Document:

THIS  NOTE  HAS BEEN  ISSUED  PURSUANT  TO AN  EXEMPTION  FROM THE  REGISTRATION
REQUIREMENTS  OF  FEDERAL  AND  STATE  SECURITIES  LAWS  AND  MAY NOT BE SOLD OR
TRANSFERRED  WITHOUT  COMPLIANCE WITH SUCH  REQUIREMENTS OR A WRITTEN OPINION OF
COUNSEL  ACCEPTABLE  TO THE  LENDER  THAT SUCH  TRANSFER  WILL NOT RESULT IN ANY
VIOLATION OF SUCH LAWS OR AFFECT THE LEGALITY OF ITS ISSUANCE.

                      AMENDED AND RESTATED PROMISSORY NOTE

US $15,100,000                                                      May 31, 2000

      FOR VALUE RECEIVED, the undersigned, SeraNova, Inc. (the "Obligor"), a New
Jersey corporation,  having its principal office at 499 Thornall Street, Edison,
New Jersey 08837, hereby promises to pay to the order of Intelligroup, Inc. (the
"Holder"), a New Jersey corporation, at the office of the Holder at 499 Thornall
Street,  Edison,  New Jersey  08837 or at such other  location as the Holder may
designate from time to time, the principal amount of fifteen million one hundred
thousand dollars ($15,100,000). The Obligor also promises to pay to the order of
the Holder simple  interest on the  principal  amount hereof at a rate per annum
equal to one half of one percent  (1/2%) above the Prime Rate as reported in the
Wall Street Journal on the date of this Note, which interest shall be payable at
such time as set forth hereunder. Interest shall be calculated on the basis of a
year of 365 days and for the number of days  actually  elapsed.  Any  amounts of
interest and principal not paid when due shall bear interest at the maximum rate
of interest  allowed by  applicable  law. The payments of principal and interest
hereunder  shall be made in coin or  currency  of the  United  States of America
which at the time of payment  shall be legal  tender  therein for the payment of
public and private debts.

      This  Note  shall  be  subject  to  the  following  additional  terms  and
conditions:

        1.  Payments.  Unless prepaid in full pursuant to Section 2 or Section 7
            --------
            hereof,  all unpaid  principal  shall be due and  payable in full on
            July 31, 2001 (the "Maturity  Date").  In the event that any payment
            to be made hereunder shall be or become due on a Saturday, Sunday or
            any other day which is a legal  bank  holiday  under the laws of the
            State of New Jersey, such payment shall be or become due on the next
            succeeding business day.

        2.  Optional Prepayment. The Obligor shall have the right at any time to
            -------------------
            prepay the principal hereof in whole or in part,  without premium or
            penalty,  prior to the Maturity Date,  provided that interest on the
            principal  hereof  to be so  prepaid,  accrued  to the  date of such
            prepayment,  shall be paid concurrently  therewith.  Amounts prepaid
            under the terms of this Note shall be applied in the  discretion  of
            the Holder.

<PAGE>

        3.  Mandatory Prepayment; Application of Proceeds From Financing.
            ------------------------------------------------------------
            Notwithstanding  any provision  herein to the contrary,  the Obligor
            shall make a  mandatory  prepayment  of  principal  in the amount of
            three million dollars  ($3,000,000) on or before September 30, 2000.
            Further,  in the  event  that the  Obligor  consummates  any debt or
            equity financing  (excluding its proposed credit facility with Fleet
            Credit  Corporation),  the Obligor  shall  first apply the  proceeds
            therefrom  to make a mandatory  prepayment  of the balance due under
            this Note in accordance  with the schedule set forth below until the
            balance of  principal  and accrued  interest  due under this Note is
            paid in full. The following schedule of mandatory  prepayments shall
            be based on the cumulative gross proceeds  resulting from any one or
            more debt or equity financings by the Obligor:

                a)  up to $2,000,000, no mandatory prepayment shall be made from
                    Obligor to Holder;

                b)  from  $2,000,000.01  to  $10,000,000,  Obligor  shall make a
                    mandatory  prepayment  equal to 50% of the net  proceeds  in
                    excess of $2,000,000;

                c)  from  $10,000,000.01  to  $15,000,000,  Obligor shall make a
                    mandatory  prepayment  equal to 75% of the net  proceeds  in
                    excess of $10,000,000; and

                d)  in excess of  $15,000,000,  Obligor  shall make a  mandatory
                    prepayment   of  all  of  the  net  proceeds  in  excess  of
                    $15,000,000.

