Document:

EXHIBIT 10.1

              AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT

      THIS  AMENDED  AND  RESTATED   FINANCING  AND  SECURITY   AGREEMENT  (this
"Agreement")  is made  this  5th day of May,  2006,  by and  among  ARGAN,  INC.
(formerly Puroflow Incorporated),  a corporation organized under the laws of the
State of Delaware  ("Argan"),  SOUTHERN  MARYLAND  CABLE,  INC.,  a  corporation
organized  under  the  laws  of the  State  of  Delaware  ("SMC")  and  VITARICH
LABORATORIES,  INC. (formerly AGAX/VLI Acquisition  Corporation),  a corporation
organized  under the laws of the State of  Delaware  ("Vitarich"),  jointly  and
severally (each of Argan, SMC and Vitarich,  a "Borrower" and collectively,  the
"Borrowers");  and BANK OF AMERICA,  N.A., a national banking  association,  its
successors and assigns (the "Lender").

                                    RECITALS

            A.  The  Lender,  Argan  and SMC  have  entered  into  that  certain
Financing  and  Security  Agreement  dated as of August 19, 2003 (as  thereafter
amended from time to time, the "Original Financing Agreement").  Pursuant to the
Original Financing Agreement,  the Lender agreed to make certain loans described
therein, and other financial accommodations to Argan and SMC.

            B. The Borrowers have requested that the Lender extend the Revolving
Credit Expiration Date and make a new term loan to the Borrowers.

            C. The  Borrowers  and the  Lender  have  agreed,  pursuant  to this
Agreement,  to  amend  and  restate  the  Original  Financing  Agreement  in its
entirety.  The Lender is willing to make the credit facilities available jointly
and severally to the Borrowers  upon the terms and subject to the conditions set
forth in this Agreement.

                                   AGREEMENTS

            NOW, THEREFORE,  in consideration of the premises and for other good
and valuable  consideration,  the receipt of which is hereby  acknowledged,  the
parties  hereby agree to amend and restate the Original  Financing  Agreement in
its entirety as follows:

                                   ARTICLE I
                                   DEFINITIONS

      Section 1.1 Certain Defined Terms.

      As used in this Agreement,  the terms defined in the Preamble and Recitals
hereto shall have the respective  meanings specified therein,  and the following
terms shall have the following meanings:

      "2006 Term Loan" has the  meaning  described  in Section  2.2.2 (2006 Term
Loan Commitment).

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      "2006 Term Loan  Commitment"  has the meaning  described in Section  2.2.2
(2006 Term Loan Commitment).

      "2006 Term Loan  Committed  Amount" has the meaning  described  in Section
2.2.2 (2006 Term Loan Commitment).

      "2006 Term Loan Facility"  means either of the  facilities  established by
the Lender pursuant to Section 2.2.2 (Term Loan Facilities).

      "2006 Term Loan Fee" has the meaning  described in Section 2.2.4 (The 2006
Term Loan Fee).

      "2006 Term Note" has the meaning  described in Section 2.2.2 (b) (The 2006
Term Note).

      "Account"  individually  and  "Accounts"  collectively  mean all presently
existing  or  hereafter  acquired  or  created  accounts,  accounts  receivable,
health-care insurance receivables,  contract rights, notes, drafts, instruments,
acceptances, chattel paper, leases and writings evidencing a monetary obligation
or a  security  interest  in, or a lease of,  goods,  all rights to payment of a
monetary  obligation or other  consideration  under present or future  contracts
(including,   without   limitation,   all  rights  (whether  or  not  earned  by
performance) to receive payments under presently  existing or hereafter acquired
or created  letters of  credit),  or by virtue of  property  that has been sold,
leased, licensed,  assigned or otherwise disposed of, services rendered or to be
rendered, loans and advances made or other considerations given, by or set forth
in or arising out of any present or future chattel paper,  note,  draft,  lease,
acceptance,  writing,  bond, insurance policy,  instrument,  document or general
intangible,  and all extensions and renewals of any thereof, all rights under or
arising out of present or future  contracts,  agreements or general  interest in
goods which gave rise to any or all of the  foregoing,  including all commercial
tort claims,  other claims or causes of action now existing or hereafter arising
in connection  with or under any agreement or document or by operation of law or
otherwise,  all collateral security of any kind (including,  without limitation,
real   property   mortgages   and  deeds  of  trust)   Supporting   Obligations,
letter-of-credit  rights and letters of credit  given by any Person with respect
to any of the  foregoing,  all books  and  records  in  whatever  media  (paper,
electronic or otherwise)  recorded or stored,  with respect to any or all of the
foregoing and all equipment and general  intangibles  necessary or beneficial to
retain,  access  and/or  process the  information  contained  in those books and
records, and all Proceeds of the foregoing.

      "Account  Debtor"  means any Person who is obligated  on a Receivable  and
"Account Debtors" mean all Persons who are obligated on the Receivables.

      "ACH Transactions" means any cash management or related services including
the automatic  clearing house transfer of funds by the Lender for the account of
any of the Borrowers pursuant to agreement or overdrafts.

      "Additional Borrower" means each Person that has executed and delivered an
Additional  Borrower  Joinder  Supplement that has been accepted and approved by
the Lender.

      "Additional  Borrower  Joinder  Supplement"  means an Additional  Borrower
Joinder  Supplement in substantially the form attached hereto as EXHIBIT A, with
the blanks appropriately  completed and executed and delivered by the Additional
Borrower and accepted by Argan on behalf of the Borrowers.

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      "Adjustment Date" has the meaning described in Section 8.5 (Assignments by
Lender).

      "Affiliate"  means,  with  respect  to any  designated  Person,  any other
Person,  (a)  directly  or  indirectly   controlling,   directly  or  indirectly
controlled  by, or under  direct or  indirect  common  control  with the  Person
designated,  (b) directly or  indirectly  owning or holding ten percent (10%) or
more of any equity interest in such designated  Person, or (c) ten percent (10%)
or more of whose stock or other equity interest is directly or indirectly  owned
or held by such designated  Person.  For purposes of this  definition,  the term
"control"  (including  with  correlative  meanings,   the  terms  "controlling",
"controlled by" and "under common control with") means the possession,  directly
or  indirectly,  of the power to direct or cause the direction of the management
and policies of a Person,  whether  through  ownership of voting  securities  or
other equity interests or by contract or otherwise.

      "Agreement"  means  this  Amended  and  Restated  Financing  and  Security
Agreement, as amended,  restated,  supplemented or otherwise modified in writing
in accordance with the provisions of Section 8.2 (Amendments; Waivers).

      "Assignee" means any Person to which the Lender assigns all or any portion
of its  interests  under  this  Agreement,  any  Commitment,  and any  Loan,  in
accordance with the provisions of Section 8.5 (Assignments by Lender),  together
with any and all  successors and assigns of such Person;  "Assignees"  means the
collective reference to all Assignees.

      "Bankruptcy  Code" means Title 11 of the United  States  Code,  as amended
from time to time, and any successor Laws.

      "Borrower"  means each Person  defined as a "Borrower"  in the preamble of
this Agreement and each Additional  Borrower;  "Borrowers"  means the collective
reference  to all  Persons  defined  as  "Borrowers"  in the  preamble  to  this
Agreement and all Additional Borrowers.

      "Borrowing  Base" has the meaning  described in Section  2.1.8  (Borrowing
Base).

      "Borrowing  Base  Deficiency"  has the meaning  described in Section 2.1.8
(Borrowing Base).

      "Borrowing  Base  Report"  has the  meaning  described  in  Section  2.1.9
(Borrowing Base Report).

      "Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in the State are authorized or required to close.

      "Capital Adequacy Regulation" means any guideline, request or directive of
any central  bank or other  Governmental  Authority,  or any other law,  rule or
regulation,  whether  or not having  the force of law,  in each case,  regarding
capital adequacy of any bank or of any corporation controlling a bank.

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<PAGE>

      "Capital  Expenditure"  means an expenditure  (whether  payable in cash or
other  property  or  accrued  as a  liability)  for  Fixed  or  Capital  Assets,
including, without limitation, the entering into of a Capital Lease.

      "Capital  Lease"  means  with  respect  to any Person any lease of real or
personal  property,  for which the related Lease Obligations have been or should
be, in accordance  with GAAP  consistently  applied,  capitalized on the balance
sheet of that Person.

      "Cash  Equivalents"  means (a) securities  with  maturities of one year or
less from the date of acquisition  issued or fully  guaranteed or insured by the
United States Government or any agency thereof, (b) certificates of deposit with
maturities  of one (1) year or less  from the date of  acquisition  of, or money
market accounts maintained with, the Lender, any Affiliate of the Lender, or any
other  domestic  commercial  bank  having  capital  and surplus in excess of One
Hundred  Million  Dollars   ($100,000,000)  or  such  other  domestic  financial
institutions  or  domestic  brokerage  houses to the  extent  disclosed  to, and
approved by, the Lender and (c) commercial  paper of a domestic  issuer rated at
least either A-1 by Standard & Poor's  Corporation  (or its successor) or P-1 by
Moody's  Investors  Service,  Inc. (or its successor) with maturities of six (6)
months or less from the date of acquisition.

      "Chattel Paper" means a record or records (including,  without limitation,
electronic  chattel  paper)  that  evidence  both a  monetary  obligation  and a
security  interest in specific goods, a security  interest in specific goods and
software  used in the  goods,  or a lease  of  specific  goods;  all  Supporting
Obligations with respect thereto;  any returned,  rejected or repossessed  goods
and software covered by any such record or records and all proceeds (in any form
including,  without limitation,  accounts,  contract rights, documents,  chattel
paper,  instruments  and  general  intangibles)  of such  returned,  rejected or
repossessed goods; and all Proceeds of the foregoing.

      "Closing Date" means the date set forth in the preamble hereof.

      "Collateral"  means all property of each and every  Borrower  subject from
time to time to the  Liens  of this  Agreement,  any of the  Security  Documents
and/or any of the other Financing Documents,  together with any and all Proceeds
thereof.

      "Collateral  Account"  has the meaning  described  in Section  2.1.11 (The
Collateral Account).

      "Collateral  Disclosure  List" has the  meaning  described  in Section 3.3
(Collateral Disclosure List).

      "Collection" means each check, draft, cash, money,  instrument,  item, and
other  remittance  in  payment or on  account  of  payment  of the  Accounts  or
otherwise with respect to any Collateral,  including,  without limitation,  cash
proceeds of any returned,  rejected or repossessed  goods,  the sale or lease of
which  gave  rise  to  an  Account,  and  other  proceeds  of  Collateral;   and
"Collections" means the collective reference to all of the foregoing.

      "Commitment"  means  the  Revolving  Credit  Commitment,   the  Term  Loan
Commitment  or  the  2006  Term  Loan  Commitment,  as  the  case  may  be,  and
"Commitments" means the collective reference to the Revolving Credit Commitment,
the Term Loan  Commitment,  the 2006 Term Loan Commitment and the commitment for
any loan,  letter of credit,  interest rate  protection,  foreign exchange risk,
cash management,  and other Credit Facility now or hereafter  provided to any of
the Borrowers by the Lender whether under this Agreement or otherwise.

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<PAGE>

      "Committed  Amount" means the Revolving Credit Committed Amount,  the Term
Loan Committed  Amount or the 2006 Term Loan Committed  Amount,  as the case may
be, and "Committed  Amounts" means  collectively  the Revolving Credit Committed
Amount, the Term Loan Committed Amount and the 2006 Term Loan Committed Amount.

      "Compliance Certificate" means a periodic Compliance Certificate described
in Section 6.1.1 (Financial Statements).

      "Commonly Controlled Entity" means an entity, whether or not incorporated,
which is under common  control  with any Borrower  within the meaning of Section
414(b) or (c) of the Internal Revenue Code.

      "Copyrights"  means and  includes,  in each case  whether now  existing or
hereafter arising,  all of each Borrower's rights,  title and interest in and to
(a) all  copyrights,  rights and interests in copyrights,  works  protectable by
copyright, copyright registrations,  copyright applications, and all renewals of
any of the foregoing,  including without limitation, those set forth in Schedule
1.1  attached  hereto,  (b) all income,  royalties,  damages and payments now or
hereafter due and/or  payable  under any of the  foregoing,  including,  without
limitation, damages or payments for past, current or future infringements of any
of  the  foregoing,   (c)  the  right  to  sue  for  past,  present  and  future
infringements of any of the foregoing,  and (d) all rights  corresponding to any
of the foregoing throughout the world.

      "Credit  Facility" means the Revolving Credit  Facility,  or either of the
Term  Loan  Facilities  as the  case  may  be,  and  "Credit  Facilities"  means
collectively  the Revolving Credit Facility and the Term Loan Facilities and any
and all other credit  facilities  now or hereafter  extended under or secured by
this Agreement.

      "Default"  means an event  which,  with the  giving  of notice or lapse of
time,  or both,  could or  would  constitute  an  Event  of  Default  under  the
provisions of this Agreement.

      "Documents" means all documents of title or receipts, whether now existing
or hereafter acquired or created, and all Proceeds of the foregoing.

      "EBITDA"  means  as  to  the  Borrowers  and  their   Subsidiaries   on  a
consolidated basis for any period of determination  thereof,  the sum of (a) the
net profit (or loss)  determined in accordance with GAAP  consistently  applied,
plus (b) interest  expense for such period,  plus (c) income tax  provisions for
such period,  plus (d)  depreciation and amortization of assets for such period,
plus (e) for the quarter ending July 31, 2005, the non-cash  derivative  expense
associated  with the issuance of common stock,  in the amount of (i)  $1,610,000
for Kevin  Thomas  and (ii)  $342,000  for Main  Street  Resources  and plus (f)
non-cash impairment of goodwill arising from the acquisition of Vitarich.

      "Eligible  Inventory"  means the collective  reference to all Inventory of
each  Borrower held for sale in the ordinary  course of business,  valued at the
lowest  of the net  purchase  cost  or  realizable  value  with  respect  to raw
materials and the lowest of the net manufacturing  cost or realizable value with
respect to finished goods  inventory,  excluding,  however,  any Inventory which
consists of:

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<PAGE>

                  (i) any Inventory located outside of the United States;

                  (ii) any  Inventory  in which the Lender has not  properly and
unavoidably perfected the Liens of the Lender under this Agreement;

                  (iii)  any  Inventory  not  in  the  actual  possession  of  a
Borrower, except to the extent provided in subsection (v) below;

                  (iv)  any   Inventory   in  the   possession   of  a   bailee,
warehouseman,  consignee or similar third party,  except to the extent that such
bailee,  warehouseman,  consignee  or similar  third party has  entered  into an
agreement  with the  Lender in which such  bailee,  warehouseman,  consignee  or
similar third party  consents and agrees to the Lender's Lien on such  Inventory
and to such other terms and conditions as may be required by the Lender;

                  (v) any  Inventory  located on premises  leased or rented to a
Borrower or otherwise not owned by a Borrower,  unless the Lender has received a
waiver and consent from the lessor, landlord and/or owner, in form and substance
satisfactory  to the Lender and from any  mortgagee of such lessor,  landlord or
owner to the extent required by the Lender;

                  (vi) any Inventory the sale or other  disposition of which has
given rise to a Receivable;

                  (vii) any  Inventory  which  fails to meet all  standards  and
requirements  imposed by any  Governmental  Authority over such Inventory or its
production, storage, use or sale;

                  (viii)  work-in-process,  supplies,  displays,  packaging  and
promotional materials;

                  (ix) any  Inventory as to which the Lender  determines  in the
exercise of its sole and  absolute  discretion  at any time and in good faith is
not in good  condition  or is  defective,  unmerchantable,  post-seasonal,  slow
moving or obsolete; and

                  (x) any Inventory  which the Lender in the good faith exercise
of its sole and  absolute  discretion  has deemed to be  ineligible  because the
Lender, in good faith, otherwise considers the collateral value to the Lender to
be impaired or its ability to realize such value to be insecure.

         In the event of any dispute under the foregoing criteria as to whether
Inventory is, or has ceased to be, Eligible Inventory, the decision of the
Lender in the good faith exercise of its sole and absolute discretion shall
control.

      "Eligible  Receivable"  and  "Eligible  Receivables"  mean, at any time of
determination  thereof,  the unpaid portion of each account (net of any returns,
discounts,  claims,  credits,  charges,  accrued  rebates  or other  allowances,
offsets,  deductions,  counterclaims,  disputes or other defenses and reduced by
the aggregate amount of all reserves, limits and deductions provided for in this
definition and elsewhere in this Agreement)  receivable in United States Dollars
by a Borrower,  provided  each account  conforms and continues to conform to the
following criteria to the satisfaction of the Lender:

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<PAGE>

            (a)  the  account  arose  in the  ordinary  course  of a  Borrower's
business  from a bona fide  outright  sale of Inventory by such Borrower or from
services performed by such Borrower;

            (b) the account is a valid,  legally  enforceable  obligation of the
Account  Debtor and  requires no further act on the part of any Person under any
circumstances to make the account payable by the Account Debtor;

            (c) the  account is based  upon an  enforceable  order or  contract,
written or oral, for Inventory shipped or for services  performed,  and the same
were shipped or performed in accordance with such order or contract;

            (d) if the account arises from the sale of Inventory,  the Inventory
the sale of which gave rise to the account has been  shipped or delivered to the
Account  Debtor on an absolute sale basis and not on a bill and hold sale basis,
a consignment sale basis, a guaranteed sale basis, a sale or return basis, or on
the basis of any other similar understanding;

            (e) if the account  arises from the  performance  of services,  such
services  have been fully  rendered and do not relate to any  warranty  claim or
obligation;

            (f) the account is evidenced by an invoice or other documentation in
form  acceptable  to the  Lender,  dated no later than the date of  shipment  or
performance  and  containing  only  terms  normally  offered  by the  respective
Borrower;

            (g) the amount  shown on the books of a Borrower and on any invoice,
certificate,  schedule  or  statement  delivered  to the Lender is owing to such
Borrower and no partial  payment has been received  unless  reflected  with that
delivery;

            (h) the account is not  outstanding  more than ninety (90) days from
the date of the invoice therefore;

            (i) the  account  is not owing by any  Account  Debtor for which the
Lender has deemed fifty  percent  (50%) or more of such Account  Debtor's  other
accounts (or any portion thereof) due to a Borrower, individually, or all of the
Borrowers  collectively,  to be non-Eligible  Receivables,  excluding,  however,
those  accounts  for which the Lender has  excluded  under this  subsection  (i)
solely as a result of such accounts exceeding the concentration limits set forth
in subsection (j) below;

            (j) to the extent  such  account is owing by an Account  Debtor or a
group  of  affiliated  Account  Debtors  then  existing  accounts  to all of the
Borrowers collectively exceed in aggregate face amount twenty five percent (25%)
of the total Eligible Receivables of all Borrowers Receivables,  the accounts in
excess of twenty five percent (25%) shall not be Eligible Receivables;

            (k) the  Account  Debtor has not  returned,  rejected  or refused to
retain, or otherwise notified a Borrower of any dispute  concerning,  or claimed
nonconformity  of, any of the  Inventory or services from the sale or furnishing
of which the account arose;

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<PAGE>

            (l) the account is not subject to any present or contingent  (and no
facts exist  which are the basis for any future)  offset,  claim,  deduction  or
counterclaim,  dispute or  defense in law or equity on the part of such  Account
Debtor,  or any claim for credits,  allowances,  or  adjustments  by the Account
Debtor because of returned,  inferior,  or damaged  Inventory or  unsatisfactory
services, or for any other reason including,  without limitation,  those arising
on account of a breach of any express or implied representation or warranty;

            (m) the  Account  Debtor is not a  Subsidiary  or  Affiliate  of any
Borrower or an  employee,  officer,  director or  shareholder  (other than Kevin
Thomas), of any Borrower or any Subsidiary or Affiliate of any Borrower;

            (n) the Account Debtor is not  incorporated or primarily  conducting
business or otherwise  located in any jurisdiction  outside of the United States
of America, unless the Account Debtor's obligations with respect to such account
are secured by a letter of credit,  guaranty or banker's acceptance having terms
and from such issuers and confirmation  banks as are acceptable to the Lender in
its sole and absolute  discretion (which letter of credit,  guaranty or banker's
acceptance is subject to the perfected Lien of the Lender);

            (o) as to which  none of the  following  events  has  occurred  with
respect to the Account Debtor on such Account:  death or judicial declaration of
incompetency of an Account Debtor who is an individual; the filing by or against
the Account  Debtor of a request or petition  for  liquidation,  reorganization,
arrangement,  adjustment of debts,  adjudication as a bankrupt,  winding-up,  or
other relief  under the  bankruptcy,  insolvency,  or similar laws of the United
States,  any state or territory  thereof,  or any foreign  jurisdiction,  now or
hereafter in effect;  the making of any general assignment by the Account Debtor
for the benefit of creditors;  the  appointment of a receiver or trustee for the
Account  Debtor  or for any of the  assets  of the  Account  Debtor,  including,
without limitation, the appointment of or taking possession by a "custodian," as
defined in the  Federal  Bankruptcy  Code;  the  institution  by or against  the
Account Debtor of any other type of insolvency  proceeding (under the bankruptcy
laws of the United States or otherwise) or of any formal or informal  proceeding
for the dissolution or liquidation of, settlement of claims against,  or winding
up of affairs of, the Account Debtor; the sale,  assignment,  or transfer of all
or any  material  part of the  assets  of the  Account  Debtor;  the  nonpayment
generally  by the  Account  Debtor  of its  debts  as they  become  due;  or the
cessation of the business of the Account Debtor as a going concern;

            (p) the Account Debtor is not a Governmental  Authority,  unless all
rights of each  Borrower  with respect to such account have been assigned to the
Lender on terms  acceptable to the Lender  pursuant to the  Assignment of Claims
Act of 1940, as amended or any comparable state statute;

            (q) no Borrower is indebted in any manner to the Account  Debtor (as
creditor,  lessor,  supplier or  otherwise),  with the  exception  of  customary
credits,  adjustments  and/or discounts given to an Account Debtor by a Borrower
in the ordinary course of its business;

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<PAGE>

            (r) the account does not arise from services under or related to any
warranty obligation of a Borrower or out of service charges,  finance charges or
other fees for the time value of money;

            (s) the account is not  evidenced by chattel  paper or an instrument
of any kind;

            (t) the title of the respective  Borrower to the account is absolute
and is not subject to any prior assignment,  claim,  Lien, or security interest,
except Permitted Liens;

            (u) no bond or other  undertaking  by a guarantor or surety has been
or is required to be obtained, supporting the performance of any Borrower or any
other obligor in respect of any of such  Borrower's  agreements with the Account
Debtor or supporting the account and any of the Account Debtor's  obligations in
respect of the account;

            (v) each  Borrower has the full and  unqualified  right and power to
assign and grant a security  interest in, and Lien on, the account to the Lender
as security and collateral for the payment of the Obligations;

            (w) the account is subject to a Lien in favor of the  Lender,  which
Lien is perfected as to the account by the filing of  financing  statements  and
which Lien upon such filing  constitutes a first priority  security interest and
Lien;

            (x) the Inventory giving rise to the account was not, at the time of
the sale thereof, subject to any Lien, except those in favor of the Lender;

            (y) the part of the account  which  represents a retainage  shall be
excluded  from  Eligible  Accounts,  and to the  extent  any part of an  account
represents  a progress  billing  the Lender  reserves  the right to among  other
things,  exclude such account or to lower the advance rate of Eligible Accounts,
or limit the amount of loans which can be made against progress billings,  based
on the results of a field exam; and

            (z) the Lender in the good faith  exercise of its sole and  absolute
discretion  has not deemed the account  ineligible  because of uncertainty as to
the  creditworthiness  of the  Account  Debtor or because  the Lender  otherwise
considers the  collateral  value of such account to the Lender to be impaired or
its ability to realize such value to be insecure.

      In the event of any dispute,  under the foregoing criteria,  as to whether
an account is, or has ceased to be, an Eligible Receivable,  the decision of the
Lender in the good faith  exercise  of its sole and  absolute  discretion  shall
control.

      "Equipment" means all equipment,  machinery,  computers,  chattels, tools,
parts,  machine tools,  furniture,  furnishings,  fixtures and supplies of every
nature,  presently  existing  or  hereafter  acquired  or created  and  wherever
located,  whether or not the same shall be deemed to be affixed to real property
and all of such types of property  leased by any of the Borrowers and all of the
Borrowers'   rights  and  interests  with  respect  thereto  under  such  leases
(including,   without  limitation,  options  to  purchase),  together  with  all
accessions,  additions, fittings,  accessories,  special tools, and improvements
thereto and  substitutions  therefore and all parts and  equipment  which may be
attached to or which are necessary or beneficial for the  operation,  use and/or
disposition of such personal property, all licenses, warranties,  franchises and
General   Intangibles  related  thereto  or  necessary  or  beneficial  for  the
operation,  use and/or  disposition  of the same,  together  with all  Accounts,
Chattel Paper,  Instruments and other consideration  received by any Borrower on
account  of the  sale,  lease  or  other  disposition  of all or any part of the
foregoing,  and  together  with all rights  under or  arising  out of present or
future Documents and contracts relating to the foregoing and all Proceeds of the
foregoing.

                                       9
<PAGE>

      "Enforcement Costs" means all expenses, charges, costs and fees whatsoever
(including,  without  limitation,  reasonable  outside  and  allocated  in-house
counsel  attorney's fees and expenses) of any nature whatsoever paid or incurred
by or on behalf of the Lender in connection  with (a) the  enforcement of any or
all of the  Obligations,  this  Agreement  and/or  any  of the  other  Financing
Documents   and  (b)  the   creation,   perfection,   collection,   maintenance,
preservation,  defense,  protection,  realization  upon,  disposition,  sale  or
enforcement of all or any part of the  Collateral,  this Agreement or any of the
other  Financing  Documents,  including,  without  limitation,  those  costs and
expenses more specifically enumerated in Section 3.6 (Costs) and/or Section 8.10
(Enforcement Costs), and further including, without limitation,  amounts paid to
lessors,  processors,  bailees,  warehousemen,  sureties, judgment creditors and
others  in  possession  of or  with  a  Lien  against  or  claimed  against  the
Collateral.

      "ERISA"  means the Employee  Retirement  Income  Security Act of 1974,  as
amended from time to time.

      "Event of Default"  has the meaning  described in ARTICLE VII (Default and
Rights and Remedies).

      "Facilities" means the collective reference to the loan, letter of credit,
interest rate  protection,  foreign  exchange risk, cash  management,  and other
credit facilities now or hereafter  provided to any one or more of the Borrowers
by the Lender.

      "Fees"  means the  collective  reference to each fee payable to the Lender
under  the  terms of this  Agreement  or  under  the  terms of any of the  other
Financing Documents.

      "Financing  Documents" means at any time collectively this Agreement,  the
Notes, the Security  Documents and any other  instrument,  agreement or document
previously,  simultaneously or hereafter executed and delivered by any Borrower,
and/or any other  Person,  singly or jointly  with  another  Person or  Persons,
evidencing,  securing,  guarantying or in connection  with this  Agreement,  any
Note, any of the Security  Documents,  any of the Facilities,  and/or any of the
Obligations.

      "Fixed or Capital  Assets" of a Person at any date means all assets  which
would,  in  accordance  with GAAP  consistently  applied,  be  classified on the
balance sheet of such Person as property, plant or equipment at such date.

      "Fixed Charges" means as to the Borrowers and their  Subsidiaries  for any
period of determination, the sum of all scheduled interest expense excluding the
non-cash interest expense associated with the amortization of issuance costs for
Subordinated  Indebtedness in favor of Kevin Thomas,  all principal payments and
all Capital Lease payments of the Borrowers and their  Subsidiaries  made during
the twelve (12) months preceding the date such covenant is being tested,  all in
accordance with GAAP.

                                       10
<PAGE>

      "Fixed  Charge  Coverage  Ratio"  means,  as to the  Borrowers  and  their
Subsidiaries for any period of determination  thereof,  the ratio of (a) EBITDA,
minus dividends and distributions to (b) Fixed Charges.

