. money market funds that invest substantially all in obligations issued or guaranteed
by the United States of America or an agency thereof; provided, however, that if no Event of Default shall have occurred and be continuing at the time of such investment, or occur as a result thereof, Borrower may:

 
(1)     acquire assets constituting a business unit or substantially all of the stock or other equity interests of any Person engaged in a line of business currently engaged in by Borrower as described in
Section 5.22, provided that (i) the aggregate value of the consideration (including, without limitation, the assumption of liabilities) of all such investments made during the Term shall not exceed $30,000,000 plus the appreciated value, if any, of such
investments, (ii) no more than twenty five percent (25%) of such consideration shall be funded, directly or indirectly, with the proceeds of advances under Senior Credit Facility, (iii) any portion of such consideration consisting of Indebtedness of
Borrower to the seller or sellers of such assets, stock or other investments or to any other Person shall be subordinated in right of payment to the prior payment in full of the Obligations on terms and conditions satisfactory to Lenders and (iv) after
giving effect to any advances under the Senior Credit Facility made or to be made to Borrower to consummate such acquisition, Borrower shall have Undrawn Availability under (and as defined in) the Senior Credit Facility of at least $10,000,000 upon such
consummation;

  

(2)     invest in direct Subsidiaries of Borrower so long as (x) Borrower has pledged sixty five percent (65%) (to the extent it is a foreign Subsidiary) or one hundred percent (100%) (to the extent it is a
domestic Subsidiary) of each class of equity securities of such Subsidiary owned by Borrower and (y) the aggregate amount of such investments during any fiscal year net of the aggregate amount of cash dividends actually received by Borrower in such fiscal
year from such Subsidiaries plus the aggregate amount of loans made by Borrower to its Subsidiaries during such fiscal year which remain outstanding after giving effect solely to principal repayments of such loans made by such Subsidiary, shall not exceed $15,000,000;

(3)     make investments solely with the proceeds of Extraordinary Receipts; 

(4)     maintain investments existing on the date hereof and set forth on Schedule 7.4;

(5)     acquire and hold Receivables owing to it or created in the ordinary course of its business;

(6)     make pledges and deposits to the extent such pledges and deposits constitute "Permitted Encumbrances" under clauses (d), (e), (n) or (o) of the definition thereof;

(7)     acquire and own investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and Customers and in good faith settlement of delinquent obligations of,
and other disputes with Customers or suppliers arising in the ordinary course of business;

(8)     make deposits in the ordinary course consistent with past practices to secure Borrower's performance under leases; 

(9)     enter into transactions which are permitted under Section 7.1 (a) hereof; and

(10)     other investments not to exceed the aggregate amount of $250,000 at any time or from time to time.

     7.5.     Loans. Make advances, loans or extensions of credit to any Person, including without limitation, any Parent, Subsidiary or Affiliate except with respect to (a) the
extension of commercial trade credit in connection with the sale of Inventory in the ordinary course of its business, (b) loans to its employees in the ordinary course of business not to exceed the aggregate amount of $500,000 at any time outstanding, (c)
non-cash loans or extensions of credit made to the purchaser of any of Borrower's assets (other than Equipment which was purchased with the proceeds of an Equipment Loan) in connection with the disposition of assets (other than Equipment which was
purchased with the proceeds of an Equipment Loan) which is permitted by Section 7.1(b) hereof to the extent that such loans are evidenced by a promissory note in favor of Borrower, (d) non-cash loans made to an officer or other employee of Borrower to
enable such officer or employee to acquire shares of capital stock of Borrower or options to purchase shares of capital stock of Borrower so long as such loans are evidenced by a promissory note in favor of Borrower, and (e) so long as no Event of Default
shall have occurred and be continuing, loans made to a direct Subsidiary of Borrower provided that the aggregate amount of such loans during any fiscal year plus the aggregate amount of investments made by Borrower to its Subsidiaries during such fiscal
year net of the aggregate amount of cash dividends actually received by Borrower in such fiscal year from such Subsidiaries which remain outstanding after giving effect solely to principal repayments of such loans made by such Subsidiary, shall not exceed
$15,000,000 and (z) such loans are evidenced by a promissory note in favor of Borrower.

     7.6.     Intentionally Omitted.

     7.7.     Dividends. Declare, pay or make any dividend or distribution on any shares of the common stock or preferred stock of Borrower (other than dividends or distributions
payable (a) in its stock, or split-ups or reclassifications of its stock or (b) payable solely out of Extraordinary Receipts to the extent that no Event of Default shall have occurred and be continuing) or apply any of its funds, property or assets to the
purchase, redemption or other retirement of any common or Preferred Stock, or of any options to purchase or acquire any such shares of common or Preferred Stock of Borrower; provided, however, that any Subsidiary of the Borrower may pay dividends or make other distributions to its shareholders; and provided, further, that so long as no Default or Event of Default shall have occurred and be
continuing, Borrower shall be permitted to (a) repurchase, redeem, otherwise acquire or retire for value any capital stock of Borrower held by any members or former member of the Borrower's (or any of its Subsidiaries') management; so long as the
aggregate price paid shall not exceed (x) $1,000,000 in any calendar year (with unused amounts ("Carryover Amounts") in any fiscal year being carried over to the next succeeding fiscal year ("Carryover Year") and any such payments used for such repurchase
or redemption in the Carryover Year shall be allocated first to the permitted amounts in such year and then, to the Carryover Amount from the preceding fiscal year), plus (y) the aggregate amount of Extraordinary Receipts received from members of
management of Borrower and its Subsidiaries plus (z) the proceeds received by Borrower of any "key-man" life insurance policies; provided, that the cancellation of Indebtedness owing to Borrower from members of management of Borrower in connection with such repurchase of capital stock will not be deemed to be a restricted payment under this Section; (b) repurchase capital
stock upon the exercise of stock options if such capital stock represents a portion of the exercise price thereof; and (c) in the event that any letter of intent or purchase agreement entered into which is permitted by Section 7.4 hereof is terminated and
Borrower is entitled to a reimbursement of any cash earnest money deposit made by it in connection therewith which was funded by an equity contribution, pay a cash dividend in an amount not to exceed the amount of such reimbursement payment.

     7.8.     Indebtedness. Create, incur, assume or suffer to exist any Indebtedness (exclusive of trade debt) except in respect of (i) Indebtedness to Lenders; (ii) Indebtedness
due under the Subordinated Note Documentation or any refinancing thereof, provided that such refinancing shall not be materially more onerous to Borrower and shall contain subordination terms which are acceptable to Lenders in all respects; (iii)
subordinated Indebtedness incurred in connection with (a) any investment permitted by the proviso of Section 7.4 and otherwise complying with the conditions thereof and (b) any repurchase of capital stock or options from terminated employees in accordance
with the provisions of Section 7.7 hereof; (iv) Indebtedness in respect of hedge agreements entered into in the ordinary course of business to protect the Borrower or any of its Subsidiaries against fluctuations in interest rates or currency valuations
and not for speculative purposes; (v) Indebtedness deemed to exist pursuant to guarantees which are permitted by Section 7.3 hereof; (vi) Indebtedness existing as of the Closing Date as set forth in Schedule 7.8 and refinancing thereof not to exceed the aggregate amount of Indebtedness existing as of the Closing Date and so long as such refinancing does not contain terms which are materially more onerous than the existing arrangement; (vii)
Indebtedness secured by Liens which are permitted under Section 7.2 hereof including under capitalized leases so long as the amount of such Indebtedness, including capitalized leases, does not exceed the amounts permitted under Section 7.6 hereof; (viii)
unsecured Indebtedness not otherwise permitted hereunder not to exceed $5,000,000 in the aggregate principal amount at any one time outstanding, (ix) Indebtedness incurred for capital expenditures permitted under the Senior Credit Facility and (x)
Indebtedness under the Senior Credit Facility.

 

     7.9.     Nature of Business. Substantially change the nature of the business in which it is presently engaged and those reasonably related or ancillary thereto, nor except as
specifically permitted hereby purchase or invest, directly or indirectly, in any assets or property other than in the ordinary course of business for assets or property which are useful in, necessary for and are to be used in its business as presently
conducted or as reasonably related or ancillary thereto.

     7.10.     Transactions with Affiliates. Directly or indirectly, purchase, acquire or lease any property from, or sell, transfer or lease any property to, or otherwise deal
with, any Affiliate, except transactions in the ordinary course of business, on an arm's-length basis on terms no less favorable than terms which would have been obtainable from a Person other than an Affiliate, provided that in any event the following transactions shall be permitted:

          (a)     the payment of management fees and expenses incurred by CEI and/or any of their respective Affiliates in providing services to Borrower from
time to time in accordance with the Management Services Agreement as in effect on the Closing Date;

           (b)     the payment of customary and reasonable fees to, and the out-of-pocket expenses of the Board of Directors of Borrower and customary
indemnities for the benefit of members of the Board of Directors of Borrower;

          (c)     the payment by Borrower, in connection with any acquisition, divestiture or financing transaction that is consummated, of a transaction fee to
CEI and/or any of their respective Affiliates for such transaction in an amount which is customary in transactions of that nature;

          (d)     the making of any payments permitted pursuant to Section 7.7; 

          (e)     the payment of customary compensation paid to, and indemnity provided on behalf of, officers, employees or consultants of Borrower or any of
its Subsidiaries as determined in good faith by the Board of Directors of Borrower; and

          (f)     transactions with Subsidiaries to the extent such transactions are permitted under Sections 7.1, 7.3, 7.4 or 7.5 hereof.

     7.11.     Subsidiaries.

          (a)     Form any Subsidiary unless (i) such Subsidiary executes a Guaranty if such Subsidiary is incorporated in the United States of America or any
state thereof and (ii) Lenders shall have received all documents, including legal opinions, it may reasonably require to establish compliance with each of the foregoing conditions.

          (b)     Enter into any partnership, joint venture or similar arrangement except to the extent permitted by Section 7.4 hereof.

 

    7.12.     Fiscal Year and Accounting Changes. Change its fiscal year from a year ending on or about August 31 or make any significant change (i) in accounting treatment and
reporting practices except as is consistent with GAAP or (ii) in tax reporting treatment except as permitted by law and provided that Borrower shall promptly notify Lenders of any such changes.

     7.13.     Pledge of Credit. Now or hereafter pledge any Lender's credit on any purchases or for any purpose whatsoever.

     7.14.     Amendment of Articles of Incorporation, By-Laws. Amend, modify or waive any term or material provision of its Articles of Incorporation or By-Laws if any such
amendment, modification or waiver could, in Lenders' reasonable judgment, have a Material Adverse Effect.

     7.15.     Compliance with ERISA. (i) (x) Maintain or (y) become obligated to contribute to any Multiemployer Plan or Pension Benefit Plan, other than those Multiemployer
Plans and Pension Benefit Plans disclosed on Schedule 5.8(d), (ii) engage in any non-exempt "prohibited transaction", as that term is defined in section 406 of ERISA and Section 4975 of the Code unless such transactions could not reasonably be expected to result in a Material Adverse Effect,
(iii) incur any "accumulated funding deficiency", as that term is defined in Section 302 of ERISA or Section 412 of the Code which, if such deficiency continued for two plan years and was not corrected as provided in Section 4971 of the Code could subject
Borrower to a material tax imposed by Section 4971 of the Code or could reasonably be expected to result in a Material Adverse Effect, (iv) terminate any Plan where such event could reasonably be expected to result in any material liability of Borrower or
the imposition of a Lien on the property of Borrower pursuant to Section 4068 of ERISA, unless such Lien falls with the basket permitted by clause (r) of the definition of Permitted Encumbrances, (v) assume any obligation to contribute to any
Multiemployer Plan not disclosed on Schedule 5.8(d), (vi) incur any withdrawal liability to any Multiemployer Plan which could reasonably be expected to result in a Material Adverse Effect; (vii) fail to promptly notify Lenders of the occurrence of any Termination Event, (viii) fail
to comply with the requirements of ERISA or the Code or other applicable laws in respect of any Plan, unless the failure to so comply could not reasonably be expected to result in a Material Adverse Effect (ix) fail to meet all minimum funding
requirements under ERISA or the Code or postpone or delay any funding requirement with respect of any Plan unless the failure to meet such funding requirements could not reasonably be expected to result in a Material Adverse Effect.

     7.16.     Prepayment of Indebtedness. Except as permitted pursuant to Section 7.18 hereof, at any time, directly or indirectly, prepay or defease any subordinated
Indebtedness (other than to Lenders), or repurchase, redeem, retire or otherwise acquire any subordinated Indebtedness of Borrower.

     7.17.     Subordinated Notes. At any time, directly or indirectly, pay, prepay, repurchase, redeem, retire or otherwise acquire, or make any payment on account of any
principal of, interest on or premium payable in connection with the repayment or redemption of the Subordinated Notes, including, without limitation, any defeasance of such Subordinated Notes, other than (a) regularly scheduled payments of principal and
interest to the extent payment is permitted by the terms of the Subordinated Debt Documentation as in effect on the closing date of the Senior Credit Facility and (b) redemptions of such Subordinated Notes on the terms set forth in the Subordinated Note
Documentation as in effect on the closing date of the Senior Credit Facility and so long as (i) no Default or Event of Default shall have occurred and be continuing or would occur as a result of such redemptions and (ii) such redemptions shall be made
solely out of Extraordinary Receipts or the proceeds of a refinancing of the Subordinated Notes not to exceed the aggregate outstanding principal balance of the Subordinated Notes as of the date of any such redemption, and provided, further, that such refinancing shall not be materially more onerous to Borrower and shall contain subordination terms which are acceptable to Lenders in all respects.

     7.18.     Other Agreements. Enter into any material amendment, waiver or modification of the Subordinated Note Documentation, Indenture, Exchange Indenture, Management
Services Agreement or any related agreements.

 

VIII.     CONDITIONS PRECEDENT.

     8.1.     Conditions to Advances. The agreement of Lenders to make the Advances requested to be made on the Closing Date is subject to the satisfaction, or waiver by Lenders,
immediately prior to or concurrently with the making of such Advances, of the following conditions precedent:

          (a)     Note. Lenders shall have received the Note duly executed and delivered by an authorized officer of Borrower;

          (b)     Intentionally Omitted. 

 

          (c)     Corporate Proceedings of Borrower. The Lenders shall have received a copy of the resolutions in form and substance reasonably
satisfactory to the Lenders, of the Board of Directors or managers, as applicable, of Borrower authorizing the execution, delivery and performance of this Agreement, the Notes and any related agreements, (collectively the "Documents"); and, such
certificate shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded as of the date of such certificate;

          (d)     Proceedings of Guarantor. The Lenders shall have received a copy of the resolutions in form and substance reasonably satisfactory to the
Lenders, of the Board of Directors authorizing the execution, delivery and performance of the Guaranty certified by the Secretary, Assistant Secretary or Manager, as applicable, of Guarantor as of the Closing Date; and, such certificate shall state that
the resolutions thereby certified have not been amended, modified, revoked or rescinded as of the date of such certificate;

          (e)     Incumbency Certificates of Guarantor. The Lenders shall have received a certificate of the Secretary, Assistant Secretary or Manager, as
applicable, of Guarantor, dated the Closing Date, as to the incumbency and signature of the officers of Guarantor executing the Guaranty, any certificate or other documents to be delivered by it pursuant hereto, together with evidence of the incumbency of
such Secretary, Assistant Secretary or Manager, as applicable;

 

          (f)     Incumbency Certificates of Borrower. The Lenders shall have received a certificate of the Secretary or an Assistant Secretary of
Borrower, dated the Closing Date, as to the incumbency and signature of the officers of Borrower executing this Agreement, any certificate or other documents to be delivered by it pursuant hereto, together with evidence of the incumbency of such Secretary
or Assistant Secretary;

          (g)     Certificates. The Lenders shall have received a copy of the Articles or Certificate of Incorporation of Borrower and Guarantor, and all
amendments thereto, certified by the Secretary of State or other appropriate official of its jurisdiction of incorporation together with copies of the By-Laws of Borrower and Guarantor and all agreements of Borrower's and Guarantor's shareholders to which
Borrower or Guarantor, as applicable, is a party certified as accurate and complete by the Secretary of Borrower and Guarantor;

          (h)     Good Standing Certificates. The Lenders shall have received good standing certificates for Borrower and Guarantor dated not more than
thirty (30) days prior to the Closing Date, issued by the Secretary of State or other appropriate official of Borrower's and Guarantor's jurisdiction of incorporation and each jurisdiction where the conduct of Borrower's and Guarantor's business
activities or the ownership of its properties necessitates qualification;

          (i)     Legal Opinion. The Lenders shall have received the executed legal opinion of Kirkland & Ellis in form and substance satisfactory to
Lenders which shall cover such matters incident to the transactions contemplated by this Agreement, the Note, the Guaranty and related agreements as the Lenders may reasonably require and Borrower and Guarantor hereby authorizes and directs such counsel
to deliver such opinions to the Lenders;

          (j)     No Litigation. Except as set forth on Schedule 5.8(b), (i) no litigation, investigation or proceeding before or by any arbitrator
or Governmental Body shall be continuing or overtly threatened against Borrower or against the officers or directors of Borrower (A) in connection with this Agreement or any of the Other Documents or any of the transactions contemplated hereby or thereby
and which, in the reasonable opinion of the Lenders, is deemed material or (B) which could, in the reasonable opinion of Lenders, have a Material Adverse Effect; and (ii) no injunction, writ, restraining order or other order of any nature materially
adverse to Borrower or the conduct of its business or inconsistent with the due consummation of the Transactions shall have been issued by any Governmental Body;

 

          (k)     Financial Condition Certificates. The Lenders shall have received an executed Financial Condition Certificate in the form of Exhibit
8.1(i).