            Notwithstanding the above, in the event that the Obligor consummates
            a single  debt or  equity  financing  of at least  $20,000,000,  the
            Obligor shall make a mandatory  prepayment of the entire balance due
            under this Note.  Amounts prepaid under the terms of this Note shall
            be applied in the discretion of the Holder.  Nothing herein shall be
            construed  to waive the  Obligor's  obligation  to repay all amounts
            outstanding hereunder on the Maturity Date.

        4.  No Waiver.   No failure or  delay by the  Holder in  exercising  any
            ---------
            right, power or privilege under this Note shall  operate as a waiver
            thereof nor shall any  single or partial  exercise thereof  preclude
            any other or further exercise thereof or the  exercise  of any other
            right, power or privilege.  The rights and remedies herein  provided
            shall be cumulative and not  exclusive  of any  rights  or  remedies
            provided by law.  No course of dealing  between  the Obligor and the
            Holder shall operate as a waiver of any rights by the Holder.

        5.  Waiver of  Presentment  and Notice of Dishonor.  The Obligor and all
            ----------------------------------------------
            endorsers,  guarantors  and other  parties  that may be liable under
            this Note hereby waive presentment,  notice of dishonor, protest and
            all other  demands  and  notices in  connection  with the  delivery,
            acceptance, performance or enforcement of this Note.

                                      -2-
<PAGE>

        6.  Place  of  Payment.  All payments  of principal of this Note and the
            ------------------
            interest due thereon shall be made at such  place as the  Holder may
            from time to time designate in writing to the Obligor.

        7.  Events of Default.  The entire unpaid  principal amount of this Note
            -----------------
            and the  interest  due  thereon  shall, at the  option of the Holder
            exercised by written notice to the Obligor,  forthwith become and be
            due  and  payable,  without presentment,  demand,  protest or  other
            notice of any kind, all of which are hereby expressly waived, if any
            one or  more of the  following   events  (herein  called  "Events of
            Default")  shall  have  occurred  (for  any  reason  whatsoever  and
            whether such  happening  shall be  voluntary or  involuntary or come
            about or  be  effected  by  operation  of law  or  pursuant to or in
            compliance with any judgment,  decree or  order of  any court or any
            order,  rule or regulation of  any  administrative  or  governmental
            body) and be continuing at the time of such notice,  that is to say:

              a)  if default  shall be made in the due and  punctual  payment of
                  the  principal  of this Note and the interest due thereon when
                  and as the same  shall  become  due and  payable,  whether  at
                  maturity,  or by acceleration  or otherwise,  and such default
                  shall have continued for a period of five days;

              b)  if default  shall be made in the due and  punctual  payment of
                  any amount due from the Obligor to the Holder  pursuant to any
                  of the  following  inter-company  agreements:  (i) Tax Sharing
                  Agreement,  (ii) Space Sharing  Agreement,  and (iii) Services
                  Agreement,  each of which is dated as of January 1, 2000,  and
                  such default shall have continued for a period of ten days;

              c)  if the Obligor shall:

                  (i)   admit  in  writing  its  inability  to  pay  its   debts
                        generally as they become due;

                  (ii)  file a  petition in  bankruptcy  or a  petition to  take
                        advantage of any insolvency act;

                  (iii) make an assignment for the benefit of creditors;

                  (iv)  consent to  the appointment of a receiver of  the  whole
                        or any substantial part of his property;

                  (v)   on  a  petition  in  bankruptcy  filed  against  it,  be
                        adjudicated a bankrupt; or

                  (vi)  file a  petition  or answer  seeking  reorganization  or
                        arrangement  under the  Federal  bankruptcy  laws or any
                        other  applicable law or statute of the United States of
                        America or any State, district or territory thereof;

                                       -3-
<PAGE>

              d)  if a court of  competent  jurisdiction  shall  enter an order,
                  judgment,  or decree  appointing,  without  the consent of the
                  Obligor,  a receiver of the whole or any  substantial  part of
                  Obligor's property,  and such order,  judgment or decree shall
                  not be vacated or set aside or stayed  within 90 days from the
                  date of entry thereof; or

              e)  if,  under the  provisions  of any other law for the relief or
                  aid of  debtors,  any court of  competent  jurisdiction  shall
                  assume custody or control of the whole or any substantial part
                  of Obligor's property and such custody or control shall not be
                  terminated   or  stayed  within  90  days  from  the  date  of
                  assumption of such custody or control.