      "Funded  Debt" means all  Indebtedness  of  Borrowers in favor the Lender,
including,   without  limitation,  the  outstanding  principal  balance  of  the
Revolving  Loan,  the Term Loan and the 2006 Term Loan,  the face  amount of any
outstanding letters of credit and all Indebtedness under Capital Leases.

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

      "General  Intangibles"  means all  general  intangibles  of every  nature,
whether  presently  existing  or  hereafter  acquired  or  created,  and without
implying any limitation of the  foregoing,  further means all books and records,
commercial tort claims,  other claims (including  without  limitation all claims
for income tax and other refunds), payment intangibles,  Supporting Obligations,
choses in action,  claims, causes of action in tort or equity,  contract rights,
judgments, customer lists, software, Patents, Trademarks,  licensing agreements,
rights in intellectual property,  goodwill (including goodwill of any Borrower's
business  symbolized by and associated  with any and all  Trademarks,  trademark
licenses,   Copyrights  and/or  service  marks),  royalty  payments,   licenses,
letter-of-credit  rights,  letters of credit,  contractual  rights, the right to
receive refunds of unearned insurance premiums, rights as lessee under any lease
of real or  personal  property,  literary  rights,  Copyrights,  service  names,
service  marks,  logos,  trade  secrets,  amounts  received  as an  award  in or
settlement of a suit in damages, deposit accounts,  interests in joint ventures,
general or limited partnerships, or limited liability companies or partnerships,
rights in applications  for any of the foregoing,  books and records in whatever
media (paper,  electronic or otherwise)  recorded or stored, with respect to any
or all of the foregoing,  all Supporting  Obligations with respect to any of the
foregoing,  and all Equipment and General Intangibles necessary or beneficial to
retain,  access  and/or  process the  information  contained  in those books and
records, and all Proceeds of the foregoing.

      "Governmental  Authority"  means any  nation or  government,  any state or
other  political  subdivision  thereof  and  any  entity  exercising  executive,
legislative,  judicial,  regulatory or administrative functions of or pertaining
to government and any department, agency or instrumentality thereof.

      "Hazardous  Materials"  means (a) any "hazardous  waste" as defined by the
Resource  Conservation  and Recovery Act of 1976,  as amended from time to time,
and regulations promulgated thereunder; (b) any "hazardous substance" as defined
by the Comprehensive  Environmental Response,  Compensation and Liability Act of
1980, as amended from time to time, and regulations promulgated thereunder;  (c)
any  substance  the presence of which on any  property  now or hereafter  owned,
acquired or operated by any of the Borrowers is prohibited by any Law similar to
those set forth in this  definition;  and (d) any other  substance  which by Law
requires special handling in its collection, storage, treatment or disposal.

      "Hazardous  Materials  Contamination"  means  the  contamination  (whether
presently  existing or occurring  after the date of this Agreement) by Hazardous
Materials of any property owned,  operated or controlled by any of the Borrowers
or for  which  any of  the  Borrowers  has  responsibility,  including,  without
limitation, improvements,  facilities, soil, ground water, air or other elements
on, or of, any property now or hereafter  owned,  acquired or operated by any of
the Borrowers,  and any other contamination by Hazardous Materials for which any
of the Borrowers is, or is claimed to be, responsible.

                                       11
<PAGE>

      "Indebtedness" of a Person means at any date the total liabilities of such
Person at such time determined in accordance with GAAP consistently applied.

      "Indebtedness for Borrowed Money" of a Person means at any time the sum at
such time of (a)  Indebtedness  of such  Person  for  borrowed  money or for the
deferred  purchase  price of property or services,  (b) any  obligations of such
Person in respect of letters of credit, banker's or other acceptances or similar
obligations  issued  or  created  for the  account  of such  Person,  (c)  Lease
Obligations of such Person with respect to Capital  Leases,  (d) all liabilities
secured by any Lien on any property owned by such Person, to the extent attached
to such  Person's  interest  in such  property,  even though such Person has not
assumed or become personally liable for the payment thereof,  (e) obligations of
third parties which are being  guarantied or indemnified  against by such Person
or which are secured by the property of such Person;  (f) any obligation of such
Person under an employee stock ownership plan or other similar  employee benefit
plan;  (g) any  obligation of such Person or a Commonly  Controlled  Entity to a
Multi-employer  Plan;  and (h) any  obligations,  liabilities  or  indebtedness,
contingent or otherwise,  under or in connection  with, any Swap  Contract;  but
excluding trade and other accounts payable in the ordinary course of business in
accordance  with customary  trade terms and which are not overdue (as determined
in accordance  with  customary  trade  practices) or which are being disputed in
good faith by such Person and for which adequate  reserves are being provided on
the books of such Person in accordance with GAAP.

      "Indemnified   Parties"   has  the  meaning  set  forth  in  Section  8.19
(Indemnification).

      "Instrument"  means a negotiable  instrument  or any other  writing  which
evidences  a right to  payment  of a  monetary  obligation  and is not  itself a
security  agreement  or lease  and is of a type that in the  ordinary  course of
business  is  transferred   by  delivery  with  any  necessary   endorsement  or
assignment,  and all Supporting Obligations with respect to any of the foregoing
and all Proceeds with respect to any of the foregoing.

      "Interest Rate Protection  Agreement"  means any interest rate or currency
swap agreements,  cap, floor, and collar  agreements,  currency spot and forward
contracts and other similar agreements and arrangements.

      "Internal  Revenue  Code"  means the  Internal  Revenue  Code of 1986,  as
amended from time to time, and the Income Tax Regulations issued and proposed to
be issued thereunder.

      "Inventory"  means all goods of each  Borrower  and all  right,  title and
interest of each Borrower in and to all of its now owned and hereafter  acquired
goods and other  personal  property  furnished  under any contract of service or
intended for sale or lease,  including,  without limitation,  all raw materials,
work-in-process,  finished goods and materials and supplies of any kind,  nature
or description  which are used or consumed in any Borrower's  business or are or
might  be  used  in  connection  with  the   manufacture,   packing,   shipping,
advertising,  selling or finishing of such goods and other personal property and
all licenses, warranties, franchises, General Intangibles, personal property and
all  documents of title or  documents  relating to the same,  together  with all
Accounts,  Chattel Paper,  Instruments and other  consideration  received by any
Borrower on account of the sale,  lease or other  disposition of all or any part
of the  foregoing,  and together with all rights under or arising out of present
or future Documents and contracts  relating to the foregoing and all Proceeds of
the foregoing.

                                       12
<PAGE>

      "Investment   Property"   means  a  security,   whether   certificated  or
uncertificated,  security entitlement, securities account, commodity contract or
commodity  account and all Proceeds of, and Supporting  Obligations with respect
to, the foregoing.

      "Item of Payment" means each check, draft, cash, money, instrument,  item,
and other  remittance in payment or on account of payment of the  Receivables or
otherwise with respect to any Collateral,  including,  without limitation,  cash
proceeds of any returned,  rejected or repossessed  goods,  the sale or lease of
which gave rise to a Receivable, and other proceeds of Collateral; and "Items of
Payment" means the collective reference to all of the foregoing.

      "Laws"  means  all  ordinances,   statutes,  rules,  regulations,  orders,
injunctions, writs, or decrees of any Governmental Authority.

      "Lease   Obligations"  of  a  Person  means  for  any  period  the  rental
commitments of such Person for such period under leases for real and/or personal
property (net of rent from subleases  thereof,  but including taxes,  insurance,
maintenance and similar expenses which such Person,  as the lessee, is obligated
to pay under the terms of said  leases,  except to the extent  that such  taxes,
insurance,   maintenance  and  similar  expenses  are  payable  by  sublessees),
including rental commitments under Capital Leases.

      "Letter-of-credit  right" means a right to payment or performance  under a
letter of credit,  whether or not the beneficiary has demanded or is at the time
entitled to demand payment or performance.

      "Liabilities"  means at any date all  liabilities  that in accordance with
GAAP consistently  applied should be classified as liabilities on a consolidated
balance sheet of the Borrowers and their respective Subsidiaries.

      "LIBOR  Rate"  shall  mean a daily  fluctuating  rate equal to the one (1)
month rate of interest  (rounded  upwards,  if necessary to the nearest 1/100 of
1%) appearing on Telerate Page 3750 (or any successor page) as the one (1) month
London  interbank  offered  rate for deposits in U.S.  Dollars at  approximately
11:00 A.M.  (London,  time), on the second  preceding  business day, as adjusted
from time to time in the Lender's sole  discretion for  then-applicable  reserve
requirements, deposits insurance assessment rates and other regulatory costs. If
for any reason such rate is not available,  the term "LIBOR Rate" shall mean the
fluctuating  rate  of  interest  equal  to the one (1)  month  rate of  interest
(rounded upwards,  if necessary to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the one (1) month London interbank offered rate for deposits
in U.S.  Dollars  at  approximately  11:00  a.m.  (London  Time)  on the  second
preceding  business  day,  as  adjusted  from  time to time for  then-applicable
reserve  requirements,  deposit insurance  assessment rates and other regulatory
costs;  provided,  however, if more than one rate is specified on Reuters Screen
LIBO page, the applicable rate shall be the arithmetic mean of all such rates.

      "Lien" means any  mortgage,  deed of trust,  deed to secure  debt,  grant,
pledge, security interest,  assignment,  encumbrance,  judgment, lien, financing
statement,  hypothecation,  provision in any  instrument  or other  document for
confession of judgment,  cognovit or other similar right or other remedy, claim,
charge,  control  over or  interest  of any  kind in real or  personal  property
securing any  indebtedness,  duties,  obligations,  and liabilities  owed to, or
claimed to be owed to, a Person, all whether perfected or unperfected, avoidable
or  unavoidable,  based on the common law,  statute or  contract  or  otherwise,
including,  without  limitation,  any conditional  sale or other title retention
agreement,  any lease in the nature  thereof,  and the filing of or agreement to
give  any  financing   statement  under  the  Uniform  Commercial  Code  of  any
jurisdiction,  excluding the precautionary  filing of any financing statement by
any  lessor  in a true  lease  transaction,  by any  bailor  in a true  bailment
transaction  or by any  consignor in a true  consignment  transaction  under the
Uniform  Commercial  Code of any  jurisdiction  or the  agreement  to  give  any
financing statement by any lessee in a true lease transaction,  by any bailee in
a  true  bailment  transaction  or  by  any  consignee  in  a  true  consignment
transaction.

                                       13
<PAGE>

      "Loan" means each of the  Revolving  Loan,  the Term Loan or the 2006 Term
Loan,  as the case may be, and "Loans"  means the  collective  reference  to the
Revolving Loan, the Term Loan and the 2006 Term Loan.

      "Loan Notice" has the meaning  described in Section 2.1.2  (Procedure  for
Making Advances).

      "Lockbox"  has the meaning  described  in Section  2.1.11 (The  Collateral
Account).

      "Maximum  Rate"  has the  meaning  described  in  Section  2.3.4  (Maximum
Interest Rate).

      "Multi-employer  Plan"  means  a Plan  that  is a  Multi-employer  plan as
defined in Section 4001(a)(3) of ERISA.

      "Net  Worth"  means  the  Borrowers'  consolidated  shareholders'  equity,
defined in accordance with GAAP.

      "Note" means the  Revolving  Credit  Note,  the Term Note or the 2006 Term
Note, as the case may be, and "Notes" means  collectively  the Revolving  Credit
Note, the Term Note and the 2006 Term Note, and any other  promissory note which
may from time to time evidence all or any portion of the Obligations.

      "Obligations"   means  all  present  and  future   indebtedness,   duties,
obligations, and liabilities,  whether now existing or contemplated or hereafter
arising,  of any one or more  of the  Borrowers  to the  Lender  under,  arising
pursuant  to, in  connection  with and/or on account of the  provisions  of this
Agreement,  each Note, each Security Document, and/or any of the other Financing
Documents,  the Loans, any Swap Contract and/or any of the Facilities including,
without limitation,  the principal of, and interest on, each Note, late charges,
the Fees,  Enforcement  Costs,  and prepayment  fees (if any),  letter of credit
reimbursement obligations, letter of credit fees or fees charged with respect to
any  guaranty of any letter of credit;  also means all other  present and future
indebtedness,  duties,  obligations,  and  liabilities,  whether now existing or
contemplated  or hereafter  arising,  of any one or more of the Borrowers to the
Lender or its  Affiliates of any nature  whatsoever,  regardless of whether such
indebtedness, duties, obligations, and liabilities be direct, indirect, primary,
secondary,  joint,  several,  joint and several,  fixed or contingent;  and also
means any and all renewals, extensions, substitutions,  amendments, restatements
and  rearrangements  of  any  such  indebtedness,   duties,   obligations,   and
liabilities.

                                       14
<PAGE>

      "Patents"  means  and  includes,  in each case  whether  now  existing  or
hereafter arising,  all of each Borrower's rights,  title and interest in and to
(a) any and all patents and patent  applications,  including without limitation,
those set forth in Schedule 1.1 attached hereto,  (b) any and all inventions and
improvements described and claimed in such patents and patent applications,  (c)
reissues,     divisions,     continuations,     renewals,     extensions     and
continuations-in-part  of any  patents  and  patent  applications,  (d)  income,
royalties,  damages,  claims and payments now or  hereafter  due and/or  payable
under and with respect to any patents or patent applications, including, without
limitation,  damages and payments for past and future infringements,  (e) rights
to sue for past, present and future infringements of patents, and (f) all rights
corresponding to any of the foregoing throughout the world.

      "PBGC" means the Pension Benefit Guaranty Corporation.

      "Permitted  Liens" means:  (a) Liens for Taxes which are not delinquent or
which  the  Lender  has  determined  in the  exercise  of its sole and  absolute
discretion (i) are being  diligently  contested in good faith and by appropriate
proceedings,  and such contest  operates to suspend  collection of the contested
Taxes and enforcement of a Lien, (ii) the respective  Borrower has the financial
ability to pay, with all penalties and interest, at all times without materially
and adversely  affecting such Borrower,  and (iii) are not, and will not be with
appropriate filing, the giving of notice and/or the passage of time, entitled to
priority  over any  Lien of the  Lender;  (b)  deposits  or  pledges  to  secure
obligations  under workers'  compensation,  social  security or similar laws, or
under  unemployment  insurance  in the ordinary  course of  business;  (c) Liens
securing the  Obligations;  (d)  judgment  Liens to the extent the entry of such
judgment does not constitute a Default or an Event of Default under the terms of
this  Agreement  or result in the sale or levy of, or  execution  on, any of the
Collateral;  (e) purchase  money  security  interests in machinery and equipment
securing  Indebtedness  not in  excess  of  $50,000  in the  aggregate  per each
calendar  year;  and (f) such other Liens,  if any, as are set forth on Schedule
4.1.20 attached hereto and made a part hereof.

      "Permitted  Uses" means (a) with  respect to the Term Loan,  to  refinance
certain  existing  Indebtedness  of the Borrowers,  (b) with respect to the 2006
Term Loan, to reduce a portion of the Subordinated Debt, and (c) with respect to
the Revolving  Loan, the payment of expenses  incurred in the ordinary course of
any Borrower's business.

      "Person" means and includes an individual, a corporation, a partnership, a
joint  venture,  a  limited  liability  company  or  partnership,  a  trust,  an
unincorporated  association, a Governmental Authority, or any other organization
or entity.

      "Plan"  means any pension plan that is covered by Title IV of ERISA and in
respect of which any Borrower or a Commonly  Controlled  Entity is an "employer"
as defined in Section 3 of ERISA.

      "Post-Default Rate" means with respect to all Obligations,  the LIBOR Rate
in effect from time to time, plus four percent (4.0%) per annum.

      "Prepayment"  means a Revolving  Loan  Optional  Prepayment or a Term Loan
Optional  Prepayment,  as the case may be, and  "Prepayments"  mean collectively
all, Revolving Loan Optional Prepayments and Term Loan Optional Prepayments.

                                       15
<PAGE>

      "Proceeds" has the meaning described in the Uniform  Commercial Code as in
effect from time to time.

      "Receivable"  means one of each Borrower's now owned and hereafter  owned,
acquired  or  created   Accounts,   Chattel  Paper,   General   Intangibles  and
Instruments;  and  "Receivables"  means all of each  Borrower's now or hereafter
owned,  acquired or created  Accounts,  Chattel Paper,  General  Intangibles and
Instruments, and all Proceeds thereof.

      "Registered Organization" means an organization organized solely under the
law of a single  state or the  United  States  and as to which  the state or the
United  States must maintain a public record  showing the  organization  to have
been organized.

      "Reportable Event" means any of the events set forth in Section 4043(c) of
ERISA or the regulations thereunder.

      "Responsible Officer" means for Argan, Rainer Bosselmann,  President,  Art
Trudel, Senior Vice President and CFO, for SMC, and Art Trudel,  Secretary, Vice
President and Treasurer and for  Vitarich,  Rainer  Bosselmann,  Chairman of the
Board, Art Trudel, Vice President or Secretary.

      "Revolving  Credit  Commitment" means the agreement of the Lender relating
to the making of the Revolving  Loan and advances  thereunder  subject to and in
accordance with the provisions of this Agreement.

      "Revolving  Credit  Commitment  Period"  means the period of time from the
Closing Date to the Business Day  preceding  the  Revolving  Credit  Termination
Date.

      "Revolving  Credit Committed  Amount" has the meaning described in Section
2.1.1 (Revolving Credit Facility).

      "Revolving Credit Expiration Date" means May 31, 2007.

      "Revolving  Credit Facility" means the facility  established by the Lender
pursuant to Section 2.1 (Revolving Credit Facility).

      "Revolving  Credit  Note"  has the  meaning  described  in  Section  2.1.3
(Revolving Credit Note).

      "Revolving Credit Termination Date" means the earlier of (a) the Revolving
Credit Expiration Date, or (b) the date on which the Revolving Credit Commitment
is terminated pursuant to Section 7.2 (Remedies) or otherwise.

      "Revolving Credit Unused Line Fee" and "Revolving Credit Unused Line Fees"
have the meanings described in Section 2.1.7 (Revolving Credit Unused Line Fee).

      "Revolving  Loan" has the meaning  described in Section  2.1.1  (Revolving
Credit Facility).

      "Revolving  Loan  Account"  has the  meaning  described  in Section  2.1.6
(Revolving Loan Account).

                                       16
<PAGE>

      "Revolving  Loan  Fee"  has  the  meaning   described  in  Section  2.1.12
(Revolving Loan Fee).

      "Revolving   Loan  Optional   Prepayment"  and  "Revolving  Loan  Optional
Prepayments" have the meanings  described in Section 2.1.4 (Optional  Prepayment
of Revolving Loan).

      "Revolving  Loan  Mandatory  Prepayment"  and  "Revolving  Loan  Mandatory
Prepayments"   have  the  meanings   described  in  Section  2.1.10   (Mandatory
Prepayments of Revolving Loan).

      "Security Documents" means collectively any assignment,  pledge agreement,
security  agreement,  mortgage,  deed of trust,  deed to secure debt,  financing
statement and any similar instrument, document or agreement under or pursuant to
which a Lien is now or  hereafter  granted to, or for the benefit of, the Lender
on any real or  personal  property of any Person to secure all or any portion of
the  Obligations,  all as the same may from time to time be  amended,  restated,
supplemented or otherwise modified.

      "Solvent"  means when used with  respect to any Person that at the time of
determination:

            (a) the assets of such Person, at a fair valuation, are in excess of
the  total  amount  of its  debts  (including,  without  limitation,  contingent
liabilities); and

            (b) the present  fair  saleable  value of its assets is greater than
its probable  liability on its existing debts as such debts become  absolute and
matured; and

            (c) it is  then  able  and  expects  to be  able  to pay  its  debts
(including, without limitation,  contingent debts and other commitments) as they
mature; and

            (d) it has capital  sufficient to carry on its business as conducted
and as proposed to be conducted.

      For purposes of determining whether a Person is Solvent, the amount of any
contingent  liability  shall be computed as the amount that, in light of all the
facts and  circumstances  existing at such time,  represents the amount that can
reasonably be expected to become an actual or matured liability.

      "State" means the State of Maryland.

      "Subordinated  Debt"  means  all  Junior  Debt  as  defined  in  the  Debt
Subordination Agreement by and among Kevin J. Thomas, Argan and the Lender dated
as of [__________ __, 200_, as amended from time to time.

      "Subordinated Indebtedness" means all Indebtedness incurred at any time by
any one or more of the  Borrowers,  which is in  amounts,  subject to  repayment
terms, and subordinated to the Obligations,  as set forth in one or more written
agreements, all in form and substance satisfactory to the Lender in its sole and
absolute discretion.

                                       17
<PAGE>

      "Subsidiary"  means any  corporation  the majority of the voting shares of
which at the time are  owned  directly  by any  Borrower  and/or  by one or more
Subsidiaries of any Borrower.

      "Supporting   Obligation"  means  a  Letter-of-credit   right,   secondary
obligation or obligation of a secondary  obligor or that supports the payment or
performance of an account,  chattel paper, a document, a general intangible,  an
instrument or investment property.

      "Swap  Contract"  means any  document,  instrument  or  agreement  between
Borrower and Lender or any affiliate of Lender,  now existing or entered into in
the  future,  relating  to an  interest  rate  swap  transaction,  forward  rate
transaction,  interest  rate  cap,  floor or  collar  transaction,  any  similar
transaction,  any option to enter into any of the foregoing, and any combination
of the foregoing, which agreement may be oral or in writing, including,  without
limitation,  any master  agreement  relating to or  governing  any or all of the
foregoing and any related schedule or confirmation, each as amended from time to
time.

      "Taxes"  means all taxes  and  assessments  whether  general  or  special,
ordinary  or  extraordinary,  or  foreseen  or  unforeseen,  of every  character
(including  all  penalties  or  interest  thereon),  which  at any  time  may be
assessed,  levied,  confirmed or imposed by any Governmental Authority on any of
the Borrowers or any of its or their properties or assets or any part thereof or
in respect of any of its or their franchises, businesses, income or profits.

      "Term  Loan"  has the  meaning  described  in  Section  2.2.1  (Term  Loan
Commitment).

      "Term Loan  Commitment"  has the meaning  described in Section 2.2.1 (Term
Loan Commitment).

      "Term Loan  Committed  Amount" has the meaning  described in Section 2.2.1
(Term Loan Commitment).

      "Term Loan Facilities" means the facilities for the Term Loan and the 2006
Term  Loan  established  by the  Lender  pursuant  to  Section  2.2  (Term  Loan
Facilities).

      "Term Loan Optional Prepayment" and "Term Loan Optional  Prepayments" have
the meanings described in Section 2.2.3 (Optional Prepayments of Term Loans).

      "Term Loan Reserve" means (i) for the first eighteen (18) months following
the Closing Date, Seven Hundred Fifty Thousand Dollars  ($750,000),  and (ii) if
there is an outstanding  principal balance with respect to the 2006 Term Loan in
the nineteenth (19th) month or thereafter,  an amount equal to (a) Seven Hundred
Fifty  Thousand  Dollars  ($750,000),  minus  (b)  the  sum of all  payments  of
principal made by the Borrowers to the Lender on account of the 2006 Term Loan.

      "Term Note" has the meaning described in Section 2.2.1(b) (The Term Note).

      "Trademarks"  means and  includes  in each case  whether  now  existing or
hereafter arising,  all of each Borrower's rights,  title and interest in and to
(a) any and all  trademarks  (including  service  marks),  trade names and trade
styles,  and  applications  for  registration  thereof  and the  goodwill of the
business symbolized by any of the foregoing, including without limitation, those
set  forth  in  Schedule  1.1  attached  hereto,  (b) any and  all  licenses  of
trademarks,  service marks, trade names and/or trade styles, whether as licensor
or licensee,  (c) any renewals of any and all trademarks,  service marks,  trade
names,  trade  styles  and/or  licenses  of any of the  foregoing,  (d)  income,
royalties, damages and payments now or hereafter due and/or payable with respect
thereto, including, without limitation,  damages, claims, and payments for past,
present and future  infringements  thereof,  (e) rights to sue for past, present
and future infringements of any of the foregoing,  including the right to settle
suits  involving  claims and demands  for  royalties  owing,  and (f) all rights
corresponding to any of the foregoing throughout the world.

                                       18
<PAGE>

      "Uniform  Commercial  Code"  means,  unless  otherwise  provided  in  this
Agreement,  the Uniform Commercial Code as adopted by and in effect from time to
time in the State or in any other jurisdiction, as applicable.

      "Wholly Owned  Subsidiary"  means any domestic United States  corporation,
all the  shares  of  stock  of all  classes  of  which  (other  than  directors'
qualifying  shares) at the time are owned  directly or  indirectly by a Borrower
and/or by one or more Wholly Owned Subsidiaries of a Borrower.

      Section 1.2 Accounting Terms and Other Definitional Provisions.

      Unless  otherwise  defined  herein,  as used in this  Agreement and in any
certificate,  report  or  other  document  made or  delivered  pursuant  hereto,
accounting terms not otherwise defined herein,  and accounting terms only partly
defined herein,  to the extent not defined,  shall have the respective  meanings
given to them under GAAP, as consistently  applied to the applicable Person. All
terms used herein  which are defined by the Uniform  Commercial  Code shall have
the same meanings as assigned to them by the Uniform  Commercial Code unless and
to the  extent  varied by this  Agreement.  The  words  "hereof",  "herein"  and
"hereunder"  and words of similar import when used in this Agreement shall refer
to  this  Agreement  as a  whole  and not to any  particular  provision  of this
Agreement, and article, section, subsection, schedule and exhibit references are
references to articles, sections or subsections of, or schedules or exhibits to,
as the case may be, this Agreement unless otherwise  specified.  As used herein,
the singular  number shall  include the plural,  the plural the singular and the
use of the  masculine,  feminine or neuter gender shall include all genders,  as
the context may require. Reference to any one or more of the Financing Documents
shall mean the same as the foregoing may from time to time be amended, restated,
substituted, extended, renewed, supplemented or otherwise modified. Reference in
this  Agreement  and  the  other  Financing  Documents  to the  "Borrower",  the
"Borrowers", "each Borrower" or otherwise with respect to any one or more of the
Borrowers  shall  mean  each  and  every  Borrower  and  any  one or more of the
Borrowers,  jointly  and  severally,  unless a specific  Borrower  is  expressly
identified.

                                   ARTICLE II
                              THE CREDIT FACILITIES

      Section 2.1 The Revolving Credit Facility.

            2.1.1 Revolving Credit Facility.

            Subject to and upon the  provisions  of this  Agreement,  the Lender
establishes a revolving credit facility in favor of the Borrowers. The aggregate
of all advances under the Revolving Credit Facility is sometimes  referred to in
this Agreement as the "Revolving Loan".

                                       19
<PAGE>

            The  principal  amount of Four  Million Two Hundred  Fifty  Thousand
Dollars ($4,250,000) is the "Revolving Credit Committed Amount".

            During the Revolving  Credit  Commitment  Period,  any or all of the
Borrowers may request advances under the Revolving Credit Facility in accordance
with the provisions of this Agreement;  provided that after giving effect to any
Borrower's request the aggregate  outstanding principal balance of the Revolving
Loan would not exceed (a) the lesser of the Revolving Credit Committed Amount or
(b) the then most current Borrowing Base, minus the Term Loan Reserve.

            Unless  sooner  paid,  the  unpaid  Revolving  Loan,  together  with
interest accrued and unpaid thereon,  and all other Obligations shall be due and
payable in full on the Revolving Credit Expiration Date.

            2.1.2 Procedure for Making Advances Under the Revolving Loan; Lender
Protection Loans.

            The Borrowers may borrow under the Revolving  Credit Facility on any
Business Day.  Advances  under the Revolving Loan shall be deposited to a demand
deposit account of a Borrower with the Lender (or an Affiliate of the Lender) or
shall be otherwise  applied as directed by the  Borrowers,  which  direction the
Lender may require to be in writing.  No later than 11:00 a.m. (Eastern Time) on
the date of the requested borrowing, the Borrowers shall give the Lender oral or
written  notice (a "Loan Notice") of the amount and (if requested by the Lender)
the purpose of the requested borrowing.  Any oral Loan Notice shall be confirmed
in writing by the  Borrowers  within three (3) Business Days after the making of
the  requested  advance  under the  Revolving  Loan.  Each Loan Notice  shall be
irrevocable.