          (l)     Intentionally Omitted.

          (m)     Intentionally Omitted.

          (n)     Pro Forma Financial Statements. The Lenders shall have received a copy of the Pro Forma Financial Statements which shall be satisfactory
in all respects to Lenders;

          (o)     Intentionally Omitted.

          (p)     Intentionally Omitted.

          (q)     Payment Instructions. The Lenders shall have received written instructions from Borrower directing the application of proceeds of the
Advances made pursuant to this Agreement; 

          (r)     Intentionally Omitted.

.          (s)     Consents. The Lenders shall have received any and all Consents necessary to permit the effectuation of the transactions
contemplated by this Agreement and the Other Documents; and, the Lenders shall have received such Consents and waivers of such third parties as might assert claims with respect to the Collateral, as the Lenders and their counsel shall deem necessary;

          (t)     No Adverse Material Change. Except as set forth on Schedule 8.1(t), (i) since _________, 1999, there shall not have occurred any
event, condition or state of facts which could reasonably be expected to have a Material Adverse Effect and (ii) no representations made or information supplied to Lenders shall have been proven to be inaccurate or misleading in any material respect on or
prior to the Closing Date;

          (u)     Intentionally Omitted.

          (v)     Guaranty and Other Documents. Lenders shall have received in form and substance satisfactory to Lenders the executed Guaranty;

          (w)     Intentionally Omitted.

          (x)     Contract Review. The Lenders shall have reviewed all material contracts of Borrower including, without limitation, leases, union
contracts, labor contracts, vendor supply contracts, license agreements and distributorship agreements and such contracts and agreements shall be reasonably satisfactory in all respects to the Lenders;

          (y)     Closing Certificate. The Lenders shall have received a closing certificate signed by the President or Chief Financial Officer of
Borrower dated as of the date hereof, stating that (i) all representations and warranties set forth in this Agreement and the Other Documents are true and correct in all material respects on and as of such date, (ii) Borrower is on such date in compliance
with all the terms and provisions set forth in this Agreement and the Other Documents and (iii) on such date no Default or Event of Default has occurred or is continuing;

          (z)     Other. All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the Transactions
shall be reasonably satisfactory in form and substance to the Lenders and their counsel; 

          (aa)     Representations and Warranties. Each of the representations and warranties made by Borrower in or pursuant to this Agreement and any
related agreements to which it is a party, and each of the representations and warranties contained in any certificate, document or financial or other statement furnished at any time under or in connection with this Agreement or any related agreement
shall be true and correct in all material respects on and as of such date as if made on and as of such date, except to the extent such representations or warranties are limited by their terms to a specific date in which case they shall be true and correct
in all material respects as of such date; and

          (bb)     Intentionally Omitted.

          (cc)     No Default. No Event of Default or Default shall have occurred and be continuing on such date, or would exist after giving effect to
the Advances requested to be made, on such date; provided, however that Lenders, in their sole discretion, may continue to make Advances notwithstanding the existence of an Event of Default or Default and that any Advances so made shall not be deemed a
waiver of any such Event of Default or Default.

     8.2.     Intentionally Omitted.

IX.     INFORMATION AS TO BORROWER.

     Borrower shall, until satisfaction in full of the Obligations (other than indemnity obligations with respect to which no claims have been made) and the termination of this Agreement:

      9.1.     Disclosure of Material Matters. Promptly (but in any event no later than five (5) Business Days) upon learning thereof, report to Lenders all matters
materially affecting the value, enforceability or collectibility of any material portion of the Collateral including, without limitation, Borrower's reclamation or repossession of, or the return to Borrower of, a material amount of goods or claims or
disputes asserted by any Customer or other obligor. 

     9.2.     Intentionally Omitted.

     9.3.     Environmental Reports. Furnish Lenders, concurrently with the delivery of the financial statements referred to in Sections 9.7 and 9.8, with a certificate signed by
the President or any other executive officer of Borrower stating, to the best of his knowledge, that Borrower is in compliance in all material respects with all federal, state and local laws relating to environmental protection and control and
occupational safety and health except to the extent the failure to be in compliance could not reasonably be expected to result in a Material Adverse Effect. To the extent Borrower is not so in compliance with the foregoing laws, the certificate shall set
forth with specificity all areas of non-compliance and the proposed action Borrower will implement in order to resolve such matter.

     9.4.     Litigation. Promptly notify Lenders in writing of any litigation, suit or administrative proceeding affecting Borrower, whether or not the claim is covered by
insurance, and of any suit or administrative proceeding, which in any such case could reasonably be expected to have a Material Adverse Effect on Borrower.

     9.5.     Material Occurrences. Promptly notify Lenders in writing upon the occurrence of (a) any Event of Default or Default; (b) any event of default under any of the
Subordinated Note Documentation or the Senior Credit Facility; (c) any event which with the giving of notice or lapse of time, or both, would constitute an event of default under any of the Subordinated Note Documentation; (d) any event, development or
circumstance whereby any financial statements or other reports furnished to Lenders fail in any material respect to present fairly, in accordance with GAAP consistently applied, the financial condition or operating results of Borrower as of the date of
such statements; (e) any accumulated retirement plan funding deficiency which, if such deficiency continued for two plan years and was not corrected as provided in Section 4971 of the Code, could subject Borrower to a material tax imposed by Section 4971
of the Code or could reasonably be expected to result in a Material Adverse Effect; (f) each and every default by Borrower which might result in the acceleration of the maturity of any Indebtedness, including the names and addresses of the holders of such
Indebtedness with respect to which there is a default existing or with respect to which the maturity has been or could be accelerated, and the amount of such Indebtedness; and (g) any other development in the business or affairs of Borrower which could
reasonably be expected to have a Material Adverse Effect; in each case describing the nature thereof and the action Borrower propose to take with respect thereto.

     9.6.     Intentionally Omitted. 

     9.7.     Annual Financial Statements. Furnish Lenders within ninety (90) days after the end of each fiscal year of Borrower, financial statements of Borrower on a
consolidated and consolidating basis including, but not limited to, statements of income and stockholders' equity and cash flow from the beginning of the current fiscal year to the end of such fiscal year and the balance sheet as at the end of such fiscal
year, all prepared in accordance with GAAP applied on a basis consistent with prior practices, and in reasonable detail and reported upon without qualification by an independent certified public accounting firm selected by Borrower and satisfactory to
Lenders (the "Accountants"). The report of the Accountants shall be accompanied by a statement of the Accountants certifying that (i) they have caused this Agreement to be reviewed, (ii) in making the examination upon which such report was based either no
information came to their attention which to their knowledge constituted an Event of Default or a Default under this Agreement or any related agreement or, if such information came to their attention, specifying any such Default or Event of Default, its
nature, when it occurred and whether it is continuing, and such report shall contain or have appended thereto calculations which set forth Borrower's compliance with the requirements or restrictions imposed by Sections 6.5 and 7.6 hereof. In addition, the
reports shall be accompanied by a certificate of Borrower's Chief Financial Officer which shall state that, based on an examination sufficient to permit him to make an informed statement, no Default or Event of Default exists, or, if such is not the case,
specifying such Default or Event of Default, its nature, when it occurred, whether it is continuing and the steps being taken by Borrower with respect to such event, and such certificate shall have appended thereto calculations which set forth Borrower's
compliance with the requirements or restrictions imposed by Sections 6.5 and 7.6 hereof.

     9.8.     Quarterly Financial Statements. Furnish Lenders within forty-five (45) days after the end of each fiscal quarter, an unaudited balance sheet of Borrower on a
consolidated and consolidating basis and unaudited statements of income and stockholders' equity and cash flow of Borrower on a consolidated and consolidating basis reflecting results of operations from the beginning of the fiscal year to the end of such
quarter and for such quarter, prepared on a basis consistent with prior practices and complete and correct in all material respects, subject to normal year end adjustments. The reports shall be accompanied by a certificate signed by the Chief Financial
Officer of Borrower, which shall state that, based on an examination sufficient to permit him to make an informed statement, no Default or Event of Default exists, or, if such is not the case, specifying such Default or Event of Default, its nature, when
it occurred, whether it is continuing and the steps being taken by Borrower with respect to such default and, such certificate shall have appended thereto calculations which set forth Borrower's compliance with the requirements or restrictions imposed by
Sections 6.5 and 7.6 hereof.

     9.9.     Monthly Financial Statements. Furnish Lenders within thirty (30) days after the end of each month, an unaudited balance sheet of Borrower on a consolidated and
unaudited statements of income and stockholders' equity and cash flow of Borrower on a consolidated and consolidating reflecting results of operations from the beginning of the fiscal year to the end of such month and for such month, prepared on a basis
consistent with prior practices and complete and correct in all material respects, subject to normal year end adjustments and the absence of footnotes. The reports shall be accompanied by a certificate of Borrower's Chief Financial Officer, which shall
state that, based on an examination sufficient to permit him to make an informed statement, no Default or Event of Default exists, or, if such is not the case, specifying such Default or Event of Default, its nature, when it occurred, whether it is
continuing and the steps being taken by Borrower with respect to such event and, such certificate shall have appended thereto calculations which set forth Borrower's compliance with the requirements or restrictions imposed by Sections 6.5 and 7.6 hereof.

     9.10.     Other Reports. Furnish Lenders as soon as available, but in any event within ten (10) days after the issuance thereof, (i) with copies of such financial statements,
reports and returns as Borrower shall send generally to all of its stockholders and (ii) copies of all material notices sent pursuant to the Subordinated Note Documentation and Senior Credit Facility.

     9.11.     Additional Information. Furnish Lender with such additional information as Lender shall reasonably request in order to enable Lender to determine whether the terms,
covenants, provisions and conditions of this Agreement and the Notes have been complied with by Borrower including, without limitation and without the necessity of any request by Lender, (a) copies of all material environmental audits and reviews, (b) at
least thirty (30) days prior thereto, notice of Borrower's opening of any new office or place of business or thirty (30) days after Borrower's closing of any existing office or place of business, and (c) promptly upon Borrower's learning thereof, notice
of any labor dispute to which Borrower may become a party, any strikes or walkouts relating to any of its plants or other facilities, and the expiration of any labor contract to which Borrower is a party or by which Borrower is bound, in each case to the
extent such action could reasonably be expected to result in a Material Adverse Effect.

     9.12.     Projected Operating Budget. Furnish Lenders, no later than thirty (30) days after the beginning of Borrower's fiscal years commencing with fiscal year 2000, a month
by month projected operating budget and cash flow of Borrower for such fiscal year (including an income statement for each month and a balance sheet as at the end of the last month in each fiscal quarter), such projections to be accompanied by a
certificate signed by the President or Chief Financial Officer of Borrower to the effect that such projections have been prepared on the basis of financial planning practice consistent with past budgets and financial statements and that such officer has
no reason to question the reasonableness of any material assumptions on which such projections were prepared.

     9.13.     Variances From Operating Budget. Furnish Lenders, concurrently with the delivery of the financial statements referred to in Section 9.7 and each monthly report, a
written report summarizing all material variances from budgets submitted by Borrower pursuant to Section 9.12 and a discussion and analysis by management with respect to such variances.

     9.14.     Notice of Suits, Adverse Events. Furnish Lenders with prompt notice of (i) any lapse or other termination of any Consent issued to Borrower by any Governmental Body
or any other Person that is material to the operation of Borrower's business, (ii) any refusal by any Governmental Body or any other Person to renew or extend any such Consent; and (iii) copies of any periodic or special reports filed by Borrower with any
Governmental Body or Person, if such reports indicate any material change in the business, operations, affairs or condition of Borrower, or if copies thereof are requested by Lender, and (iv) copies of any material notices and other communications from
any Governmental Body or Person which specifically relate to Borrower.

     9.15.     ERISA Notices and Requests. Furnish Lenders with prompt (but in no event later then five (5) days) written notice in the event that (i) Borrower knows or has reason
to know that a Termination Event has occurred, together with a written statement describing such Termination Event and the action, if any, which Borrower or such member of the Controlled Group has taken, is taking, or proposes to take with respect thereto
and, when known, any action taken or threatened by the Internal Revenue Service, Department of Labor or PBGC with respect thereto, (ii) Borrower knows or has reason to know that a prohibited transaction (as defined in Sections 406 of ERISA and 4975 of the
Code) has occurred with respect to a Plan together with a written statement describing such transaction and the action which Borrower or any member of the Controlled Group has taken, is taking or proposes to take with respect thereto, (iii) a funding
waiver request has been filed with respect to any Plan together with all written communications received by Borrower or to the best of Borrower's knowledge, any member of the Controlled Group with respect to such request, (iv) any material increase in the
benefits of any existing Plan or the establishment of any new Plan that is subject to Title IV of ERISA or to the minimum funding requirements of Section 412 of the Code or Section 302 of ERISA or the commencement of contributions to any Multi-employer
Plan to which Borrower or to the best of Borrower's knowledge, any member of the Controlled Group was not previously contributing shall occur, (v) Borrower or to the best of Borrower's knowledge, any member of the Controlled Group shall receive from the
PBGC a notice of intention to terminate a Plan or to have a trustee appointed to administer a Plan, together with copies of each such notice, (vi) Borrower or to the best of Borrower's knowledge, any member of the Controlled Group shall receive any
favorable or unfavorable determination letter from the Internal Revenue Service regarding the qualification of a Plan under Section 401(a) of the Code, together with copies of each such letter; (vii) Borrower or to the best of Borrower's knowledge, any
member of the Controlled Group shall receive a written notice regarding the imposition of withdrawal liability with respect to any Multi-employer Plan, together with copies of each such notice; (viii) Borrower or to the best of Borrower's knowledge, any
member of the Controlled Group shall fail to make a required installment or any other required payment under Section 412 of the Code on or before the due date for such installment or payment; (ix) Borrower or to the best of Borrower's knowledge, any
member of the Controlled Group knows that (a) a Multiemployer Plan has been terminated, (b) the administrator or plan sponsor of a Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC has instituted or will institute proceedings
under Section 4042 of ERISA to terminate a Multiemployer Plan.

     9.16.     Additional Documents. Execute and deliver to Lenders, upon request, such documents and agreements as Lenders may, from time to time, reasonably request to carry out
the purposes, terms or conditions of this Agreement.