        8.  Remedies. In case any one or more of the Events of Default specified
            --------
            in  Section 7 hereof  shall have  occurred and  be  continuing,  the
            Holder may  proceed to  protect  and  enforce  its rights  either by
            suit in equity  and/or by  action at law,  whether for the  specific
            performance of any  covenant or agreement  contained in this Note or
            in aid of the  exercise of any power  granted in this  Note,  or the
            Holder  may  proceed  to  enforce  the  payment of all sums due upon
            this Note or to enforce  any other legal or  equitable  right of the
            Holder.

        9.  Expenses.  Obligor  shall pay  Holder any  reasonable  out-of-pocket
            --------
            expenses  (including  reasonable  legal  fees)  arising out of or in
            connection  with any action or proceeding  (including  any action or
            proceeding  arising in or related to any  insolvency,  bankruptcy or
            reorganization  involving  or affecting  Obligor)  taken to protect,
            enforce, determine or assert any right or remedy under this Note.

        10. Severability.  In the event  that one or more of the  provisions  of
            ------------
            this  Note  shall  for  any  reason  be  held  invalid,  illegal  or
            unenforceable  in  any  respect,  such  invalidity,   illegality  or
            unenforceability  shall not affect any other provision of this Note,
            but this Note  shall be  construed  as if such  invalid,  illegal or
            unenforceable provision had never been contained herein.

        11. Governing Law.  This  Note and  the  rights and  obligations of  the
            -------------
            Obligor  and  the  Holder  shall  be  governed by and  construed  in
            accordance with the laws of the State of New Jersey.

                                    ********

                                      -4-
<PAGE>

      IN WITNESS  WHEREOF,  the  undersigned has caused this Note to be executed
and delivered on the date first written above.

                                       SERANOVA, INC.

                                       By:  /s/ Rajkumar Koneru
                                          ------------------------------------
                                          Name:  Rajkumar Koneru
                                          Title: Chairman, President and
                                                 Chief Executive Officer

AGREED TO BY:

/s/ Nicholas Visco
------------------------------
Holder:  Intelligroup, Inc.
         Nicholas Visco
         VP Finance & CFOAMENDED AND RESTATED

                              REVOLVING CREDIT LOAN

                                       AND

                               SECURITY AGREEMENT

                         PNC BANK, NATIONAL ASSOCIATION
                            (AS LENDER AND AS AGENT)

                                      WITH

                               INTELLIGROUP, INC.

                                       AND

                                  EMPOWER, INC.

                                   (BORROWERS)

                                  MAY 31, 2000

<PAGE>

                              AMENDED AND RESTATED
                              REVOLVING CREDIT LOAN
                                       AND
                               SECURITY AGREEMENT
                               ------------------

     Amended and Restated Revolving Credit Loan and Security Agreement dated May
31, 2000 among INTELLIGROUP, INC., a corporation organized under the laws of the
State of New Jersey and EMPOWER, INC., a corporation organized under the laws of
the State of Michigan  (each a "Borrower"  and  collectively  "Borrowers"),  the
financial  institutions  which are now or which hereafter  become a party hereto
(collectively, the "Lenders" and individually a "Lender") and PNC BANK, NATIONAL
ASSOCIATION ("PNC"), as agent for Lenders (PNC, in such capacity, the "Agent").

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

I.   DEFINITIONS.
     -----------

     1.1.   Accounting Terms.   As used in  this  Agreement,  the  Note,  or any
            ----------------
certificate,  report  or  other  document  made or  delivered  pursuant  to this
Agreement,  accounting  terms not  defined in Section 1.2 or  elsewhere  in this
Agreement and  accounting  terms partly defined in Section 1.2 to the extent not
defined,  shall have the respective meanings given to them under GAAP; provided,
                                                                       --------
however, whenever such accounting terms are used for the purposes of determining
-------
compliance  with financial  covenants in this Agreement,  such accounting  terms
shall be  defined in  accordance  with GAAP as  applied  in  preparation  of the
audited financial statements of Borrowers for the fiscal year ended December 31,
1999.