            In addition, each of the Borrowers hereby irrevocably authorizes the
Lender at any time and from time to time, without further request from or notice
to the Borrowers,  to make advances under the Revolving  Loan, and to establish,
without  duplication  reserves against the Borrowing Base, which the Lender,  in
its sole and absolute discretion,  deems necessary or appropriate to protect the
interests of the Lender,  including,  without limitation,  advances and reserves
under the  Revolving  Loan made to cover debit  balances in the  Revolving  Loan
Account,  principal of, and/or  interest on, any Loan, the  Obligations,  and/or
Enforcement  Costs,  prior to, on, or after the  termination  of other  advances
under this Agreement,  regardless of whether the outstanding principal amount of
the Revolving Loan that the Lender may advance or reserve  hereunder exceeds the
Revolving Credit Committed Amount.  Notwithstanding the foregoing,  prior to the
occurrence of any Default,  the Lender will provide  notice of any advances made
under the Revolving Loan pursuant to this provision.

            2.1.3 Revolving Credit Note.

            The  obligation  of the Borrowers to pay the  Revolving  Loan,  with
interest,  shall  be  evidenced  by a  promissory  note  (as  from  time to time
extended, amended, restated,  supplemented or otherwise modified, the "Revolving
Credit Note")  substantially in the form of EXHIBIT B-1 attached hereto and made
a part hereof,  with  appropriate  insertions.  The Borrowers  shall execute and
deliver  to the  Lender  on  the  date  hereof  the  Revolving  Credit  Note  in
substitution for and not  satisfaction of, the issued and outstanding  Revolving
Credit Note, and the Revolving Credit Note shall be the "Revolving  Credit Note"
for all purposes of the Financing Documents. The Note being substituted pursuant
to this Agreement shall be marked "Replaced" and returned to the Borrowers after
the execution of this Agreement.  The Revolving Credit Note shall be dated as of
the  Closing  Date,  shall be  payable  to the order of the  Lender at the times
provided in the Revolving  Credit Note, and shall be in the principal  amount of
the Revolving  Credit  Committed  Amount.  The  Revolving  Credit Note shall not
operate  as a novation  of any of the  Obligations  or  nullify,  discharge,  or
release any such  Obligations  under the  Original  Financing  Agreement  or the
continuing contractual relationship of the parties hereto in accordance with the
provisions of this Agreement.

                                       20
<PAGE>

            Each  of  the  Borrowers   acknowledges  and  agrees  that,  if  the
outstanding  principal  balance of the Revolving Loan  outstanding  from time to
time exceeds the face amount of the lesser of (a) the Revolving Credit Committed
Amount or (b) the then most current Borrowing Base, minus the Term Loan Reserve,
the excess shall bear interest at the  Post-Default  Rate for the Revolving Loan
and shall be payable, with accrued interest, ON DEMAND.

            2.1.4 Optional Prepayments of Revolving Loan.

            The  Borrowers  shall  have the  option at any time and from time to
time to prepay (each a "Revolving Loan Optional Prepayment" and collectively the
"Revolving Loan Optional  Prepayments")  the Revolving Loan, in whole or in part
without premium or penalty.

            2.1.5 Treasury Management.

            The Borrowers  will provide the Lender with a list of all depository
and  investment  accounts  now or  hereafter  maintained  with  other  financial
institutions  and upon  request  of the  Lender,  will  obtain  blocked  account
agreements  in  form  and  substance   satisfactory  to  the  Lender  from  such
institutions; provided, however, that the provisions of this Section 2.1.5 shall
not apply to deposit accounts used for payroll, payroll taxes and other employee
wage and benefit payments to or for the benefit of Borrowers' employees.

            2.1.6 Revolving Loan Account.

            The Lender will  establish  and maintain a loan account on its books
(the  "Revolving  Loan  Account")  to which  the  Lender  will (a) debit (i) the
principal  amount of each  advance  of the  Revolving  Loan  made by the  Lender
hereunder as of the date made,  (ii) the amount of any  interest  accrued on the
Revolving  Loan as and when due, and (iii) any other  amounts due and payable by
the  Borrowers  to the  Lender  from time to time under the  provisions  of this
Agreement in connection with the Revolving Loan, including,  without limitation,
Enforcement Costs, Fees, late charges,  and service,  collection and audit fees,
as and when due and payable,  and (b) credit all payments  made by the Borrowers
to the Lender on account of the Revolving  Loan as of the date made.  The Lender
may debit the Revolving  Loan Account for the amount of any Item of Payment that
is returned  to the Lender  unpaid.  All credit  entries to the  Revolving  Loan
Account are conditional and shall be readjusted as of the date made if final and
indefeasible  payment is not received by the Lender in cash or solvent  credits.
Any and all periodic or other statements or reconciliations, and the information
contained in those statements or reconciliations,  of the Revolving Loan Account
shall be final,  binding and  conclusive  upon the  Borrowers  in all  respects,
absent manifest error,  unless the Lender receives  specific  written  objection
thereto from the Borrowers within thirty (30) Business Days after such statement
or reconciliation shall have been sent by the Lender.

                                       21
<PAGE>

            2.1.7 Revolving Credit Unused Line Fee.

            The Borrowers  shall pay to the Lender a revolving  credit  facility
fee (collectively,  the "Revolving Credit Unused Line Fees" and individually,  a
"Revolving  Credit  Unused Line Fee") in an amount equal to three eighths of one
percent (.375%) per annum of the average daily unused and undisbursed portion of
the  Revolving  Credit  Committed  Amount in effect  from time to time  accruing
during each month. The accrued and unpaid portion of the Revolving Credit Unused
Line Fee shall be paid by the Borrowers to the Lender  monthly in arrears on the
last day of each month,  commencing  on the first such date  following  the date
hereof, and on the Revolving Credit Termination Date.

            2.1.8 Borrowing Base.

            As used in this Agreement,  the term  "Borrowing  Base" means at any
time, an amount equal to the aggregate of (a) eighty percent (80%) of the amount
of Eligible Receivables,  plus (b) fifty percent (50%) of the amount of Eligible
Inventory.

            The Borrowing  Base shall be computed  based on the  Borrowing  Base
Report most  recently  delivered  to and  accepted by the Lender in its sole and
absolute discretion. In the event the Borrowers fail to furnish a Borrowing Base
Report required by Section 2.1.9  (Borrowing  Base Report),  or in the event the
Lender believes that a Borrowing Base Report is no longer  accurate,  the Lender
may, in its sole and absolute discretion exercised from time to time and without
limiting its other rights and remedies under this Agreement,  suspend the making
of or limit  advances  under the Revolving  Loan.  The  Borrowing  Base shall be
subject to reduction by the amount of any Receivable or any Inventory  which was
included in the Borrowing Base but which the Lender determines fails to meet the
respective  criteria  applicable  from time to time for Eligible  Receivables or
Eligible Inventory.

            If at any time the total of the  aggregate  principal  amount of the
Revolving  Loan  exceeds  the  Borrowing   Base,  a  borrowing  base  deficiency
("Borrowing Base Deficiency") shall exist. Each time a Borrowing Base Deficiency
exists,  the  Borrowers  at the  sole  and  absolute  discretion  of the  Lender
exercised from time to time shall pay the Borrowing Base Deficiency ON DEMAND to
the Lender.

            Without  implying any  limitation  on the Lender's  discretion  with
respect to the Borrowing  Base,  the criteria for Eligible  Receivables  and for
Eligible  Inventory   contained  in  the  respective   definitions  of  Eligible
Receivables  and of  Eligible  Inventory  are in part  based  upon the  business
operations  of the  Borrowers  existing  on or about the  Closing  Date and upon
information and records furnished to the Lender by the Borrowers. If at any time
or from time to time hereafter,  the business operations of the Borrowers change
or such  information  and  records  furnished  to the  Lender  is  incorrect  or
misleading,  the Lender in its discretion, may at any time and from time to time
during the duration of this Agreement  change such criteria or add new criteria.
The Lender may communicate such changed or additional  criteria to the Borrowers
from time to time either orally or in writing.

            2.1.9 Borrowing Base Report

            The  Borrowers  will furnish to the Lender no less  frequently  than
monthly  and at such other times as may be  requested  by the Lender a report of
the Borrowing Base (each a "Borrowing Base Report"; collectively, the "Borrowing
Base  Reports")  in  the  form  required  from  time  to  time  by  the  Lender,
appropriately completed and duly signed. The Borrowing Base Report shall contain
the amount and  payments on the  Receivables,  the value of  Inventory,  and the
calculations of the Borrowing Base, all in such detail,  and accompanied by such
supporting and other  information,  as the Lender may from time to time request.
Upon the Lender's request and upon the creation of any  Receivables,  or at such
other intervals as the Lender may require, the Borrowers will provide the Lender
with (a)  copies of  Account  Debtor  invoices;  (b)  evidence  of  shipment  or
delivery; and (c) such further schedules, documents and/or information regarding
the  Receivables  and the Inventory as the Lender may  reasonably  require.  The
items to be provided under this subsection shall be in form  satisfactory to the
Lender,  and certified as true and correct by a  Responsible  Officer (or by any
other officers or employees of the Borrower whom a Responsible Officer from time
to time  authorizes  in writing to do so), and delivered to the Lender from time
to time  solely  for the  Lender's  convenience  in  maintaining  records of the
Collateral.  Any  Borrower's  failure to deliver any of such items to the Lender
shall not affect, terminate,  modify, or otherwise limit the Liens of the Lender
on the Collateral.

                                       22
<PAGE>

            2.1.10 Mandatory Prepayments of Revolving Loan.

            The  Borrowers  shall  make  the  mandatory   prepayments   (each  a
"Revolving  Loan Mandatory  Prepayment"  and  collectively,  the "Revolving Loan
Mandatory  Prepayments") of the Revolving Loan at any time and from time to time
in such amounts  requested by the Lender  pursuant to Section  2.1.8  (Borrowing
Base) in order to cover any Borrowing Base Deficiency.

            2.1.11 The Collateral Account.

            If the Lender requests,  the Borrowers will deposit,  or cause to be
deposited,  all Items of Payment to a bank account  designated by the Lender and
from which the Lender alone has power of access and withdrawal (the  "Collateral
Account"). When a Collateral Account is in existence, each deposit shall be made
not later than the next  Business  Day after the date of receipt of the Items of
Payment. The Items of Payment shall be deposited in precisely the form received,
except for the  endorsements  of the  Borrowers  where  necessary  to permit the
collection of any such Items of Payment,  which endorsement the Borrowers hereby
agree to make.  In the event the Borrowers  fail to do so, the Borrowers  hereby
authorize  the Lender to make the  endorsement  in the name of any or all of the
Borrowers.  During any period when a  Collateral  Account is in place,  prior to
such a deposit,  the Borrowers  will not commingle any Items of Payment with any
of the Borrowers' other funds or property, but will hold them separate and apart
in trust and for the account of the Lender.

            In  addition,  if so  directed by the Lender,  the  Borrowers  shall
direct the mailing of all Items of Payment from their Account  Debtors to one or
more post-office  boxes designated by the Lender, or to such other additional or
replacement post-office boxes pursuant to the request of the Lender from time to
time  (collectively,  the  "Lockbox").  The Lender shall have  unrestricted  and
exclusive access to the Lockbox.

            After a Collateral  Account is  established,  the  Borrowers  hereby
authorize  the  Lender to inspect  all Items of  Payment,  endorse  all Items of
Payment in the name of any or all of the  Borrowers,  and deposit  such Items of
Payment in the Collateral Account.  The Lender reserves the right,  exercised in
its sole and absolute discretion from time to time, to provide to the Collateral
Account  credit prior to final  collection of an Item of Payment and to disallow
credit for any Item of Payment  which is  unsatisfactory  to the Lender.  In the
event Items of Payment are returned to the Lender for any reason whatsoever, the
Lender may, in the exercise of its  discretion  from time to time,  forward such
Items of Payment a second time.  Any returned  Items of Payment shall be charged
back to the Collateral Account, the Revolving Loan Account, or other account, as
appropriate.

                                       23
<PAGE>

            The Lender will apply the whole or any part of the  collected  funds
credited to the Collateral  Account  against the Revolving Loan (or with respect
to Items of Payment  that are not  proceeds of Accounts or Inventory or after an
Event of Default, against any of the Obligations) or credit such collected funds
to a depository  account of any or all of the  Borrowers  with the Lender (or an
Affiliate of the Lender),  the order and method of such application to be in the
sole  discretion  of the Lender.  On the first day of each month,  the Borrowers
shall pay the Lender an amount equal to the additional interest which would have
accrued on the Revolving  Loan during the preceding  month if collections in the
Collateral  Account  during the month had been  received two (2)  Business  Days
subsequent  to their actual  receipt;  any  resulting  increase in the amount of
interest payable by the Borrowers shall be part of the Obligations.

            2.1.12 Revolving Loan Fee.

            The Borrowers shall pay to the Lender a  non-refundable  loan fee of
Ten Thousand  Dollars  ($10,000)  on or before the Closing Date (the  "Revolving
Loan Fee"). The Revolving Loan Fee is earned when paid.

      Section 2.2 The Term Loan Facilities.

            2.2.1 The 2003 Term Loan Facility.

                  (a) Term Loan Commitment.

            The Lender has made a loan (the "Term Loan") to the Borrowers in the
principal amount of One Million Two Hundred Thousand Dollars  ($1,200,000)  (the
"Term Loan  Committed  Amount").  The  obligation of the Lender to make the Term
Loan is herein called its "Term Loan Commitment".  The Term Loan has a principal
outstanding balance as of May 1, 2006 of One Hundred Thousand Dollars and Eleven
Cents ($100,000.11).

                  (b) The Term Note.

            The  obligation  of the Borrowers to pay the Term Loan with interest
is evidenced  by a  promissory  note dated August 19, 2003 (as from time to time
extended,  amended,  restated,  supplemented  or otherwise  modified,  the "Term
Note") made a part  hereof.  The Term Note shall remain in full force and effect
without  setoff,  and the  Borrowers  shall  continue  to pay the  Term  Note in
accordance with the terms hereof and thereof.

            2.2.2 The 2006 Term Loan Facility.

                  (a) 2006 Term Loan Commitment.

            Subject to and upon the  provisions  of this  Agreement,  including,
without limitation,  the provisions of Section 5.3 of this Agreement, the Lender
agrees to make a loan (the "2006 Term Loan") to the  Borrowers  if  requested in
writing by the  Borrowers  within one hundred  twenty  (120) days of the Closing
Date (the "2006 Term Loan Availability End Date") in the principal amount of One
Million  Five  Hundred  Thousand  Dollars  ($1,500,000)  (the  "2006  Term  Loan
Committed  Amount").  The obligation of the Lender to make the 2006 Term Loan is
herein called its "2006 Term Loan Commitment".

                                       24
<PAGE>

                  (b) The 2006 Term Note.

            The  obligation  of the  Borrowers  to pay the 2006  Term  Loan with
interest shall be evidenced by a promissory note (as from time to time extended,
amended,  restated,  supplemented or otherwise  modified,  the "2006 Term Note")
substantially  in the form of EXHIBIT B-3 attached hereto and made a part hereof
with appropriate insertions.

            2.2.3 Optional Prepayments of Term Loans.

            The  Borrowers  may, at their  option,  at any time and from time to
time, prepay (each a "Term Loan Optional  Prepayment" and collectively the "Term
Loan Optional  Prepayments") the Term Loan or the 2006 Term Loan, in whole or in
part, upon five (5) Business Days prior written notice,  specifying the date and
amount of  prepayment.  The  amount to be so  prepaid,  together  with  interest
accrued  thereon to date of prepayment if the amount is intended as a prepayment
of the Term Loan or the 2006 Term Loan in whole,  shall be paid by the Borrowers
to the  Lender on the date  specified  for such  prepayment.  Partial  Term Loan
Optional  Prepayments shall be in an amount not less than the amount of the next
principal  installment under the Term Note or the 2006 Term Loan, as applicable,
and shall be applied  first to all accrued and unpaid  interest on the principal
of the Term Note or the 2006  Term  Note,  as  applicable,  then to the  balloon
payment due at maturity,  if any, and then to  principal  against the  principal
installments in the inverse order of their maturity.

            2.2.4 The 2006 Term Loan Fee.

            The  Borrowers  shall  pay to the  Lender  a  non-refundable  fee of
Eighteen  Thousand  Seven Hundred and Fifty  Dollars  ($18,750) on or before the
Closing Date (the "2006 Term Loan Fee").  The Term Loan Fee is earned when paid.
The Borrowers understand and agree that in the event the Borrowers fail to fully
satisfy the  conditions  set forth in Section 5.3 for making the 2006 Term Loan,
on or prior to the 2006 Term Loan  Availability  End Date,  the Lender shall not
return the 2006 Term Loan Fee.

      Section 2.3 General Financing Provisions.

            2.3.1 Borrowers' Representatives.

            The Borrowers  hereby  represent and warrant to the Lender that each
of them will derive benefits,  directly and indirectly,  from each Loan, both in
their separate capacity and as a member of the integrated group to which each of
the  Borrowers  belong and because the  successful  operation of the  integrated
group is dependent upon the continued successful performance of the functions of
the  integrated  group as a whole,  because  (a) the  terms of the  consolidated
financing  provided under this Agreement are more favorable than would otherwise
be obtainable by the Borrowers  individually,  (b) this  financing has enabled a
certain   purchase   agreement   transaction   and  (c)  Borrowers'   additional
administrative  and  other  costs  and  reduced   flexibility   associated  with
individual   financing   arrangements  which  would  otherwise  be  required  if
obtainable  would  substantially  reduce  the  value  to  the  Borrowers  of the
financing.  The Borrowers in the discretion of their respective  managements are
to  agree  among  themselves  as to the  allocation  of  proceeds  of the  Loan,
provided,  however,  that the Borrowers shall be deemed to have  represented and
warranted to the Lender at the time of  allocation  that each benefit and use of
proceeds is a Permitted Use.

                                       25
<PAGE>

            For  administrative  convenience,  each Borrower hereby  irrevocably
appoints Argan as the Borrower's  attorney-in-fact,  with power of  substitution
(with the prior  written  consent of the Lender in the  exercise of its sole and
absolute  discretion),  in the name of Argan or in the name of any  Borrower  or
otherwise to take any and all actions with  respect to the this  Agreement,  the
other Financing  Documents,  the Obligations  and/or the Collateral  (including,
without  limitation,  the  Proceeds  thereof) as Argan may so elect from time to
time, including,  without limitation,  actions to (i) request advances under the
Loan and direct  the  Lender to  disburse  or credit  the  proceeds  of any Loan
directly to an account of Argan any one or more of the  Borrowers or  otherwise,
which direction shall evidence the making of such Loan and shall  constitute the
acknowledgment  by each of the  Borrowers of the receipt of the proceeds of such
Loan, (ii) enter into, execute,  deliver,  amend, modify,  restate,  substitute,
extend and/or renew this Agreement,  any Additional Borrower Joinder Supplement,
any other Financing Documents,  security agreements,  mortgages, deposit account
agreements,  instruments,  certificates, waivers, letter of credit applications,
releases,  documents  and  agreements  from time to time,  and (iii) endorse any
check or other  item of payment  in the name of the  Borrower  or in the name of
Argan. The foregoing appointment is coupled with an interest,  cannot be revoked
without the prior written consent of the Lender,  and may be exercised from time
to time through  Argan's duly  authorized  officer,  officers or other Person or
Persons designated by Argan to act from time to time on behalf of Argan.

            Each of the Borrowers  hereby  irrevocably  authorizes the Lender to
make Loans to any one or more of the  Borrowers  pursuant to the  provisions  of
this Agreement upon the written, oral or telephone request of any one or more of
the Persons who is from time to time a Responsible  Officer of a Borrower  under
the provisions of the most recent  certificate of corporate  resolutions  and/or
incumbency  of the  Borrowers on file with the Lender and also upon the written,
oral or  telephone  request of any one of the Persons who is from time to time a
Responsible Officer of Argan under the provisions of the most recent certificate
of corporate resolutions and/or incumbency for Argan on file with the Lender.

            The Lender  assumes no  responsibility  or liability for any errors,
mistakes,  and/or  discrepancies  in the  oral,  telephonic,  written  or  other
transmissions of any instructions,  orders,  requests and confirmations  between
the Lender and the Borrowers in connection with the Credit Facilities,  any Loan
or any other  transaction in connection  with the provisions of this  Agreement.
Without  implying  any  limitation  on  the  joint  and  several  nature  of the
Obligations, the Lender agrees that, notwithstanding any other provision of this
Agreement,  the  Borrowers  may  create  reasonable  inter-company  indebtedness
between or among the  Borrowers  with respect to the  allocation of the benefits
and proceeds of the advances and Credit  Facilities  under this  Agreement.  The
Borrowers  agree among  themselves,  and the Lender  consents to that agreement,
that each  Borrower  shall  have  rights of  contribution  from all of the other
Borrowers  to the  extent  such  Borrower  incurs  Obligations  in excess of the
proceeds of the Loans  received  by, or  allocated  to  purposes  for the direct
benefit of, such Borrower.  All such  indebtedness  and rights shall be, and are
hereby agreed by the Borrowers to be, subordinate in priority and payment to the
indefeasible  repayment  in full in cash of the  Obligations,  and,  unless  the
Lender agrees in writing otherwise, shall not be exercised or repaid in whole or
in part  until all of the  Obligations  have been  indefeasibly  paid in full in
cash. The Borrowers agree that all of such inter-company indebtedness and rights
of  contribution  are part of the  Collateral and secure the  Obligations.  Each
Borrower hereby waives all rights of counterclaim, recoupment and offset between
or among themselves arising on account of that indebtedness and otherwise.  Each
Borrower  shall  not  evidence  the  inter-company  indebtedness  or  rights  of
contribution by note or other instrument, and shall not secure such indebtedness
or rights of contribution  with any Lien or security.  Notwithstanding  anything
contained in this Agreement to the contrary, the amount covered by each Borrower
under the Obligations (including,  without limitation, Section 2.3.8 (Guaranty))
shall be limited to an aggregate  amount (after giving effect to any collections
from,  rights to receive  contribution  from or payments made by or on behalf of
any other  Borrower in respect of the  Obligations)  which,  together with other
amounts owing by such Borrowers to the Lender under the Obligations, is equal to
the largest  amount that would not be subject to avoidance  under the Bankruptcy
Code or any applicable  provisions of any applicable,  comparable state or other
Laws.

                                       26
<PAGE>

            2.3.2 Use of Proceeds of the Loans.

            The  proceeds of each  advance  under the Loans shall be used by the
Borrowers for Permitted  Uses, and for no other purposes except as may otherwise
be agreed by the Lender in writing.  The Borrowers shall use the proceeds of the
Loans promptly.

            2.3.3 Computation of Interest and Fees.

            All applicable Fees and interest shall be calculated on the basis of
a year of 360 days for the  actual  number of days  elapsed.  Any  change in the
interest  rate on any of the  Obligations  resulting  from a change in the LIBOR
Rate shall  become  effective  as of the opening of business on the day on which
such change in the LIBOR Rate is announced.

            2.3.4 Maximum Interest Rate.

            In no event shall any interest rate  provided for  hereunder  exceed
the maximum rate  permissible for corporate  borrowers under  applicable law for
loans of the type provided for hereunder (the "Maximum Rate"). If, in any month,
any interest rate, absent such limitation, would have exceeded the Maximum Rate,
then the  interest  rate for that month  shall be the Maximum  Rate,  and, if in
future months, that interest rate would otherwise be less than the Maximum Rate,
then that  interest rate shall remain at the Maximum Rate until such time as the
amount of interest paid hereunder equals the amount of interest which would have
been paid if the same had not been  limited by the  Maximum  Rate.  In the event
that, upon payment in full of the Obligations, the total amount of interest paid
or accrued  under the terms of this  Agreement  is less than the total amount of
interest  which would,  but for this  Section,  have been paid or accrued if the
interest  rates  otherwise set forth in this  Agreement had at all times been in
effect, then the Borrowers shall, to the extent permitted by applicable law, pay
the Lender, an amount equal to the excess of (a) the lesser of (i) the amount of
interest  which would have been  charged if the Maximum  Rate had, at all times,
been in effect or (ii) the amount of interest  which would have  accrued had the
interest  rates  otherwise set forth in this  Agreement,  at all times,  been in
effect  over (b) the amount of  interest  actually  paid or  accrued  under this
Agreement.  In the event that a court  determines  that the Lender has  received
interest and other charges  hereunder in excess of the Maximum Rate, such excess
shall be deemed  received on account of, and shall  automatically  be applied to
reduce,  the Obligations other than interest,  in the inverse order of maturity,
and if there are no  Obligations  outstanding,  the Lender  shall  refund to the
Borrowers such excess.

                                       27
<PAGE>

            2.3.5 Payments.

            All  payments of the  Obligations,  including,  without  limitation,
principal,  interest,  Prepayments,  and  Fees,  shall be paid by the  Borrowers
without  setoff,  recoupment  or  counterclaim  to  the  Lender  in  immediately
available funds not later than 12:00 p.m. (Eastern Time) on the due date of such
payment.  All payments received by the Lender after such time shall be deemed to
have been received by the Lender for purposes of computing interest and Fees and
otherwise as of the next Business Day. Payments shall not be considered received
by the  Lender  until  such  payments  are  paid to the  Lender  in  immediately
available funds to the Lender's  principal  office in Rockville,  Maryland or at
such other  location  as the Lender may at any time and from time to time notify
the Borrowers.  Alternatively, at its sole discretion, the Lender may charge any
deposit  account of the  Borrowers at the Lender or any  Affiliate of the Lender
with all or any part of any amount due to the Lender under this Agreement or any
of the other Financing Documents to the extent that the Borrowers shall have not
otherwise tendered payment to the Lender.

            2.3.6 Liens; Setoff.

            The Borrowers  hereby grant to the Lender as  additional  collateral
and  security  for  all of the  Obligations,  a  continuing  Lien on any and all
monies,  Investment  Property,  and  other  property  of the  Borrowers  and the
proceeds  thereof,  now or  hereafter  held or received by or in transit to, the
Lender,  and/or any  Affiliate  of the  Lender,  from or for the account of, the
Borrowers,  and also upon any and all deposit accounts  (general or special) and
credits  of the  Borrowers,  if any,  with the  Lender or any  Affiliate  of the
Lender,  at any  time  existing,  excluding  any  deposit  accounts  held by the
Borrowers  in their  capacity as trustee for  Persons who are not  Borrowers  or
Affiliates of the Borrowers. Without implying any limitation on any other rights
the Lender may have under the Financing Documents or applicable Laws, during the
continuance  of an Event of  Default,  the  Lender is hereby  authorized  by the
Borrowers at any time and from time to time, without notice to the Borrowers, to
set off,  appropriate and apply any or all items hereinabove referred to against
all Obligations  then  outstanding  (whether or not then due), all in such order
and  manner  as shall  be  determined  by the  Lender  in its sole and  absolute
discretion.

            2.3.7 Requirements of Law.

            In the event that the Lender  shall  have  determined  in good faith
that (a) the adoption of any Capital Adequacy  Regulation,  or (b) any change in
any Capital Adequacy  Regulation or in the interpretation or application thereof
or (c) compliance by the Lender or any  corporation  controlling the Lender with
any request or directive  regarding  capital adequacy (whether or not having the
force of law) from any central  bank or  Governmental  Authority,  does or shall
have the effect of  reducing  the rate of return on the capital of the Lender or
any corporation  controlling the Lender,  as a consequence of the obligations of
the Lender  hereunder to a level below that which the Lender or any  corporation
controlling  the Lender  would have  achieved but for such  adoption,  change or
compliance  (taking  into  consideration  the  policies  of the  Lender  and the
corporation  controlling  the Lender,  with  respect to capital  adequacy) by an
amount deemed by the Lender, in its reasonable discretion,  to be material, then
from time to time,  after submission by the Lender to the Borrowers of a written
request  therefore  and a  statement  of the basis for such  determination,  the
Borrowers shall pay to the Lender such additional  amount or amounts in order to
compensate the Lender or its controlling corporation for any such reduction.