X.     EVENTS OF DEFAULT.

     The occurrence of any one or more of the following events shall constitute an "Event of Default":

     10.1.     failure by Borrower to (a) pay any principal, interest on the Obligations when due, whether at maturity or by reason of acceleration pursuant to the terms of this
Agreement or by notice of intention to prepay, or by required prepayment or failure to pay any other liabilities or (b) make any other payment, fee or charge provided for herein or in any Other Document within five (5) Business Days of when due;

      10.2.     any representation or warranty made or deemed made by Borrower in this Agreement or any related agreement or in any certificate, document or financial or other
statement furnished at any time to Lenders in connection herewith or therewith shall prove to have been misleading in any material respect on the date when made or deemed to have been made; 

     10.3.     failure by Borrower to (i) furnish financial information required by Section 9.2 hereof or any other financial information within ten (10) days of when due or when
requested or (ii) permit the inspection of its books or records in accordance with the terms hereof; 

     10.4.     issuance of a notice of Lien, levy, assessment, injunction or attachment against a material portion of Borrower's property which is not stayed or lifted within thirty (30)
days;

     10.5.     except as otherwise provided for in Sections 10.1 through 10.4 or Section 10.19 (i) failure or neglect of Borrower to perform, keep or observe any term, provision,
condition, covenant contained in Sections 6.1, 6.3, 9.4 or 9.6 hereof which is not cured within thirty (30) days from the occurrence of such failure or neglect or (ii) failure or neglect of Borrower to perform, keep or observe any other term, provision,
condition or covenant contained in any other agreement or arrangement, now or hereafter entered into between Borrower and any Lender;

     10.6.     any judgment or judgments are rendered or judgment liens filed against Borrower for an aggregate amount in excess of $5,000,000 solely as it relates to a Subsidiary of
Borrower not incorporated in the United States of America or any state thereof or $2,000,000 in all other matters which within forty (40) days of such rendering or filing is not either satisfied, bonded, stayed or discharged of record; 

     10.7.     Borrower shall (i) apply for, consent to or suffer the appointment of, or the taking of possession by, a receiver, custodian, trustee or similar fiduciary of itself or of
all or a substantial part of its property, (ii) make a general assignment for the benefit of creditors, (iii) commence a voluntary case under any state or federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or
insolvent, (v) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vi) acquiesce to, or fail to have dismissed, within sixty (60) days, any petition filed against it in any involuntary case under such
bankruptcy laws, or (vii) take any action for the purpose of effecting any of the foregoing;

      10.8.     Borrower shall admit in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business in its entirety;

     10.9.     any Subsidiary of Borrower which is material to the operations of Borrower shall (i) apply for, consent to or suffer the appointment of, or the taking of possession by, a
receiver, custodian, trustee or similar fiduciary of itself or of all or a substantial part of its property, (ii) admit in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business
unless consolidated, merged or liquidated with and into Borrower or any other Subsidiary of Borrower; (iii) make a general assignment for the benefit of creditors, (iv) commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vii) acquiesce to, or fail to have dismissed, within sixty (60) days, any petition
filed against it in any involuntary case under such bankruptcy laws, or (viii) take any action for the purpose of effecting any of the foregoing;

     10.10.     Intentionally Omitted.

     10.11.     an event of default has occurred and been declared under the Senior Credit Facility or the Subordinated Note Documentation which default shall not have been cured or
waived within any applicable grace period and for which Trustee is permitted to take action under the Indenture or the Exchange Indenture, as applicable, or with respect to the Senior Credit Facility, which has resulted in the acceleration of amounts
owing thereunder;

     10.12. a default of the obligations of Borrower under any other agreement to which it is a party shall occur which could reasonably be expected to result in a Material Adverse Effect which default is not
cured within any applicable grace period;

     10.13.     Intentionally Omitted.

     10.14.     any material provision of this Agreement or any Other Document shall, for any reason, cease to be valid and binding on Borrower, or Borrower shall so claim in writing to
Lenders;

     10.15.     (i) any Governmental Body shall (A) revoke, terminate, suspend or adversely modify any license, permit, patent trademark or tradename of Borrower, the continuation of
which is material to the continuation of Borrower's business and is not replaced by a substitute acceptable to Lenders within sixty (60) days after the date of such revocation, termination or similar action and such revocation, termination or other
similar action could reasonably be expected to result in a Material Adverse Effect, or (ii) any agreement which is necessary or material to the operation of Borrower's business shall be revoked or terminated and not replaced by a substitute acceptable to
Lenders within sixty (60) days after the date of such revocation or termination, and such revocation or termination and non-replacement would reasonably be expected to have a Material Adverse Effect on Borrower;

     10.16.     Intentionally Omitted

     10.17.     the operations of Borrower's manufacturing facility are interrupted at any time for more than seven (7) consecutive days (other than in connection with normal
maintenance conducted on a basis consistent with past practices), unless Borrower shall (i) be entitled to receive for such period of interruption, proceeds of business interruption insurance sufficient to assure that its per diem cash needs during such
period is at least equal to its average per diem cash needs for the consecutive three month period immediately preceding the initial date of interruption and (ii) receive such proceeds in the amount described in clause (i) preceding not later than ninety
(90) days following the initial date of any such interruption; provided, however, that notwithstanding the provisions of clauses (i) and (ii) of this section, an Event of Default shall be deemed to have occurred if Borrower shall be receiving the proceeds
of business interruption insurance for a period of ninety (90) consecutive days; 

     10.18.     termination except in accordance with its terms or breach of any Guaranty executed and delivered to Lenders in connection with the Obligations or if any Guarantor
attempts to terminate the validity of, or its liability under, any such Guaranty except in accordance with its terms; or

     10.19.     an event or condition specified in Sections 7.15 or 9.15 hereof shall occur or exist with respect to any Plan and, as a result of such event or condition, together with
all other such events or conditions, Borrower or any member of the Controlled Group shall incur, or in the opinion of Lenders be reasonably likely to incur, a liability to a Plan or the PBGC (or both) which, in the reasonable judgment of Lenders, would
have a Material Adverse Effect on Borrower.

 

XI.     LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.

     11.1     Rights and Remedies. Upon the occurrence of (i) an Event of Default pursuant to Section 10.7 all Obligations shall be immediately due and payable and this Agreement
and the obligation of Lenders to make Advances shall be deemed terminated; and, (ii) any of the other Events of Default and at any time thereafter (such default not having previously been cured), at the option of Required Lenders (and only if all amounts
due under the Senior Credit Facility or the Subordinated Note Documentation shall have been declared immediately due and payable), all Obligations shall be immediately due and payable and Lenders shall have the right to terminate this Agreement and (iii)
a filing of a petition against Borrower in any involuntary case under any state or federal bankruptcy laws, the obligation of Lenders to make Advances hereunder shall be terminated other than as may be required by an appropriate order of the bankruptcy
court having jurisdiction over Borrower. 

     

     11.2     Intentionally Omitted.

     11.3     Setoff. In addition to any other rights which any Lender may have under applicable law, upon the occurrence of an Event of Default hereunder and during the
continuation thereof, such Lender shall have a right to apply Borrower's property held by such Lender to reduce the Obligations.

     11.4     Rights and Remedies not Exclusive. The enumeration of the foregoing rights and remedies is not intended to be exhaustive and the exercise of any rights or remedy
shall not preclude the exercise of any other right or remedies provided for herein or otherwise provided by law, all of which shall be cumulative and not alternative.

 

XII.     WAIVERS AND JUDICIAL PROCEEDINGS.

     12.1     Waiver of Notice. Borrower hereby waives demand, presentment, protest and notice thereof with respect to any and all instruments, notice of acceptance hereof, notice
of loans or advances made, credit extended, or any other action taken in reliance hereon, and all other demands and notices of any description, except such as are expressly provided for herein.

     12.2     Delay. No delay or omission on any Lender's part in exercising any right, remedy or option shall operate as a waiver of such or any other right, remedy or option or
of any default.

     12.3.     Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH
PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

XIII.     EFFECTIVE DATE AND TERMINATION.

     13.1     Term. This Agreement, which shall inure to the benefit of and shall be binding upon the respective successors and permitted assigns of Borrower and each Lender,
shall become effective on the date hereof and shall continue in full force and effect until February 27, 2004 (the "Term") unless sooner terminated as herein provided. Borrower may terminate this Agreement at any time upon ten (10) Business Days' prior
written notice upon payment in full of the Obligations so long as all amounts due under the Senior Credit Facility have been paid in full in cash and the Senior Credit Facility and all commitments to lend thereunder have been irrevocably terminated. 

     13.2.     Termination. The termination of the Agreement shall not affect Borrower's or any Lender's rights, or any of the Obligations having their inception prior to the
effective date of such termination, and the provisions hereof shall continue to be fully operative until all transactions entered into, rights or interests created or Obligations (other than indemnity obligations with respect to which no claim has been
made) have been fully disposed of, concluded or liquidated. All representations, warranties, covenants, waivers and agreements contained herein shall survive termination hereof until all Obligations (other than indemnity obligations with respect to which
no claim has been made) are paid or performed in full.

  

XIV.     INTENTIONALLY OMITTED.

XV.     MISCELLANEOUS.

     15.1     Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applied to contracts to be performed wholly
within the State of New York. Any judicial proceeding brought by or against Borrower with respect to any of the Obligations, this Agreement or any related agreement may be brought in any court of competent jurisdiction in the State of New York, United
States of America, and, by execution and delivery of this Agreement, Borrower accepts for itself and in connection with its properties, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. Borrower hereby waives personal service of any and all process upon it and consents that all such service of process may be made by registered mail (return receipt requested)
directed to Borrower at its address set forth in Section 15.6 and service so made shall be deemed completed five (5) Business Days after the same shall have been so deposited in the mails of the United States of America. Nothing herein shall affect the
right to serve process in any manner permitted by law or shall limit the right of any Lender to bring proceedings against Borrower in the courts of any other jurisdiction. Borrower waives any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. Any judicial proceeding by Borrower against any Lender involving, directly or indirectly, any matter or claim in any way arising out of,
related to or connected with this Agreement or any related agreement, shall be brought only in a federal or state court located in the County of New York, State of New York.

     15.2.     Entire Understanding. (a) This Agreement and the documents executed concurrently herewith contain the entire understanding between Borrower and each Lender and
supersede all prior agreements and understandings, if any, relating to the subject matter hereof. Any promises, representations, warranties or guarantees not herein contained and hereinafter made shall have no force and effect unless in writing, signed by
Borrower's and each Lender's respective officers. Neither this Agreement nor any portion or provisions hereof may be changed, modified, amended, waived, supplemented, discharged, cancelled or terminated orally or by any course of dealing, or in any manner
other than by an agreement in writing, signed by the party to be charged. Borrower acknowledges that it has been advised by counsel in connection with the execution of this Agreement and the Other Documents and is not relying upon oral representations or
statements inconsistent with the terms and provisions of this Agreement.

          (b)     The Required Lenders and Borrower may, subject to the provisions of this Section 15.2 (b), from time to time enter into written supplemental
agreements to this Agreement or the Other Documents executed by Borrower, for the purpose of adding or deleting any provisions or otherwise changing, varying or waiving in any manner the rights of Lenders or Borrower thereunder or the conditions,
provisions or terms thereof of waiving any Event of Default thereunder, but only to the extent specified in such written agreements; provided, however, that no such supplemental agreement shall, without the consent of all Lenders:

               (i)     increase the Commitment Percentage or maximum dollar commitment of any Lender.

               (ii)     extend the maturity of any Note or the due date for any amount payable hereunder, or decrease the rate of
interest or reduce any fee payable by Borrower to Lenders pursuant to this Agreement.

               (iii)     alter the definition of the term Required Lenders or alter, amend or modify this Section 15.2(b).

Any such supplemental agreement shall apply equally to each Lender and shall be binding upon Borrower and Lenders and all future holders of the Obligations. In the case of any waiver, Borrower and Lenders shall be restored to their
former positions and rights, and any Event of Default waived shall be deemed to be cured and not continuing, but no waiver of a specific Event of Default shall extend to any subsequent Event of Default (whether or not the subsequent Event of Default is
the same as the Event of Default which was waived), or impair any right consequent thereon.

     15.3.     Successors and Assigns; Participations; New Lenders.

          (a)     This Agreement shall be binding upon and inure to the benefit of Borrower and each Lender, all future holders of the Obligations and their
respective successors and assigns, except that Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender.

          (b)     Borrower acknowledges that in the regular course of commercial banking business one or more Lenders may at any time and from time to time sell
participating interests in the Advances to other financial institutions (each such transferee or purchaser of a participating interest, a "Transferee"). Each Transferee may exercise all rights of payment (including without limitation rights of set-off)
with respect to the portion of such Advances held by it or other Obligations payable hereunder as fully as if such Transferee were the direct holder thereof provided that Borrower shall not be required to pay to any Transferee more than the amount which
it would have been required to pay to Lender which granted an interest in its Advances or other Obligations payable hereunder to such Transferee had such Lender retained such interest in the Advances hereunder or other Obligations payable hereunder and in
no event shall Borrower be required to pay any such amount arising from the same circumstances and with respect to the same Advances or other Obligations payable hereunder to both such Lender and such Transferee. Borrower hereby grants to any Transferee a
continuing security interest in any deposits, moneys or other property actually or constructively held by such Transferee as security for the Transferee's interest in the Advances.

          (c)     Any Lender may with the consent of the Agent, Lenders and Borrower (which consent of the Agent, Lenders and Borrowers shall not be unreasonably
withheld or delayed and which consent of Borrower shall not be required at any time following the occurrence of an Event of Default and during the continuation thereof) sell, assign or transfer all or any part of its rights under this Agreement and the
Other Documents to one or more additional banks or financial institutions and one or more additional entities may commit to make Advances hereunder (each a "Purchasing Lender"), in minimum amounts of not less than $500,000, pursuant to a Commitment
Transfer Supplement, executed by a Purchasing Lender and the transferor Lender, and delivered to Borrower for recording in the Register described in paragraph (d) below. Upon such execution, delivery, acceptance and recording, from and after the transfer
effective date determined pursuant to such Commitment Transfer Supplement, (i) Purchasing Lender thereunder shall be a party hereto and, to the extent provided in such Commitment Transfer Supplement, have the rights and obligations of a Lender thereunder
with a Commitment Percentage as set forth therein, and (ii) the transferor Lender thereunder shall, to the extent provided in such Commitment Transfer Supplement, be released from its obligations under this Agreement, the Commitment Transfer Supplement
creating a novation for that purpose. Such Commitment Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Lender and the resulting adjustment of the
Commitment Percentages arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such transferor Lender under this Agreement and the Other Documents. Borrower hereby consents to the addition of such
Purchasing Lender and the resulting adjustment of the Commitment Percentages arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such transferor Lender under this Agreement and the Other Documents.
Borrower shall execute and deliver such further documents and do such further acts and things in order to effectuate the foregoing. 

          (d)     Borrower shall maintain at its address a copy of each Commitment Transfer Supplement delivered to it and a register (the "Register") for the
recordation of the names and addresses of each Lender and the outstanding principal, accrued and unpaid interest and other fees due and owing hereunder from time to time. The entries in the Register shall be conclusive, in the absence of manifest error,
and Borrower and Lenders may treat each Person whose name is recorded in the Register as the owner of the Advance recorded therein for the purposes of this Agreement. The Register shall be available for inspection by any Lender at any reasonable time and
from time to time upon reasonable prior notice. 

          (e)     Borrower authorizes each Lender to disclose to any Transferee or Purchasing Lender and any prospective Transferee or Purchasing Lender who has
signed a confidentiality agreement in substantially the form of Exhibit A attached hereto any and all financial information in such Lender's possession concerning Borrower which has been delivered to such Lender by or on behalf of Borrower pursuant to this Agreement or in connection with such Lender's credit
evaluation of Borrower.

     15.4.     Intentionally Omitted.

     15.5.     Indemnity. Borrower shall indemnify each Lender and each of their respective officers, directors, Affiliates, employees and agents (collectively, the "Indemnitees")
from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, reasonable fees and disbursements of counsel)
which may be imposed on, incurred by, or asserted against any Indemnitee in any litigation, proceeding or investigation instituted or conducted by any governmental agency or instrumentality or any other Person with respect to any aspect of, or any
transaction contemplated by, or referred to in, or any matter related to, this Agreement or the Other Documents, whether or not any Indemnitee is a party thereto, except to the extent that any of the foregoing arises out of the willful misconduct or gross
(not mere) negligence of such Indemnitee.

     15.6.     Notice. Any notice or request hereunder may be given to Borrower or any Lender at their respective addresses set forth below or at such other address as may
hereafter be specified in a notice designated as a notice of change of address under this Section. Any notice or request hereunder shall be given by (a) hand delivery, (b) overnight courier, (c) registered or certified mail, return receipt requested, (d)
telex or telegram, subsequently confirmed by registered or certified mail, or (e) telecopy to the number set out below (or such other number as may hereafter be specified in a notice designated as a notice of change of address) with electronic
confirmation of its receipt. Any notice or other communication required or permitted pursuant to this Agreement shall be deemed given (a) when personally delivered to any officer of the party to whom it is addressed, (b) on the earlier of actual receipt
thereof or three (3) days following posting thereof by certified or registered mail, postage prepaid, or (c) upon actual receipt thereof when sent by a recognized overnight delivery service or (d) upon actual receipt thereof when sent by telecopier to the
number set forth below with electronic confirmation of its receipt, in each case addressed to each party at its address set forth below or at such other address as has been furnished in writing by a party to the other by like notice:

          (A)     If to a Lender, as specified on the signature pages hereof

          

	
         (B)       If to Borrower:                     
                 
	
MCMS, Inc.