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

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

            "Advances" shall mean and include the Revolving Advances and Letters
of Credit.

            "Advance Rates" shall have the meaning  set forth in Section  2.1(a)
hereof.

            "Affiliate" of any Person shall mean (a) any Person which,  directly
or  indirectly,  is in control of, is controlled  by, or is under common control
with such  Person,  or (b) any Person who is a director  or officer  (i) of such
Person,  (ii) of any Subsidiary of such Person or (iii) of any Person  described
in clause (a) above. For purposes of this definition,  control of a Person shall
mean the power,  direct or  indirect,  (x) to vote 5% or more of the  securities
having  ordinary  voting power for the election of directors of such Person,  or
(y) to direct or cause the direction of

<PAGE>

the management and policies of such Person whether by contract or otherwise.

            "Agent" shall have the  meaning  set forth in the  preamble  to this
Agreement and shall include its successors and assigns.

            "Applicable Eurodollar  Margin"  shall mean as of the Closing  Date,
250 basis points and thereafter, as at the end of each fiscal quarter commencing
with the quarter ending June 30, 2000, the Applicable Eurodollar Margin shall be
subject to adjustment based upon the formula set forth as follows:

             Average Quarterly Funded Debt             Applicable
              Divided by Rolling 12 month              Eurodollar
                   EBITDA (ASP+ only)                  Margin
                 ---------------------                 ----------

            Greater than 2.00 to 1.00                  250 basis points
            Greater than 1.50 but less than or         225 basis points
            equal to 2.00 to 1.00
            Greater than 1.00 but less than or         200 basis points
            equal to 1.50 to 1.00
            Less than 1.00 to 1.00                     175 basis points

which adjustment  shall be calculated by Agent based upon the financial  reports
submitted by Borrowers,  which reports shall be  determinative,  absent manifest
error.

            "ASP+"  shall mean all the assets and  operation  of  Borrowers  and
their  Subsidiaries and Affiliates,  excepting only all assets and operations of
SeraNova and its Subsidiaries.

            "Authority" shall have the meaning set forth in Section 4.19(d).

            "Base Rate" shall mean the base  commercial  lending  rate of PNC as
publicly  announced to be in effect from time to time,  such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
This  rate of  interest  is  determined  from  time to time by PNC as a means of
pricing some loans to its  customers and is neither tied to any external rate of
interest  or index nor does it  necessarily  reflect the lowest rate of interest
actually charged by PNC to any particular class or category of customers of PNC.

            "Blocked Accounts" shall  have the  meaning  set  forth  in  Section
4.15(h).

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

                                       2
<PAGE>

            "Borrowing Base Certificate"  shall mean a certificate duly executed
by an officer of Borrowers appropriately completed and in substantially the form
of Exhibit A hereto.

            "Borrowers  on a  consolidated  basis"  shall mean the  consolidated
financial results of Borrowers and all Subsidiary Parties, limited to ASP+ only,
determined in accordance with GAAP applied on a consistent basis.

            "Borrowers'  Account"  shall have the  meaning  set forth in Section
2.7.

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

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

            "Change of Management" shall mean the failure of at least one of the
individuals  identified  as  follows  to  actively  hold the  position  of Chief
Executive  Officer of Intelligroup,  Inc:  Nagarjun  Valluripalli  (Chairman and
Co-Chief  Executive  Officer as of the Closing Date) and Ashok Pandey  (Co-Chief
Executive Officer as of the Closing Date).

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

            "Closing  Date" shall mean May 31, 2000 or such other date as may be
agreed to by the parties hereto.