                                       28
<PAGE>

            2.3.8 Guaranty.

                  (a) Each  Borrower  hereby  unconditionally  and  irrevocably,
guarantees to the Lender:

                        (i) the due and punctual payment in full (and not merely
                  the collectibility) by the other Borrowers of the Obligations,
                  including  unpaid and accrued interest  thereon,  in each case
                  when  due and  payable,  all  according  to the  terms of this
                  Agreement, the Notes and the other Financing Documents;

                        (ii)  the due and  punctual  payment  in full  (and  not
                  merely the collectibility) by the other Borrowers of all other
                  sums and  charges  which may at any time be due and payable in
                  accordance with this Agreement,  the Notes or any of the other
                  Financing Documents;

                        (iii)  the due and  punctual  performance  by the  other
                  Borrowers of all of the other terms,  covenants and conditions
                  contained in the Financing Documents; and

                        (iv) all the other Obligations of the other Borrowers.

                  (b) The  obligations  and  liabilities  of each  Borrower as a
guarantor under this Section 2.3.8 shall be absolute and unconditional and joint
and several, irrespective of the genuineness,  validity, priority, regularity or
enforceability  of this  Agreement,  any of the  Notes  or any of the  Financing
Documents or any other circumstance which might otherwise  constitute a legal or
equitable discharge of a surety or guarantor. Each Borrower in its capacity as a
guarantor  expressly  agrees  that the  Lender  may,  in its  sole and  absolute
discretion,  without notice to or further assent of such Borrower and without in
any way  releasing,  affecting  or in any way  impairing  the joint and  several
obligations and liabilities of such Borrower as a guarantor hereunder:

                        (i) waive  compliance  with, or any defaults  under,  or
                  grant any other  indulgences  under or with  respect to any of
                  the Financing Documents;

                        (ii) modify,  amend,  change or terminate any provisions
                  of any of the Financing Documents;

                        (iii) grant extensions or renewals of or with respect to
                  the Credit Facilities, the Notes or any of the other Financing
                  Documents;

                        (iv) effect any release,  subordination,  compromise  or
                  settlement in connection with this Agreement, any of the Notes
                  or any of the other Financing Documents;

                                       29
<PAGE>

                        (v)  agree to the  substitution,  exchange,  release  or
                  other  disposition of the  Collateral or any part thereof,  or
                  any other  collateral for the Loan or to the  subordination of
                  any lien or security interest therein;

                        (vi) make  advances  for the purpose of  performing  any
                  term,  provision or covenant contained in this Agreement,  any
                  of the  Notes or any of the  other  Financing  Documents  with
                  respect to which the Borrowers shall then be in default;

                        (vii) make future advances pursuant to this Agreement or
                  any of the other Financing Documents;

                        (viii) assign, pledge, hypothecate or otherwise transfer
                  the Commitments,  the Obligations, the Notes, any of the other
                  Financing Documents or any interest therein, all as and to the
                  extent permitted by the provisions of this Agreement;

                        (ix) deal in all respects with the other Borrowers as if
                  this Section 2.3.8 were not in effect;

                        (x) effect any release,  compromise or  settlement  with
                  any of the other  Borrowers,  whether in their  capacity  as a
                  Borrower or as a guarantor  under this Section  2.3.8,  or any
                  other guarantor; and

                        (xi) provide debtor-in-possession financing or allow use
                  of cash collateral in proceedings  under the Bankruptcy  Code,
                  it  being  expressly  agreed  by all  Borrowers  that any such
                  financing and/or use would be part of the Obligations.

                  (c) The  obligations  and  liabilities  of each  Borrower,  as
guarantor  under this Section  2.3.8,  shall be primary,  direct and  immediate,
shall not be subject to any  counterclaim,  recoupment,  set off,  reduction  or
defense based upon any claim that a Borrower may have against any one or more of
the other  Borrowers,  the Lender,  and/or any other  guarantor and shall not be
conditional  or  contingent  upon  pursuit or  enforcement  by the Lender of any
remedies it may have against the Borrowers with respect to this  Agreement,  the
Notes or any of the other  Financing  Documents,  whether  pursuant to the terms
thereof  or by  operation  of  law.  Without  limiting  the  generality  of  the
foregoing,  the Lender  shall not be required to make any demand upon any of the
Borrowers, or to sell the Collateral or otherwise pursue, enforce or exhaust its
remedies  against the Borrowers or the Collateral  either  before,  concurrently
with or after pursuing or enforcing its rights and remedies  hereunder.  Any one
or more  successive or concurrent  actions or proceedings may be brought against
each  Borrower  under this Section  2.3.8,  either in the same  action,  if any,
brought  against  any one or more of the  Borrowers  or in  separate  actions or
proceedings,  as often as the Lender may deem  expedient or  advisable.  Without
limiting the foregoing,  it is specifically  understood  that any  modification,
limitation or discharge of any of the  liabilities  or obligations of any one or
more of the  Borrowers,  any other  guarantor  or any  obligor  under any of the
Financing  Documents,   arising  out  of,  or  by  virtue  of,  any  bankruptcy,
arrangement,  reorganization  or similar  proceeding for relief of debtors under
federal or state law  initiated by or against any one or more of the  Borrowers,
in their  respective  capacities as borrowers and guarantors  under this Section
2.3.8, or under any of the Financing Documents shall not modify,  limit, lessen,
reduce,  impair,  discharge,  or otherwise affect the liability of each Borrower
under this Section 2.3.8 in any manner whatsoever,  and this Section 2.3.8 shall
remain and  continue in full force and  effect.  It is the intent and purpose of
this Section 2.3.8 that each Borrower shall and does hereby waive all rights and
benefits  which  might  accrue  to any  other  guarantor  by  reason of any such
proceeding,  and the  Borrowers  agree  that they  shall be liable  for the full
amount of the obligations and liabilities  under this Section 2.3.8,  regardless
of, and  irrespective  to, any  modification,  limitation  or  discharge  of the
liability  of any one or more  of the  Borrowers,  any  other  guarantor  or any
obligor  under any of the  Financing  Documents,  that may result  from any such
proceedings.

                                       30
<PAGE>

                  (d) Each  Borrower,  as guarantor  under this  Section  2.3.8,
hereby unconditionally, jointly and severally, irrevocably and expressly waives:

                        (i)   presentment   and  demand   for   payment  of  the
                  Obligations and protest of non-payment;

                        (ii) notice of  acceptance  of this Section 2.3.8 and of
                  presentment, demand and protest thereof;

                        (iii) notice of any default hereunder or under the Notes
                  or any of the  other  Financing  Documents  and  notice of all
                  indulgences;

                        (iv) notice of any increase in the amount of any portion
                  of or all of  the  indebtedness  guaranteed  by  this  Section
                  2.3.8;

                        (v) demand for observance, performance or enforcement of
                  any of the terms or  provisions  of this  Section  2.3.8,  the
                  Notes or any of the other Financing Documents;

                        (vi) all errors and  omissions  in  connection  with the
                  Lender's administration of all indebtedness guaranteed by this
                  Section 2.3.8,  except errors and omissions resulting from the
                  Lender's gross negligence or willful misconduct;

                        (vii) any right or claim of right to cause a marshalling
                  of the assets of any one or more of the other Borrowers;

                        (viii) any act or omission of the Lender  which  changes
                  the scope of the risk as guarantor hereunder; and

                        (ix) all other notices and demands otherwise required by
                  law which the Borrower may lawfully waive.

            Within ten (10) days  following  any request of the Lender so to do,
each  Borrower  will furnish the Lender and such other persons as the Lender may
direct with a written  certificate,  duly acknowledged stating in detail whether
or not any  credits,  offsets or  defenses  exist with  respect to this  Section
2.3.8.

                                       31
<PAGE>

            2.3.9 ACH Transactions and Swap Contracts.

            The Borrowers may request and the Lender or its  Affiliates  may, in
their sole and absolute discretion, provide ACH Transactions and Swap Contracts.
In the event the  Borrowers  request  Lender or its  Affiliates  to procure  ACH
Transactions or Swap  Contracts,  then the Borrowers agree to indemnify and hold
the  Lender  or its  Affiliates  harmless  from any and all  obligations  now or
hereafter owing to the Lender or its Affiliates.  The Borrowers agree to pay the
Lender or its  Affiliates  all  amounts  owing to the  Lender or its  Affiliates
pursuant to ACH  Transactions  and Swap  Contracts.  In the event the  Borrowers
shall not have paid to the Lender or its Affiliates such amounts, the Lender may
cover such amounts by an advance under the Revolving  Loan,  which advance shall
be deemed to have been requested by the Borrowers. The Borrowers acknowledge and
agree that the obtaining of ACH  Transactions and Swap Contracts from the Lender
or its  Affiliates  (a) is in the sole and absolute  discretion of the Lender or
its Affiliates and (b) is subject to all rules and  regulations of the Lender or
its Affiliates.

                                  ARTICLE III
                                 THE COLLATERAL

      Section 3.1 Debt and Obligations Secured.

            All property and Liens assigned,  pledged or otherwise granted under
or in connection with this Agreement (including, without limitation, those under
Section 3.2 (Grant of Liens)) or any of the Financing Documents shall secure (a)
the payment of all of the Obligations, and (b) the performance,  compliance with
and  observance by the Borrowers of the  provisions of this Agreement and all of
the other Financing Documents or otherwise under the Obligations.

      Section 3.2 Grant of Liens.

            Each of the  Borrowers  hereby  assigns,  pledges  and grants to the
Lender,  and  agrees  that the  Lender  shall have a  perfected  and  continuing
security  interest in, and Lien on, all of the Borrowers'  Accounts,  Inventory,
Chattel  Paper,  Documents,  Instruments,  Equipment,  Investment  Property  and
General  Intangibles  and  all of  the  Borrowers'  deposit  accounts  with  any
financial  institution  with  which  any of the  Borrowers  maintains  deposits,
whether now owned or existing or hereafter  acquired or arising,  all  returned,
rejected or  repossessed  goods,  the sale or lease of which shall have given or
shall give rise to an Account or Chattel Paper, all insurance  policies relating
to the foregoing, all books and records in whatever media (paper,  electronic or
otherwise)  recorded or stored,  with respect to the foregoing and all Equipment
and General Intangibles necessary or beneficial to retain, access and/or process
the  information  contained  in those books and  records,  and all  Proceeds and
products of the foregoing.  Each of the Borrowers further agrees that the Lender
shall have in respect  thereof all of the rights and remedies of a secured party
under the Uniform  Commercial  Code as well as those provided in this Agreement,
under each of the other Financing Documents and under applicable Laws.

      Section 3.3 Collateral Disclosure List.

            On or prior to the Closing Date, each of the Borrowers shall deliver
to the Lender a list (the "Collateral Disclosure List") which shall contain such
information  with  respect to such  Borrower's  business  and real and  personal
property  as the Lender may  require  and shall be  certified  by a  Responsible
Officer of such  Borrower,  all in the form  provided  to the  Borrowers  by the
Lender.  Promptly  after demand by the Lender,  the Borrowers,  as  appropriate,
shall  furnish  to the  Lender  an update of the  information  contained  in the
Collateral Disclosure List at any time and from time to time as may be requested
by the Lender.

                                       32
<PAGE>

      Section 3.4 Personal Property.

            The Borrowers  acknowledge and agree that it is the intention of the
parties to this Agreement that the Lender shall have a first priority, perfected
Lien, in form and substance  satisfactory to the Lender and its counsel,  on all
of the Borrowers' assets of any kind and nature whatsoever, whether now owned or
hereafter acquired,  subject only to the Permitted Liens, if any. In furtherance
of the foregoing:

            3.4.1 Investment Property, Chattel Paper, Promissory Notes, etc.

                  (a) On the Closing Date and without implying any limitation on
the scope of Section 3.2 (Grant of Liens),  each of the Borrowers  shall deliver
to  the  Lender  the  originals  of all of its  letters  of  credit,  Investment
Property,  Chattel  Paper,  Documents  and  Instruments  and,  if the  Lender so
requires,  shall execute and deliver  separate  pledge,  assignment and security
agreements  in  form  and  content  acceptable  to  the  Lender,  which  pledge,
assignment and security agreements shall assign,  pledge and grant a Lien to the
Lender on all such Borrower's letters of credit,  Investment  Property,  Chattel
Paper, Documents, and Instruments.

                  (b) In the event that any of the Borrowers shall acquire after
the Closing  Date any letters of credit,  Investment  Property,  Chattel  Paper,
Documents,  or  Instruments,  each such  Borrower  shall  promptly so notify the
Lender and deliver the originals of all of the foregoing to the Lender  promptly
and in any event within ten (10) days of each acquisition.

                  (c) All letters of credit, Investment Property, Chattel Paper,
Documents  and  Instruments  shall be  delivered to the Lender  endorsed  and/or
assigned as required by any pledge,  assignment and security agreement and/or as
the Lender  may  require  and,  if  applicable,  shall be  accompanied  by blank
irrevocable and unconditional  stock or bond powers and/or notices as the Lender
may require.

      Section 3.5 Record Searches.

            As of the  Closing  Date and  thereafter  at the time any  Financing
Document is executed and  delivered by the  Borrowers  pursuant to this Section,
the Lender  shall  have  received,  in form and  substance  satisfactory  to the
Lender, such Lien or record searches with respect to all of the Borrowers and/or
any other Person,  as  appropriate,  and the property  covered by such Financing
Document  showing that the Lien of such  Financing  Document will be a perfected
first priority Lien on the property  covered by such Financing  Document subject
only to Permitted Liens or to such other matters as the Lender may approve.

      Section 3.6 Costs.

            The Borrowers agree to pay, as part of the Enforcement  Costs and to
the fullest extent permitted by applicable  Laws, on demand all costs,  fees and
expenses  incurred  by the Lender in  connection  with the  taking,  perfection,
preservation,  protection and/or release of a Lien on the Collateral, including,
without limitation:

                                       33
<PAGE>

                  (a)  customary   fees  and  expenses   incurred  in  preparing
Financing Documents from time to time (including, without limitation, reasonable
attorneys' fees incurred in connection  with preparing the Financing  Documents,
including, any amendments and supplements thereto);

                  (b) all filing and/or recording taxes or fees;

                  (c) all costs of Lien and record searches;

                  (d) reasonable  attorneys'  fees in connection  with all legal
opinions required; and

                  (e) all related costs, fees and expenses.

      Section 3.7 Release.

            Upon the  indefeasible  repayment in full in cash of the Obligations
and  performance  of all  Obligations of the Borrowers and all  obligations  and
liabilities  of each other Person,  other than the Lender,  under this Agreement
and all other Financing Documents,  and the termination and/or expiration of all
of the Commitments,  upon the Borrowers' request and at the Borrowers' sole cost
and expense,  the Lender shall release and/or  terminate any Financing  Document
but only if and provided that there is no  commitment or obligation  (whether or
not  conditional)  of the Lender to  re-advance  amounts  which would be secured
thereby.

      Section 3.8 Inconsistent Provisions.

            In the event that the provisions of any Financing  Document directly
conflict with any provision of this Agreement,  the provisions of this Agreement
govern.

                                   ARTICLE IV
                         REPRESENTATIONS AND WARRANTIES

      Section 4.1 Representations and Warranties.

            The  Borrowers,  for  themselves  and for each other,  represent and
warrant to the Lender, as follows:

            4.1.1 Subsidiaries.

            The  Borrowers  have  the  Subsidiaries  listed  on  the  Collateral
Disclosure  List and no  others.  Each of the  Subsidiaries  is a  Wholly  Owned
Subsidiary  except as shown on the Collateral  Disclosure  List, which correctly
indicates the nature and amount of each Borrower's ownership interests therein.

            4.1.2 Existence.

            Each Borrower (a) is a Registered Organization under the laws of the
jurisdiction stated in the Preamble of this Agreement,  (b) has the power to own
its  property and to carry on its  business as now being  conducted,  and (c) is
duly  qualified to do business and is in good standing in each  jurisdiction  in
which  the  character  of the  properties  owned by it  therein  or in which the
transaction of its business makes such qualification necessary. Each Borrower is
organized under the laws of only one (1) jurisdiction.

                                       34
<PAGE>

            4.1.3 Power and Authority.

            Each  Borrower  has full power and  authority to execute and deliver
this Agreement and the other Financing Documents to which it is a party, to make
the  borrowings  under this  Agreement and to incur and perform the  Obligations
whether under this Agreement, the other Financing Documents or otherwise, all of
which have been duly authorized by all proper and necessary  action.  No consent
or  approval  of  owners  or any  creditors  of any  Borrower,  and no  consent,
approval, filing or registration with or notice to any Governmental Authority on
the part of any Borrower, is required as a condition to the execution, delivery,
validity or  enforceability  of this  Agreement,  or any of the other  Financing
Documents, or the performance by any Borrower of the Obligations.

            4.1.4 Binding Agreements.

            This  Agreement  and the  other  Financing  Documents  executed  and
delivered  by the  Borrowers  have been  properly  executed  and  delivered  and
constitute  the valid and legally  binding  obligations of the Borrowers and are
fully  enforceable  against  each of the  Borrowers  in  accordance  with  their
respective terms, subject to bankruptcy, insolvency, reorganization,  moratorium
and other laws of general  application  affecting  the  rights and  remedies  of
creditors and secured parties,  and general  principles of equity  regardless of
whether applied in a proceeding in equity or at law.

            4.1.5 No Conflicts.

            Neither the execution, delivery and performance of the terms of this
Agreement or of any of the other Financing  Documents  executed and delivered by
any Borrower  nor the  consummation  of the  transactions  contemplated  by this
Agreement  will  conflict  with,  violate or be prevented by (a) any  Borrower's
organizational or governing  documents,  (b) any existing  mortgage,  indenture,
contract or agreement binding on any Borrower or affecting its property,  or (c)
any Laws.

            4.1.6 No  Defaults,  Violations.

                  (a) No  Default  or  Event  of  Default  has  occurred  and is
continuing.

                  (b)  None  of  the  Borrowers  nor  any  of  their  respective
Subsidiaries  is in default  under or with respect to any  obligation  under any
existing mortgage,  indenture,  contract or agreement binding on it or affecting
its property in any respect which could be  materially  adverse to the business,
operations,  property or  financial  condition of any  Borrower,  or which could
materially  adversely  affect  the  ability  of  any  Borrower  to  perform  its
obligations under this Agreement or the other Financing Documents,  to which any
Borrower is a party.

            4.1.7 Compliance with Laws.

            None of the Borrowers nor any of their respective Subsidiaries is in
violation  of any  applicable  Laws  (including,  without  limitation,  any Laws
relating to employment  practices,  to  environmental,  occupational  and health
standards  and  controls) or order,  writ,  injunction,  decree or demand of any
court,  arbitrator,  or any Governmental Authority affecting any Borrower or any
of its properties,  the violation of which,  considered in the aggregate,  could
materially  adversely  affect the  business,  operations  or  properties  of any
Borrower and/or any Subsidiaries.

                                       35
<PAGE>

            4.1.8 Margin Stock.

            None  of the  proceeds  of the  Loans  will  be  used,  directly  or
indirectly,  by any Borrower or any  Subsidiary for the purpose of purchasing or
carrying,  or for the purpose of reducing or retiring any indebtedness which was
originally  incurred to purchase or carry, any "margin stock" within the meaning
of  Regulation  U (12 CFR Part 221),  of the Board of  Governors  of the Federal
Reserve  System or for any  other  purpose  which  might  make the  transactions
contemplated  in this  Agreement  a  "purpose  credit"  within  the  meaning  of
Regulation  U, or cause this  Agreement to violate any other  regulation  of the
Board of Governors of the Federal Reserve System or the Securities  Exchange Act
of 1934 or the Small Business  Investment Act of 1958, as amended,  or any rules
or regulations promulgated under any of such statutes.

            4.1.9 Investment Company Act; Margin Stock.

            None of the Borrowers nor any of their respective Subsidiaries is an
investment  company within the meaning of the Investment Company Act of 1940, as
amended, nor is it, directly or indirectly, controlled by or acting on behalf of
any Person which is an investment  company  within the meaning of said Act. None
of  the  Borrowers  nor  any  of  their   respective   Subsidiaries  is  engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of  purchasing  or  carrying  "margin  stock"  within the
meaning of  Regulation  U (12 CFR Part 221),  of the Board of  Governors  of the
Federal Reserve System.

            4.1.10 Litigation.

            Except as otherwise disclosed on Schedule 4.1.10 attached hereto and
made a part hereof, there are no proceedings,  actions or investigations pending
or, so far as any Borrower knows,  threatened before or by any court, arbitrator
or any  Governmental  Authority  which, in any one case or in the aggregate,  if
determined  adversely to the interests of any Borrower or any Subsidiary,  would
have a material adverse effect on the business, properties, condition (financial
or otherwise) or operations, present or prospective, of any Borrower.

            4.1.11 Financial Condition.

            The  consolidated  financial  statements  of Argan dated January 31,
2006 are complete and correct and fairly present the financial  position of each
of the Borrowers and their  Subsidiaries and the results of their operations and
transactions  in  their  surplus  accounts  as of the  date  and for the  period
referred  to and have  been  prepared  in  accordance  with  GAAP  applied  on a
consistent  basis  throughout  the period  involved.  There are no  liabilities,
direct or indirect, fixed or contingent, of any Borrower or any Subsidiary as of
the date of such financial  statements that are not reflected  therein or in the
notes thereto.  There has been no adverse  change in the financial  condition or
operations of any Borrower or any  Subsidiary  since the date of such  financial
statements and to the Borrowers'  knowledge no such adverse change is pending or
threatened.  None  of the  Borrowers  nor  any  Subsidiary  has  guaranteed  the
obligations of, or made any investment in or advances to, any Person,  except as
disclosed in such financial statements.

                                       36
<PAGE>

            4.1.12 Full Disclosure.

            The financial  statements  referred to in Section 4.1.11  (Financial
Condition),  the  Financing  Documents  (including,   without  limitation,  this
Agreement),  and  the  statements,  reports  or  certificates  furnished  by any
Borrower  in  connection  with the  Financing  Documents  (a) do not contain any
untrue statement of a material fact and (b) when taken in their entirety, do not
omit any material fact  necessary to make the statements  contained  therein not
misleading.  There is no fact known to any Borrower  which such Borrower has not
disclosed  to the Lender in  writing  prior to the date of this  Agreement  with
respect  to the  transactions  contemplated  by  the  Financing  Documents  that
materially  and  adversely  affects or in the future  could,  in the  reasonable
opinion of that Borrower materially adversely affect the condition, financial or
otherwise,  results of  operations,  business,  or assets of any Borrower or any
Subsidiary.

            4.1.13 Indebtedness for Borrowed Money.

            Except  for the  Obligations  and  except as set  forth in  Schedule
4.1.13  attached  hereto  and  made  a  part  hereof,   the  Borrowers  have  no
Indebtedness  for Borrowed  Money.  The Lender has received  photocopies  of all
promissory  notes  evidencing any  Indebtedness  for Borrowed Money set forth in
Error!  Reference  source not found.,  together  with any and all  subordination
agreements,  other agreements,  documents, or instruments securing,  evidencing,
guarantying or otherwise executed and delivered in connection therewith.

            4.1.14 Taxes.

            Each of the  Borrowers and its  Subsidiaries  has filed all returns,
reports  and  forms for Taxes  that,  to the  knowledge  of the  Borrowers,  are
required to be filed,  and has paid all Taxes as shown on such returns or on any
assessment received by it, to the extent that such Taxes have become due, unless
and to the extent only that such Taxes, assessments and governmental charges are
currently contested in good faith and by appropriate  proceedings by a Borrower,
such Taxes are not the  subject of any Liens  other than  Permitted  Liens,  and
adequate  reserves  therefore have been  established as required under GAAP. All
tax  liabilities  of the  Borrowers  were as of the  date of  audited  financial
statements  referred to in Section 4.1.11  (Financial  Condition),  and are now,
adequately provided for on the books of the Borrowers and their Subsidiaries, as
appropriate.  No tax liability has been asserted by the Internal Revenue Service
or any state or local  authority  against  any  Borrower  for Taxes in excess of
those already paid.

            4.1.15 ERISA.

            With respect to any Plan that is maintained or contributed to by any
Borrower  and/or by any Commonly  Controlled  Entity or as to which any Borrower
retains material liability:  (a) no "accumulated  funding deficiency" as defined
in Code ss.412 or ERISA  ss.302 has  occurred,  whether or not that  accumulated
funding  deficiency has been waived;  (b) no Reportable Event has occurred other
than events for which reporting has been waived;  (c) no termination of any plan
subject to Title IV of ERISA has  occurred;  (d)  neither the  Borrower  nor any
Commonly  Controlled  Entity has  incurred a  "complete  withdrawal"  within the
meaning of ERISA ss.4203 from any Multi-employer  Plan; (e) neither the Borrower
nor any Commonly  Controlled Entity has incurred a "partial  withdrawal"  within
the meaning of ERISA  ss.4205 with respect to any  Multi-employer  Plan;  (f) no
Multi-employer  Plan to which the Borrower or any Commonly Controlled Entity has
an obligation to contribute is in  "reorganization"  within the meaning of ERISA
ss.4241 nor has notice been received by the Borrower or any Commonly  Controlled
Entity that such a Multi-employer Plan will be placed in "reorganization".

                                       37
<PAGE>

            4.1.16 Title to Properties.

            The  Borrowers  have  good  and  marketable  title  to all of  their
respective  properties,  including,  without limitation,  the Collateral and the
properties  and assets  reflected  in the balance  sheets  described  in Section
4.1.11  (Financial  Condition).   The  Borrowers  have  legal,  enforceable  and
uncontested  rights  to use  freely  such  property  and  assets.  All  of  such
properties,  including,  without limitation, the Collateral that were purchased,
were purchased for fair  consideration  and reasonably  equivalent  value in the
ordinary course of business of both the seller and the Borrowers and not, by way
of example only, as part of a bulk sale.

            4.1.17 Patents, Trademarks, Etc.

            Each of the Borrowers and its Subsidiaries owns,  possesses,  or has
the  right  to use all  necessary  Patents,  licenses,  Trademarks,  Copyrights,
permits and  franchises to own its properties and to conduct its business as now
conducted,  without known conflict with the rights of any other Person.  Any and
all  obligations  to pay  royalties  or  other  charges  with  respect  to  such
properties  and  assets  are  properly  reflected  on the  financial  statements
described in Section 4.1.11 (Financial Condition).

            4.1.18 Employee Relations.

            Except as disclosed on Schedule  4.1.18  attached  hereto and made a
part  hereof,  (a)  no  Borrower  nor  any  Subsidiary  thereof  nor  any of the
Borrower's or  Subsidiary's  employees is subject to any  collective  bargaining
agreement,  (b) no petition for  certification or union election is pending with
respect to the  employees  of any  Borrower  or any  Subsidiary  and no union or
collective  bargaining unit has sought such  certification  or recognition  with
respect to the  employees  of a Borrower,  (c) there are no strikes,  slowdowns,
work  stoppages  or  controversies  pending  or,  to the best  knowledge  of the
Borrowers after due inquiry,  threatened between any Borrower and its employees,
and (d) no Borrower nor any  Subsidiaries is subject to an employment  contract,
severance  agreement,   commission  contract,   consulting  agreement  or  bonus
agreement. Hours worked and payments made to the employees of any one or more of
the Borrowers have not been in violation of the Fair Labor  Standards Act or any
other applicable law dealing with such matters. All payments due from any one or
more of the Borrowers or for which any claim may be made against a Borrower,  on
account of wages and employee and retiree health and welfare insurance and other
benefits have been paid or accrued as a liability on its books. The consummation
of the transactions  contemplated by the Financing Agreement or any of the other
Financing  Documents  will not give rise to a right of  termination  or right of
re-negotiation  on the  part  of  any  union  under  any  collective  bargaining
agreement to which any Borrower is a party or by which it is bound.

            4.1.19  Presence  of  Hazardous  Materials  or  Hazardous  Materials
Contamination.

      To the best of each Borrower's  knowledge,  (a) no Hazardous Materials are
located  on any  real  property  owned,  controlled  or  operated  by any of the
Borrowers or for which any Borrower is, or is claimed to be, responsible, except
for  reasonable  quantities  of necessary  supplies for use by a Borrower in the
ordinary course of its current line of business and stored, used and disposed in
accordance  with  applicable  Laws;  and (b) no property  owned,  controlled  or
operated by any Borrower or for which any  Borrower  has, or is claimed to have,
responsibility has ever been used as a manufacturing,  storage, or dump site for
Hazardous Materials nor is affected by Hazardous Materials  Contamination at any
other property.