	
                                        
                                       
	
16399 Franklin Road

	
                                        
                                          
	
Nampa, Idaho 83687

	
                                        
                                          
  
	
Attention:     Christopher J. Anton

	
                                        
                                          
  
	
Telephone:     (208) 898-2600

	
                                        
                                          
  
	
Facsimile:     (208) 898-2796

	
                    with copies to:              
                                 
	
Kirkland & Ellis

	 	
153 East 53rd Street, 39th Floor

	
 
	
New York, New York 10022-4675

	
      
	
Attention:     Frederick Tanne, Esq.

	 	
Telephone:     (212) 446-4800

	 	
Telecopier:     (212) 446-4900

	
 
	 
	
 and:  
	
Cornerstone Equity Investors IV, L.P.

	
           
	
717 Fifth Avenue, Suite 1100

	
          
	
New York, New York 10022

	
           
	
Attention:     Michael Najjar

	
            
	
                       John A. Downer

	
            
	
Telephone:     (212) 753-0901

	
            
	
Telecopier:     (212) 826-6798

	
   and:            
	
Kirkland & Ellis

	
             
	
153 East 53rd Street, 39th Floor

	
            
	
New York, New York 10022

	
           
	
Attention:     Frederick Tanne, Esq.

	
           
	
Telephone:     (212) 446-4800

	
            
	
Telecopier:     (212) 446-4900

 

     15.7.     Survival. The obligations of Borrower under Section 15.5 and the obligations of Lenders under Section 14.7 shall survive termination of this Agreement and the Other
Documents and payment in full of the Obligations.

     15.8.     Severability. If any part of this Agreement is contrary to, prohibited by, or deemed invalid under applicable laws or regulations, such provision shall be
inapplicable and deemed omitted to the extent so contrary, prohibited or invalid, but the remainder hereof shall not be invalidated thereby and shall be given effect so far as possible.

     15.9     Expenses. All reasonable costs and expenses including, without limitation, reasonable attorneys' fees (whether outside counsel or the allocated costs of in house
counsel but not for the same legal work performed by each such counsel) and disbursements incurred by the Lenders (i) in all efforts made to enforce payment of any Obligation, or (ii) in connection with the enforcement of this Agreement and the Other
Documents or any consents or waivers hereunder and all related agreements, documents and instruments, or (iii) in defending or prosecuting any actions or proceedings arising out of or relating to any Lender's transactions with Borrower, or (v) in
connection with any advice given to any Lender with respect to its rights and obligations under this Agreement and all related agreements, may be charged to Borrower and shall be part of the Obligations.

 

     15.10.     Injunctive Relief. Borrower recognizes that, in the event Borrower fails to perform, observe or discharge any of its obligations or liabilities under this
Agreement, any remedy at law may prove to be inadequate relief to Lenders; therefore, the Lenders shall be entitled to seek temporary and permanent injunctive relief in any such case without the necessity of proving that actual damages are not an adequate
remedy.

     15.11.     Consequential Damages. No Lender, nor any agent or attorney for any of them, shall be liable to Borrower for consequential damages arising from any breach of
contract, tort or other wrong relating to the establishment, administration or collection of the Obligations.

     15.12.     Captions. The captions at various places in this Agreement are intended for convenience only and do not constitute and shall not be interpreted as part of this
Agreement.

     15.13.     Counterparts; Telecopied Signatures. This Agreement may be executed in any number of and by different parties hereto on separate counterparts, all of which, when
so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any signature delivered by a party by facsimile transmission shall be deemed to be an original signature hereto.

     15.14.     Construction. The parties acknowledge that each party and its counsel have reviewed this Agreement and that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments, schedules or exhibits thereto.

     

     15.15     Confidentiality; Sharing Information. (a) Each Lender and each Transferee shall hold all non-public information obtained by Lenders, such Lender or such Transferee
pursuant to the requirements of this Agreement in accordance with such Lender's and such Transferee's customary procedures for handling confidential information of this nature; provided, however, each Lender and each Transferee may disclose such
confidential information (a) to its examiners, (b) to its affiliates, outside auditors, counsel and other professional advisors to the extent such Persons(s) has signed a confidentiality agreement in substantially the form of Exhibit A hereto, (c) to any Lender or to any prospective Transferees and Purchasing Lenders to the extent such Persons(s) has signed a confidentiality agreement in substantially the form of Exhibit A hereto, and (d) as required or requested
by any Governmental Body or representative thereof or pursuant to legal process; provided, further that (i) unless specifically prohibited by applicable law or court order, each Lender and each Transferee shall use its reasonable efforts prior to
disclosure thereof, to notify Borrower of the applicable request for disclosure of such non-public information (A) by a Governmental Body or representative thereof (other than any such request in connection with an examination of the financial condition
of a Lender or a Transferee by such Governmental Body) or (B) pursuant to legal process and (ii) in no event shall any Lender or any Transferee be obligated to return any materials furnished by Borrower once the Obligations (other than indemnity
obligations with respect to which no claim has been made) have been paid in full and this Agreement has been terminated.

          (b)     Borrower acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to Borrower
or one or more of its Affiliates (in connection with this Agreement or otherwise) by any Lender or by one or more Subsidiaries or Affiliates of such Lender and Borrower hereby authorizes each Lender to share any information delivered to such Lender by
Borrower and its Subsidiaries pursuant to this Agreement, or in connection with the decision of such Lender to enter into this Agreement, to any such Subsidiary or Affiliate of such Lender for such purposes only to the extent such Person(s) has signed a
confidentiality agreement in substantially the form of Exhibit A hereto, it being understood that any such Subsidiary or Affiliate of any Lender receiving such information shall be bound by the provision of Section 15.15 as if it were a Lender hereunder. Such authorization shall survive the repayment
of the other Obligations and the termination of the Loan Agreement.

 

[SIGNATURE PAGE TO FOLLOW]

     Each of the parties has signed this Agreement as of the day and year first above written.

                              .

WITNESS:                                         
                                MCMS, INC

________________________                                     
By:_______________________________

             [SEAL]                            
                                          
     Name: Christopher J. Anton

                                          
                                          
                Title: Vice President, Finance and Chief Financial Officer
16399 Franklin Road

Nampa, Idaho 83687

 

CORNERSTONE EQUITY INVESTORS IV, L.P.

as Lender 

By:_______________________________

Name:_____________________________

Title:____________________________

717 Fifth Avenue, Suite 1100

New York, New York 10022

Commitment Percentage: 58.4%

 

BANKERS TRUST COMPANY,

as Lender 

By:_______________________________

Name: David Bell

Title:____________________________

 

Commitment Percentage: 22.4%

 

OAK INVESTMENT FUNDS,

as Lender 

By:_______________________________

Name:_____________________________

Title:____________________________

 

Commitment Percentage: 9.6%

 

AUGUST CAPITAL, as Lender

By:_______________________________

Name:_____________________________

Title:____________________________

 

Commitment Percentage: 9.6%

STATE OF NEW YORK         )

                                          
          ) ss.

COUNTY OF NEW YORK     )

     On this _____ day of February, 2000, before me personally came Christopher J. Anton, to me known, who, being by me duly sworn, did depose and say that he is the Vice President, Finance and Chief Financial Officer of MCMS,
INC., the corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the board of directors of said
corporation, and that he signed his name thereto by like order.
______________________________

Notary Public

 

STATE OF NEW YORK         )

                                          
          ) ss.

COUNTY OF NEW YORK     )

     On this _____ day of February, 2000, before me personally came ___________, to me known, who, being by me duly sworn, did depose and say that he is the ____________ of ________, the national association described in and
which executed the foregoing instrument and that he signed his name thereto by on behalf of said association
______________________________

Notary Public

 

 

 

List of Exhibits and Schedules

 

	
Exhibits
	
 

	
Exhibit 2.1(a) 
	
Term Note

	
Exhibit 5.5(b)
	
Financial Projections

	
Exhibit 8.1(i)
	
Financial Condition Certificate

	
Exhibit 15.3 
	
Commitment Transfer Supplement

	
Exhibit A
	
Confidentiality Agreement

	
Schedules
	
 

	
Schedule 1.2 
	
Permitted Encumbrances

	
Schedule 4.5 
	
Equipment and Inventory Locations

	
Schedule 4.19
	
Real Property

	
Schedule 5.2(a) 
	
States of Qualification and Good Standing

	
Schedule 5.2(b) 
	
Subsidiaries

	
Schedule 5.5(c)
	
Changes in Financial Condition

	
Schedule 5.6 
	
Prior Names

	
Schedule 5.7(c) 
	
Environmental

	
Schedule 5.8(b) 
	
Litigation

	
Schedule 5.8(d) 
	
Plans

	
Schedule 5.9 
	
Intellectual Property, Source Code Escrow Agreements

	
Schedule 5.10 
	
Licenses and Permits

	
Schedule 5.14 
	
Labor Disputes

	
Schedule 5.19
	
Swap Agreements

	
Schedule 7.4
	
Investments

	
Schedule 7.8
	
Indebtedness

	
Schedule 8.1(t)
	
Material Adverse Changes

	
Schedule A
	
Original Owners

 

 

TABLE OF CONTENTS

	
I.       DEFINITIONS
	
 
	
25

	
1.1.
	
Accounting Terms
	
25

	
1.2.
	
General Terms
	
25

	
1.3.
	
Uniform Commercial Code Terms
	
33

	
1.4.
	
Certain Matters of Construction
	
33

	
II.      ADVANCES, PAYMENTS
	
 
	
33

	
2.1.
	
(a) Revolving Advances
	
33

	
2.3.
	
Disbursement of Advance Proceeds
	
33

	
2.6.
	
Repayment of Advances
	
33

	
III.      INTEREST AND FEES
	
 
	
34

	
3.1.
	
Interest
	
34

	
3.2.
	
Fee Letter
	
34

	
3.4.
	
Intentionally Omitted
	
34

	
3.5.
	
Computation of Interest and Fees
	
34

	
3.6.
	
Maximum Charges
	
34

	
V.     REPRESENTATIONS AND WARRANTIES
	
34

	
5.1.
	
Authority
	
34

	
5.2.
	
Formation and Qualification
	
35

	
5.3.
	
Survival of Representations and Warranties
	
35

	
5.4.
	
Tax Returns
	
35

	
5.5.
	
Financial Statements
	
35

	
5.6.
	
Corporate Name
	
36

	
5.7.
	
O.S.H.A. and Environmental Compliance
	
36

	
5.8.
	
Solvency; No Litigation, Violation, Indebtedness or Default
	
36

	
5.9.
	
Patents, Trademarks, Copyrights and Licenses
	
37

	
5.10.
	
Licenses and Permits
	
38

	
5.11.
	
Default of Indebtedness
	
38

	
5.12.
	
No Default
	
38

	
5.13.
	
No Burdensome Restrictions
	
38

	
5.14.
	
No Labor Disputes
	
38

	
5.15.
	
Margin Regulations
	
38

	
5.16.
	
Investment Company Act
	
38

	
5.17.
	
Disclosure
	
38

	
5.19.
	
Swaps
	
39

	
5.20.
	
Conflicting Agreements
	
39

	
5.21.
	
Application of Certain Laws and Regulations
	
39

	
5.22.
	
Business and Property of Borrower
	
39

	
5.23.
	
Year 2000
	
39

	
VI.      AFFIRMATIVE COVENANTS
	
39

	
6.1.
	
Payment of Fees
	
39

	
6.2.
	
Conduct of Business and Maintenance of Existence and Assets
	
40

	
6.3.
	
Violations
	
40

	
6.4.
	
Intentionally Omitted
	
40

	
6.6.
	
Execution of Supplemental Instruments
	
40

	
6.7.
	
Payment of Indebtedness
	
40

	
6.8.
	
Standards of Financial Statements
	
40

	
6.9.
	
Appraisals
	
40

	
 
	
 
	
 

	
VII.      NEGATIVE COVENANTS
	
 
	
40

	
7.1.
	
Merger, Consolidation, Acquisition and Sale of Assets
	
40

	
7.2.
	
Creation of Liens
	
41

	
7.3.
	
Guarantees
	
41

	
7.4.
	
Investments
	
41

	
7.5.
	
Loans
	
42

	
7.7.
	
Dividends
	
42

	
7.8.
	
Indebtedness
	
43

	
7.9.
	
Nature of Business
	
43

	
7.10.
	
Transactions with Affiliates
	
43

	
7.11.
	
Subsidiaries
	
44

	
7.12.
	
Fiscal Year and Accounting Changes
	
44

	
7.13.
	
Pledge of Credit
	
44

	
7.14.
	
Amendment of Articles of Incorporation, By-Laws
	
44

	
7.15.
	
Compliance with ERISA
	
44

	
7.16.
	
Prepayment of Indebtedness
	
45

	
7.17.
	
Subordinated Notes
	
45

	
7.18.
	
Other Agreements
	
45

	
VIII.      CONDITIONS PRECEDENT.
	
45

	
8.1.
	
Conditions to Advances
	
45

	
(a)
	
Note
	
45

	
(b)
	
Filings, Registrations and Recordings
	
45

	
(c)
	
Corporate Proceedings of Borrower
	
45

	
(d)
	
Proceedings of Guarantor
	
45

	
(e)
	
Incumbency Certificates of Guarantor
	
45

	
(f)
	
Incumbency Certificates of Borrower
	
46

	
(g)
	
Certificates
	
46

	
(h)
	
Good Standing Certificates
	
46

	
(i)
	
Legal Opinion
	
46

	
(j)
	
No Litigation
	
46

	
(k)
	
Financial Condition Certificates
	
46

	
(n)
	
Pro Forma Financial Statements
	
46

	
(p)
	
Intentionally Omitted
	
46

	
(q)
	
Payment Instructions
	
46

	
(s)
	
Consents
	
46

	
(t)
	
No Adverse Material Change
	
47

	
(v)
	
Guaranty and Other Documents
	
47

	
(x)
	
Contract Review
	
47

	
(y)
	
Closing Certificate
	
47

	
(z)
	
Other
	
47

	
(aa)
	
Representations and Warranties
	
47

	
(cc)
	
No Default
	
47

	
8.2.
	
Intentionally Omitted
	
47

	
IX.      INFORMATION AS TO BORROWER
	
47

	
9.1.
	
Disclosure of Material Matters
	
48

	
9.2.
	
Intentionally Omitted
	
48

	
9.3.
	
Environmental Reports
	
48

	
9.4.
	
Litigation
	
48

	
9.5.
	
Material Occurrences
	
48

	
9.6.
	
Intentionally Omitted
	
48

	
9.7.
	
Annual Financial Statements
	
48

	
9.8.
	
Quarterly Financial Statements
	
49

	
9.9.
	
Monthly Financial Statements
	
49

	
9.10.
	
Other Reports
	
49

	
9.11.
	
Additional Information
	
49

	
9.12.
	
Projected Operating Budget
	
49

	
9.13.
	
Variances From Operating Budget
	
50

	
9.14.
	
Notice of Suits, Adverse Events
	
50

	
9.15.
	
ERISA Notices and Requests
	
50

	
9.16.
	
Additional Documents
	
50

	
X.      EVENTS OF DEFAULT
	
 
	
50

	
XI.      LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT
	
52

	
11.1.
	
Rights and Remedies
	
52

	
11.3.
	
Setoff
	
53

	
11.4.
	
Rights and Remedies not Exclusive
	
53

	
XII.     WAIVERS AND JUDICIAL PROCEEDINGS
	
53

	
12.1.
	
Waiver of Notice
	
53

	
12.2.
	
Delay
	
53

	
12.3.
	
Jury Waiver
	
53

	
XIII.      EFFECTIVE DATE AND TERMINATION
	
53

	
13.1.
	
Term
	
53

	
13.2.
	
Termination
	
53

	
XIV.      REGARDING AGENT
	
 
	
54

	
XV.      MISCELLANEOUS
	
 
	
54

	
15.1
	
Governing Law
	
54

	
15.2.
	
Entire Understanding
	
54

	
15.3.
	
Successors and Assigns; Participations; New Lenders
	
55

	
15.5.
	
Indemnity
	
56

	
15.6.
	
Notice
	
56

	
15.7.
	
Survival
	
57

	
15.8.
	
Severability
	
57

	
15.9.
	
Expenses
	
57

	
15.10.
	
Injunctive Relief
	
57

	
15.11.
	