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

            "Collateral" shall mean and include:

                  (a)   all Receivables;

                  (b)   all Equipment;

                                       3
<PAGE>

                  (c)   all General Intangibles;

                  (d)   all Inventory;

                  (e)   all Investment Property;

                  (f)   all Subsidiary Stock;

                  (g) all of each Borrower's right, title and interest in and to
(i) its respective goods and other property  including,  but not limited to, all
merchandise  returned or rejected by  Customers,  relating to or securing any of
the Receivables; (ii) all of each Borrower's rights as a consignor, a consignee,
an unpaid vendor,  mechanic,  artisan,  or other lienor,  including  stoppage in
transit,  setoff,  detinue,  replevin,  reclamation  and  repurchase;  (iii) all
additional  amounts  due to any  Borrower  from  any  Customer  relating  to the
Receivables;  (iv) other property,  including  warranty claims,  relating to any
goods  securing this  Agreement;  (v) all of each  Borrower's  contract  rights,
rights of payment  which have been earned under a contract  right,  instruments,
documents,  chattel paper, warehouse receipts,  deposit accounts and money; (vi)
if and when  obtained by any Borrower,  all real and personal  property of third
parties in which such  Borrower has been granted a lien or security  interest as
security  for the payment or  enforcement  of  Receivables;  and (vii) any other
goods,  personal  property or real  property now owned or hereafter  acquired in
which any  Borrower  has  expressly  granted a security  interest  or may in the
future  grant a security  interest to Agent  hereunder,  or in any  amendment or
supplement hereto or thereto, or under any other agreement between Agent and any
Borrower;

                  (h) all of each Borrower's ledger sheets, ledger cards, files,
correspondence,  records, books of account, business papers, computers, computer
software  (owned  by any  Borrower  or in  which it has an  interest),  computer
programs, tapes, disks and documents relating to (a), (b), (c), (d), (e), (f) or
(g) of this Paragraph; and

                  (i) all proceeds and products of (a), (b), (c), (d), (e), (f),
(g) and (h) in whatever  form,  including,  but not limited  to:  cash,  deposit
accounts (whether or not comprised solely of proceeds), certificates of deposit,
insurance proceeds  (including hazard,  flood and credit insurance),  negotiable
instruments  and other  instruments  for the  payment of money,  chattel  paper,
security agreements,  documents, eminent domain proceeds,  condemnation proceeds
and tort claim proceeds.

            "Commitment  Percentage" of any Lender shall mean the percentage set
forth  below such  Lender's  name on the  signature  page  hereof as same may be
adjusted upon any assignment by a Lender pursuant to Section 16.3(b) hereof.

            "Commitment  Transfer  Supplement" shall mean a document in the form
of Exhibit 16.3 hereto,  properly  completed and otherwise in form and substance
   ------------
satisfactory  to Agent by which the  Purchasing  Lender  purchases and assumes a
portion of the obligation of Lenders to make Advances under this Agreement.

                                       4
<PAGE>

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

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

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

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

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

            "Defaulting Lender" shall have the meaning set forth in Section 2.14
hereof.

            "Depository  Accounts"  shall have the  meaning set forth in Section
4.15(h) hereof.

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

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

            "Domestic  Rate Loan"  shall mean any  Advance  that bears  interest
based upon the Base Rate.

            "Early Termination Date" shall have the meaning set forth in Section
13.1 hereof.

            "Earnings  Before  Interest and Taxes" shall mean for any period the
sum of (i) net income (or loss) of  Borrowers on a  consolidated  basis for such
period (excluding extraordinary gains and losses, plus (ii) all interest expense
                                                  ----
of Borrowers  on a  consolidated  basis for such period,  plus (iii) all charges
                                                          ----
against income of Borrowers on a consolidated basis for such period for federal,
state and local taxes accrued.

            "EBITDA"  shall mean for any period the sum of (i)  Earnings  Before
Interest  and Taxes for such period  plus (ii)  depreciation  expenses  for such
                                     ----
period, plus (iii) amortization expenses for such period.
        ----

                                       5
<PAGE>

            "Eligible  Receivables"  shall mean and include with respect to each
Borrower,  each  Receivable of such Borrower  arising in the ordinary  course of
such  Borrower's  business and which Agent, in its reasonable  credit  judgment,
shall deem to be an Eligible  Receivable,  based on such considerations as Agent
may from  time to time  deem  appropriate.  A  Receivable  shall  not be  deemed
eligible unless such  Receivable is subject to Agent's first priority  perfected
security interest and no other Lien (other than Permitted Encumbrances),  and is
evidenced by an invoice or other documentary evidence  satisfactory to Agent. In
addition, no Receivable shall be an Eligible Receivable if:

            (a)  it arises out of a sale  made by any  Borrower to an  Affiliate
of any Borrower or to a Person controlled by an Affiliate of any Borrower;

            (b)  it  is  due or  unpaid  more than  sixty  (60) days  after  the
original due date or more than  one-hundred  fifty (150) days after the original
invoice date, whichever is less;

            (c)  fifty  percent  (50%)  or more  of the  Receivables  from  such
Customer are not deemed Eligible Receivables hereunder.  Such percentage may, in
Agent's sole discretion, be increased or decreased from time to time;

            (d)  any covenant,  representation  or  warranty  contained in  this
Agreement with respect to such Receivable has been breached;

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

            (f)  the sale is to a Customer outside the continental United States
of  America,  unless the sale is on letter of  credit,  guaranty  or  acceptance
terms, in each case acceptable to Agent in its sole discretion;

            (g)  the  sale to the  Customer is  on a  bill-and-hold,  guaranteed
sale, sale-and-return,  sale on approval, consignment or any other repurchase or
return basis or is evidenced by chattel paper;

            (h)  Agent believes, in its reasonable judgment,  that collection of
such Receivable is insecure or that such Receivable may not be paid by reason of
the Customer's financial inability to pay;

                                       6
<PAGE>

            (i)  the Customer is the  United States of America, any state or any
department,  agency or  instrumentality  of any of them,  unless the  applicable
Borrower  assigns its right to payment of such  Receivable to Agent  pursuant to
the Assignment of Claims Act of 1940, as amended (31 U.S.C.  Sub-Section 3727 et
                                                                              --
seq. and 41 U.S.C.  Sub-Section 15 et seq.) or has otherwise complied with other
---                                -- ---
applicable statutes or ordinances;

            (j)  the goods giving rise to such Receivable  have not been shipped
to the Customer or the  services  giving rise to such  Receivable  have not been
performed  by the  applicable  Borrower  or the  Receivable  otherwise  does not
represent a final sale;

            (k)  Intentionally Omitted;

            (l)  the Receivable  is subject to any offset,  deduction,  defense,
dispute,  or  counterclaim,  the  Customer  is also a creditor  or supplier of a
Borrower to the extent of any amount due from a Borrower to such Customer or the
Receivable is contingent in any respect or for any reason;

            (m)  the  applicable  Borrower  has  made  any  agreement  with  any
Customer for any deduction therefrom, except for discounts or allowances made in
the ordinary  course of business for prompt  payment,  all of which discounts or
allowances are reflected in the calculation of the face value of each respective
invoice related thereto;

            (n)  any return,  rejection or  repossession of the  merchandise has
occurred or the rendition of services has been disputed;

            (o)  such Receivable is not payable to a Borrower; or

            (p)  such  Receivable  is not  otherwise  satisfactory  to  Agent as
determined  in good  faith by  Agent  in the  exercise  of its  discretion  in a
reasonable manner.

            "Eligible  Unbilled  Receivables"  shall mean  Eligible  Receivables
which have not been invoiced but for which the work has been performed and which
shall be billed not more than  forty-five  (45) days after such Account is first
included on the Borrowing  Base  Certificate  or otherwise  reported to Agent as
Collateral.

            "Environmental  Complaint"  shall  have  the  meaning  set  forth in
Section 4.19(d) hereof.

            "Environmental  Laws"  shall  mean  all  federal,  state  and  local
environmental,  land use,  zoning,  health,  chemical use, safety and sanitation
laws,  statutes,  ordinances  and  codes  relating  to  the  protection  of  the
environment   and/or  governing  the  use,   storage,   treatment,   generation,
transportation,  processing,  handling,  production  or  disposal  of  Hazardous
Substances and the rules, regulations,  policies,  guidelines,  interpretations,
decisions,  orders  and  directives  of  federal,  state and local  governmental
agencies and authorities with respect thereto.