                                       38
<PAGE>

            4.1.20 Perfection and Priority of Collateral.

            The Lender has, or upon  execution and  recording of this  Agreement
and the Security  Documents will have, and will continue to have as security for
the  Obligations,  a valid and  perfected  Lien on and security  interest in all
Collateral,  free of all  other  Liens,  claims  and  rights  of  third  parties
whatsoever  except  Permitted  Liens,  including,   without  limitation,   those
described on Schedule 4.1.20 attached hereto and made a part hereof.

            4.1.21 Collateral Disclosure List.

            The information  contained in the Collateral Disclosure List of each
Borrower is complete and correct. Each Collateral Disclosure List completely and
accurately  identifies (a) the type of entity, the state of organization and the
chief  executive  office of the  applicable  Borrower  (b) each  other  place of
business of such Borrower,  (c) the location of all books and records pertaining
to the Collateral, and (d) each location, other than the foregoing, where any of
the Collateral is located.

            4.1.22 Business Names and Addresses.

            In the five (5) years  preceding  the date  hereof,  no Borrower has
changed its name, identity or corporate structure,  has conducted business under
any name other than its current  name,  and has  conducted  its  business in any
jurisdiction other than those disclosed on the Collateral Disclosure List.

            4.1.23 Equipment.

            All  Equipment is  personalty  and is not and will not be affixed to
real estate in such  manner as to become a fixture or part of such real  estate.
No equipment is held by any Borrower on a sale on approval basis.

            4.1.24 Inventory.

            The  Inventory  of the  Borrowers  is (a) of good  and  merchantable
quality, free from defects, (b) not stored with a bailee, warehouseman, carrier,
or similar party, (c) not on consignment,  sale on approval,  or sale or return,
and (d) located at the places of business set forth on the Collateral Disclosure
List. No goods offered for sale by any Borrower are consigned to or held on sale
or return terms by that Borrower.

            4.1.25 Accounts.

            With  respect  to all  Accounts  and to the  best of the  Borrowers'
knowledge (a) they are genuine, and in all respects what they purport to be, and
are not evidenced by a judgment,  an  Instrument,  or Chattel Paper (unless such
judgment  has been  assigned  and such  Instrument  or  Chattel  Paper  has been
endorsed and delivered to the Lender); (b) they represent bona fide transactions
completed in accordance with the terms and provisions contained in the invoices,
purchase  orders  and  other  contracts  relating  thereto,  and the  underlying
transaction therefore is in accordance with all applicable Laws; (c) the amounts
shown on the respective  Borrower's books and records,  with respect thereto are
actually and absolutely owing to that Borrower and are not contingent or subject
to reduction for any reason other than regular discounts, credits or adjustments
allowed by that Borrower in the ordinary course of its business; (d) all Account
Debtors thereon have the capacity to contract; and (e) the goods sold, leased or
transferred or the services furnished giving rise thereto are not subject to any
Liens except the security  interest  granted to the Lender by this Agreement and
Permitted Liens.

                                       39
<PAGE>

            4.1.26 Solvency

            Each of the Borrowers is Solvent prior to and after giving effect to
the Purchase Transaction and the making of the Loans.

            4.1.27 Compliance with Eligibility Standards.

            Each Account and all Inventory  included in the  calculation  of the
Borrowing  Base  does and will at all  times  meet  and  comply  with all of the
standards for Eligible Receivables and Eligible Inventory. With respect to those
Accounts  which the  Lender  has deemed  Eligible  Receivables  (a) there are no
facts,   events  or   occurrences   which  in  any  way  impair  the   validity,
collectibility  or  enforceability  thereof or tend to reduce the amount payable
thereunder;  and (b) there are no  proceedings  or actions known to any Borrower
that are threatened or pending  against any Account Debtor which might result in
any material adverse change in the Borrowing Base.

      Section 4.2 Survival; Updates of Representations and Warranties.

            All representations and warranties  contained in or made under or in
connection with this Agreement and the other  Financing  Documents shall survive
the Closing  Date,  the making of any advance  under the Loans and  extension of
credit made hereunder,  and the incurring of any other  Obligations and shall be
deemed to have been made at the time of each  request for, and again at the time
of the making of, each advance under the Loans,  except that the representations
and warranties which relate to the financial statements which are referred to in
Section 4.1.11  (Financial  Condition),  shall also be deemed to cover financial
statements  furnished from time to time to the Lender  pursuant to Section 6.1.1
(Financial Statements).

                                   ARTICLE V
                              CONDITIONS PRECEDENT

      Section 5.1 Conditions to the Initial Advance.

            The making of the initial  advance under the Loans is subject to the
fulfillment on or before the Closing Date of the following  conditions precedent
in a manner satisfactory in form and substance to the Lender and its counsel:

            5.1.1 Organizational Documents - Borrowers.

            The Lender shall have received for each Borrower:

                                       40
<PAGE>

                  (a) a certificate of good standing  certified by the Secretary
of State, or other appropriate Governmental Authority, of the state of formation
of the Borrower;

                  (b)  a  certified  copy  from  the  appropriate   Governmental
Authority   under  which  the   Borrower  is   organized,   of  the   Borrower's
organizational documents and all recorded amendments thereto;

                  (c) a certificate of qualification to do business certified by
the Secretary of State or other  Governmental  Authority of each jurisdiction in
which the Borrower conducts business;

                  (d) a  certificate  dated  as  of  the  Closing  Date  by  the
Secretary or an Assistant Secretary of the Borrower covering:

                        (i)  true  and   complete   copies  of  the   Borrower's
                  organizational  and  governing  documents  and all  amendments
                  thereto;

                        (ii) true and complete  copies of the resolutions of its
                  Board of Directors  authorizing (A) the borrowings  hereunder,
                  and  (B)  the  granting  of the  Liens  contemplated  by  this
                  Agreement and the Financing Documents to which the Borrower is
                  a party;

                        (iii) the  incumbency,  authority and  signatures of the
                  officers of the Borrower authorized to sign this Agreement and
                  the  other  Financing  Documents  to which the  Borrower  is a
                  party; and

                        (iv) the identity of the Borrower's  current  directors,
                  common  stock  holders and other  equity  holders  who, to the
                  knowledge of any Borrower,  own more than twenty percent (20%)
                  of the outstanding  common stock, as well as their  respective
                  percentage ownership interests.

            5.1.2 Opinion of Borrowers' Counsel.

            The Lender shall have received the favorable  opinion of counsel for
the Borrowers addressed to the Lender.

            5.1.3 Consents, Licenses, Approvals, Etc.

            The Lender shall have received copies of all consents,  licenses and
approvals,  required in connection  with the execution,  delivery,  performance,
validity and  enforceability  of the  Financing  Documents,  and such  consents,
licenses and approvals shall be in full force and effect.

            5.1.4 Notes.

            The Lender shall have received the Term Note, the 2006 Term Note and
the  Revolving  Credit Note,  each  conforming  to the  requirements  hereof and
executed  by a  Responsible  Officer of each  Borrower  and  attested  by a duly
authorized representative of each Borrower.

                                       41
<PAGE>

            5.1.5 Financing Documents and Collateral.

            Each  Borrower  shall have  executed  and  delivered  the  Financing
Documents to be executed by it, and shall have delivered original Chattel Paper,
Instruments, Investment Property, and related Collateral and all opinions, title
insurance, and other documents contemplated by ARTICLE III (The Collateral).

            5.1.6 Other Documents, Etc.

            The Lender shall have  received such other  certificates,  opinions,
documents  and  instruments   confirmatory  of  or  otherwise  relating  to  the
transactions  contemplated  hereby as may have been reasonably  requested by the
Lender.

            5.1.7 Payment of Fees.

            The Lender shall have received  payment of any Fees due on or before
the Closing Date including, without limitation, the 2006 Term Loan Fee.

            5.1.8 Collateral Disclosure List.

            Each Borrower shall have delivered the  Collateral  Disclosure  List
required under the provisions of Section 3.3 (Collateral  Disclosure  List) duly
executed by a Responsible Officer of each Borrower.

            5.1.9 Recordings and Filings.

            Each Borrower  shall have:  (a) executed and delivered all Financing
Documents  required to be filed,  registered or recorded in order to create,  in
favor of the Lender,  a perfected  Lien in the  Collateral  (subject only to the
Permitted Liens) in form and in sufficient number for filing, registration,  and
recording  in  each  office  in  each   jurisdiction   in  which  such  filings,
registrations and recordations are required,  and (b) delivered such evidence as
the Lender deems  satisfactory  that all necessary filing fees and all recording
and  other  similar  fees,  and all Taxes and  other  expenses  related  to such
filings, registrations and recordings will be or have been paid in full.

            5.1.10 Insurance Certificate.

            The  Lender  shall  have  received  an  insurance   certificate   in
accordance with the provisions of Section 6.1.8 (Insurance).

            5.1.11 Subordination Agreement

            The  Lender  shall  have  received  a debt  subordination  agreement
satisfactory  in form and  substance to the Lender and its counsel,  executed by
the  Borrowers  and Kevin J. Thomas,  or his  successor or assign,  if any, with
respect to the Subordinated Debt.

            5.1.12 Subordination Note

            The Lender  shall have  received  evidence  that the maturity of the
Subordinated Debt has been extended to no earlier than August 1, 2007.

                                       42
<PAGE>

      Section 5.2 Conditions to all Extensions of Credit.

            The  making  of all  advances  under  the  Loans is  subject  to the
fulfillment of the following  conditions  precedent in a manner  satisfactory in
form and substance to the Lender and its counsel:

            5.2.1 Compliance.

            Each  Borrower  shall have  complied and shall then be in compliance
with all terms,  covenants,  conditions and provisions of this Agreement and the
other Financing Documents that are binding upon it.

            5.2.2 Default.

            There shall exist no Event of Default or Default hereunder.

            5.2.3 Representations and Warranties.

            The   representations  and  warranties  of  each  of  the  Borrowers
contained among the provisions of this Agreement shall be true and with the same
effect as though such  representations  and warranties had been made at the time
of the making of, and of the request for, each advance  under the Loans,  except
that the  representations  and warranties  which relate to financial  statements
which are referred to in Section  4.1.11  (Financial  Condition),  shall also be
deemed to cover financial  statements  furnished from time to time to the Lender
pursuant to Section 6.1.1 (Financial Statements).

            5.2.4 Adverse Change.

            No adverse change shall have occurred in the condition (financial or
otherwise), operations or business of any Borrower that would, in the good faith
judgment of the Lender, materially impair the ability of that Borrower to pay or
perform any of the Obligations.

            5.2.5 Legal Matters.

            All legal  documents  incident to each advance under the Loans shall
be reasonably satisfactory to counsel for the Lender.

            Section 5.3 Conditions to 2006 Term Loan.

            In  addition  to the  satisfaction  of the  conditions  set forth in
Sections  5.1 and 5.2,  the  making  of the 2006  Term  Loan is  subject  to the
fulfillment of the following  conditions  precedent in a manner  satisfactory in
form and substance to the Lender and its counsel:

            5.3.1 2006 Term Note.

            The Lender shall have received the 2006 Term Note  conforming to the
requirements  hereof and executed by a Responsible  Officer of each Borrower and
attested by a duly authorized representative of each Borrower.

            5.3.2 Default.

            There shall exist no Event of Default or Default hereunder.

                                       43
<PAGE>

            5.3.3 Interest Rate Protection Agreement.

            The Lender shall have received an executed  Interest Rate Protection
Agreement in accordance with Section 6.2.19.

            5.3.4 Compliance.

            The Lender shall have  received  pro-forma  financial  statements in
form and detail satisfactory to the Lender for the most recent month then ended,
that  demonstrate  that,  after making the 2006 Term Loan and after reducing the
Subordinated  Debt with the proceeds  thereof,  Borrowers  will be in compliance
with all the financial covenants set forth in Section 6.1.14 based on a trailing
twelve (12) month test.

            5.3.5 Other Documents, Etc.

            The Lender shall have  received such other  certificates,  opinions,
documents and instruments confirmatory of or otherwise relating to the 2006 Term
Loan as may have been reasonably requested by the Lender.

            5.3.6 Legal Matters.

            All  legal  documents  incident  to the  2006  Term  Loan  shall  be
reasonably satisfactory to counsel for the Lender.

                                   ARTICLE VI
                           COVENANTS OF THE BORROWERS

      Section 6.1 Affirmative Covenants.

      So long as any of the Obligations (or any the Commitments therefore) shall
be  outstanding  hereunder,  the Borrowers  agree jointly and severally with the
Lender as follows:

            6.1.1 Financial Statements.

                   The Borrowers shall furnish to the Lender:

                  (a) Annual  Statements and  Certificates.  The Borrowers shall
furnish to the  Lender as soon as  available,  but in no event more than  ninety
(90) days  after the close of the  Borrowers'  fiscal  years,  (i) a copy of the
annual  financial  statement in  reasonable  detail  satisfactory  to the Lender
relating to the Borrowers and their  Subsidiaries,  prepared in accordance  with
GAAP and examined and  certified by  independent  certified  public  accountants
satisfactory  to  the  Lender,   which  financial   statement  shall  include  a
consolidated  and  consolidating  balance  sheet  of  the  Borrowers  and  their
Subsidiaries  as  of  the  end  of  such  fiscal  year  and   consolidated   and
consolidating  statements  of  income,  cash flows and  changes in  shareholders
equity of the  Borrowers  and their  Subsidiaries  for such fiscal year,  (ii) a
Compliance Certificate,  in substantially the form attached to this Agreement as
EXHIBIT  C, as may be  amended by the  Lender  from time to time,  containing  a
detailed  computation  of each  financial  covenant in this  Agreement  which is
applicable for the period reported,  a certification that no change has occurred
to the  information  contained in the Collateral  Disclosure List (except as set
forth  in  a  schedule  attached  to  the  certification),  each  prepared  by a
Responsible  Officer of the  Borrowers in a format  acceptable to the Lender and
(iii) a management  letter in the form  prepared by the  Borrowers'  independent
certified  public  accountants.  It is understood  and agreed that the Borrowers
shall  furnish to the Lender  within  fifteen  (15) days of the Closing Date the
statements required by this Section for the fiscal year end January 31, 2006.

                                       44
<PAGE>

                  (b) Quarterly Statements and Certificates. The Borrowers shall
furnish to the Lender as soon as available, but in no event more than forty five
(45) days after the close of the Borrowers'  fiscal  quarters,  consolidated and
consolidating  balance sheets of the Borrowers and their  Subsidiaries as of the
close of such period,  consolidated  and  consolidating  income,  cash flows and
changes in  shareholders  equity  statements  for such  period and a  Compliance
Certificate,  in substantially the form attached to this Agreement as EXHIBIT C,
containing a detailed  computation of each financial  covenant in this Agreement
which is applicable for the period reported,  a certification that no change has
occurred to the information  contained in the Collateral Disclosure List (except
as set forth on a schedule  attached to the  certification),  each prepared by a
Responsible  Officer of or on behalf of each Borrower in a format  acceptable to
the Lender,  all as  prepared  and  certified  by a  Responsible  Officer of the
Borrowers and  accompanied by a certificate of that officer  stating whether any
event has occurred which constitutes a Default or an Event of Default hereunder,
and, if so, stating the facts with respect thereto.

                  (c) Annual Budget and Projections. The Borrowers shall furnish
to the Lender as soon as available,  but in no event later than thirty (30) days
before the end of each fiscal year a consolidated and  consolidating  budget and
pro forma  financial  statements on a quarterly  basis for the following  fiscal
year.

                  (d) Additional  Reports and  Information.  The Borrowers shall
furnish  to  the  Lender  promptly,  such  additional  information,  reports  or
statements as the Lender may from time to time reasonably request.

                  (e) Monthly Reports. The Borrowers shall furnish to the Lender
within  twenty (20) days after the end of each fiscal  month,  a Borrowing  Base
Report and a report containing the following information:

                        (i) a detailed  aging  schedule  of all  Receivables  by
                  Account  Debtor,  in  such  detail,  and  accompanied  by such
                  supporting  information,  as the  Lender may from time to time
                  reasonably request;

                        (ii)  a  detailed  aging  of  all  accounts  payable  by
                  supplier,  in such detail,  and accompanied by such supporting
                  information,  as the Lender  may from time to time  reasonably
                  request;

                        (iii) a listing of all Inventory by component,  category
                  and  location,   in  such  detail,  and  accompanied  by  such
                  supporting  information  as the  Lender  may from time to time
                  reasonably request; and

                        (iv) such other information as the Lender may reasonably
                  request.

            6.1.2 Reports to SEC and to Stockholders.

            The Borrowers  will furnish to the Lender,  promptly upon the filing
or making thereof, at least one (l) copy of all financial  statements,  reports,
notices and proxy  statements sent by any Borrower to its  stockholders,  and of
all regular and other reports filed by any Borrower with any securities exchange
or with the Securities and Exchange Commission.

                                       45
<PAGE>

            6.1.3 Recordkeeping, Rights of Inspection, Field Examination, Etc.

                  (a) Each of the Borrowers  shall,  and shall cause each of its
Subsidiaries to, maintain (i) a standard system of accounting in accordance with
GAAP,  and (ii)  proper  books of record  and  account in which  full,  true and
correct  entries are made of all  dealings and  transactions  in relation to its
properties, business and activities.

                  (b) Each of the Borrowers  shall,  and shall cause each of its
Subsidiaries to, permit  authorized  representatives  of the Lender to visit and
inspect the  properties  of the  Borrowers  and their  Subsidiaries,  to review,
audit,  check and inspect the Collateral at any time with or without notice,  to
review,  audit,  check and inspect the  Borrowers'  other books of record at any
time with or without notice and to make abstracts and photocopies  thereof,  and
to discuss  the  affairs,  finances  and  accounts  of the  Borrowers  and their
Subsidiaries,  with the officers, directors, employees and other representatives
of the Borrowers and their Subsidiaries and their respective accountants, all at
such times during normal business hours and other  reasonable times and as often
as the Lender may reasonably request.

                  (c) Each of the Borrowers  hereby  irrevocably  authorizes and
directs all accountants and auditors employed by any of the Borrowers and/or any
of  their  Subsidiaries  at any  time  prior  to the  repayment  in  full of the
Obligations  to exhibit and  deliver to the Lender  copies of any and all of the
financial  statements,  trial balances,  management letters, or other accounting
records of any nature of any or all of the Borrowers  and/or any or all of their
respective  Subsidiaries  in the  accountant's or auditor's  possession,  and to
disclose to the Lender any  information  they may have  concerning the financial
status and business  operations of any or all of the Borrowers and/or any or all
of  their  respective  Subsidiaries.  Further,  each  of  the  Borrowers  hereby
authorizes  all  Governmental  Authorities  to furnish  to the Lender  copies of
reports or examinations  relating to any and all of the Borrowers  and/or any or
all Subsidiaries,  whether made by the Borrowers or otherwise. The Lender agrees
that prior to the  occurrence of a Default to give the  Borrowers  five (5) days
prior notice before  requesting any such information from any such  accountants,
auditors or Governmental Authorities.

                  (d) Any and all costs and  expenses  incurred by, or on behalf
of,  the  Lender  in  connection  with  the  conduct  of any  of the  foregoing,
including,  without limitation,  travel,  lodging, meals, and other expenses for
inspections of the  Collateral  and the  Borrowers'  operations for each auditor
employed by the Lender for  inspections  of the  Collateral  and the  Borrowers'
operations,  shall be part of the Enforcement  Costs and shall be payable to the
Lender  upon  demand.  Prior  to the  occurrence  of an Event  of  Default,  the
Borrowers  shall  not be  responsible  for the cost of more  than two (2)  field
examinations  in any twelve (12) month  period.  The Borrowers  acknowledge  and
agree that such  expenses may include,  but shall not be limited to, any and all
reasonable out-of-pocket costs and expenses of the Lender's employees and agents
in, and when, traveling to any of the Borrowers' facilities.

            6.1.4 Existence.

            Each of the  Borrowers  shall (a)  maintain,  and cause  each of its
Subsidiaries to maintain,  its existence in good standing in the jurisdiction in
which it is  organized  and in each other  jurisdiction  where it is required to
register  or  qualify  to do  business  if the  failure  to do so in such  other
jurisdiction might have a material adverse effect on the ability of the Borrower
to perform the Obligations,  on the conduct of the Borrower's operations, on the
Borrower's financial condition, or on the value of, or the ability of the Lender
to realize upon, the Collateral and (b) remain a Registered  Organization  under
the laws of the jurisdiction stated in the Preamble of this Agreement.

                                       46
<PAGE>

            6.1.5 Compliance with Laws.

            Each  of  the  Borrowers  shall  comply,   and  cause  each  of  its
Subsidiaries  to  comply,  with  all  applicable  Laws  and  observe  the  valid
requirements  of  Governmental  Authorities,   the  noncompliance  with  or  the
non-observance  of which might have a material  adverse effect on the ability of
the  Borrowers  to perform the  Obligations,  on the  conduct of the  Borrowers'
operations,  on the Borrowers' consolidated financial condition, or on the value
of, or the ability of the Lender to realize upon, the Collateral.

            6.1.6 Preservation of Properties.

            Each of the Borrowers will, and will cause each of its  Subsidiaries
to,  at all times  (a)  maintain,  preserve,  protect  and keep its  properties,
whether owned or leased, in good operating  condition,  working order and repair
(ordinary  wear and tear  excepted),  and from time to time will make all proper
repairs, maintenance, replacements, additions and improvements thereto needed to
maintain such properties in good operating condition,  working order and repair,
and (b) do or cause to be done all things  necessary  to preserve and to keep in
full force and  effect  its  material  franchises,  leases of real and  personal
property,  trade names,  Patents,  Trademarks,  Copyrights and permits which are
necessary for the orderly continuance of its business.

            6.1.7 Line of Business.

            Each of the Borrowers will continue to engage  substantially  in the
businesses of the marketing and manufacture of filtration  related  products and
providing  infrastructure  services to the government and the telecommunications
and utility industries.

            6.1.8 Insurance.

            Each of the Borrowers will, and will cause each of its  Subsidiaries
to, at all times  maintain  with "A" or better rated  insurance  companies  such
insurance as is required by applicable  Laws and such other  insurance,  in such
amounts, of such types and against such risks, hazards, liabilities,  casualties
and contingencies as are usually insured against in the same geographic areas by
business entities engaged in the same or similar business.  Without limiting the
generality of the foregoing,  each of the Borrowers will, and will cause each of
its Subsidiaries to, keep adequately insured all of its property against loss or
damage  resulting from fire or other risks insured against by extended  coverage
and maintain  public  liability  insurance  against claims for personal  injury,
death or property damage occurring upon, in or about any properties  occupied or
controlled by it, or arising in any manner out of the  businesses  carried on by
it, all in such amounts not less than the Lender shall reasonably determine from
time to time.  Each of the Borrowers  shall deliver to the Lender on the Closing
Date (and  thereafter  on each date there is a material  change in the insurance
coverage) an insurance  certificate  containing a detailed list of the insurance
then in effect and stating the names of the insurance companies,  the types, the
amounts  and rates of the  insurance,  dates of the  expiration  thereof and the
properties  and risks covered  thereby.  Within thirty (30) days after notice in
writing from the Lender, the Borrowers will obtain such additional  insurance as
the Lender may reasonably request.

                                       47
<PAGE>

            6.1.9 Taxes.

            Except to the extent that the  validity  or amount  thereof is being
contested in good faith and by  appropriate  proceedings,  each of the Borrowers
will,  and will cause each of its  Subsidiaries,  to pay and discharge all Taxes
prior to the date when any interest or penalty  would accrue for the  nonpayment
thereof.  Each of the Borrowers shall furnish to the Lender at such times as the
Lender may require proof satisfactory to the Lender of the making of payments or
deposits required by applicable Laws including, without limitation,  payments or
deposits with respect to amounts withheld by any of the Borrowers from wages and
salaries of employees and amounts contributed by any of the Borrowers on account
of federal  and other  income or wage taxes and  amounts  due under the  Federal
Insurance Contributions Act, as amended.

            6.1.10 ERISA.

            Each Borrower will,  and will cause each of its Commonly  Controlled
Entities to, comply with the funding requirements of ERISA with respect to Plans
for its respective  employees.  No Borrower will permit with respect to any Plan
(a) any  prohibited  transaction  or  transactions  under ERISA or the  Internal
Revenue Code,  which results,  or may result,  in any material  liability of any
Borrower,  or (b) any Reportable Event if, upon termination of the plan or plans
with respect to which one or more such  Reportable  Events shall have  occurred,
there is or would be any material  liability  of the Borrower to the PBGC.  Upon
the Lender's  request,  each  Borrower  will deliver to the Lender a copy of the
most recent actuarial report,  financial  statements and annual report completed
with respect to any Plan.

            6.1.11 Notification of Events of Default and Adverse Developments.

            Each  of  the  Borrowers  shall  promptly  notify  the  Lender  upon
obtaining knowledge of the occurrence of:

                  (a) any Event of Default;

                  (b) any Default;

                  (c) any litigation instituted or threatened against any of the
Borrowers or any of their  Subsidiaries and of the entry of any judgment or Lien
(other than any Permitted  Liens) against any of the assets or properties of any
of the Borrowers or any Subsidiary  where the claims against any Borrower or any
Subsidiary exceed One Hundred Thousand Dollars ($100,000) and are not covered by
insurance;

                  (d)  any  event,   development  or  circumstance  whereby  the
financial statements furnished hereunder fail in any material respect to present
fairly, in accordance with GAAP, the financial condition and operational results
of any of the Borrowers or any of their respective Subsidiaries;

                  (e)  any  judicial,   administrative  or  arbitral  proceeding
pending against any of the Borrowers or any of their respective Subsidiaries and
any judicial or  administrative  proceeding  known by any of the Borrowers to be
threatened  against any Borrower or any Subsidiary  that, if adversely  decided,
could materially adversely affect the financial condition or operations (present
or prospective) of any Borrower or any Subsidiary;

                                       48
<PAGE>

                  (f) the receipt by any of the  Borrowers or any  Subsidiary of
any notice,  claim or demand from any Governmental  Authority which alleges that
any of the  Borrowers or any  Subsidiary is in violation of any of the terms of,
or has failed to comply with any  applicable  Laws  regulating its operation and
business,  including, but not limited to, the Occupational Safety and Health Act
and the Environmental Protection Act; and

                  (g) any other development in the business or affairs of any of
the  Borrowers or any of their  respective  Subsidiaries  that may be materially
adverse;

in each case describing in detail  satisfactory to the Lender the nature thereof
and the action the Borrowers propose to take with respect thereto.

            6.1.12 Hazardous Materials; Contamination.

            Each of the Borrowers agrees to:

                  (a) give  notice  to the  Lender  immediately  upon  acquiring
knowledge of the presence of any Hazardous  Materials or any Hazardous Materials
Contamination  on any property owned,  operated or controlled by any Borrower or
for which any Borrower is, or is claimed to be, responsible  (provided that such
notice shall not be required for  Hazardous  Materials  placed or stored on such
property in accordance with  applicable Laws in the ordinary course  (including,
without  limitation,  quantity)  of a  Borrower's  line  of  business  expressly
described in this Agreement), with a full description thereof;

                  (b)  promptly  comply  with any Laws  requiring  the  removal,
treatment   or  disposal  of  Hazardous   Materials   or   Hazardous   Materials
Contamination  and  provide  the  Lender  with  satisfactory  evidence  of  such
compliance;

                  (c) provide the Lender, within thirty (30) days after a demand
by the  Lender,  with a bond,  letter of credit or similar  financial  assurance
evidencing to the Lender's  satisfaction  that the necessary funds are available
to pay the cost of removing, treating, and disposing of such Hazardous Materials
or  Hazardous  Materials  Contamination  and  discharging  any Lien which may be
established as a result thereof on any property owned, operated or controlled by
any Borrower or for which any Borrower is, or is claimed to be, responsible; and

                  (d) as part of the  Obligations,  defend,  indemnify  and hold
harmless the Lender and its agents, employees,  trustees, successors and assigns
from any and all claims which may now or in the future  (whether before or after
the  termination  of this  Agreement) be asserted as a result of the presence of
any Hazardous Materials or any Hazardous Materials Contamination on any property
owned,  operated or  controlled by any Borrower or for which any Borrower is, or
is claimed to be, responsible.  Each Borrower  acknowledges and agrees that this
indemnification  shall  survive  the  termination  of  this  Agreement  and  the
Commitments and the payment and performance of all of the other Obligations.