Consequential Damages
	
57

	
15.12.
	
Captions
	
57

	
15.13.
	
Counterparts; Telecopied Signatures
	
57

	
15.14.
	
Construction
	
57

	
15.15.
	
Confidentiality; Sharing Information
	
58SECURITIES PURCHASE AGREEMENT

                                     Between

                               CEL SCI CORPORATION

                                       and

                         THE INVESTORS SIGNATORY HERETO

                           Dated as of March 21, 2000

<PAGE>

      SECURITIES  PURCHASE AGREEMENT (this  "Agreement"),  dated as of March 15,
2000, among Cel Sci Corporation, a Colorado corporation (the "Company"), and the
investors  signatory  hereto (each such investor is a  "Purchaser"  and all such
investors are, collectively, the "Purchasers").

      WHEREAS,  subject to the terms and conditions set forth in this Agreement,
the  Company  desires to issue and sell to the  Purchasers  and the  Purchasers,
severally and not jointly,  desire to purchase  from the Company,  shares of the
Company's  common  stock,  $.01 par value per share (the  "Common  Stock"),  and
certain  other  securities  of the  Company  as  more  fully  described  in this
Agreement.

      NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement,  and for  other  good and  valuable  consideration  the  receipt  and
adequacy  are hereby  acknowledged,  the  Company  and the  Purchasers  agree as
follows:

                                    ARTICLE I
                                PURCHASE AND SALE

      1.1   The Closing.

            (a) The Closing.  (i) Subject to the terms and  conditions set forth
in this  Agreement,  the Company shall issue and sell to the  Purchasers and the
Purchasers  shall,  severally and not jointly,  purchase an aggregate of 933,333
shares of  Common  Stock  (the  "Shares")  for an  aggregate  purchase  price of
$7,000,000.  The closing of the purchase and sale of the Shares (the  "Closing")
shall take place at the offices of Robinson  Silverman  Pearce Aronsohn & Berman
LLP  ("Robinson  Silverman"),  1290 Avenue of the Americas,  New York,  New York
10104, on March 21, 2000. The date of the Closing is hereinafter  referred to as
the "Closing Date."

                  (ii) At the Closing,  the parties shall deliver or shall cause
to be delivered the  following:  (A) the Company shall deliver to each Purchaser
(1) a stock  certificate  representing the number of Shares indicated below such
Purchaser's name on the signature page of this Agreement, registered in the name
of such Purchaser,  (2) a Common Stock purchase warrant,  in the form of Exhibit
A,  registered in the name of such  Purchaser,  pursuant to which such Purchaser
shall  have the right to  acquire  shares of Common  Stock upon the terms and in
such number as set forth therein (each an  "Adjustable  Warrant"),  (3) a Common
Stock purchase warrant, in the form of Exhibit B, registered in the name of such
Purchaser,  pursuant to which such Purchaser shall have the right to acquire the
number of shares of Common Stock  indicated below such  Purchaser's  name on the
signature page of this  Agreement,  upon the terms and at the exercise price set
forth  therein  (each,  a "Closing  Warrant"  and together  with the  Adjustable
Warrants,  the  "Warrants"),  (4) the legal  opinion  of Hart & Trinen,  outside
counsel  to the  Company,  substantially  in the form of  Exhibit C, and (5) all
other documents,  instruments and writings  required to be delivered at or prior
to the Closing by the Company pursuant to this Agreement,  including an executed

<PAGE>

Registration Rights Agreement,  dated the date hereof, among the Company and the
Purchasers, in the form of Exhibit D (the "Registration Rights Agreement"),  and
the  Transfer  Agent  Instructions,  in the form of Exhibit E,  delivered to and
acknowledged   by  the   Company's   transfer   agent   (the   "Transfer   Agent
Instructions");  and (B) each  Purchaser  shall  deliver to the  Company (1) the
purchase price  indicated below such  Purchaser's  name on the signature page to
this Agreement in United States dollars in immediately  available  funds by wire
transfer to an account  designated for such purpose prior to the Closing Date in
writing by the Company, and (2) all documents, instruments and writings required
to have  been  delivered  at or  prior  to the  Closing  Date by such  Purchaser
pursuant to this Agreement, including an executed Registration Rights Agreement.

            1.2 Certain Defined Terms.  For purposes of this  Agreement,"Trading
Day" and "Per Share Market Value" shall have the meanings set forth in Exhibit A
and "Business Day" shall mean any day except Saturday, Sunday, the day following
Christmas,  the day following  Thanksgiving and any day which shall be a federal
legal holiday or a day on which banking institutions in the State of New York or
the  Commonwealth  of Virginia  generally  are  authorized or required by law or
other  governmental   action  to  close.  A  "Person"  means  an  individual  or
corporation,  partnership,  trust,  incorporated or unincorporated  association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.

                                   ARTICLE II
                         REPRESENTATIONS AND WARRANTIES

      2.1  Representations  and  Warranties of the Company.  The Company  hereby
makes the following representations and warranties to the Purchasers:

            (a)  Organization  and  Qualification.  The Company is a corporation
duly  incorporated,  validly existing and in good standing under the laws of the
State of Colorado,  with the requisite  corporate power and authority to own and
use its  properties  and  assets  and to  carry  on its  business  as  currently
conducted.  The Company has no subsidiaries  other than as set forth in Schedule
2.1(a)  (collectively,  the  "Subsidiaries").  Each  of the  Subsidiaries  is an
entity, duly incorporated or otherwise  organized,  validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as  applicable),  with the  requisite  power and  authority  to own and use its
properties and assets and to carry on its business as currently conducted.  Each
of the Company and the  Subsidiaries  is duly qualified to do business and is in
good standing as a foreign  corporation or other entity in each  jurisdiction in
which the nature of the business  conducted  or property  owned by it makes such
qualification necessary,  except where the failure to be so qualified or in good
standing, as the case may be, could not,  individually or in the aggregate,  (x)
adversely affect the legality,  validity or enforceability of the Securities (as
defined below) or any of this Agreement,  the Registration Rights Agreement, the
Transfer Agent  Instructions  or the Warrants  (collectively,  the  "Transaction
Documents"),  (y) have or result in a material  adverse effect on the results of
operations,  assets,  prospects,  or condition  (financial  or otherwise) of the
Company and the  Subsidiaries,  taken as a whole,  or (z)  adversely  impair the
Company's  ability to perform fully on a timely basis its obligations  under any
of the  Transaction  Documents  (any of (x),  (y) or (z),  a  "Material  Adverse
Effect").

            (b)  Authorization;  Enforcement.  The  Company  has  the  requisite
corporate  power and authority to enter into and to consummate the  transactions
contemplated by each of the Transaction Documents and otherwise to carry out its

<PAGE>

obligations  thereunder.  The execution and delivery of each of the  Transaction
Documents  by  the  Company  and  the  consummation  by it of  the  transactions
contemplated  thereby have been duly  authorized by all necessary  action on the
part of the Company and no further  action is required by the  Company.  Each of
the  Transaction  Documents  has been duly  executed  by the Company  and,  when
delivered in accordance  with the terms hereof,  will  constitute  the valid and
binding obligation of the Company  enforceable against the Company in accordance
with its terms. Neither the Company nor any Subsidiary is in violation of any of
the provisions of its respective certificate of incorporation,  by-laws or other
charter or organizational documents.

            (c) Capitalization. The number of authorized, issued and outstanding
capital  stock  of the  Company  is set  forth in  Schedule  2.1(c).  Except  as
disclosed in Schedule 2.1(c),  the Company owns all of the capital stock of each
Subsidiary.  No  securities  of the Company or any  Subsidiary  are  entitled to
preemptive or similar rights,  nor is any holder of securities of the Company or
any  Subsidiary  entitled to  preemptive  or similar  rights  arising out of any
agreement or  understanding  with the Company or any Subsidiary by virtue of any
of the Transaction Documents.  Except as disclosed in Schedule 2.1(c) and except
as a result of the purchase and sale of the Securities, there are no outstanding
options,  warrants,  script rights to subscribe to, calls or  commitments of any
character  whatsoever  relating  to, or  securities,  or  rights or  obligations
convertible  into or  exchangeable  for,  or  giving  any  Person  any  right to
subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
understandings, or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. To the knowledge of the
Company,  except as specifically disclosed in the SEC Reports (as defined below)
or Schedule 2.1(c), no Person or group of related Persons  beneficially owns (as
determined  pursuant to Rule 13d-3 promulgated under the Securities Exchange Act
of 1934,  as  amended  (the  "Exchange  Act")),  or has the right to  acquire by
agreement with or by obligation binding upon the Company,  beneficial  ownership
of in excess of 5% of the Common Stock.

            (d) Issuance of the  Securities.  The Securities are duly authorized
and,  when  issued  and paid for in  accordance  with the terms  hereof  and the
Warrants,   shall   have  been  duly  and   validly   issued,   fully  paid  and
non-assessable,  free and clear of all liens,  encumbrances  and rights of first
refusal of any kind (collectively,  "Liens").  The Company has reserved a number
of duly authorized number of shares of Common Stock for issuance  hereunder upon
exercise of the  Warrants  that is not less than the sum of (i) the Shares to be
issued  hereunder;  (ii) the  number of shares of  Common  Stock  issuable  upon
exercise of the Adjustable Warrants on the First Vesting Date (as defined in the
Adjustable Warrant), assuming for such purposes that, on the First Vesting Date,
each  Purchaser  holds the entire number of Shares  purchased  hereunder and the
Adjustment  Price  equals 50% of the Per Share  Market  Value on the Trading Day
immediately preceding the Closing Date, and (iii) the number of shares of Common
Stock as are issuable upon exercise in full of the Closing  Warrants (the number
of shares of Common  Stock  contemplated  in (i),  (ii) and (iii),  the "Initial
Minimum"). The shares of Common Stock issuable upon exercise of the Warrants are
referred to herein as the "Underlying  Shares." The Shares, the Warrants and the
Underlying Shares are collectively referred to herein as, the "Securities."

<PAGE>

            (e) No Conflicts.  The  execution,  delivery and  performance of the
Transaction  Documents by the Company and the consummation by the Company of the
transactions  contemplated  thereby  do not and  will not (i)  conflict  with or
violate any  provision  of the  Company's  or any  Subsidiary's  certificate  of
incorporation,  bylaws or other charter  documents  (each as amended through the
date hereof),  or (ii) subject to obtaining  the Required  Approvals (as defined
below), conflict with, or constitute a default (or an event which with notice or
lapse of time or both  would  become a  default)  under,  or give to others  any
rights of termination,  amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument  (evidencing  a Company or  Subsidiary  debt or  otherwise)  or other
understanding  to which the Company or any Subsidiary is a party or by which any
property  or asset of the Company or any  Subsidiary  is bound or  affected,  or
(iii)  result in a violation  of any law,  rule,  regulation,  order,  judgment,
injunction,  decree or other restriction of any court or governmental  authority
to which the Company or a  Subsidiary  is subject  (including  federal and state
securities  laws and  regulations),  or by which  any  property  or asset of the
Company  or a  Subsidiary  is bound or  affected;  except in the case of each of
clauses (ii) and (iii), as could not, individually or in the aggregate,  have or
result in a Material  Adverse  Effect.  The business of the Company is not being
conducted in violation of any law,  ordinance or regulation of any  governmental
authority,  except for violations which, individually or in the aggregate, could
not have or result in a Material Adverse Effect.

            (f)  Filings,  Consents and  Approvals.  Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration  with, any court or other
federal,  state,  local or other  governmental  authority  or  other  Person  in
connection  with the execution,  delivery and  performance by the Company of the
Transaction  Documents,  other than (i) the filings required pursuant to Section
3.10,  (ii)  the  filing  with  the  Securities  and  Exchange  Commission  (the
"Commission") of a registration  statement meeting the requirements set forth in
the Registration  Rights Agreement and covering the resale of the Shares and the
Underlying  Shares  by  the  Purchasers  (the  "Underlying  Shares  Registration
Statement"),  (iii) the  application(s)  to the American Stock Exchange ("AMEX")
for the listing of the Shares and the Underlying  Shares with the AMEX (and with
any other  national  securities  exchange of market in which the Common Stock is
then listed) in the time and manner required  thereby,  (vi) applicable Blue Sky
filings,  and (v) in all other cases  where the failure to obtain such  consent,
waiver,  authorization  or order,  or to give such notice or make such filing or
registration  could not have or result in,  individually or in the aggregate,  a
Material   Adverse  Effect  (the  items   described  in  clauses   (i)-(vi)  are
collectively, the "Required Approvals").

            (g) Litigation; Proceedings. Except as specified in the SEC Reports,
there  is  no  action,  suit,  inquiry,  notice  of  violation,   proceeding  or
investigation pending or, to the knowledge of the Company, threatened against or
affecting  the  Company or any of its  Subsidiaries  or any of their  respective
properties  before or by any court,  arbitrator,  governmental or administrative
agency or  regulatory  authority  (federal,  state,  county,  local or  foreign)
(collectively,  an  "Action")  which (i)  adversely  affects or  challenges  the
legality,  validity or enforceability of any of the Transaction Documents or the
Securities or (ii) could,  individually or in the aggregate, have or result in a
Material Adverse Effect.

<PAGE>

            (h) No Default or Violation.  Neither the Company nor any Subsidiary
(i) is in default under or in violation of (and no event has occurred  which has
not been waived which,  with notice or lapse of time or both,  would result in a
default by the  Company or any  Subsidiary  under),  nor has the  Company or any
Subsidiary  received notice of a claim that it is in default under or that it is
in violation of, any indenture,  loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its  properties is
bound  (whether or not such default or violation  has been  waived),  (ii) is in
violation of any order of any court,  arbitrator or governmental  body, or (iii)
is in  violation  of  any  statute,  rule  or  regulation  of  any  governmental
authority,  except as could not individually or in the aggregate, have or result
in a Material Adverse Effect.

            (i) Private Offering.  Assuming the accuracy of the  representations
and warranties of the Purchasers  set forth in Sections  2.2(b)-(g),  the offer,
issuance and sale of the Securities to the Purchasers as contemplated hereby are
exempt from the  registration  requirements  of the  Securities  Act of 1933, as
amended (the "Securities Act"). Neither the Company nor any Person acting on its
behalf has taken or is, to the  knowledge of the Company,  contemplating  taking
any action which could subject the offering,  issuance or sale of the Securities
to the registration  requirements of the Securities Act including soliciting any
offer to buy or sell the Securities by means of any form of general solicitation
or advertising.

            (j) SEC  Reports;  Financial  Statements.  The Company has filed all
reports  required to be filed by it under the  Securities  Act, and the Exchange
Act for the two years  preceding the date hereof (or such shorter  period as the
Company was  required by law to file such  material)  (the  foregoing  materials
being  collectively  referred to herein as the "SEC Reports" and,  together with
the Schedules to this Agreement the "Disclosure Materials") on a timely basis or
has received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such  extension.  As of their  respective
dates, the SEC Reports  complied in all material  respects with the requirements
of the Securities Act and the Exchange Act and the rules and  regulations of the
Commission  promulgated  thereunder,  and none of the SEC  Reports,  when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated  therein or necessary in order to make the statements
therein,  in  light  of the  circumstances  under  which  they  were  made,  not
misleading.  All material agreements to which the Company is a party or to which
the property or assets of the Company are subject which were required  under the

<PAGE>

Securities  Act,  the  Exchange  Act or the  rules  or  regulations  promulgated
thereunder to have been filed with the Commission have been filed as exhibits to
the SEC Reports.  The financial  statements  of the Company  included in the SEC
Reports comply in all material respects with applicable accounting  requirements
and the rules and  regulations  of the  Commission  with  respect  thereto as in
effect at the time of filing.  Such financial  statements  have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved ("GAAP"), except as may be otherwise specified
in such  financial  statements or the notes  thereto,  and fairly present in all
material  respects the  financial  position of the Company and its  consolidated
subsidiaries  as of and for the dates thereof and the results of operations  and
cash  flows  for the  periods  then  ended,  subject,  in the case of  unaudited
statements, to normal,  immaterial,  year-end audit adjustments.  Since June 30,
1999, except as specifically disclosed in the SEC Reports, (a) there has been no
event,  occurrence  or  development  that has or that could result in a Material
Adverse Effect, (b) the Company has not incurred any liabilities  (contingent or
otherwise)  other  than (x)  liabilities  incurred  in the  ordinary  course  of
business  consistent  with past practice and (y)  liabilities not required to be
reflected in the Company's financial  statements pursuant to GAAP or required to
be  disclosed  in filings  made with the  Commission,  (c) the  Company  has not
altered its method of  accounting  or the  identity of its  auditors and (d) the
Company has not  declared or made any payment or  distribution  of cash or other
property to its  stockholders or officers or directors (other than in compliance
with  existing  Company stock or stock option plans) with respect to its capital
stock, or purchased, redeemed (or made any agreements to purchase or redeem) any
shares of its capital stock.