                                       7
<PAGE>

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

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

            "Eurodollar  Rate" shall mean for any  Eurodollar  Rate Loan for the
then  current  Interest  Period  relating  thereto the  interest  rate per annum
determined  by PNC by dividing  (the  resulting  quotient  rounded  upwards,  if
necessary,  to the  nearest  1/100th of 1% per  annum) (i) the rate of  interest
determined by PNC in accordance with its usual procedures  (which  determination
shall be  conclusive  absent  manifest  error) to be the  average  of the London
interbank  offered  rates  for  U.S.  Dollars  quoted  by the  British  Bankers'
Association  as set  forth  on Dow  Jones  Markets  Service  (formerly  known as
Telrate) (or appropriate  successor or, if British  Banker's  Association or its
successor ceases to provide such quotes, a comparable  replacement determined by
PNC)  display  page 3750 (or such other  display  page on the Dow Jones  Markets
Service system as may replace  display page 3750) two (2) Business Days prior to
the  first  day of  such  Interest  Period  for an  amount  comparable  to  such
Eurodollar  Rate Loan and having a borrowing  date and a maturity  comparable to
such  Interest  Period  by  (ii) a  number  equal  to  1.00  minus  the  Reserve
Percentage. The Eurodollar Rate may also be expressed by the following formula:

          Average of London interbank  offered rates quoted by BBA as shown
     on  Eurodollar  Rate =Dow Jones Markets  Service  display page 3750 or
                           ------------------------------------------------
     appropriate successor
     ---------------------
                           1.00 - Reserve Percentage]

            "Eurodollar  Rate Loan" shall mean an Advance at any time that bears
interest based on the Eurodollar Rate.

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

            "Formula Amount" shall have the meaning set forth in Section 2.1(a).

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

            "General Intangibles" shall mean and include as to each Borrower all
of such Borrower's general intangibles,  whether now owned or hereafter acquired
including, without limitation, all choses in action, causes of action, corporate
or other business records,  inventions,  designs,  patents, patent applications,
equipment formulations,  manufacturing  procedures,  quality control procedures,
trademarks,  service marks, trade secrets, goodwill,  copyrights, design rights,
registrations,  licenses,  franchises,  customer lists, tax refunds,  tax refund
claims,  computer programs,  all claims under guaranties,  security interests or
other security held by or granted to

                                       8
<PAGE>

such Borrower to secure  payment of any of the  Receivables  by a Customer,  all
rights of  indemnification  and all other intangible  property of every kind and
nature (other than Receivables).

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

            "Guarantor"  shall  mean any of  Borrowers'  Subsidiaries  organized
under the laws of one of the United States  identified as guarantors on Schedule
5.2(b) and any other Person who may hereafter  guarantee  payment or performance
of the whole or any part of the Obligations and "Guarantors"  means collectively
all such Persons.

            "Guarantor  Security  Agreement"  shall mean any Security  Agreement
executed  by any  Guarantor  in favor of Agent  securing  the  Guaranty  of such
Guarantor.

            "Guaranty"  shall mean any guaranty of the  obligations of Borrowers
executed  by a  Guarantor  in favor of Agent for its benefit and for the ratable
benefit of Lenders.

            "Hazardous  Discharge"  shall have the  meaning set forth in Section
4.19(d) hereof.

            "Hazardous Substance" shall mean, without limitation,  any flammable
explosives,  radon,  radioactive  materials,  asbestos,  urea  formaldehyde foam
insulation,   polychlorinated  biphenyls,   petroleum  and  petroleum  products,
methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or
related materials as defined in CERCLA, the Hazardous  Materials  Transportation
Act, as amended (49 U.S.C.  Sections 1801, et seq.), RCRA, Articles 15 and 27 of
                                           ------
the New Jersey  State  Environmental  Conservation  Law or any other  applicable
Environmental Law and in the regulations adopted pursuant thereto.

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

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

                                       9
<PAGE>

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

            "Interest  Period" shall mean the period provided for any Eurodollar
Rate Loan pursuant to Section 2.2(b).

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

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

            "Issuer"  shall  mean any  Person  who  issues a  Letter  of  Credit
pursuant to the terms hereof.

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

            "Letter of Credit  Fees" shall have the meaning set forth in Section
3.2.

            "Letters of Credit" shall have the meaning set forth in Section 2.9.