                                       49
<PAGE>

            6.1.13 Disclosure of Significant Transactions.

            Each of the Borrowers  shall deliver to the Lender a written  notice
describing in detail each transaction by it involving the purchase, sale, lease,
or other  acquisition  or loss or casualty to or  disposition  of an interest in
Fixed or Capital  Assets  which  exceeds  One  Hundred  Fifty  Thousand  Dollars
($150,000),  said notices to be delivered to the Lender  within thirty (30) days
of the occurrence of each such transaction.

            6.1.14 Financial Covenants.

                  (a) Funded Debt to EBITDA.  The  Borrowers,  on a consolidated
basis, will not permit the ratio of Funded Debt to EBITDA, tested as of the last
day of each of the Borrowers'  fiscal quarters  commencing July 31, 2006 for the
four (4) quarter period then ending, to be greater than 2.50 to 1.00.

                  (b) Fixed Charge Coverage Ratio.  The Borrowers will maintain,
on a consolidated  basis and tested as of the last day of each of the Borrowers'
fiscal  quarters  commencing  July 31,  2006,  and  thereafter  for the four (4)
quarter period then ending,  a Fixed Charge Coverage Ratio of not less than 1.25
to 1.00.

                  (c)  Minimum  EBITDA.  The  Borrowers  will  maintain,   on  a
consolidated  basis  and  tested  as of the last  day of each of the  Borrowers'
fiscal quarters  commencing July 31, 2006,  minimum EBITDA equal to or exceeding
the following levels on a rolling four (4) quarter basis:

            For the quarter ending:
            July 31, 2006                                         $1,200,000
            October 31, 2006                                      $1,300,000
            January 31, 2007, and each quarter thereafter         $1,800,000

                  (d)  Waivers.  Pursuant  to  Section  6.1.14  of the  Original
Financing  Agreement,  the  Lender  and the  Borrowers  have  agreed to  certain
financial  covenants.  In consideration of the execution of this Agreement,  the
Lender has agreed to waive Borrower's  compliance with the Funded Debt to EBITDA
and Fixed  Charge  Coverage  Ratio  financial  covenants  for the period  ending
January 31, 2006.

            6.1.15 Collection of Receivables.

            Until  the  occurrence  of  a  Default,   the  Borrowers  and  their
Subsidiaries  shall at their own expense have the  privilege for the account of,
and in trust for, the Lender of collecting  their  Receivables  and receiving in
respect thereto all Items of Payment and shall otherwise  completely service all
of the  Receivables  including  (a) the  billing,  posting  and  maintaining  of
complete records applicable thereto,  (b) the taking of such action with respect
to the  Receivables as the Lender may request or in the absence of such request,
as each of the Borrowers and each of the  Subsidiaries  may deem advisable;  and
(c) the granting, in the ordinary course of business, to any Account Debtor, any
rebate,  refund  or  adjustment  to which the  Account  Debtor  may be  lawfully
entitled, and may accept, in connection therewith, the return of goods, the sale
or lease of which shall have given rise to a Receivable  and may take such other
actions  relating  to the  settling  of any  Account  Debtor's  claim  as may be
commercially reasonable. The Lender may, at its option, at any time or from time
to time  after and  during the  continuance  of an Event of  Default  hereunder,
revoke the  collection  privilege  given in this Agreement to any one or more of
the  Borrowers  and each of the  Subsidiaries  by  either  giving  notice of its
assignment  of,  and Lien on the  Collateral  to the  Account  Debtors or giving
notice of such  revocation to the Borrowers.  The Lender shall not have any duty
to, and the  Borrowers  hereby  release  the  Lender  from all claims of loss or
damage  caused  by the  delay  or  failure  to  collect  or  enforce  any of the
Receivables  or to preserve any rights  against any other party with an interest
in the  Collateral.  The Lender  shall be  entitled at any time and from time to
time after written notice to the Borrowers to confirm and verify Receivables.

                                       50
<PAGE>

            6.1.16 Assignments of Receivables.

            Each Borrower will  promptly,  upon request,  execute and deliver to
the Lender written assignments, in form and content acceptable to the Lender, of
specific  Receivables  or groups of  Receivables;  provided,  however,  the Lien
and/or security interest granted to the Lender under this Agreement shall not be
limited in any way to or by the  inclusion or exclusion  of  Receivables  within
such   assignments.   Receivables  so  assigned  shall  secure  payment  of  the
Obligations  and  are not  sold  to the  Lender  whether  or not any  assignment
thereof,  which is  separate  from  this  Agreement,  is in form  absolute.  The
Borrowers  agree  that  neither  any  assignment  to the  Lender  nor any  other
provision  contained in this Agreement or any of the other  Financing  Documents
shall impose on the Lender any  obligation  or liability of any of the Borrowers
with respect to that which is assigned and the  Borrowers  hereby agree  jointly
and severally to indemnify the Lender and hold the Lender  harmless from any and
all claims, actions, suits, losses, damages, costs, expenses,  fees, obligations
and liabilities which may be incurred by or imposed upon the Lender by virtue of
the assignment of and Lien on any Borrower's rights,  title and interest in, to,
and under the Collateral.

            6.1.17 Government Accounts.

            The  Borrowers  will  immediately  notify  the  Lender if any of the
Receivables in excess of One Hundred  Thousand  Dollars  ($100,000) and having a
remaining  term in excess of six (6)  months  arise  out of  contracts  with the
United States or with any other  Governmental  Authority,  and, as  appropriate,
execute any  documents  and take any steps  required by the Lender in order that
all moneys due and to become due under such  contracts  shall be assigned to the
Lender and notice thereof given to the Governmental  Authority under the Federal
Assignment of Claims Act or any other applicable Laws.

            6.1.18 Inventory.

            With respect to the Inventory,  the Borrowers and their Subsidiaries
will: (a) keep correct and accurate  records  itemizing and describing the kind,
type,  quality and quantity of Inventory,  the Borrowers' and Subsidiaries' cost
therefore and the selling price thereof, all of which records shall be available
to the  officers,  employees or agents of the Lender upon demand for  inspection
and copying thereof; (b) not store any Inventory with a bailee,  warehouseman or
similar Person without the Lender's prior written consent,  which consent may be
conditioned  on, among other  things,  delivery by the bailee,  warehouseman  or
similar Person to the Lender of warehouse  receipts,  in form  acceptable to the
Lender,  in the name of the Lender  evidencing  the storage of Inventory and the
interests  of the  Lender  therein;  and (c) permit the Lender and its agents or
representatives  to inspect and examine the  Inventory and to check and test the
same as to quality,  quantity, value and condition upon prior notice at any time
or times hereafter during the Borrowers' and Subsidiaries'  usual business hours
or at other  reasonable  times.  The Borrowers and their  Subsidiaries  shall be
permitted to sell their  Inventory in the ordinary  course of business until the
occurrence of an Event of Default.

                                       51
<PAGE>

            6.1.19 Maintenance of the Collateral.

            The Borrowers  will maintain the  Collateral in good working  order,
saving and excepting  ordinary wear and tear, and will not permit anything to be
done to the Collateral that may materially impair the value thereof.  The Lender
shall not have any duty to, and the Borrowers hereby release the Lender from all
claims of loss or damage  caused by the delay or  failure  to collect or enforce
any of the  Receivables or to,  preserve any rights against any other party with
an interest in the Collateral.

            6.1.20 Equipment.

            The Borrowers  shall (a) maintain all Equipment as  personalty,  (b)
not affix any Equipment to any real estate in such manner as to become a fixture
or part of such  real  estate,  and (c)  shall  hold no  Equipment  on a sale on
approval basis. The Borrowers hereby declare their intent that,  notwithstanding
the means of  attachment,  no goods of the Borrowers  hereafter  attached to any
realty  shall be  deemed a  fixture,  which  declaration  shall be  irrevocable,
without the Lender's  consent,  until all of the  Obligations  have been paid in
full and all of the Commitments have been terminated or have expired.

            6.1.21 Defense of Title and Further Assurances.

            At  their  expense,  the  Borrowers  will  defend  the  title to the
Collateral (and any part thereof), and will immediately execute, acknowledge and
deliver  any  renewal,   affidavit,   deed,   assignment,   security  agreement,
certificate  or other document which the Lender may require in order to perfect,
preserve,  maintain,  continue,  protect  and/or  extend the Lien granted to the
Lender under this  Agreement or under any of the other  Financing  Documents and
the first  priority  of that Lien,  subject  only to the  Permitted  Liens.  The
Borrowers hereby authorize the filing of any financing statement or continuation
statement  required under the Uniform  Commercial  Code. The Borrowers will from
time to time do whatever the Lender may require by way of obtaining,  executing,
delivering,   and/or  filing  landlords'  or  mortgagees'  waivers,  notices  of
assignment  and other  notices  and  amendments  and  renewals  thereof  and the
Borrowers will take any and all steps and observe such formalities as the Lender
may require,  in order to create and  maintain a valid Lien upon,  pledge of, or
paramount security interest in, the Collateral,  subject to the Permitted Liens.
The  Borrowers  shall pay to the Lender on demand all taxes,  costs and expenses
incurred by the Lender in connection with the preparation,  execution, recording
and filing of any such document or  instrument.  To the extent that the proceeds
of any of the Accounts or  Receivables  of the  Borrowers are expected to become
subject  to the  control  of, or in the  possession  of, a party  other than the
Borrowers,  the Borrowers shall cause all such parties to execute and deliver on
the Closing  Date  security  documents  or other  documents  as requested by the
Lender and as may be necessary to evidence and/or perfect the security  interest
of the Lender in those proceeds.  Each Borrower hereby irrevocably  appoints the
Lender as the Borrower's  attorney-in-fact,  with power of substitution,  in the
name of the Lender or in the name of the Borrower or otherwise,  for the use and
benefit of the Lender,  but at the cost and expense of the Borrowers and without
notice to the Borrowers,  to execute and deliver any and all of the  instruments
and other  documents  and take any action which the Lender may require  pursuant
the foregoing provisions of this Section 6.1.21.

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<PAGE>

            6.1.22 Business Names; Locations.

            Each  of  the  Borrowers   will  notify  and  cause  each  of  their
Subsidiaries  to notify the Lender not less than  thirty  (30) days prior to (a)
any change in the name under  which the  Borrower or the  applicable  Subsidiary
conducts its  business,  (b) any change of the  location of the chief  executive
office of the  applicable  Borrower or the  applicable  Subsidiary,  and (c) the
opening of any new place of  business or the  closing of any  existing  place of
business, and (d) any change in the location of the places where the Collateral,
or any part thereof, or the books and records, or any part thereof, are kept.

            6.1.23 Use of Premises and Equipment.

            The Borrowers  agree that until the  Obligations  are fully paid and
all of the  Commitments  have been  terminated or have  expired,  the Lender (a)
after and  during the  continuance  of an Event of  Default,  may use any of the
Borrowers'  owned or  leased  lifts,  hoists,  trucks  and other  facilities  or
equipment for handling or removing the  Collateral;  and (b) shall have,  and is
hereby granted, a right of ingress and egress to the places where the Collateral
is located,  and may proceed  over and  through any of the  Borrowers'  owned or
leased property.

            6.1.24 Protection of Collateral.

            The  Borrowers  agree that the Lender may at any time  following  an
Event of Default  take such steps as the Lender  deems  reasonably  necessary to
protect  the  interest  of the  Lender  in,  and  to  preserve  the  Collateral,
including,  the hiring of such security  guards or the placing of other security
protection measures as the Lender deems appropriate,  may employ and maintain at
any of the  Borrowers'  premises a custodian who shall have full authority to do
all acts  necessary to protect the interests of the Lender in the Collateral and
may lease  warehouse  facilities to which the Lender may move all or any part of
the Collateral to the extent  commercially  reasonable.  The Borrowers  agree to
cooperate  fully with the Lender's  efforts to preserve the  Collateral and will
take such  actions to  preserve  the  Collateral  as the  Lender may  reasonably
direct. All of the Lender's expenses of preserving the Collateral, including any
reasonable  expenses  relating to the  compensation  and bonding of a custodian,
shall be part of the Enforcement Costs.

            6.1.25 Appraisals.

            Whenever  a Default  or an Event of Default  exists,  the  Borrowers
shall,  at their expense,  provide the Lender with appraisals or updates thereof
of any or all of the  Collateral  from an appraiser  and in form in all respects
satisfactory to the Lender.

      Section 6.2 Negative Covenants.

            So  long  as any of the  Obligations  or the  Commitments  shall  be
outstanding hereunder, the Borrowers agree with the Lender as follows:

            6.2.1 Capital Structure, Merger, Acquisition or Sale of Assets.

                                       53
<PAGE>

            None of the  Borrowers  will alter or amend its  capital  structure,
authorize  any  additional  class of  equity,  issue  any stock or equity of any
class,  enter  into any  merger  or  consolidation  or  amalgamation,  windup or
dissolve  itself (or suffer any  liquidation or  dissolution)  or acquire all or
substantially  all the assets of any Person, or sell, lease or otherwise dispose
of any of its assets  (except  Inventory  disposed of in the ordinary  course of
business  prior  to an Event of  Default).  Any  consent  of the  Lender  to the
disposition  of any assets may be conditioned on a specified use of the proceeds
of  disposition.  Notwithstanding  anything  set  forth in this  Section  to the
contrary,  the Lender agrees that it will not unreasonably  withhold its consent
to one or more of the  Borrowers  creating  one or more wholly  owned  operating
Subsidiaries   (collectively,   the  "Operating  Subsidiary")  and  transferring
substantially all of its assets to the Operating Subsidiary,  provided,  that at
the time of such transfer and after giving effect thereto, each of the following
conditions  is met:  (a) no  Default  or Event of Default  has  occurred  and is
continuing  or would occur as a result of such event;  (b) the Lender shall have
received and reviewed the pro forma  projections  of the  Borrowers (in form and
detail  satisfactory  to the Lender in its  reasonable  discretion)  taking into
effect the Operating  Subsidiary,  which pro forma  projections  demonstrate the
Borrowers' continued compliance with all of the material terms of this Agreement
throughout the term hereof; (c) the Lender shall have received a written summary
of the revised capital structure of the Borrowers and the Operating  Subsidiary;
(d) Argan shall own one hundred percent (100%) of the  outstanding  stock of the
Operating  Subsidiary;  (e)  the  Lender  shall  have  received  copies  of  all
organizational  documents  for  the  Operating  Subsidiary,   including  without
limitation an incumbency certificate and resolution;  (f) the Borrowers shall at
the  Borrowers'  expense  cause  the  Operating  Subsidiary  to  be  added  as a
co-obligor  on  this  Agreement  and  the  Financing  Documents  pursuant  to an
Additional  Borrower  Joinder  Supplement and deliver such additional  Financing
Documents,  instruments,  and opinions as the Lender may  reasonably  require to
cause all of the  assets of the  Operating  Subsidiary  to be subject to a first
Lien security interest in favor of the Lender.

            6.2.2 Subsidiaries.

            None of the Borrowers will create or acquire any Subsidiaries  other
than the Subsidiaries  identified on the Collateral Disclosure List, without the
prior written consent of the Lender.

            6.2.3 Issuance of Stock.

            None of the  Borrowers  will issue,  or grant any option or right to
purchase, any of its capital stock.

            6.2.4 Purchase or Redemption of Securities, Dividend Restrictions.

            None of the Borrowers will purchase, redeem or otherwise acquire any
shares of its capital stock or warrants now or hereafter outstanding, declare or
pay any  dividends  thereon  (other  than  stock  dividends),  apply  any of its
property or assets to the purchase, redemption or other retirement of, set apart
any sum for the payment of any dividends on, or for the purchase, redemption, or
other  retirement of, make any distribution by reduction of capital or otherwise
in respect of, any shares of any class of capital stock of any Borrower,  or any
warrants,  permit any  Subsidiary to purchase or acquire any shares of any class
of capital stock of, or warrants issued by, any Borrower,  make any distribution
to  stockholders  or set aside any funds for any such  purpose,  and not prepay,
purchase  or  redeem  any   Indebtedness  for  Borrowed  Money  other  than  the
Obligations.

                                       54
<PAGE>

            6.2.5 Indebtedness.

            None of the Borrowers will create,  incur, assume or suffer to exist
any Indebtedness for Borrowed Money or permit any Subsidiary to do so, except:

                  (a) the Obligations;

                  (b) current accounts payable arising in the ordinary course;

                  (c) Indebtedness secured by Permitted Liens;

                  (d) Subordinated Indebtedness;

                  (e)  Indebtedness  resulting  from  endorsement  of negotiable
instruments for collection in the ordinary course of business;

                  (f) Indebtedness of the Borrowers  existing on the date hereof
and reflected on the financial  statements  furnished pursuant to Section 4.1.11
(Financial Condition); and

                  (g) Any  extensions,  renewals or replacements of Indebtedness
described in clauses (c) and (e) above, which do not increase the amount of such
Indebtedness.

            6.2.6 Investments, Loans and Other Transactions.

            Except  as  otherwise  provided  in  this  Agreement,  none  of  the
Borrowers  will, or will permit any of its  Subsidiaries  to, (a) make,  assume,
acquire or continue to hold any investment in any real property  (unless used in
connection  with its  business  and  treated as a Fixed or Capital  Asset of any
Borrower or any Subsidiary) or any Person,  whether by stock  purchase,  capital
contribution,   acquisition  of   indebtedness   of  such  Person  or  otherwise
(including,   without   limitation,   investments   in  any  joint   venture  or
partnership),  (b)  guaranty or  otherwise  become  contingently  liable for the
Indebtedness or obligations of any Person, or (c) make any loans or advances, or
otherwise extend credit to any Person, except:

                        (i) any loan or advance to an officer or employee of any
                  Borrower or any Subsidiary, provided that the aggregate amount
                  of all such loans  advances by all of the  Borrowers and their
                  Subsidiaries  (taken as a whole) outstanding at any time shall
                  not exceed Twenty Five Thousand Dollars ($25,000);

                        (ii)  the  endorsement  of  negotiable  instruments  for
                  deposit or collection or similar  transactions in the ordinary
                  course of business;

                        (iii)  any  investment  in Cash  Equivalents,  which are
                  pledged  to the  Lender as  collateral  and  security  for the
                  Obligations; and

                        (iv) trade credit  extended to customers in the ordinary
                  course of business.

                                       55
<PAGE>

            6.2.7 Stock of Subsidiaries.

            None of the Borrowers  will sell or otherwise  dispose of any shares
of  capital  stock of any  Subsidiary  (except  in  connection  with a merger or
consolidation  of a Wholly Owned Subsidiary into any of the Borrowers or another
Wholly Owned  Subsidiary of any of the Borrowers or with the  dissolution of any
Subsidiary)  or permit  any  Subsidiary  to issue any  additional  shares of its
capital stock except pro rata to its stockholders.

            6.2.8 Subordinated Indebtedness.

            None of the Borrowers will, nor will permit any Subsidiary to make:

                  (a) any payment of  principal  of, or interest  on, any of the
Subordinated  Indebtedness,  if a Default  or an Event of  Default  then  exists
hereunder or would result from such payment;

                  (b)  any  payment  of the  principal  or  interest  due on the
Subordinated  Indebtedness as a result of acceleration thereunder or a mandatory
prepayment thereunder;

                  (c) any  amendment or  modification  of or  supplement  to the
documents evidencing or securing the Subordinated Indebtedness; or

                  (d)  payment of  principal  or  interest  on the  Subordinated
Indebtedness  other than when due (without giving effect to any  acceleration of
maturity or mandatory prepayment).

            6.2.9 Liens; Confessed Judgment.

            Each Borrower agrees that it (a) will not create,  incur,  assume or
suffer to exist any Lien upon any of its properties or assets, whether now owned
or  hereafter  acquired,  or permit any  Subsidiary  so to do,  except for Liens
securing the Obligations and Permitted  Liens,  (b) will not agree to, assume or
suffer to exist any provision in any instrument or other document for confession
of judgment,  cognovit or other similar right or remedy, (c) will not enter into
any  contracts  for the  consignment  of goods,  will not  execute or suffer the
filing of any financing  statements or the posting of any signs giving notice of
consignments,  and will not, as a material part of its  business,  engage in the
sale of goods belonging to others, and (d) will not allow or suffer to exist the
failure of any Lien  described  in the Security  Documents to attach to,  and/or
remain at all times perfected on, any of the property  described in the Security
Documents.

            6.2.10 Transactions with Affiliates.

            None of the Borrowers nor any of their  Subsidiaries will enter into
or participate in any transaction with any Affiliate other than  transactions in
the ordinary  course of business on fair and reasonable  terms no less favorable
to the Borrowers than would be obtained in a comparable arm's length transaction
with a Person not an  Affiliate,  with the  officers,  directors,  employees and
other representatives of any Borrower and/or any Subsidiary.

                                       56
<PAGE>

            6.2.11 Other Businesses.

            None of the  Borrowers  nor any of their  Subsidiaries  will  engage
directly or indirectly  in any business  other than its current line of business
described elsewhere in this Agreement.

            6.2.12 ERISA Compliance.

            None of the Borrowers nor any Commonly  Controlled Entity shall: (a)
engage in or permit any  "prohibited  transaction"  (as  defined in ERISA);  (b)
cause any  "accumulated  funding  deficiency"  as  defined  in ERISA  and/or the
Internal  Revenue  Code;  (c) terminate any pension plan in a manner which could
result in the  imposition of a lien on the property of any Borrower  pursuant to
ERISA; (d) terminate or consent to the termination of any  Multi-employer  Plan;
or (e) incur a complete or partial withdrawal with respect to any Multi-employer
Plan.

            6.2.13 Prohibition on Hazardous Materials.

            None of the Borrowers shall place, manufacture or store or permit to
be placed, manufactured or stored any Hazardous Materials on any property owned,
operated or controlled by any Borrower or for which any Borrower is  responsible
other than Hazardous  Materials  placed or stored on such property in accordance
with applicable Laws in the ordinary course of a Borrower's  business  expressly
described in this Agreement.

            6.2.14 Method of Accounting; Fiscal Year.

            Each Borrower agrees that:

                  (a) it shall not change the method of  accounting  employed in
the  preparation of any financial  statements  furnished to the Lender under the
provisions of Section 6.1.1 (Financial  Statements),  unless required to conform
to GAAP and on the condition that the Borrowers'  accountants shall furnish such
information  as the  Lender  may  request  to  reconcile  the  changes  with the
Borrowers' prior financial statements

                  (b) it will not change its fiscal  year from a year  ending on
January 31.

            6.2.15 Compensation.

            None of the Borrowers nor any Subsidiary will pay any bonuses, fees,
compensation,  commissions,  salaries, drawing accounts, or other payments (cash
and non-cash),  whether direct or indirect, to any stockholders,  Subsidiary, or
any Affiliate, other than reasonable compensation (including bonuses) for actual
services  rendered by stockholders in their capacity as officers or employees of
the Borrower or Subsidiary.

                                       57
<PAGE>

            6.2.16 Transfer of Collateral.

            None of the Borrowers nor any of their  Subsidiaries  will transfer,
or permit the transfer,  of the  Collateral or the books and records  related to
any of the Collateral to a location not disclosed on the  Collateral  Disclosure
List,  except for "mobile  goods" and  vehicles  being  operated in the ordinary
course of business.

            6.2.17 Sale and Leaseback.

            None of the Borrowers nor any of their Subsidiaries will directly or
indirectly enter into any arrangement to sell or transfer all or any substantial
part of its fixed assets and thereupon or within one (1) year thereafter rent or
lease the assets so sold or transferred.

            6.2.18 Disposition of Collateral.

            None  of  the  Borrowers  will  sell,  discount,  allow  credits  or
allowances,  transfer,  assign,  extend the time for payment on, convey,  lease,
assign,  transfer or otherwise  dispose of the Collateral,  except,  prior to an
Event of Default,  dispositions expressly permitted elsewhere in this Agreement,
the sale of  Inventory  in the  ordinary  course  of  business,  and the sale of
unnecessary or obsolete Equipment.

            6.2.19 Interest Rate Protection Agreements.

            On or prior to the date upon  which the  Lender  makes the 2006 Term
Loan,  the Borrowers  will obtain and at all times  thereafter  maintain in full
force and effect one or more Interest Rate Protection Agreements with the Lender
(and/or with a bank or other financial  institution having capital,  surplus and
undivided profits of at least Five Hundred Million Dollars ($500,000,000), which
effectively  enables Borrowers (in a manner  satisfactory to the Lender),  as of
any date, to protect themselves  against  fluctuations of interest rates as to a
notional  principal  amount at least equal to Seventy-Five  Percent (75%) of the
aggregate  amount of the 2006 Term Loan.  The  Borrowers  will not enter into or
permit to exist or acquire any Interest Rate Protection  Agreement except in the
ordinary  course of  business  to mitigate  fluctuations  of  interest  rates in
respect of outstanding Indebtedness.

                                  ARTICLE VII
                         DEFAULT AND RIGHTS AND REMEDIES

            Section 7.1 Events of Default.

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

            7.1.1 Failure to Pay.

            The failure of the  Borrowers to pay any of the  Obligations  within
five (5) days of when due and payable in accordance  with the provisions of this
Agreement, the Notes and/or any of the other Financing Documents.

            7.1.2 Breach of Representations and Warranties.

            Any  representation  or warranty  made in this  Agreement  or in any
report,  statement,  schedule,  certificate,  opinion  (including any opinion of
counsel for the Borrowers),  financial  statement or other document furnished in
connection with this Agreement,  any of the other  Financing  Documents,  or the
Obligations,  shall  prove to have been false or  misleading  when made (or,  if
applicable, when reaffirmed) in any material respect.

                                       58
<PAGE>

            7.1.3 Failure to Comply with Covenants.

            Default  shall be made by the  Borrower  in the due  observance  and
performance of any covenant,  condition or agreement contained in Sections 6.1.1
or 6.1.14 hereof or in Section 6.2 hereof.

            7.1.4 Other Defaults.

            Default  shall  be made by the  Borrower  in the due  observance  or
performance of any other term,  covenant or agreement  herein  contained  (other
than as set forth in Section 7.1.3 above), which default shall remain unremedied
for thirty (30) days after written notice thereof to the Borrower by the Lender.

            7.1.5 Default Under Other Financing Documents or Obligations.

            A default shall occur under any of the other Financing  Documents or
under any other Obligations, and such default is not cured within any applicable
grace period provided therein.

            7.1.6 Receiver; Bankruptcy.

            Any Borrower or any Subsidiary shall (a) apply for or consent to the
appointment  of a  receiver,  trustee  or  liquidator  of  itself  or any of its
property,  (b) admit in writing its  inability  to pay its debts as they mature,
(c) make a general assignment for the benefit of creditors, (d) be adjudicated a
bankrupt or insolvent, (e) file a voluntary petition in bankruptcy or a petition
or an answer  seeking or consenting to  reorganization  or an  arrangement  with
creditors or to take advantage of any  bankruptcy,  reorganization,  insolvency,
readjustment of debt,  dissolution or liquidation  law or statute,  or an answer
admitting  the  material  allegations  of a  petition  filed  against  it in any
proceeding  under any such law,  or take  corporate  action for the  purposes of
effecting any of the foregoing, (f) by any act indicate its consent to, approval
of or  acquiescence in any such proceeding or the appointment of any receiver of
or trustee for any of its property, or suffer any such receivership, trusteeship
or proceeding to continue  undischarged  for a period of sixty (60) days, or (g)
by any act indicate its consent to,  approval of or  acquiescence  in any order,
judgment or decree by any court of competent  jurisdiction  or any  Governmental
Authority enjoining or otherwise prohibiting the operation of a material portion
of any  Borrower's or any  Subsidiary's  business or the use or disposition of a
material portion of any Borrower's or any Subsidiary's assets.