            (k) Investment Company.  The Company is not, and is not an Affiliate
(as defined in Rule 405 under the Securities  Act) of, an  "investment  company"
within the meaning of the Investment Company Act of 1940, as amended.

            (l)  Certain  Fees.  Except  as  are  payable  to  Reedland  Capital
Partners,  no fees or commissions  will be payable by the Company to any broker,
financial advisor or consultant,  finder,  placement agent,  investment  banker,
bank or other  Person,  with respect to the  transactions  contemplated  by this
Agreement.  The Purchasers  shall have no obligation with respect to any fees or
with  respect to any claims made by or on behalf of other  Persons for fees of a
type  contemplated  in this  Section  that  may be due in  connection  with  the
transactions  contemplated  by this  Agreement.  The Company shall indemnify and
hold harmless the Purchasers, their employees,  officers, directors, agents, and
partners,  and its respective  Affiliates,  from and against all claims, losses,
damages,  costs  (including  the costs of preparation  and attorney's  fees) and
expenses  suffered in respect of any such claimed or existing fees, as such fees
and expenses are incurred.

            (m)  Solicitation  Materials.  Neither  the  Company  nor any Person
acting  on the  Company's  behalf  has  solicited  any  offer to buy or sell the
Securities by means of any form of general solicitation or advertising.

            (n) Form S-3  Eligibility.  The Company is eligible to register  its
Common Stock for resale under Form S-3 promulgated under the Securities Act.

            (o) Listing and  Maintenance  Requirements.  The Company has not, in
the two years  preceding the date hereof  received notice (written or oral) from
the AMEX or any other stock  exchange,  market or trading  facility on which the
Common  Stock is or has been  listed  (or on  which it has been  quoted)  to the
effect that the  Company is not in  compliance  with the listing or  maintenance
requirements of such exchange,  market or trading facility.  The Company is, and
has no reason to believe that it will not in the foreseeable  future continue to
be, in compliance with all such listing and maintenance requirements.

            (p) Patents and Trademarks.  The Company and its Subsidiaries  have,
or have rights to use, all patents, patent applications,  trademarks,  trademark
applications,  service marks, trade names, copyrights, licenses and rights which
are necessary or material for use in connection with their  respective  business
as  described  in the SEC  Reports  (collectively,  the  "Intellectual  Property
Rights") and which the failure to so have would have a Material Adverse Effect .
Neither the Company nor any  Subsidiary  has received a written  notice that the
Intellectual Property Rights used by the Company or its Subsidiaries violates or
infringes  upon the rights of any Person,  to the best knowledge of the Company.
All such  Intellectual  Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.

<PAGE>

            (q) Regulatory Permits. The Company and its Subsidiaries possess all
certificates,  authorizations  and permits  issued by the  appropriate  federal,
state or foreign  regulatory  authorities  necessary to conduct their respective
businesses as described in the SEC Reports,  except where the failure to possess
such permits could not,  individually  or in the aggregate,  have or result in a
Material Adverse Effect  ("Material  Permits"),  and neither the Company nor any
such  Subsidiary  has  received  any  notice  of  proceedings  relating  to  the
revocation or modification of any Material Permit.

            (r) Title. The Company and the Subsidiaries have good and marketable
title in fee simple to all real  property  and personal  property  owned by them
which is material to the business of the Company and its  Subsidiaries,  in each
case free and clear of all Liens, except for Liens as do not affect the value of
such property and do not interfere  with the use made and proposed to be made of
such  property  by the  Company  and its  Subsidiaries.  Any real  property  and
facilities held under lease by the Company and its Subsidiaries are held by them
under valid,  subsisting and enforceable  leases with such exceptions as are not
material and do not  materially  interfere  with the use made and proposed to be
made of such property and buildings by the Company and its Subsidiaries.

            (s)  Registration  Rights;  Rights of  Participation.  Except as set
forth on Schedule 6(b) to the Registration Rights Agreement, the Company has not
granted  or agreed to grant to any Person  any  rights  (including  "piggy-back"
registration  rights) to have any securities of the Company  registered with the
Commission or any other  governmental  authority  which has not been  satisfied.
Except as set forth on Schedule 6(b) to the Registration  Rights  Agreement,  no
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to  participate  in the  transactions  contemplated  by the
Transaction Documents.

            (t) Absence of Certain  Proceedings.  Except as described in the SEC
Reports,  (i) there is no Action  pending or, to the  knowledge  of the Company,
threatened  against  the  Company,  in any  such  case  wherein  an  unfavorable
decision,  ruling or finding could have or result in a Material  Adverse Effect;
(ii)  neither  the  Company  nor any  Subsidiary,  nor any  director  or officer
thereof,  is or has been the  subject  of any  Action  involving  (A) a claim of
violation of or liability under federal or state  securities laws or (B) a claim
of breach of fiduciary duty;  (iii) the Company does not have pending before the
Commission any request for confidential treatment of information and the Company
has no knowledge  of any  expected  such request that would be made prior to the
Effectiveness Date (as defined in the Registration  Rights Agreement);  and (iv)
there  has not been,  and to the best of the  Company's  knowledge  there is not
pending or  contemplated,  any  investigation  by the  Commission  involving the
Company or any current or former director or officer of the Company.

            (u) Labor  Relations.  No material  labor problem  exists or, to the
knowledge of the Company,  is imminent  with respect to any of the  employees of
the Company.

<PAGE>

            (v) Disclosure.  The Company confirms that neither it nor any Person
acting on its behalf has provided the Purchasers or their agents or counsel with
any  information  that  constitutes  or  might  constitute  material  non-public
information.  The Company  understands and confirms that the Purchasers shall be
relying on the foregoing representations in effecting transactions in securities
of the Company. All disclosure provided to the Purchasers regarding the Company,
its business and the transactions  contemplated hereby,  including the Schedules
to this Agreement, furnished by or on behalf of the Company are true and correct
and do not contain any untrue  statement of a material fact or omit to state any
material fact necessary in order to make the statements  made therein,  in light
of the circumstances under which they were made, not misleading.

      2.2  Representations  and  Warranties of the  Purchasers.  Each  Purchaser
hereby for itself and for no other  Purchaser,  represents  and  warrants to the
Company as follows:

            (a)  Organization;  Authority.  Such  Purchaser  is an  entity  duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
jurisdiction  of its  organization  with the requisite  corporate or partnership
power  and  authority  to  enter  into  and  to  consummate   the   transactions
contemplated  by the  Transaction  Documents  and  otherwise  to  carry  out its
obligations  thereunder.  The  purchase  by  such  Purchaser  of the  Securities
hereunder has been duly  authorized by all necessary  action on the part of such
Purchaser. Each of this Agreement and the Registration Rights Agreement has been
duly  executed  by such  Purchaser,  and when  delivered  by such  Purchaser  in
accordance with the terms hereof,  will constitute the valid and legally binding
obligation of such  Purchaser,  enforceable  against it in  accordance  with its
terms.

            (b) Investment Intent. Such Purchaser is acquiring the Securities as
principal for its own account for  investment  purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Purchaser's right, subject to the provisions of this
Agreement  and  the  Registration  Rights  Agreement,  at all  times  to sell or
otherwise dispose of all or any part of such Securities pursuant to an effective
registration   statement  under  the  Securities  Act  and  in  compliance  with
applicable  federal and state  securities  laws or under an exemption  from such
registration.  Nothing  contained  herein  shall be deemed a  representation  or
warranty by such Purchaser to hold Securities for any amount of time.

            (c)  Purchaser  Status.  At the time such  Purchaser was offered the
Securities,  it was,  and at the date  hereof it is, and at each  exercise  date
under the  Warrants,  it will be, an  "accredited  investor"  as defined in Rule
501(a) under the Securities Act.

            (d) Experience of such Purchaser.  Such  Purchaser,  either alone or
together  with its  representatives,  has  such  knowledge,  sophistication  and
experience in business and  financial  matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.

            (e) Ability of Purchaser to Bear Risk of Investment.  Such Purchaser
is able to bear the economic risk of an investment in the Securities and, at the
present time, is able to afford a complete loss of such investment.

<PAGE>

            (f) Access to Information.  Such Purchaser  acknowledges that it has
reviewed the Disclosure  Materials and has been afforded (i) the  opportunity to
ask such questions as it has deemed  necessary of, and to receive  answers from,
representatives  of the  Company  concerning  the  terms and  conditions  of the
offering  of the  Securities  and the  merits  and  risks  of  investing  in the
Securities;  (ii) access to  information  about the  Company  and the  Company's
financial condition, results of operations, business, properties, management and
prospects  sufficient  to enable it to evaluate  its  investment;  and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without  unreasonable effort or expense that is necessary to make an
informed  investment  decision  with  respect to the  investment.  Neither  such
inquiries  nor  any  other  investigation  conducted  by or on  behalf  of  such
Purchaser or its  representatives or counsel shall modify,  amend or affect such
Purchaser's  right  to rely  on the  truth,  accuracy  and  completeness  of the
Disclosure Materials and the Company's  representations and warranties contained
in the Transaction Documents.

            (g) General  Solicitation.  Such  Purchaser  is not  purchasing  the
Securities as a result of or subsequent to any advertisement, article, notice or
other  communication  regarding  the  Securities  published  in  any  newspaper,
magazine or similar media or broadcast over  television or radio or presented at
any seminar or any other general solicitation or general advertisement.

            (h) Reliance.  Such Purchaser  understands and acknowledges that (i)
the Securities are being offered and sold to it without  registration  under the
Securities  Act in a  private  placement  that is exempt  from the  registration
provisions of the Securities Act and (ii) the  availability  of such  exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing  representations  and such Purchaser  hereby  consents to such
reliance.

            (i) Trading in the Common Stock. During the thirty (30) Trading Days
immediately preceding the Closing Date, such Purchaser has neither established a
position in the Common Stock nor engaged in any trading activity with respect to
the Common Stock.

            The Company  acknowledges  and agrees that no Purchaser makes or has
made representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.

                                   ARTICLE III
                         OTHER AGREEMENTS OF THE PARTIES

      3.1 Transfer Restrictions. (a) Securities may only be disposed of pursuant
to an effective  registration statement under the Securities Act, to the Company
or pursuant to an available  exemption  from or in a transaction  not subject to
the registration  requirements of the Securities Act, and in compliance with any
applicable federal and state securities laws. In connection with any transfer of
Securities other than pursuant to an effective  registration statement or to the
Company,  except as  otherwise  set forth  herein,  the  Company may require the
transferor  thereof to provide to the Company an opinion of counsel  selected by
the  transferor,  the form and  substance of which  opinion  shall be reasonably
satisfactory  to the Company,  to the effect that such transfer does not require
registration  under the  Securities  Act.  Notwithstanding  the  foregoing,  the

<PAGE>

Company,  without  requiring a legal  opinion as  described  in the  immediately
preceding  sentence,  hereby  consents to and agrees to register on the books of
the Company and with any transfer  agent for the  securities  of the Company any
transfer of  Securities  by a Purchaser to an Affiliate of such  Purchaser or to
one or more  funds  or  managed  accounts  under  common  management  with  such
Purchaser,  and any transfer  among any such  Affiliates or one or more funds or
managed  accounts,  provided that:  (A) the transferee  certifies to the Company
that it is an "accredited  investor" within the meaning of Rule 501(a) under the
Securities  Act and that it is acquiring the  Securities  solely for  investment
purposes (subject to the  qualifications  hereof) and (B) any such transfer does
not constitute a public distribution of securities.  As a condition of transfer,
any such  transferee  shall  agree in  writing  to be bound by the terms of this
Agreement and shall have the rights of a Purchaser  under this Agreement and the
Registration Rights Agreement.

            (b) The Purchasers  agree to the imprinting,  so long as is required
by this Section 3.1(b), of the following legend on the Securities:

            [NEITHER]  THESE  SECURITIES  [NOR THE  SECURITIES  INTO WHICH THESE
      SECURITIES ARE  EXERCISABLE]  HAVE BEEN REGISTERED WITH THE SECURITIES AND
      EXCHANGE COMMISSION OR THE SECURITIES  COMMISSION OF ANY STATE IN RELIANCE
      UPON AN EXEMPTION FROM  REGISTRATION  UNDER THE SECURITIES ACT OF 1933, AS
      AMENDED (THE "SECURITIES  ACT"), AND,  ACCORDINGLY,  MAY NOT BE OFFERED OR
      SOLD EXCEPT  PURSUANT TO AN  EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE
      SECURITIES  ACT  OR  PURSUANT  TO AN  AVAILABLE  EXEMPTION  FROM,  OR IN A
      TRANSACTION  NOT  SUBJECT  TO,  THE   REGISTRATION   REQUIREMENTS  OF  THE
      SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

            Neither  Shares nor  Underlying  Shares shall contain the legend set
forth  above  nor any  other  legend  at any  time  while an  Underlying  Shares
Registration  Statement is effective  under the  Securities Act or, in the event
there is not an effective Underlying Shares Registration  Statement at such time
if such legend is not required under  applicable  requirements of the Securities
Act (including judicial  interpretations and pronouncements  issued by the staff
of the  Commission).  The  Company  shall  cause its  counsel to issue the legal
opinion  included in the Transfer Agent  Instructions to the Company's  transfer
agent on the day that such Underlying Shares Registration  Statement is declared
effective by the Commission (the "Effective  Date").  The Company agrees that if
any Shares or Underlying Shares are issued with a legend in accordance with this
Section 3.1(b), it will, within three (3) Trading Days after request therefor by
a Purchaser and the surrender by such Purchaser of the certificate  representing
the  applicable  Shares or  Underlying  Shares,  provide such  Purchaser  with a
certificate or certificates  representing such Shares or Underlying Shares, free
from such legend at such time as such legend would not have been required  under
this Section 3.1(b) had such issuance occurred on the date of such request.  The
Company may not make any  notation on its  records or give  instructions  to any
transfer  agent of the Company  which enlarge the  restrictions  of transfer set
forth in this Section.

      3.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of  Underlying  Shares upon  exercise of the Warrants will result in dilution of
the outstanding  shares of Common Stock, which dilution may be substantial under
certain market conditions.  The Company further acknowledges that its obligation
to issue Underlying  Shares upon exercise of the Warrants  pursuant to the terms
thereof  is  unconditional  and  absolute  regardless  of the effect of any such
dilution.

<PAGE>

      3.3 Furnishing of  Information.  As long as the Purchasers own Securities,
the Company  covenants to timely file (or obtain  extensions in respect  thereof
and file within the applicable grace period) all reports required to be filed by
the Company  after the date hereof  pursuant to the Exchange Act. So long as the
Purchasers  own  Securities,  if the  Company is not  required  to file  reports
pursuant to such laws,  it will prepare and furnish to the  Purchasers  and make
publicly  available  in  accordance  with  Rule  144(c)  promulgated  under  the
Securities  Act such  information  as is required for the Purchasers to sell the
Securities  under Rule 144  promulgated  under the  Securities  Act. The Company
further  covenants  that it will  take  such  further  action  as any  holder of
Securities may reasonably request,  all to the extent required from time to time
to enable such Person to sell Underlying Shares without  registration  under the
Securities  Act within the  limitation  of the  exemptions  provided by Rule 144
promulgated  under the Securities  Act,  including the legal opinion  referenced
above in this  Section.  Upon the request of any such Person,  the Company shall
deliver to such Person a written  certification of a duly authorized  officer as
to whether it has complied with such requirements.

      3.4 Integration.  The Company shall not, and shall use its best efforts to
ensure that, no Affiliate of the Company shall,  sell, offer for sale or solicit
offers to buy or  otherwise  negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the  Securities  in a manner that would  require the  registration  under the
Securities  Act of the sale of the Securities to the Purchasers or that would be
integrated  with the offer or sale of the  Securities  for purposes of the rules
and regulations of the AMEX.

      3.5 Increase in Authorized Shares. If on any date the Company would be, if
a notice of exercise were to be delivered on such date,  precluded  from issuing
the sum of (i) 200% of the  number  of  Underlying  Shares  then  issuable  upon
exercise in full of the  Adjustable  Warrants and (ii) the number of  Underlying
Shares  issuable  upon  exercise in full of the Closing  Warrants  (the "Current
Required  Minimum")  due  to  the  unavailability  of  a  sufficient  number  of
authorized  but unissued or reserved  shares of Common Stock,  then the Board of
Directors of the Company  shall  promptly  (and in any case,  within 30 Business
Days from such date) prepare and mail to the  stockholders  of the Company proxy
materials   requesting   authorization  to  amend  the  Company's   articles  of
incorporation to increase the number of shares of Common Stock which the Company
is  authorized  to issue to at least  such  number of  shares  as is  reasonably
adequate  to enable  the  Company  to comply  with its  issuance,  exercise  and
reservation  of  shares  obligations  as set  forth  in this  Agreement  and the
Warrants  (the sum of (x) the number of shares of Common Stock then  outstanding
plus all  shares of Common  Stock  issuable  upon  exercise  of all  outstanding
options,  warrants and convertible  instruments other than the Warrants, and (y)
the Current  Required  Minimum,  shall be a reasonable  number).  In  connection
therewith, the Board of Directors shall (a) adopt proper resolutions authorizing
such  increase,  (b) recommend to and otherwise use its best efforts to promptly
and duly obtain  stockholder  approval to carry out such resolutions (and hold a
special  meeting of the  stockholders  no later than the earlier to occur of the
60th day after delivery of the proxy materials  relating to such meeting and the
90th day after request by a holder of Warrants to issue the number of Underlying
Shares in  accordance  with the terms  hereof) and (c) within five (5)  Business
Days of obtaining such stockholder authorization,  file an appropriate amendment
to the Company's articles of incorporation to evidence such increase.

<PAGE>

      3.6  Reservation and Listing of Underlying  Shares.  (a) The Company shall
(i) in the time  and  manner  required  by the  AMEX  and  such  other  national
securities  exchange  or market or trading or  quotation  facility  on which the
Common  Stock is then  listed for  trading,  prepare and file with the AMEX (and
such other  national  securities  exchange  or market or  trading  or  quotation
facility  on which the Common  Stock is then listed for  trading) an  additional
shares listing application  covering a number of shares of Common Stock which is
not less than the Initial  Minimum,  (ii) take all steps necessary to cause such
shares of Common Stock to be approved for listing in the AMEX (as well as on any
such other  national  securities  exchange  or market or  trading  or  quotation
facility  on  which  the  Common  Stock  is then  listed)  as  soon as  possible
thereafter,  and (iii) provide to the Purchasers  evidence of such listing,  and
the Company  shall  maintain  the listing of its Common  Stock  thereon.  If the
number of  Underlying  Shares  issuable  upon  exercise of the then  unexercised
portion  of the  Warrants  exceeds  85%  of  the  number  of  Underlying  Shares
previously  listed on account  thereof  with AMEX (and any such  other  required
exchanges),  then the Company  shall take the necessary  actions to  immediately
list a number of  Underlying  Shares  as  equals  no less than the then  Current
Required Minimum with respect thereto.

            (b) The Company  shall  maintain a reserve of shares of Common Stock
for  issuance  upon  exercise  in full of the  Warrants in  accordance  with the
Warrants,  in such amount as may be required to fulfill its  obligations in full
under the  Warrants,  which  reserve  shall equal no less than the then  Current
Required Minimum.

      3.7 Exercise  Procedures.  The  Transfer  Agent  Instructions  and Form of
Election to Purchase under the Warrants set forth the totality of the procedures
with  respect  to the  exercise  of the  Warrants,  including  the form of legal
opinion,  if necessary,  that shall be rendered to the Company's  transfer agent
and such other  information and  instructions as may be reasonably  necessary to
enable the Purchasers to exercise the Warrants.

      3.8 Notice of Breaches.  Each of the Company and the Purchasers shall give
prompt  written  notice to the other of any breach by it of any  representation,
warranty or other agreement  contained in any Transaction  Document,  as well as
any events or occurrences  arising after the date hereof which would  reasonably
be likely to cause any  representation  or warranty or other  agreement  of such
party, as the case may be,  contained  therein to be incorrect or breached as of
the Closing Date.  However,  no  disclosure by a party  pursuant to this Section
shall be deemed  to cure any  breach of any  representation,  warranty  or other
agreement contained in any Transaction Document.

      3.9 Certain Securities Laws Disclosures; Publicity. The Company shall: (i)
on the  Closing  Date,  issue  a  press  release  acceptable  to the  Purchasers
disclosing the transactions contemplated hereby, (ii) file with the Commission a
Report  on Form 8-K or Form 10-Q (as  applicable)  disclosing  the  transactions
contemplated  hereby within ten (10)  Business Days after the Closing Date,  and
(iii) timely file with the Commission a Form D promulgated  under the Securities
Act as required  under  Regulation D promulgated  under the  Securities  Act and
provide a copy thereof to the Purchasers promptly after the filing thereof.  The
Company  shall,  no less than one (1)  Business  Days prior to the filing of any
disclosure  required by clauses (ii) and (iii) above,  provide a copy thereof to

<PAGE>

the Purchasers.  The Company and the Purchasers shall consult with each other in
issuing any press releases or otherwise making public  statements or filings and
other  communications  with the  Commission  or any  regulatory  agency or stock
market or trading facility with respect to the transactions  contemplated hereby
and neither party shall issue any such press release or otherwise  make any such
public statement, filings or other communications pertaining to the transactions
contemplated  hereby  without  the prior  written  consent of the  other,  which
consent  shall not be  unreasonably  withheld or  delayed,  except that no prior
consent shall be required if such disclosure is required by law and such consent
can not  reasonably  be expected to be  received  prior to the time  required to
complete such filing or make such statement in accordance  with such  applicable
law, in which such case the disclosing  party shall provide the other party with
prior  notice  of  such  public  statement,   filing  or  other   communication.
Notwithstanding the foregoing,  the Company shall not publicly disclose the name
of a  Purchaser,  or include  the name of a  Purchaser  in any  filing  with the
Commission,  or any regulatory agency,  trading facility or stock market without
the  prior  written  consent  of  such  Purchaser,  except  to the  extent  such
disclosure  (but not any disclosure as to the  controlling  Persons  thereof) is
required by law, in which case the Company  shall  provide such  Purchaser  with
prior notice of such disclosure.

      3.10 Transfer of Intellectual  Property Rights.  Except in connection with
the sale of all or substantially  all of the assets of the Company,  the Company
shall not  transfer,  sell or  otherwise  dispose of any  Intellectual  Property
Rights,  or allow any of the  Intellectual  Property Rights to become subject to
any Liens, or fail to renew such Intellectual  Property Rights (if renewable and
it would otherwise  lapse if not renewed),  without the prior written consent of
the  Purchasers.  Notwithstanding  anything  contained in this  Agreement or the
other Transaction Documents to the contrary,  the Company will not be restricted
from selling,  transferring  or otherwise  disposing of: (i) any interest in its
subsidiaries:  Viral  Technology,  Inc. or  MaxPharma,  (ii) any interest in its
HGP-30 or AIDS technology,  (iii) any interest in its L.E.A.P.S.  technology, or
(iv) so long as any sale,  transfer or disposition is made to a corporation with
gross annual revenues of at least $100,000,000 or a market  capitalization of at
least $500,000,000 any interest in its other  Intellectual  Property Rights. The
restriction  provided by this  Section  3.11 will expire on the earlier of three
(3) years from the date of this  Agreement or the date the  Purchasers no longer
own any Shares.

      3.11 Use of Proceeds. The Company shall use the net proceeds from the sale
of the  Securities  hereunder  for  working  capital  purposes  and  not for the
satisfaction  of any portion of the Company's debt  (excluding  payment of trade
payables in the ordinary course of the Company's  business and prior practices),
to redeem any Company  equity or  equity-equivalent  securities or to settle any
outstanding litigation. Pending application of the proceeds of this placement in
the manner permitted  hereby,  the Company will invest such proceeds in interest
bearing accounts and/or short-term, investment grade interest bearing securities

      3.12  Reimbursement.  If any Purchaser,  other than by reason of its gross
negligence or willful  misconduct or other than in connection  with an agreement
between such  Purchaser  and a Person other than the Company or the formation or
governing  documents of such Purchaser,  becomes involved in any capacity in any
action,  proceeding or investigation brought by or against any Person, including
stockholders  of  the  Company,  in  connection  with  or  as a  result  of  the
consummation  of the  transactions  contemplated by Transaction  Documents,  the
Company  will  reimburse  such  Purchaser  for its  reasonable  legal  and other

<PAGE>

expenses  (including the cost of any investigation and preparation and travel in
connection  therewith)  incurred in connection  therewith,  as such expenses are
incurred. In addition, other than with respect to any matter in which any of the
Purchasers is a named party, the Company will pay such Purchaser the charges, as
reasonably  determined  by such  Purchaser,  for the  time  of any  officers  or
employees  of such  Purchaser  devoted to appearing  and  preparing to appear as
witnesses, assisting in preparation for hearings, trials or pretrial matters, or
otherwise with respect to inquiries,  hearings,  trials,  and other  proceedings
relating to the subject matter of this Agreement. The reimbursement  obligations
of the Company under this paragraph  shall be in addition to any liability which
the Company may otherwise have,  shall extend upon the same terms and conditions
to any  Affiliates  of the  Purchasers  who are  actually  named in such action,
proceeding or  investigation,  and partners,  directors,  agents,  employees and
controlling persons (if any), as the case may be, of the Purchasers and any such
Affiliate, and shall be binding upon and inure to the benefit of any successors,
assigns,  heirs and personal  representatives of the Company, the Purchasers and
any such Affiliate and any such Person. The Company also agrees that neither the
Purchasers nor any such Affiliates,  partners,  directors,  agents, employees or
controlling  persons  shall  have any  liability  to the  Company  or any Person
asserting  claims on behalf of or in right of the Company in connection  with or
as a result  of the  consummation  of the  Transaction  Documents  except to the
extent that any losses, claims, damages, liabilities or expenses incurred by the
Company result from the gross negligence or willful misconduct of the applicable
Purchaser or entity in connection  with the  transactions  contemplated  by this
Agreement.

      3.13  Redemption at the Option of the Company.

            (a) Subject to the  provisions  of this  Section,  commencing on the
Effective Date, the Company shall have the right, upon thirty (30) Trading Days'
notice to the  Purchasers  which may not be given until after the Effective Date
(an  "Optional  Redemption  Notice"  and the date such notice is received by the
Purchasers,  the "Notice  Date"),  to redeem all or a portion of the Shares then
held by the  Purchasers at a cash price equal to the Optional  Redemption  Price
(as defined below).  The Company may only deliver an Optional  Redemption Notice
to the  Purchasers  if, on the Notice  Date:  (i) either  there is an  effective
Underlying Shares  Registration  Statement  pursuant to which the Purchasers are
permitted to utilize the  prospectus  thereunder to sell Shares or Shares may be
sold without  volume  restrictions  pursuant to Rule 144  promulgated  under the
Securities  Act, as determined  by counsel to the Company  pursuant to a written
opinion  letter,  addressed  and  delivered  prior  to the  Notice  Date  to the
Company's transfer agent in the form and substance  acceptable to the Purchasers
and such  transfer  agent and (ii) the Common Stock is listed for trading on the
AMEX or on a Subsequent Market (as defined in the Adjustable  Warrants).  If any
of the  foregoing  conditions  shall  cease to be in effect  during  the  period
between the Notice Date and the date the Optional  Redemption Payment is paid in
full,  then the  Purchasers  subject to such  redemption  may elect,  by written
notice to the Company  given at any time after any of the  foregoing  conditions
shall  cease  to  be  in  effect,  to  invalidate  ab  initio  such  redemption,
notwithstanding  anything herein  contained to the contrary.  The Purchasers may
sell any portion of the Shares subject to an Optional Redemption Notice prior to
the date that the Optional Redemption Price is due and paid in full.

            (b) The Optional  Redemption  Price is due on the  thirtieth  (30th)
Trading Day following the Notice Date. If any portion of the Optional Redemption
Price shall not be paid by the Company by  expiration of such  thirtieth  (30th)
Trading Day,  interest shall accrue thereon at the rate of 18% per annum (or the
maximum rate permitted by applicable law,  whichever is less) until the Optional
Redemption  Price plus all such  interest is paid in full.  In addition,  if any
portion of the Optional  Redemption  Price remains  unpaid after such date,  the
Purchasers  subject  to such  redemption  may elect,  by  written  notice to the
Company given at any time  thereafter,  to invalidate ab initio such redemption,
notwithstanding anything herein contained to the contrary. If a Purchaser elects
to invalidate such redemption the Company shall promptly, and, in any event, not
later than three (3) Trading  Days from  receipt of such  Purchaser's  notice of
such election, return to such Purchaser all of the Shares for which the Optional
Redemption Price shall not have been paid in full.

<PAGE>

            (c) The  "Optional  Redemption  Price" for each Share to be redeemed
shall equal the sum of (i) 120%  multiplied by the greater of (A) the average of
the Per Share Market Values for the five (5) Trading Days immediately  preceding
the date the Optional  Redemption Price is paid in full, and (B) the most recent
Adjustment  Price (as defined in the Adjustable  Warrants),  or if such optional
redemption occurs prior to the First Vesting Date, the Initial Closing Price (as
defined in the Adjustable Warrants), and (ii) all other amounts, costs, expenses
and liquidated damages due in respect of such Shares.

            3.14  Redemption at the Option of the Purchasers.

            (a) Upon the  occurrence of a Triggering  Event (as defined  below),
each  Purchaser  shall have the right,  exercisable  at the sole  option of such
Purchaser,  to require the Company to redeem all or a portion of the Shares then
held by such Purchaser for a redemption  price, in cash,  equal to the Mandatory
Redemption Price (as defined below). The Mandatory Redemption Price shall be due
and payable within five (5) Trading Days of the date on which the notice for the
payment  therefor is provided by a Purchaser (the date such notice is delivered,
the  "Mandatory  Redemption  Date").  If the Company  fails to pay the Mandatory
Redemption  Price  hereunder  in full  pursuant to this Section on the date such
amount is due in  accordance  with this  Section,  the Company will pay interest
thereon at a rate of 18% per annum (or the lesser amount permitted by applicable
law),  accruing daily from such date until the Mandatory  Redemption Price, plus
all such interest thereon, is paid in full.

            (b) A  "Triggering  Event"  means  any one or more of the  following
events  (whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order,  rule or regulation of any  administrative  or governmental
body):

                  (i)  after  the  Effective  Date,  the  effectiveness  of  the
Underlying Shares Registration Statement lapses for any reason or the Purchasers
shall not be  permitted  to resell  Registrable  Securities  (as  defined in the
Registration   Rights  Agreement)  under  the  Underlying  Shares   Registration
Statement, in either case, for more than an aggregate of thirty (30) days (which
need not be consecutive days);

                  (ii) for an aggregate  of five (5)  consecutive  days,  at the
direction of the Company or due to events or circumstances within the control of
the  Company,  there shall be no closing bid prices for the Company  reported by
Bloomberg  Information  Services,  Inc. (or any successor  entity thereto to the
function of reporting stock prices);

                  (iii) the failure of the Common Stock to be listed for trading
on the AMEX or on a Subsequent Market or the suspension of the Common Stock from
trading on the AMEX or on a Subsequent  Market, in either case, at the direction
of the  Company  or due to events or  circumstances  within  the  control of the
Company;

<PAGE>

                  (iv) the  Company  shall  either  be a party to any  Change of
Control  Transaction  (as defined below) or agree to sell (in one or a series of
related  transactions)  all or  substantially  all of its assets (whether or not
such sale would constitute a Change of Control Transaction).  "Change of Control
Transaction"  means the occurrence of any of (i) an  acquisition  after the date
hereof  by an  individual  or legal  entity or  "group"  (as  described  in Rule
13d-5(b)(1)  promulgated  under the Exchange Act) of effective  control (whether
through  legal or  beneficial  ownership  of capital  stock of the  Company,  by
contract  or  otherwise)  of in excess of 33% of the  voting  securities  of the
Company, except as a result of a tender offer to the holders of the Common Stock
that is not approved by the Board,  (ii) a replacement  at one time or over time
of more than one-half of the members of the Company's  board of directors  which
is not approved by a majority of those  individuals who are members of the board
of  directors  on the date  hereof (or by those  individuals  who are serving as
members of the board of directors on any date whose  nomination  to the board of
directors  was  approved by a majority of the members of the board of  directors
who are members on the date  hereof),  (iii) the merger of the  Company  with or
into  another  entity  which  either is not listed for  trading on the AMEX or a
Subsequent  Market or in which the holders of the Company's  securities prior to
the  first  such  transaction  do not own a  minimum  of 51% of the  outstanding
capital stock of the surviving  entity,  or (iv) the execution by the Company of
an agreement to which the Company is a party or by which it is bound,  providing
for any of the events set forth above in (i) - (iii);

                  (v) the  Company  shall fail to  observe or perform  any other
covenant,  agreement or warranty contained in, or otherwise commit any breach of
the Transaction  Documents,  and such failure or breach shall not, if subject to
the  possibility  of a cure by the Company,  have been remedied  within five (5)
days after the date on which  notice of such  failure or breach  shall have been
given.