            7.1.7 Involuntary Bankruptcy, etc.

                  (a) An order for relief  shall be  entered in any  involuntary
case brought against any Borrower or any Subsidiary  under the Bankruptcy  Code,
or (b) any such case shall be commenced  against any Borrower or any  Subsidiary
and shall not be  dismissed  within  sixty  (60)  days  after the  filing of the
petition,  or (c) an order, judgment or decree under any other Law is entered by
any court of competent  jurisdiction or by any other  Governmental  Authority on
the  application  of a  Governmental  Authority  or of a Person  other  than any
Borrower or any  Subsidiary  (i)  adjudicating  any Borrower,  or any Subsidiary
bankrupt or insolvent,  or (ii) appointing a receiver,  trustee or liquidator of
any Borrower or of any Subsidiary, or of a material portion of any Borrower's or
any Subsidiary's  assets, or (iii) enjoining,  prohibiting or otherwise limiting
the  operation  of a material  portion  of any  Borrower's  or any  Subsidiary's
business or the use or  disposition  of a material  portion of any Borrower's or
any Subsidiary's  assets, and such order,  judgment or decree continues unstayed
and in effect for a period of thirty (30) days from the date entered.

                                       59
<PAGE>

            7.1.8 Judgment.

            Unless adequately insured in the opinion of the Lender, the entry of
a final  judgment  for the  payment  of money  involving  more than One  Hundred
Thousand  Dollars  ($100,000)  against any Borrower or any  Subsidiary,  and the
failure by such  Borrower or such  Subsidiary to discharge the same, or cause it
to be discharged,  within thirty (30) days from the date of the order, decree or
process under which or pursuant to which such judgment was entered, or to secure
a stay of execution pending appeal of such judgment.

            7.1.9 Execution; Attachment.

            Any execution or attachment  shall be levied against the Collateral,
or any part thereof,  and such  execution or attachment  shall not be set aside,
discharged  or stayed  within  thirty  (30) days  after the same shall have been
levied.

            7.1.10 Default Under Other Borrowings.

            Default shall be made with respect to any  Indebtedness for Borrowed
Money of any of the Borrowers (other than the Loans) if the default is a failure
to pay at  maturity  or if the  effect  of such  default  is to  accelerate  the
maturity  of such  Indebtedness  for  Borrowed  Money or to permit the holder or
obligee thereof or other party thereto to cause such  Indebtedness  for Borrowed
Money to become due prior to its stated maturity.

            7.1.11 Challenge to Agreements.

            Any Borrower shall  challenge the validity and binding effect of any
provision of any of the Financing Documents or shall state its intention to make
such a  challenge  of any of the  Financing  Documents  or any of the  Financing
Documents  shall for any reason  (except to the extent  permitted by its express
terms) cease to be effective or to create a valid and perfected  first  priority
Lien  (except  for  Permitted  Liens) on, or  security  interest  in, any of the
Collateral purported to be covered thereby.

            7.1.12 Material Adverse Change.

            The Lender, in its sole discretion,  determines in good faith that a
material  adverse  change has occurred in the financial  condition of any of the
Borrowers.

            7.1.13 Impairment of Position.

            The Lender, in its sole discretion, determines in good faith that an
event has occurred which impairs in any material respect the prospect of payment
of any of the Obligations and/or the value of the Collateral.

            7.1.14 Liquidation,  Termination, Dissolution, Change in Responsible
Officers.

            Any Borrower shall liquidate, dissolve or terminate its existence or
shall suspend or terminate a substantial  portion of its business  operations or
if 2 of the 3 current  Responsible  Officers  at any time  cease to be  actively
involved in the daily  management  of any  Borrower  without  the prior  written
consent of the Lender.

                                       60
<PAGE>

            7.1.15 Swap Default.

            An event  occurs  which  gives  the  Lender  the  right or option to
terminate any Swap Contract which is secured by the Collateral.

            Section 7.2 Remedies.

            Upon the occurrence of any Event of Default,  the Lender may, in the
exercise  of its sole and  absolute  discretion  from time to time,  at any time
thereafter exercise any one or more of the following rights, powers or remedies:

            7.2.1 Acceleration.

            The  Lender  may  declare  any  or  all  of  the  Obligations  to be
immediately  due  and  payable,   notwithstanding  anything  contained  in  this
Agreement or in any of the other  Financing  Documents to the contrary,  without
presentment,  demand, protest, notice of protest or of dishonor, or other notice
of any kind, all of which the Borrowers hereby waive.

            7.2.2 Further Advances.

            The Lender  may from time to time  without  notice to the  Borrowers
suspend,  terminate or limit any further advances,  loans or other extensions of
credit under the Commitments, under this Agreement and/or under any of the other
Financing  Documents.  Further,  upon the  occurrence  of an Event of Default or
Default  specified in Section  7.1.6  (Receiver;  Bankruptcy)  or Section  7.1.7
(Involuntary  Bankruptcy,   etc.),  the  Revolving  Credit  Commitment  and  any
agreement in any of the Financing  Documents to provide  additional credit shall
immediately and  automatically  terminate and the unpaid principal amount of the
Notes  (with  accrued   interest   thereon)  and  all  other   Obligations  then
outstanding,  shall immediately become due and payable without further action of
any kind and without presentment,  demand, protest or notice of any kind, all of
which are hereby expressly waived by the Borrowers.

            7.2.3 Uniform Commercial Code.

            The Lender  shall have all of the rights and  remedies  of a secured
party under the applicable  Uniform  Commercial Code and other  applicable Laws.
Upon demand by the Lender,  the Borrowers shall assemble the Collateral and make
it available to the Lender,  at a place designated by the Lender.  The Lender or
its  agents may  without  notice  from time to time  enter  upon any  Borrower's
premises  to take  possession  of the  Collateral,  to  remove  it, to render it
unusable,  to  process  it or  otherwise  prepare  it for  sale,  or to  sell or
otherwise dispose of it.

            Any written notice of the sale, disposition or other intended action
by the Lender  with  respect to the  Collateral  which is sent by regular  mail,
postage  prepaid,  to the  Borrowers  at the  address  set forth in Section  8.1
(Notices), or such other address of the Borrowers which may from time to time be
shown on the  Lender's  records,  at least  ten (10)  days  prior to such  sale,
disposition or other action, shall constitute  commercially reasonable notice to
the Borrowers.  The Lender may alternatively or additionally give such notice in
any other  commercially  reasonable  manner.  Nothing  in this  Agreement  shall
require the Lender to give any notice not required by applicable Laws.

            If any consent,  approval, or authorization of any state,  municipal
or other  Governmental  Authority or of any other Person or of any Person having
any  interest  therein,  should be  necessary  to  effectuate  any sale or other
disposition  of  the  Collateral,  the  Borrowers  agree  to  execute  all  such
applications  and other  instruments,  and to take all other  action,  as may be
required  in   connection   with   securing  any  such   consent,   approval  or
authorization.

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            The  Borrowers  recognize  that the Lender may be unable to effect a
public sale of all or a part of the Collateral consisting of Investment Property
by reason of certain  prohibitions  contained in the  Securities Act of 1933, as
amended, and other applicable Federal and state Laws. The Lender may, therefore,
in its  discretion,  take such steps as it may deem  appropriate  to comply with
such Laws and may,  for example,  at any sale of the  Collateral  consisting  of
securities  restrict the  prospective  bidders or purchasers as to their number,
nature of business and investment intention,  including,  without limitation,  a
requirement  that the Persons making such  purchases  represent and agree to the
satisfaction  of the Lender that they are purchasing  such  securities for their
account,  for investment,  and not with a view to the  distribution or resale of
any thereof. The Borrowers covenant and agree to do or cause to be done promptly
all such acts and things as the Lender may request  from time to time and as may
be necessary to offer and/or sell the securities or any part thereof in a manner
which is valid and binding and in conformance with all applicable Laws. Upon any
such sale or disposition, the Lender shall have the right to deliver, assign and
transfer to the  purchaser  thereof the  Collateral  consisting of securities so
sold.

            7.2.4 Specific Rights With Regard to Collateral.

            In addition to all other rights and remedies  provided  hereunder or
as shall exist at law or in equity from time to time,  the Lender may (but shall
be under no  obligation  to),  at any time after the  occurrence  of an Event of
Default,  without  notice  to any of the  Borrowers,  and each  Borrower  hereby
irrevocably  appoints  the  Lender  as  its  attorney-in-fact,   with  power  of
substitution,  in the name of the Lender and/or in the name of any or all of the
Borrowers or otherwise,  for the use and benefit of the Lender,  but at the cost
and expense of the Borrowers and without notice to the Borrowers:

                  (a)  request  any  Account  Debtor  obligated  on  any  of the
Accounts to make payments thereon directly to the Lender, with the Lender taking
control of the Proceeds thereof;

                  (b) compromise,  extend or renew any of the Collateral or deal
with the same as it may deem advisable;

                  (c) make exchanges,  substitutions or surrenders of all or any
part of the Collateral;

                  (d) copy, transcribe,  or remove from any place of business of
any   Borrower  or  any   Subsidiary   all  books,   records,   ledger   sheets,
correspondence,  invoices and  documents,  relating to or evidencing  any of the
Collateral  or  without  cost or  expense  to the  Lender,  make such use of any
Borrower's  or any  Subsidiary's  place(s)  of  business  as  may be  reasonably
necessary to administer, control and collect the Collateral;

                  (e) repair,  alter or supply  goods if necessary to fulfill in
whole or in part the purchase order of any Account Debtor;

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<PAGE>

                  (f)  demand,   collect,   receipt   for  and  give   renewals,
extensions, discharges and releases of any of the Collateral;

                  (g) institute and prosecute legal and equitable proceedings to
enforce collection of, or realize upon, any of the Collateral;

                  (h) settle, renew, extend, compromise,  compound,  exchange or
adjust  claims in  respect  of any of the  Collateral  or any legal  proceedings
brought in respect thereof;

                  (i) endorse or sign the name of any Borrower upon any Items of
Payment, certificates of title, Instruments,  Investment Property, stock powers,
documents,  documents of title,  financing statements,  assignments,  notices or
other writing relating to or part of the Collateral and on any proof of claim in
bankruptcy against an Account Debtor;

                  (j) notify the Post Office  authorities  to change the address
for the delivery of mail to the  Borrowers to such address or Post Office Box as
the Lender may designate  and receive and open all mail  addressed to any of the
Borrowers; and

                  (k) take any other action  necessary or  beneficial to realize
upon or dispose of the Collateral or to carry out the terms of this Agreement.

            7.2.5 Application of Proceeds.

            Any proceeds of sale or other  disposition of the Collateral will be
applied by the Lender to the payment first of any and all Enforcement Costs, and
any balance of such  proceeds will be applied to the  Obligations  in such order
and manner as the Lender shall  determine.  If the sale or other  disposition of
the  Collateral  fails to fully satisfy the  Obligations,  the  Borrowers  shall
remain liable to the Lender for any deficiency.

            7.2.6 Performance by Lender.

            The  Lender  without  notice to or  demand  upon the  Borrowers  and
without  waiving or releasing any of the  Obligations or any Default or Event of
Default, may (but shall be under no obligation to) at any time after any Default
or Event of Default make such payment or perform such act for the account and at
the expense of the  Borrowers,  and may enter upon the premises of the Borrowers
for that  purpose  and take all such action  thereon as the Lender may  consider
necessary  or  appropriate  for such  purpose and each of the  Borrowers  hereby
irrevocably  appoints the Lender as its attorney-in-fact to do so, with power of
substitution,  in the  name  of the  Lender,  in the  name  of any or all of the
Borrowers or otherwise,  for the use and benefit of the Lender,  but at the cost
and expense of the Borrowers and without  notice to the  Borrowers.  All sums so
paid or advanced by the Lender  together with interest  thereon from the date of
payment,  advance or incurring until paid in full at the  Post-Default  Rate and
all costs and expenses,  shall be deemed part of the Enforcement Costs, shall be
paid by the Borrowers to the Lender on demand, and shall constitute and become a
part of the Obligations.

                                       63
<PAGE>

            7.2.7 Other Remedies.

            The Lender may from time to time  proceed to protect or enforce  its
rights by an action or actions  at law or in equity or by any other  appropriate
proceeding,  whether  for  the  specific  performance  of any  of the  covenants
contained in this Agreement or in any of the other Financing  Documents,  or for
an injunction against the violation of any of the terms of this Agreement or any
of the other Financing Documents,  or in aid of the exercise or execution of any
right,  remedy or power  granted in this  Agreement,  the  Financing  Documents,
and/or  applicable  Laws. The Lender is authorized to offset and apply to all or
any part of the Obligations all moneys, credits and other property of any nature
whatsoever of any or all of the  Borrowers  now or at any time  hereafter in the
possession  of, in transit to or from,  under the  control or custody  of, or on
deposit with, the Lender or any Affiliate of the Lender.

                                  ARTICLE VIII
                                  MISCELLANEOUS

      Section 8.1 Notices.

      All notices, requests and demands to or upon the parties to this Agreement
shall be in  writing  and  shall  be  deemed  to have  been  given or made  when
delivered  by hand on a  Business  Day,  or two (2) days  after  the  date  when
deposited in the mail,  postage prepaid by registered or certified mail,  return
receipt requested,  or when sent by overnight courier,  on the Business Day next
following  the day on which the notice is delivered to such  overnight  courier,
addressed as follows:

      Borrowers:               Argan Inc.
                               One Church Street, Suite 302
                               Rockville, Maryland 20850
                               Attention: Arthur F. Trudel
                               Chief Financial Officer

      with a copy to:          Robinson & Cole LLP
                               280 Trumbull Street
                               Harford, CT 06103
                               Attention:  Eileen P. Baldwin, Esq.

      Lender:                  Bank of America, N.A.
                               1101 Wootton Parkway, 4th Floor
                               Rockville, Maryland  20852
                               Attention:  Michael J. Radcliffe, SVP

      with a copy to:          Troutman Sanders LLP
                               1660 International Drive, Suite 600
                               McLean, Virginia 22102
                               Attention:  Richard M. Pollak, Esq.

      By written notice,  each party to this Agreement may change the address to
which notice is given to that party,  provided  that such  changed  notice shall
include a street address to which notices may be delivered by overnight  courier
in the ordinary course on any Business Day.

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<PAGE>

      Section 8.2 Amendments; Waivers.

      This  Agreement  and the other  Financing  Documents  may not be  amended,
modified,  or changed in any respect except by an agreement in writing signed by
the Lender and the Borrowers. No waiver of any provision of this Agreement or of
any of the other  Financing  Documents,  nor  consent  to any  departure  by the
Borrowers therefrom, shall in any event be effective unless the same shall be in
writing signed by the Lender. No course of dealing between the Borrowers and the
Lender  and no act or failure to act from time to time on the part of the Lender
shall  constitute a waiver,  amendment or  modification of any provision of this
Agreement or any of the other  Financing  Documents or any right or remedy under
this Agreement,  under any of the other Financing  Documents or under applicable
Laws.

            Without implying any limitation on the foregoing:

                  (a) Any  waiver  or  consent  shall be  effective  only in the
specific  instance,  for the terms and purpose for which given,  subject to such
conditions as the Lender may specify in any such instrument.

                  (b) No waiver of any Default or Event of Default  shall extend
to any  subsequent  or other  Default or Event of  Default,  or impair any right
consequent thereto.

                  (c) No notice to or demand on the  Borrowers in any case shall
entitle  the  Borrowers  to any other or  further  notice or demand in the same,
similar or other circumstance.

                  (d) No  failure  or delay by the  Lender  to  insist  upon the
strict  performance  of any  term,  condition,  covenant  or  agreement  of this
Agreement or of any of the other Financing Documents,  or to exercise any right,
power or remedy  consequent  upon a breach thereof,  shall  constitute a waiver,
amendment or modification of any such term, condition,  covenant or agreement or
of any such breach or preclude the Lender from exercising any such right,  power
or remedy at any time or times.

                  (e) By  accepting  payment  after  the due date of any  amount
payable under this Agreement or under any of the other Financing Documents,  the
Lender shall not be deemed to waive the right either to require  prompt  payment
when due of all other amounts  payable under this  Agreement or under any of the
other  Financing  Documents,  or to declare a default for failure to effect such
prompt payment of any such other amount.

      Section 8.3 Cumulative Remedies.

      The rights,  powers and  remedies  provided in this  Agreement  and in the
other  Financing  Documents are  cumulative,  may be exercised  concurrently  or
separately,  may be exercised  from time to time and in such order as the Lender
shall  determine,  subject  to the  provisions  of  this  Agreement,  and are in
addition to, and not  exclusive  of,  rights,  powers and  remedies  provided by
existing or future  applicable  Laws. In order to entitle the Lender to exercise
any remedy reserved to it in this  Agreement,  it shall not be necessary to give
any  notice,  other  than  such  notice  as may be  expressly  required  in this
Agreement.  Without  limiting the generality of the foregoing and subject to the
terms of this Agreement, the Lender may:

                                       65
<PAGE>

                  (a) proceed  against any one or more of the Borrowers  with or
without  proceeding against any other Person (who may be liable (by endorsement,
guaranty, indemnity or otherwise) for all or any part of the Obligations;

                  (b) proceed  against any one or more of the Borrowers  with or
without  proceeding  under any of the other  Financing  Documents or against any
Collateral  or  other  collateral  and  security  for  all  or any  part  of the
Obligations;

                  (c)  without  reducing  or  impairing  the  obligation  of the
Borrowers and without notice,  release or compromise with any guarantor or other
Person  liable  for  all or any  part of the  Obligations  under  the  Financing
Documents or otherwise;

                  (d)  without  reducing or  impairing  the  obligations  of the
Borrowers and without notice thereof:

                        (i) fail to perfect the Lien in any or all Collateral or
                  to release any or all the  Collateral or to accept  substitute
                  Collateral;

                        (ii) approve the making of advances  under the Revolving
                  Loan under this Agreement;

                        (iii) waive any provision of this Agreement or the other
                  Financing Documents;

                        (iv)  exercise or fail to exercise  rights of set-off or
                  other rights; or

                        (v) accept partial  payments or extend from time to time
                  the maturity of all or any part of the Obligations.

      Section 8.4 Severability.

      In  case  one or  more  provisions,  or part  thereof,  contained  in this
Agreement  or in the other  Financing  Documents  shall be  invalid,  illegal or
unenforceable  in any respect  under any Law,  then without need for any further
agreement, notice or action:

                  (a) the validity, legality and enforceability of the remaining
provisions  shall remain  effective and binding on the parties thereto and shall
not be affected or impaired thereby;

                  (b) the  obligation  to be  fulfilled  shall be reduced to the
limit of such validity;

                  (c) if such provision or part thereof pertains to repayment of
the Obligations, then, at the sole and absolute discretion of the Lender, all of
the Obligations of the Borrowers to the Lender shall become  immediately due and
payable; and

                                       66
<PAGE>

                  (d) if the affected provision or part thereof does not pertain
to repayment of the Obligations,  but operates or would prospectively operate to
invalidate  this  Agreement  in whole or in part,  then such  provision  or part
thereof only shall be void,  and the  remainder of this  Agreement  shall remain
operative and in full force and effect.

      Section 8.5 Assignments by Lender.

      The Lender may,  without notice to or consent of the Borrowers,  assign to
any Person (each an  "Assignee"  and  collectively,  the  "Assignees")  all or a
portion of the Lender's  Commitments.  The Lender and its Assignee  shall notify
the Borrowers in writing of the date on which the  assignment is to be effective
(the  "Adjustment  Date").  On or before the Adjustment  Date,  the Lender,  the
Borrowers  and the  Assignee  shall  execute  and  deliver a written  assignment
agreement  in a form  acceptable  to  the  Lender,  which  shall  constitute  an
amendment to this Agreement to the extent  necessary to reflect such assignment.
Upon the request of the Lender  following an assignment  made in accordance with
this  Section  8.5,  the  Borrowers  shall issue new Notes to the Lender and its
Assignee reflecting such assignment,  in exchange for the existing Notes held by
the Lender,  provided the Lender shall have used good faith  efforts to obtain a
confidentiality agreement from any such Assignee.

         In addition, notwithstanding the foregoing, the Lender may at any time
pledge all or any portion of the Lender's rights under this Agreement, any of
the Commitments or any of the Obligations to a Federal Reserve Bank.

      Section 8.6 Participations by Lender.

      The  Lender  may at any time  sell to one or more  financial  institutions
participating  interests  in any of the  Lender's  Obligations  or  Commitments;
provided,  however, that (a) no such participation shall relieve the Lender from
its  obligations  under  this  Agreement  or under  any of the  other  Financing
Documents to which it is a party, (b) the Lender shall remain solely responsible
for the performance of its obligations under this Agreement and under all of the
other  Financing  Documents to which it is a party,  and (c) the Borrowers shall
continue  to deal solely and  directly  with the Lender in  connection  with the
Lender's  rights and  obligations  under this Agreement and the other  Financing
Documents.

      Section 8.7 Disclosure of Information by Lender.

      In connection with any sale, transfer,  assignment or participation by the
Lender in  accordance  with Section 8.5  (Assignments  by Lender) or Section 8.6
(Participations  by Lender),  the Lender shall have the right to disclose to any
actual or potential purchaser, assignee, transferee or participant all financial
records,  information,  reports,  financial statements and documents obtained in
connection with this Agreement  and/or any of the other  Financing  Documents or
otherwise.

      Section 8.8 Successors and Assigns.

      This Agreement and all other Financing Documents shall be binding upon and
inure to the  benefit  of the  Borrowers  and the  Lender  and their  respective
successors  and assigns,  except that the Borrowers  shall not have the right to
assign their rights  hereunder or any interest  herein without the prior written
consent of the Lender.

                                       67
<PAGE>

      Section 8.9 Continuing Agreements.

      All covenants,  agreements,  representations  and  warranties  made by the
Borrowers in this Agreement, in any of the other Financing Documents, and in any
certificate delivered pursuant hereto or thereto shall survive the making by the
Lender  of the Loans and the  execution  and  delivery  of the  Notes,  shall be
binding  upon the  Borrowers  regardless  of how long  before  or after the date
hereof any of the Obligations  were or are incurred,  and shall continue in full
force and effect so long as any of the  Obligations  are outstanding and unpaid.
From time to time upon the Lender's  request,  and as a condition of the release
of any one or more of the Security  Documents,  the  Borrowers and other Persons
obligated  with respect to the  Obligations  shall  provide the Lender with such
acknowledgments  and  agreements  as the Lender may  require to the effect  that
there exists no defenses, rights of setoff or recoupment, claims, counterclaims,
actions or causes of action of any kind or nature whatsoever  against the Lender
and/or any of its agents and others,  or to the extent  there are,  the same are
waived and released.

      Section 8.10 Enforcement Costs.

      The Borrowers agree to pay to the Lender on demand all Enforcement  Costs,
together with interest  thereon from the date incurred or advanced until paid in
full at a per annum  rate of  interest  equal at all  times to the  Post-Default
Rate.  Enforcement  Costs  shall  be  immediately  due and  payable  at the time
advanced or incurred,  whichever is earlier.  Without implying any limitation on
the foregoing,  the Borrowers  agree, as part of the  Enforcement  Costs, to pay
upon demand any and all stamp and other Taxes and fees payable or  determined to
be payable in connection  with the execution and delivery of this  Agreement and
the other  Financing  Documents and to save the Lender harmless from and against
any and all liabilities with respect to or resulting from any delay in paying or
omission to pay any Taxes or fees referred to in this Section. The provisions of
this Section shall survive the  execution  and delivery of this  Agreement,  the
repayment of the other  Obligations  and shall survive the  termination  of this
Agreement.

      Section 8.11 Applicable Law; Jurisdiction.

            8.11.1 Applicable Law.

            Borrowers  acknowledge  and  agree  that  the  Financing  Documents,
including,  this  Agreement,  shall be governed by the Laws of the State,  as if
each of the  Financing  Documents  and this  Agreement  had each been  executed,
delivered,  administered  and performed  solely within the State even though for
the  convenience  and at  the  request  of the  Borrowers,  one or  more  of the
Financing Documents may be executed elsewhere. The Lender acknowledges, however,
that remedies  under certain of the Financing  Documents that relate to property
outside the State may be subject to the laws of the state in which the  property
is located.

            8.11.2 Submission to Jurisdiction.

            The Borrowers irrevocably submit to the jurisdiction of any state or
federal court sitting in the State over any suit,  action or proceeding  arising
out of or relating to this  Agreement or any of the other  Financing  Documents.
Each of the Borrowers  irrevocably  waives,  to the fullest extent  permitted by
law, any objection  that it may now or hereafter have to the laying of the venue
of any such suit,  action or proceeding  brought in any such court and any claim
that any such  suit,  action or  proceeding  brought  in any such court has been
brought in an  inconvenient  forum.  Final judgment in any such suit,  action or
proceeding  brought in any such court shall be  conclusive  and binding upon the
Borrowers and may be enforced in any court in which the Borrowers are subject to
jurisdiction,  by a suit upon such judgment, provided that service of process is
effected upon the  Borrowers in one of the manners  specified in this Section or
as otherwise permitted by applicable Laws.

                                       68
<PAGE>

            8.11.3 Appointment of Agent for Service of Process.

            The   Borrowers   hereby   irrevocably   designate  and  appoint  CT
Corporation System,  Corporation Trust Center,  1209 Orange Street,  Wilmington,
Delaware 19801, as the Borrowers'  authorized agent to receive on the Borrowers'
behalf service of any and all process that may be served in any suit,  action or
proceeding  of the nature  referred  to in this  Section in any state or federal
court  sitting in the State.  If such agent shall cease so to act, the Borrowers
shall irrevocably  designate and appoint without delay another such agent in the
State  satisfactory  to the  Lender  and shall  promptly  deliver  to the Lender
evidence in writing of such other agent's acceptance of such appointment and its
agreement that such appointment shall be irrevocable.

            8.11.4 Service of Process.

            Each of the Borrowers hereby consents to process being served in any
suit,  action or proceeding of the nature referred to in this Section by (a) the
mailing of a copy thereof by  registered  or certified  mail,  postage  prepaid,
return receipt  requested,  to the Borrower at the Borrower's address designated
in or pursuant to Section 8.1 (Notices), and (b) serving a copy thereof upon the
agent, if any,  designated and appointed by the Borrower as the Borrower's agent
for service of process by or pursuant to this Section. The Borrowers irrevocably
agree that such service (y) shall be deemed in every respect  effective  service
of process upon the Borrowers in any such suit,  action or  proceeding,  and (z)
shall,  to the fullest  extent  permitted  by law, be taken and held to be valid
personal  service upon the  Borrowers.  Nothing in this Section shall affect the
right of the Lender to serve process in any manner otherwise permitted by law or
limit  the  right of the  Lender  otherwise  to bring  proceedings  against  the
Borrowers in the courts of any jurisdiction or jurisdictions.

      Section 8.12 Duplicate Originals and Counterparts.

      This  Agreement  may be executed in any number of  duplicate  originals or
counterparts,  each of such duplicate  originals or counterparts shall be deemed
to be an original and all taken together  shall  constitute but one and the same
instrument.

      Section 8.13 Headings.

      The headings in this Agreement are included herein for  convenience  only,
shall not constitute a part of this  Agreement for any other purpose,  and shall
not be deemed to affect the  meaning or  construction  of any of the  provisions
hereof.

                                       69
<PAGE>

      Section 8.14 No Agency.

      Nothing herein contained shall be construed to constitute the Borrowers as
the agent of the Lender for any purpose whatsoever or to permit the Borrowers to
pledge any of the credit of the Lender.  The Lender shall not be  responsible or
liable for any shortage, discrepancy, damage, loss or destruction of any part of
the  Collateral  wherever  the same may be located and  regardless  of the cause
thereof.  The Lender  shall not, by anything  herein or in any of the  Financing
Documents  or  otherwise,  assume any of the  Borrowers'  obligations  under any
contract  or  agreement  assigned  to the  Lender,  and the Lender  shall not be
responsible in any way for the  performance by the Borrowers of any of the terms
and  conditions  thereof,  except for losses which are the direct  result of the
Lender's gross negligence or willful misconduct.