                  (vi) there shall have occurred a "Triggering  Event" under the
Company's Securities Purchase Agreement,  dated December 8, 1999, except that no
Triggering  Event hereunder will be deemed to have occurred if the Company shall
have complied with its obligations under Section 3(c) of the Registration Rights
Agreement,  dated as of December 8, 1999,  among the Purchasers and the Company,
by timely filing the additional  registration  statement, if any, required to be
filed under such agreement, unless such additional registration statement is not
declared  effective by the  Commission  by the 70th day  following the date that
such registration statement was first required to have been filed.

            (c)  Notwithstanding  anything herein to the contrary,  in the event
one or more of the  Triggering  Events  would  cause the  Company's  auditors to
characterize  the issuance of the Shares as a debt issuance then the Company and
the  Purchasers  agree to discuss any changes to the  Transaction  Documents  in
order to  avoid  the  characterization  of the  issuance  of the  Shares  by the
Company's auditors as a debt issuance. The "Mandatory Redemption Price" for each
Share to be redeemed  shall equal the sum of (i) 120%  multiplied by the greater
of (A) the average of the Per Share Market  Values for the five (5) Trading Days
preceding the Mandatory Redemption Date, (B) the average of the Per Share Market
Values  for the five  (5)  Trading  Days  preceding  the  date  the  {Mandatory}
Redemption Price is paid in full, and (C) the most recent  Adjustment  Price, or
if such optional  redemption occurs prior to the First Vesting Date, the Initial
Closing  Price,  and (ii) all other  amounts,  costs,  expenses  and  liquidated
damages due in respect of such Shares.

<PAGE>

            3.15 Certain Trading  Restrictions.  Each Purchaser agrees that from
the period  commencing on the Closing Date and ending on the Expiration Date (as
defined in the  Adjustable  Warrants)  it will not,  during the 35 Trading  Days
preceding each Vesting Date (as defined in the Adjustable Warrants),  enter into
any Short Sales (as defined herein). For purposes of this Section 3.16, a "Short
Sale" by a Purchaser shall mean a sale of Common Stock by such Purchaser that is
marked as a short  sale and that is made at a time when  there is no  equivalent
offsetting long position in Common Stock held by the Purchaser.  For purposes of
determining  whether there is an equivalent  offsetting  long position in Common
Stock  held by a  Purchaser,  Warrant  Shares  that have not yet been  issued on
exercise of the Warrants held by a Purchaser  shall be deemed to be held long by
such Purchaser.

                                   ARTICLE IV
                                  MISCELLANEOUS

            4.1 Fees and Expenses.  At the Closing the Company  shall  reimburse
the Purchasers for their legal fees and expenses incurred in connection with the
preparation and  negotiation of the Transaction  Documents by paying to Robinson
Silverman  $25,000  for  the  preparation  and  negotiation  of the  Transaction
Documents.  Other than the amounts  contemplated  in the  immediately  preceding
sentence,  and  except  as  otherwise  set  forth  in  the  Registration  Rights
Agreement, each party shall pay the fees and expenses of its advisers,  counsel,
accountants and other experts,  if any, and all other expenses  incurred by such
party  incident  to  the  negotiation,   preparation,  execution,  delivery  and
performance of this  Agreement.  The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Securities.

            4.2  Entire  Agreement;   Amendments.   The  Transaction  Documents,
together   with  the  Exhibits  and  Schedules   thereto,   contain  the  entire
understanding  of the  parties  with  respect to the subject  matter  hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such  matters,  which the  parties  acknowledge  have been  merged  into such
documents, exhibits and schedules.

            4.3  Notices.  Any  and  all  notices  or  other  communications  or
deliveries  required or permitted to be provided  hereunder  shall be in writing
and  shall be deemed  given and  effective  on the  earliest  of (i) the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  telephone  number  specified in this Section  prior to 5:00 p.m. (New
York City  time) on a  Business  Day,  (ii) the  Business  Day after the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Agreement later than 5:00 p.m. (New
York City time) on any date and earlier than 11:59 p.m.  (New York City time) on
such date,  (iii) the Business  Day  following  the date of mailing,  if sent by
nationally recognized overnight courier service and marked for next Business Day
delivery,  or (iv) upon  actual  receipt  by the  party to whom  such  notice is
required to be given. The address for such notices and  communications  shall be
as follows:

      If to the Company:       Cel Sci Corporation
                               8229 Boone Boulevard, Suite 802
                               Vienna, Virginia 22182
                               Facsimile No.: (703) 506-9460
                               Attn: Chief Financial Officer

<PAGE>

      With copies to:          Hart & Trinen
                               1624 Washington Street
                               Denver, Colorado
                               Facsimile No.: (303) 839-5414
                               Attn: Bill Hart, Esq.

      If to a Purchaser:       To the address set forth under such
                               Purchaser's name on the signature
                               pages hereto.

or such other  address as may be designated  in writing  hereafter,  in the same
manner, by such Person.

            4.4  Amendments;  Waivers.  No  provision of this  Agreement  may be
waived  or  amended  except in a written  instrument  signed,  in the case of an
amendment,  by both the Company and the  Purchasers or, in the case of a waiver,
by the party against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any  provision,  condition  or  requirement  of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other  provision,  condition or requirement  hereof,  nor shall any delay or
omission of either  party to exercise any right  hereunder in any manner  impair
the exercise of any such right accruing to it thereafter.

            4.5 Headings.  The headings herein are for convenience  only, do not
constitute a part of this  Agreement  and shall not be deemed to limit or affect
any of the provisions hereof.

            4.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted  assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without  the prior  written  consent of the  Purchasers.  Except as set forth in
Section  3.1(a),  the  Purchasers  may not assign this  Agreement  or any of the
rights or  obligations  hereunder  without  the  consent  of the  Company.  This
provision  shall not limit  any  Purchaser's  right to  transfer  securities  or
transfer or assign rights under the Registration Rights Agreement.

            4.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties  hereto and their  respective  successors  and  permitted
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other Person.

            4.8 Governing Law. The corporate laws of the State of Colorado shall
govern  all  issues  concerning  the  relative  rights  of the  Company  and its
stockholders.  All  other  questions  concerning  the  construction,   validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance  with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof.

            4.9  Survival.  The  representations,   warranties,  agreements  and
covenants  contained  herein  shall  survive the Closing  and the  delivery  and
exercise of the Warrants.

<PAGE>

            4.10  Execution.  This  Agreement  may be  executed  in two or  more
counterparts,  all of which when taken  together shall be considered one and the
same agreement and shall become effective when  counterparts have been signed by
each party and  delivered  to the other  party,  it being  understood  that both
parties need not sign the same  counterpart.  In the event that any signature is
delivered by facsimile  transmission,  such  signature  shall create a valid and
binding  obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.

            4.11 Severability. In case any one or more of the provisions of this
Agreement  shall be invalid or  unenforceable  in any respect,  the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be  affecting  or impaired  thereby and the parties  will  attempt to
agree  upon a valid  and  enforceable  provision  which  shall  be a  reasonable
substitute  therefor,  and upon so agreeing,  shall  incorporate such substitute
provision in this Agreement.

            4.12 Remedies.  In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
the  Transaction  Documents.  Each of the Company and the Purchasers  agree that
monetary  damages  may not be  adequate  compensation  for any loss  incurred by
reason of any breach of its obligations  described in the foregoing sentence and
hereby  agrees  to waive in any  action  for  specific  performance  of any such
obligation the defense that a remedy at law would be adequate.

            4.13 Independent  Nature of Purchasers'  Obligations and Rights. The
obligations of each Purchaser under any Transaction  Document is several and not
joint with the  obligations of any other  Purchaser,  and no Purchaser  shall be
responsible  in any way for the  performance  of the  obligations  of any  other
Purchaser under any Transaction  Document.  Nothing  contained  herein or in any
Transaction  Document,  and no action taken by any Purchaser  pursuant  thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint  venture  or any other kind of entity,  or create a  presumption  that the
Purchasers are in any way acting in concert with respect to such  obligations or
the transactions  contemplated by the Transaction Document. Each Purchaser shall
be entitled to independently  protect and enforce its rights,  including without
limitation the rights  arising out of this  Agreement or out of the  Transaction
Documents, and it shall not be necessary for any other Purchaser to be joined as
an additional party in any proceeding for such purpose.

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                            SIGNATURE PAGE FOLLOWS]

<PAGE>

            IN WITNESS  WHEREOF,  the parties hereto have caused this Securities
Purchase   Agreement  to  be  duly  executed  by  their  respective   authorized
signatories as of the date first indicated above.

                  .               CEL SCI CORPORATION

                                  By:_____________________________________
                                      Name:
                                      Title:

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                     SIGNATURE PAGES FOR PURCHASERS FOLLOWS]

<PAGE>

                              ADVANTAGE FUND II LTD.

                              By:_____________________________________
                                      Name:
                                     Title:

                         Purchase Price for Shares to be
                         acquired at Closing:                       $4,000,000

                         Number of Shares to be acquired at
                         Closing:                                      533,333

                         Warrant Shares subject to Closing
                         Warrant:                                      214,724

                         Address for Notice:

                              c/o CITCO
                              Kaya Flamboyan 9
                              Curacao, Netherlands Antilles
                              Facsimile: 011-599-9732-2008
                              Attention: W.R. Weber

                              With copies to:

                              Genesee International Inc.
                              10500 NE 8th Street
                              Suite 1920
                              Bellevue, WA 98004
                              Facsimile: (425) 462-4645
                              Attention: Christopher Purrier

                              Robinson Silverman Pearce Aronsohn & Berman LLP
                              1290 Avenue of the Americas
                              New York, NY  10104
                              Facsimile No.:  (212) 541-4630 and (212) 541-1432
                              Attn:  Eric L. Cohen, Esq.

                    [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                       SIGNATURE PAGE FOR PURCHASER FOLLOWS]

<PAGE>

                              KOCH INVESTMENT GROUP LTD.

                             By:_____________________________________
                                  Name:
                                 Title:

                              Purchase Price for Shares to be
                              acquired at Closing:                 $3,000,000

                              Number of Shares to be acquired at
                              Closing:                                400,000

                              Warrant Shares subject to Closing
                              Warrant:                                161,043

                              Address for Notice:

                              4111 East 37th Street North
                              Wichita, Kansas 67270
                              Facsimile: (316) 828-7947
                              Attention: Josh Taylor

<PAGE>

                               CEL-SCI CORPORATION
                                    SCHEDULES

Schedule 2.1 (a)  Subsidiaries:

               The Company has the following subsidiaries:

               Viral Technologies, Inc.
               MaxPharma

Schedule 2.1 (c)  Capitalization

                                                               Number of
                                                                Shares

Shares outstanding as of March 14, 2000                       20,314,873

Shares issuable upon exercise of Series A and
Series B Warrants                                              1,100,000

Shares issuable upon exercise of sales agent warrants             75,000

Shares issuable upon exercise of options granted
to financial and investor relations consultants                  305,000

Shares issuable upon exercise of warrants issued in
connection with exchange offer                                   116,405

Shares issuable upon exercise of callable warrants held by
Advantage Fund II, Ltd. and Koch Investment Group, Ltd.          402,007

Advantage Fund II, Ltd. and Koch Investment Group, Ltd. -
shares issuable upon exercise of Adjustable Warrants                  (1)

Former underwriter.  Shares issuable upon exercise of warrants.   10,000

Shares issuable upon exercise of options and warrants
granted to Company's officers, directors, employees,
consultants and third parties.                                 3,153,448

(1) Number of shares  issuable upon exercise of  Adjustable  Warrants  cannot be
determined at this time.

<PAGE>

                               CEL-SCI CORPORATION
                           SCHEDULE TO EXHIBIT 10 (m)

    The form of the Securities  Purchase Agreement was filed as Exhibit 10(m) as
part of the Company's original filing.

    This schedule provides information  regarding those persons who were parties
to the acquired the Company's securities pursuant to the terms of the Securities
Purchase  Agreement as well as other  information  required by  Instruction 2 to
Item 601 of Regulation S-K.

    The names and addresses of the investors which are parties to the Securities
Purchase Agreement, and the shares and warrants issued to the investors, are:

      Name and Address              Number of Shares        Series C Warrants

      Advantage Fund II Ltd.           533,333                214,724
      c/o CITCO
      Kaya Flamboyan 9
      Curacao, Netherlands Antilles
      Attention: W.R. Webber

      Koch Investment Group, Ltd.      400,000                161,043
      4111 East 37th Street North
      Wichita, Kansas 67270
      Attention: Josh Taylor

      Mooring Capital Fund              93,333                 37,577
      8614 Westwood Center Drive
      Suite 650
      Vienna, Virginia  22182

The  Series C  Warrant  is  sometimes  referred  to in the  Securities  Purchase
Agreement as the "Callable Warrant".  The exercise price of the Series C Warrant
is $8.50 per share.

The  Series D  Warrant  is  sometimes  referred  to in the  Securities  Purchase
Agreement as the "Adjustable  Warrant".  The investors listed above all received
Series D Warrants in the  transaction.  However,  the number of shares  issuable
pursuant to the Series D Warrants cannot be determined at this time.

<PAGE>

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

Series C         The Series A Warrants allow the investors the purchase  shares
Warrants         of the  Company's  common  stock at a price of $8.50 per share
                 at any time prior to March 21, 2003.

                 The Series A Warrant are callable by the Company if the
                 closing price of the Company's common stock is above $25.00 for
                 20 consecutive trading days.
-------------------------------------------------------------------------------
Series D         The Series D Warrants  allow the investors to acquire  shares
Warrants         of  the  Company's   common  stock  at  a  nominal  price  in
                 accordance with the following terms:

                 If subsequent  to March 21, 2001 the Company  closes any equity
                 or debt  financing at a price below $7.50,  then on the closing
                 date  of  that  financing  (the  "Anti-Dilution   Reset  Date")
                 additional Common Shares shall be issued to the Investor, equal
                 to the following:

                                       [(C x I) / A] - C

                    C   =   Common Shares held by the Investor on the Reset Date
                            (excluding hedged Common Shares)
                    I   =   $7.50
                    A   =  "Adjustment  Price",  equal  to  the  lesser  of (x)
                           $7.50,  (y) the average of the closing bid prices of
                           the Common Stock on the American  Stock Exchange for
                           the  10  trading  days  immediately   preceding  the
                           Anti-Dilution  Reset  Date,  or (z) the price of the
                           subsequent  financing  in excess of $1 million  (the
                           lowest   determinable   conversion   price   for   a
                           convertible financing;  the lowest share price for a
                           common  stock   financing,   the  strike  price  for
                           warrants, etc

                 On March  16,  2001 and each six month  anniversary  thereafter
                 through  and  including  the March 16,  2003 (each a  "Periodic
                 Reset  Date"),  additional  Common  Shares may be issued to the
                 Investors  to reset the  value  per share to the  lesser of (y)
                 $7.50,  or (z) the Reset Price as of that Periodic  Reset Date.
                 The following  formula will be used to determine any additional
                 Common Shares to be issued:

                                      [(C x PA) / A] - C

                   C   =   Common Shares held by the Investor on the Reset Date
                           (excluding hedged Common Shares)
                   PA  =   Adjustment  Price from  immediately  preceding Reset
                           Date ($7.50 if no previous Reset Dates)
                   A   =  Adjustment  Price equal to the lesser of (y) $7.50, or
                          (z) the average of the 10 lowest closing bid prices of
                          the Common Stock over the 30 trading days  immediately
                          preceding the Periodic Reset Date. The investors agree
                          not to sell or short any CEL-SCI  shares during the 35
                          trading days prior to the
                          Reset Date.
-------------------------------------------------------------------------------

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00007-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00007-of-00352.parquet"}]]