      Section 8.15 Date of Payment.

      Should the principal of or interest on the Notes become due and payable on
other than a Business  Day, the maturity  thereof  shall be extended to the next
succeeding Business Day and in the case of principal,  interest shall be payable
thereon at the rate per annum specified in the Notes during such extension.

      Section 8.16 Entire Agreement.

      This  Agreement  is  intended  by the  Lender  and the  Borrowers  to be a
complete,  exclusive and final  expression of the agreements  contained  herein.
Neither the Lender nor the Borrowers  shall  hereafter have any rights under any
prior agreements pertaining to the matters addressed by this Agreement but shall
look solely to this Agreement for definition and  determination  of all of their
respective rights, liabilities and responsibilities under this Agreement.

      Section 8.17 Waiver of Trial by Jury.

      THE BORROWERS AND THE LENDER HEREBY  JOINTLY AND SEVERALLY  WAIVE TRIAL BY
JURY IN ANY ACTION OR  PROCEEDING  TO WHICH THE  BORROWER  AND THE LENDER MAY BE
PARTIES,  ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY
OF THE FINANCING  DOCUMENTS,  OR (C) THE COLLATERAL.  THIS WAIVER  CONSTITUTES A
WAIVER OF TRIAL BY JURY OF ALL CLAIMS  AGAINST  ALL  PARTIES TO SUCH  ACTIONS OR
PROCEEDINGS,  INCLUDING  CLAIMS  AGAINST  PARTIES  WHO ARE NOT  PARTIES  TO THIS
AGREEMENT.

      This waiver is knowingly,  willingly and voluntarily made by the Borrowers
and the  Lender,  and the  Borrowers  and the Lender  hereby  represent  that no
representations  of fact or opinion have been made by any  individual  to induce
this waiver of trial by jury or to in any way modify or nullify its effect.  The
Borrowers and the Lender further  represent  that they have been  represented in
the signing of this  Agreement  and in the making of this waiver by  independent
legal  counsel,  selected  of their  own free  will,  and that they have had the
opportunity to discuss this waiver with counsel.

                                       70
<PAGE>

      Section 8.18 Liability of the Lender.

      The Borrowers hereby agree that the Lender shall not be chargeable for any
negligence,  mistake,  act or omission of any  accountant,  examiner,  agency or
attorney  employed  by the  Lender in  making  examinations,  investigations  or
collections,  or otherwise in perfecting,  maintaining,  protecting or realizing
upon any lien or security  interest or any other  interest in the  Collateral or
other security for the Obligations.

      By inspecting the Collateral or any other properties of the Borrowers or
by accepting or approving anything required to be observed, performed or
fulfilled by the Borrowers or to be given to the Lender pursuant to this
Agreement or any of the other Financing Documents, the Lender shall not be
deemed to have warranted or represented the condition, sufficiency, legality,
effectiveness or legal effect of the same, and such acceptance or approval shall
not constitute any warranty or representation with respect thereto by the
Lender.

      Section 8.19 Indemnification.

      The Borrowers agree to indemnify and hold harmless,  Lender,  the Lender's
parent and  Affiliates  and the  Lender's  parent's  and  Affiliates'  officers,
directors, shareholders,  employees and agents (each an "Indemnified Party," and
collectively,  the "Indemnified Parties"),  from and against any and all claims,
liabilities,   losses,   damages,  costs  and  expenses  (whether  or  not  such
Indemnified Party is a party to any litigation),  including without  limitation,
reasonable  attorney's  fees and  costs  and  costs of  investigation,  document
production,  attendance  at  depositions  or other  discovery,  incurred  by any
Indemnified  Party with respect to,  arising out of or as a  consequence  of (a)
this  Agreement  or any of the  other  Financing  Documents,  including  without
limitation,  any  failure  of the  Borrowers  to pay when due (at  maturity,  by
acceleration or otherwise) any principal,  interest, fee or any other amount due
under this  Agreement or the other  Financing  Documents,  or any other Event of
Default;  (b) the use by the Borrowers of any proceeds advanced  hereunder;  (c)
the transactions  contemplated  hereunder;  or (d) any claim, demand,  action or
cause  of  action  being  asserted  against  (i) the  Borrowers  or any of their
Affiliates by any other Person,  or (ii) any Indemnified  Party by the Borrowers
in connection  with the  transactions  contemplated  hereunder.  Notwithstanding
anything  herein  or  elsewhere  to the  contrary,  the  Borrowers  shall not be
obligated  to  indemnify  or  hold  harmless  any  Indemnified  Party  from  any
liability,  loss  or  damage  resulting  from  the  gross  negligence,   willful
misconduct or unlawful actions of such Indemnified  Party. Any amount payable to
the Lender under this Section will bear  interest at the Post- Default Rate from
the due date until paid.

                    [SIGNATURES APPEAR ON THE FOLLOWING PAGE]

                                       71
<PAGE>

      IN WITNESS WHEREOF, each of the parties hereto have executed and delivered
this Agreement under their respective seals as of the day and year first written
above.

                                   Borrowers:

WITNESS/ATTEST:                         ARGAN, INC.

/s/Arthur Trudel                        By: /s/ Rainer Bosselmann (Seal)
----------------                           ----------------------
                                           Name: Rainer Bosselmann
                                           Title: Chairman and CEO

WITNESS/ATTEST:                         SOUTHERN MARYLAND CABLE, INC.

/s/ Rainer Bosselmann                   By: /s/Arthur Trudel (Seal)
---------------------                      ------------------
                                           Name: Arthur Trudel
                                           Title: CFO

WITNESS/ATTEST:                         VITARICH LABORATORIES, INC.

/s/ Arthur Trudel                       By: /s/ Rainer Bosselmann (Seal)
----------------                           ----------------------
                                           Name: Rainer Bosselmann
                                           Title: Chairman and CEO

                                        Lender:

WITNESS:                                BANK OF AMERICA, N.A.

------------------------                By: /s/ Michael J. Radcliffe (Seal)
                                           -------------------------
                                           Name: Michael J. Radcliffe
                                           Title: Senior Vice President

                                       72
<PAGE>

                                LIST OF EXHIBITS

A.                      Additional Borrower Joinder Supplement

B-1.                    Revolving Credit Note

B-2.                    Term Note

B-3.                    2006 Term Note

C.                      Form of Compliance Certificate

                                       73
<PAGE>

                                LIST OF SCHEDULES

Schedule 1.1            Copyrights, Patents and Trademarks

Schedule 4.1.10         Litigation

Schedule 4.1.13         Indebtedness for Borrowed Money

Schedule 4.1.18         Employee Relations

Schedule 4.1.20         Perfection and Priority of Collateral

                                       74
<PAGE>

                              AMENDED AND RESTATED
                        FINANCING AND SECURITY AGREEMENT

                                      Dated

                                   May 5, 2006

                                  By and Among

                                   ARGAN INC.

                                       And

                          SOUTHERN MARYLAND CABLE, INC.

                                       And

                           VITARICH LABORATORIES, INC.

                                       And

                              BANK OF AMERICA, N.A.EXHIBIT 10.2

                THIRD AMENDED AND RESTATED REVOLVING CREDIT NOTE

$4,250,000                                                   Rockville, Maryland
                                                                   May 5th, 2006

      FOR VALUE RECEIVED, ARGAN, INC., a corporation organized under the laws of
the State of Delaware  ("Argan"),  SOUTHERN MARYLAND CABLE,  INC., a corporation
organized  under  the  laws  of the  State  of  Delaware  ("SMC")  and  VITARICH
LABORATORIES,  INC.,  a  corporation  organized  under  the laws of the State of
Delaware ("Vitarich") (each a "Borrower" and collectively "Borrowers"),  jointly
and severally  promise to pay to the order of BANK OF AMERICA,  N.A., a national
banking  association,  its successors and assigns (the "Lender"),  the principal
sum of FOUR  MILLION  TWO  HUNDRED  FIFTY  THOUSAND  DOLLARS  ($4,250,000)  (the
"Principal  Sum"),  or so  much  thereof  as has  been  or may  be  advanced  or
readvanced  to or for the  account of the  Borrowers  pursuant  to the terms and
conditions of this Third Amended and Restated  Revolving  Credit Note (including
all renewals,  extensions or modifications  hereof, this "Note"),  together with
interest thereon at the rate or rates hereinafter  provided,  in accordance with
the following:

      1. Interest.

      Commencing as of the date hereof and continuing until repayment in full of
all sums due  hereunder,  the unpaid  Principal  Sum shall bear  interest at the
LIBOR Rate plus three and one quarter  percent  (3.25%) per annum.  For purposes
hereof,  the "LIBOR Rate" shall mean a daily  fluctuating  rate equal to the one
(1) month rate of interest (rounded  upwards,  if necessary to the nearest 1/100
of 1%) appearing on Telerate  Page 3750 (or any  successor  page) as the one (1)
month  London   interbank   offered  rate  for  deposits  in  U.S.   Dollars  at
approximately  11:00 A.M. (London,  time), on the second preceding business day,
as  adjusted   from  time  to  time  in  the  Lender's   sole   discretion   for
then-applicable  reserve  requirements,  deposits insurance assessment rates and
other regulatory  costs. If for any reason such rate is not available,  the term
"LIBOR Rate" shall mean the  fluctuating  rate of interest  equal to the one (1)
month rate of interest  (rounded  upwards,  if necessary to the nearest 1/100 of
1%) appearing on Reuters Screen LIBO Page as the one (1) month London  interbank
offered rate for deposits in U.S.  Dollars at  approximately  11:00 a.m. (London
Time) on the second  preceding  business  day, as adjusted from time to time for
then-applicable  reserve  requirements,  deposit insurance  assessment rates and
other regulatory costs; provided, however, if more than one rate is specified on
Reuters Screen LIBO page, the  applicable  rate shall be the arithmetic  mean of
all such rates.

      The rate of interest charged under this Note shall change  immediately and
contemporaneously  with any change in the LIBOR Rate. All interest payable under
the terms of this Note shall be  calculated  on the basis of a 360-day  year and
the actual number of days elapsed.

      2. Payments and Maturity.

      The unpaid  Principal Sum,  together with interest  thereon at the rate or
rates provided above, shall be payable as follows:

<PAGE>

                  (a) Interest only on the unpaid Principal Sum shall be due and
payable  monthly,  commencing  September  30, 2004,  and on the last day of each
month thereafter to maturity; and

                  (b) Unless sooner paid,  the unpaid  Principal  Sum,  together
with interest  accrued and unpaid  thereon,  shall be due and payable in full on
the Revolving Credit Expiration Date.

      The fact that the  balance  hereunder  may be reduced to zero from time to
time pursuant to the Financing Agreement will not affect the continuing validity
of this Note or the Financing Agreement, and the balance may be increased to the
Principal Sum after any such reduction to zero.

      Borrower hereby authorizes Lender to automatically  deduct from Borrower's
account numbered 003939628068 the amount of each payment of principal (including
without  limitation the principal payment due on the final maturity date) and/or
interest on the dates such payments  become due. If the funds in the account are
insufficient  to cover any  payment,  Lender  shall not be  obligated to advance
funds to cover the payment.  At any time and for any reason,  Borrower or Lender
may voluntarily terminate automatic payments as provided in this paragraph.

      3. Default Interest.

      Upon the occurrence of an Event of Default (as hereinafter  defined),  the
unpaid Principal Sum shall bear interest  thereafter at the LIBOR Rate plus four
percent (4.00%) (the "Post-Default Rate") until such Event of Default is cured.

      4. Late Charges.

      If the  Borrowers  shall fail to make any payment  under the terms of this
Note  within  five (5) days after the date such  payment is due,  the  Borrowers
shall pay to the Lender on demand a late charge  equal to five  percent  (5%) of
such payment.

      5. Application and Place of Payments.

      All  payments,  made on account of this Note shall be applied first to the
payment of accrued and unpaid interest then due hereunder, and the remainder, if
any,  shall be applied to the unpaid  Principal  Sum. All payments on account of
this Note  shall be paid in lawful  money of the  United  States of  America  in
immediately  available funds during regular  business hours of the Lender at its
principal office in Rockville, Maryland or at such other times and places as the
Lender  may at any  time and  from  time to time  designate  in  writing  to the
Borrowers.

      6. Financing Agreement and Other Financing Documents.

      This Note is the  "Revolving  Credit  Note"  described  in the Amended and
Restated Financing and Security Agreement,  dated of even date herewith,  by and
among the Borrowers and the Lender (as amended, modified, restated, substituted,
extended  and  renewed  at any  time  and  from  time to  time,  the  "Financing
Agreement").  This Note amends and restates in its entirety that certain  Second
Amended and  Restated  Revolving  Credit Note (the "Prior  Note") in the maximum
principal sum of Four Million Two Hundred Fifty  Thousand  Dollars  ($4,250,000)
dated  April __, 2005 in favor of the Lender.  It is  expressly  agreed that the
indebtedness evidenced by the Prior Note has not been extinguished or discharged
hereby.  The  Borrowers  and the Lender agree that the execution of this Note is
not intended to and shall not cause or result in a novation  with respect to the
Prior Note.  The  indebtedness  evidenced  by this Note is  included  within the
meaning of the term  "Obligations"  as defined in the Financing  Agreement.  The
term  "Financing  Documents" as used in this Note shall mean  collectively  this
Note, the Term Note,  the 2006 Term Note, the Financing  Agreement and any other
instrument,  agreement,  or document  previously,  simultaneously,  or hereafter
executed and delivered by any Borrower  and/or any other  Person,  singularly or
jointly  with  any  other  Person,  evidencing,  securing,  guaranteeing,  or in
connection with the Principal Sum, this Note and/or the Financing Agreement.

                                       2
<PAGE>

      7. Security.

      This Note is secured as provided in the Financing Agreement.

      8. Events of Default.

      The occurrence of any one or more of the following events shall constitute
an event of default (individually,  an "Event of Default" and collectively,  the
"Events of Default") under the terms of this Note:

            (a) The failure of any Borrower to pay to the Lender within five (5)
days of when due any and all amounts payable by any Borrower to the Lender under
the terms of this Note; or

            (b) The occurrence of an Event of Default (as defined therein) under
the terms and conditions of any of the other Financing Documents.

      9. Remedies.

      Upon the  occurrence of an Event of Default,  at the option of the Lender,
all amounts  payable by the Borrowers to the Lender under the terms of this Note
shall immediately  become due and payable by the Borrowers to the Lender without
notice to the  Borrowers or any other  Person,  and the Lender shall have all of
the rights,  powers, and remedies available under the terms of this Note, any of
the other  Financing  Documents and all  applicable  laws. The Borrowers and all
endorsers,  guarantors,  and  other  parties  who  may now or in the  future  be
primarily or secondarily liable for the payment of the indebtedness evidenced by
this Note hereby  severally  waive  presentment,  protest and demand,  notice of
protest,  notice of demand  and of  dishonor  and  non-payment  of this Note and
expressly  agree that this Note or any payment  hereunder  may be extended  from
time to time  without  in any way  affecting  the  liability  of the  Borrowers,
guarantors and endorsers.

      10. Confessed Judgment.

      Upon  the  occurrence  of  an  Event  of  Default,  each  Borrower  hereby
authorizes  any attorney  designated  by the Lender or any clerk of any court of
record to appear for the  Borrowers in any court of record and confess  judgment
without  prior  hearing  against the Borrowers in favor of the Lender for and in
the amount of the unpaid Principal Sum, all interest accrued and unpaid thereon,
all other amounts  payable by any Borrower to the Lender under the terms of this
Note or any of the other Financing Documents, costs of suit, and attorneys' fees
of fifteen  percent  (15%) of the unpaid  Principal  Sum and  interest  then due
hereunder.  By its  acceptance of this Note, the Lender agrees that in the event
the Lender  exercises at any time its right to confess judgment under this Note,
the Lender shall use its best  efforts to obtain  legal  counsel who will charge
the Lender for its services on an hourly basis,  at its  customary  hourly rates
and only for the time and reasonable  expenses  incurred.  In no event shall the
Lender  enforce  the legal fees  portion of a  confessed  judgment  award for an
amount in excess of the fees and  expenses  actually  charged  to the Lender for
services  rendered by its counsel in connection with such confession of judgment
and/or  the  collection  of sums owed to the  Lender.  In the  event the  Lender
receives,  through execution upon a confessed  judgment,  payments on account of
attorneys' fees in excess of such actual  attorneys' fees and expenses  incurred
by the  Lender,  then,  after  full  repayment  and  satisfaction  of all of the
obligations under and in connection with this Note, the Financing  Agreement and
all of the other Financing Documents, the Lender shall refund such excess amount
to the Borrowers.  Each Borrower  hereby  releases,  to the extent  permitted by
applicable  law,  all  errors  and all  rights  of  exemption,  appeal,  stay of
execution,  inquisition, and other rights to which any Borrower may otherwise be
entitled  under  the laws of the  United  States of  America  or of any state or
possession  of the United  States of America now in force or which may hereafter
be enacted. The authority and power to appear for and enter judgment against the
Borrowers  shall not be  exhausted  by one or more  exercises  thereof or by any
imperfect exercise thereof and shall not be extinguished by any judgment entered
pursuant  thereto.  Such  authority may be exercised on one or more occasions or
from time to time in the same or different  jurisdictions as often as the Lender
shall  deem  necessary  or  desirable,  for all of which  this  Note  shall be a
sufficient warrant.
                                       3
<PAGE>

      11. Expenses.

      Each  Borrower  promises  to pay to the Lender on demand by the Lender all
costs and expenses  incurred by the Lender in connection with the collection and
enforcement of this Note, including,  without limitation,  reasonable attorneys'
fees and expenses and all court costs.

      12. Notices.

      Any  notice,  request,  or demand to or upon the  Borrowers  or the Lender
shall be deemed to have been properly given or made when delivered in accordance
with Section 8.1 of the Financing Agreement.

      13. Miscellaneous.

      Each right,  power,  and remedy of the Lender as provided for in this Note
or any of the other Financing Documents,  or now or hereafter existing under any
applicable  law or otherwise  shall be cumulative and concurrent and shall be in
addition to every other right, power, or remedy provided for in this Note or any
of the  other  Financing  Documents  or  now or  hereafter  existing  under  any
applicable  law,  and the exercise or beginning of the exercise by the Lender of
any one or more of such  rights,  powers,  or remedies  shall not  preclude  the
simultaneous  or later  exercise by the Lender of any or all such other  rights,
powers, or remedies. No failure or delay by the Lender to insist upon the strict
performance of any term,  condition,  covenant, or agreement of this Note or any
of the other  Financing  Documents,  or to exercise any right,  power, or remedy
consequent  upon a breach thereof,  shall  constitute a waiver of any such term,
condition,  covenant, or agreement or of any such breach, or preclude the Lender
from  exercising any such right,  power,  or remedy at a later time or times. By
accepting  payment  after the due date of any amount  payable under the terms of
this Note,  the Lender  shall not be deemed to waive the right either to require
prompt  payment when due of all other  amounts  payable  under the terms of this
Note or to declare an Event of Default  for the  failure to effect  such  prompt
payment of any such  other  amount.  No course of  dealing  or conduct  shall be
effective to amend,  modify,  waive,  release,  or change any provisions of this
Note.

                                       4
<PAGE>

      Until such time as the Lender is not committed to extend further credit to
the  Borrowers  and all  Obligations  of the  Borrowers  to the Lender have been
indefeasibly  paid in full in cash,  and subject to and not in limitation of the
provisions set forth in the next following  paragraph  below,  no Borrower shall
have any right of subrogation (whether contractual, arising under the bankruptcy
code or  otherwise),  reimbursement  or  contribution  from any  Borrower or any
guarantor,  nor any right of recourse to its  security  for any of the debts and
obligations  of any  Borrower  which are the  subject  of this  Note.  Except as
otherwise  expressly permitted by the Financing  Agreement,  any and all present
and future  debts and  obligations  of any  Borrower to any other  Borrower  are
hereby  subordinated  to the full  payment  and  performance  of all present and
future debts and  obligations  to the Lender  under this Note and the  Financing
Agreement  and  the  Financing  Documents,  provided,  however,  notwithstanding
anything set forth in this Note to the  contrary,  prior to the  occurrence of a
payment Default, the Borrowers shall be permitted to make payments on account of
any of such  present  and  future  debts  and  obligations  from time to time in
accordance with the terms thereof.

      Each Borrower  further agrees that, if any payment made by any Borrower or
any other person is applied to this Note and is at any time annulled, set aside,
rescinded,  invalidated,  declared to be fraudulent or preferential or otherwise
required to be refunded or repaid,  or the  proceeds of any  property  hereafter
securing this Note is required to be returned by the Lender to any Borrower, its
estate,  trustee,  receiver or any other party,  including,  without limitation,
such  Borrower,  under any bankruptcy  law, state or federal law,  common law or
equitable  cause,  then,  to the  extent  of such  payment  or  repayment,  such
Borrower's  liability  hereunder  (and  any  lien,  security  interest  or other
collateral  securing  such  liability)  shall be and  remain  in full  force and
effect,  as fully as if such payment had never been made,  or, if prior  thereto
any such lien,  security  interest or other collateral  hereafter  securing such
Borrower's  liability hereunder shall have been released or terminated by virtue
of such cancellation or surrender,  this Note (and such lien,  security interest
or other  collateral)  shall be  reinstated  in full force and effect,  and such
prior cancellation or surrender shall not diminish,  release,  discharge, impair
or otherwise affect the obligations of such Borrower in respect of the amount of
such payment (or any lien,  security interest or other collateral  securing such
obligation).

      The JOINT AND SEVERAL  obligations  of each Borrower under this Note shall
be absolute,  irrevocable and  unconditional  and shall remain in full force and
effect  until the  outstanding  principal  of and  interest on this Note and all
other Obligations or amounts due hereunder and under the Financing Agreement and
the Financing  Documents  shall have been  indefeasibly  paid in full in cash in
accordance with the terms thereof and this Note shall have been canceled.

      The Borrowers each shall be jointly and severally liable on the payment of
the Obligations as and when due and payable in accordance with the provisions of
this Note, the Financing Agreement and the other Financing  Documents.  The term
"Borrowers"  when  used  in  this  Note  shall  include  all of  the  Borrowers,
individually  and jointly,  and the Lender may (without  notice to or consent of
any  or all of  the  Borrowers  and  with  or  without  consideration)  release,
compromise,  settle with,  proceed  against any or all of the Borrowers  without
affecting,  impairing,  lessening  or  releasing  the  obligations  of the other
Borrower hereunder.

                                       5
<PAGE>

      14. Partial Invalidity.

      In the event any provision of this Note (or any part of any  provision) is
held  by  a  court  of  competent  jurisdiction  to  be  invalid,   illegal,  or
unenforceable in any respect, such invalidity,  illegality,  or unenforceability
shall  not  affect  any  other  provision  (or  remaining  part of the  affected
provision)  of this Note;  but this Note shall be construed as if such  invalid,
illegal, or unenforceable  provision (or part thereof) had not been contained in
this Note, but only to the extent it is invalid, illegal, or unenforceable.

      15. Captions.

      The captions  herein set forth are for  convenience  only and shall not be
deemed to define, limit, or describe the scope or intent of this Note.

      16. Applicable Law.

      Each Borrower  acknowledges and agrees that this Note shall be governed by
the laws of the State of Maryland,  even though for the  convenience  and at the
request of the Borrowers, this Note may be executed elsewhere.

      17. Consent to Jurisdiction.

      Each  Borrower  irrevocably  submits to the  jurisdiction  of any state or
federal  court  sitting  in the  State of  Maryland  over any suit,  action,  or
proceeding arising out of or relating to this Note or any of the other Financing
Documents.  Each Borrower irrevocably waives, to the fullest extent permitted by
law, any objection  that any Borrower may now or hereafter have to the laying of
venue of any such suit,  action, or proceeding brought in any such court and any
claim that any such suit,  action,  or proceeding  brought in any such court has
been brought in an inconvenient  forum. Final judgment in any such suit, action,
or proceeding brought in any such court shall be conclusive and binding upon the
Borrowers  and may be enforced in any court in which any  Borrower is subject to
jurisdiction  by a suit upon such judgment,  provided that service of process is
effected upon the  Borrowers as provided in this Note or as otherwise  permitted
by applicable law.

      18. Service of Process.

      Each Borrower  hereby  irrevocably  designates and appoints CT Corporation
Systems,  Corporation  Trust Center,  1209 Orange Street,  Wilmington,  Delaware
19801, as each Borrower's  authorized agent to receive on each Borrower's behalf
service  of any and all  process  that may be  served in any  suit,  action,  or
proceeding instituted in connection with this Note in any state or federal court
sitting in the State of  Maryland.  If such  agent  shall  cease so to act,  the
Borrowers  shall  irrevocably  designate and appoint  without delay another such
agent in the State of  Maryland  satisfactory  to the Lender and shall  promptly
deliver to the Lender  evidence in writing of such  agent's  acceptance  of such
appointment and its agreement that such appointment shall be irrevocable.

                                       6
<PAGE>

      Each Borrower hereby consents to process being served in any suit, action,
or proceeding  instituted  in connection  with this Note by (a) the mailing of a
copy thereof by certified mail, postage prepaid,  return receipt  requested,  to
each  Borrower  and (b)  serving  a copy  thereof  upon  the  agent  hereinabove
designated and appointed by each Borrower as each  Borrower's  agent for service
of process.  Each Borrower  irrevocably agrees that such service shall be deemed
in every  respect  effective  service of process upon the  Borrowers in any such
suit,  action or proceeding,  and shall, to the fullest extent permitted by law,
be taken and held to be valid personal  service upon the  Borrowers.  Nothing in
this Section shall affect the right of the Lender to serve process in any manner
otherwise  permitted by law or limit the right of the Lender  otherwise to bring
proceedings  against  the  Borrowers  in  the  courts  of  any  jurisdiction  or
jurisdictions.

      19. WAIVER OF TRIAL BY JURY.

      EACH  BORROWER AND THE LENDER  HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR
PROCEEDING  TO WHICH ANY BORROWER AND THE LENDER MAY BE PARTIES,  ARISING OUT OF
OR IN ANY WAY PERTAINING TO (A) THIS NOTE OR (B) THE FINANCING DOCUMENTS.  IT IS
AGREED AND UNDERSTOOD THAT THIS WAIVER  CONSTITUTES A WAIVER OF TRIAL BY JURY OF
ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS,  INCLUDING CLAIMS
AGAINST PARTIES WHO ARE NOT PARTIES TO THIS NOTE.

      THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY EACH BORROWER,
AND EACH BORROWER HEREBY REPRESENTS THAT NO  REPRESENTATIONS  OF FACT OR OPINION
HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN
ANY WAY MODIFY OR NULLIFY ITS EFFECT.  EACH BORROWER FURTHER  REPRESENTS THAT IT
HAS BEEN  REPRESENTED  IN THE  SIGNING  OF THIS  NOTE AND IN THE  MAKING OF THIS
WAIVER BY  INDEPENDENT  LEGAL  COUNSEL,  SELECTED OF ITS OWN FREE WILL, AND THAT
EACH HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

                    [SIGNATURES APPEAR ON THE FOLLOWING PAGE]

                                       7
<PAGE>

      IN WITNESS  WHEREOF,  the  Borrowers  have caused this Note to be executed
under seal by their duly authorized officers as of the date first written above.

WITNESS/ATTEST:                         ARGAN, INC.

/s/Arthur Trudel                        By: /s/ Rainer Bosselmann (Seal)
------------------------                   ----------------------
                                           Name: Rainer Bosselmann
                                           Title: Chairman and CEO

WITNESS/ATTEST:                         SOUTHERN MARYLAND CABLE, INC.

 /s/ Rainer Bosselmann                  By: /s/ Arthur Trudel     (Seal)
------------------------                   ----------------------
                                           Name: Arthur Trudel
                                           Title: CFO

WITNESS/ATTEST:                         VITARICH LABORATORIES, INC.

/s/ Arthur Trudel                       By: /s/ Rainer Bosselmann (Seal)
------------------------                   ----------------------
                                           Name: Rainer Bosselmann
                                           Title: Chairman and CEO

                                       8

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