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

            "Material Adverse Effect" shall mean a material adverse effect on or
with respect to (a) the condition,  operations, assets, business or prospects of
the  applicable  Person  or  Persons,  (b)  any  Borrower's  ability  to pay the
Obligations  in  accordance  with  the  terms  thereof,  (c)  the  value  of the
Collateral,  or Agent's Liens on the Collateral or the priority of any such Lien
or (d) the  practical  realization  of the benefits of Agent's and each Lender's
rights and remedies under this Agreement and the Other Documents.

                                       10
<PAGE>

            "Maximum Revolving Advance Amount" shall mean Twenty Million Dollars
($20,000,000.00).

            "Monthly  Advances"  shall have the meaning set forth in Section 3.1
hereof.

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

            "Note" shall mean the Revolving Credit Note.

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

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

                                       11
<PAGE>

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

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

            "Payment  Office" shall mean  initially Two Tower Center  Boulevard,
East  Brunswick,  New Jersey 08816;  thereafter,  such other office of Agent, if
any,  which it may designate by notice to Borrowers and to each Lender to be the
Payment Office.

            "PBGC" shall mean the Pension Benefit Guaranty Corporation.

            "Permitted  Acquisition"  shall mean and include the  acquisition by
either Borrower of all or substantially  all of the assets or capital stock of a
Person at such time as the following conditions are satisfied:

                  (a)  No Default or Event of Default shall have occurred and be
continuing;

                  (b)  Undrawn   Availability,   after  giving   effect  to  the
acquisition in question,  shall equal or exceed the sum of Three Million Dollars
($3,000,000.00);

                  (c)  Any  new  Subsidiary  of  Borrower  resulting  from  such
acquisition,  if formed under the laws of a United  States  jurisdiction,  shall
become a Guarantor  and shall  execute and deliver a Guaranty and a  Guarantor's
Security Agreement in form and substance acceptable to Agent in its discretion;

                  (d)  Such Borrower shall pledge one hundred  percent (100%) of
the issued and Outstanding stock of such Subsidiary (or not less than sixty five
percent (65%) in the case of a Subsidiary  formed in a jurisdiction  outside the
United  States) to Agent  pursuant to a pledge  agreement in form and  substance
acceptable to Agent in its discretion;

                  (e)  After giving  effect to such  acquisition,  not more than
five million  dollars  ($5,000,000.00)  of Revolving  Advances in the  aggregate
shall be  outstanding  with  respect  to funds  used for the  purpose  of making
acquisitions; and

                  (f)  The Required Lenders shall have given their prior written
consent to such acquisition after an examination of a Borrowing Base Certificate
to confirm  Undrawn  Availability  which shall be delivered to Agent and Lenders
not less than five (5) Business Days prior to the acquisition.

            "Permitted  Encumbrances" shall mean (a) Liens in favor of Agent for
the  benefit of Agent and  Lenders;  (b) Liens for taxes,  assessments  or other
governmental charges not

                                       12
<PAGE>

delinquent or being  contested in good faith and by appropriate  proceedings and
with respect to which proper  reserves have been taken by  Borrowers;  provided,
                                                                       --------
that,  with  respect to any such  contest,  the Lien shall have no effect on the
----
priority  of the  Liens in favor of Agent or the  value of the  assets  in which
Agent has such a Lien and a stay of  enforcement  of any such  Lien  shall be in
effect; (c) Liens disclosed in the financial  statements  referred to in Section
5.5, the existence of which Agent has  consented to in writing;  (d) deposits or
pledges to secure  obligations under worker's  compensation,  social security or
similar laws, or under unemployment insurance; (e) deposits or pledges to secure
bids,  tenders,  contracts  (other  than  contracts  for the  payment of money),
leases, statutory obligations,  surety and appeal bonds and other obligations of
like nature  arising in the  ordinary  course of any  Borrower's  business;  (f)
judgment  Liens  that have  been  stayed or  bonded  and  mechanics',  workers',
materialmen's  or  other  like  Liens  arising  in the  ordinary  course  of any
Borrower's  business with respect to obligations  which are not due or which are
being contested in good faith by the applicable Borrower;  (g) Liens placed upon
fixed  assets  hereafter  acquired  to secure a portion  of the  purchase  price
thereof,  provided that (x) any such lien shall not encumber any other  property
of the Borrowers and (y) the aggregate  amount of  Indebtedness  secured by such
Liens  incurred as a result of such  purchases  during any fiscal year shall not
exceed the  amount  provided  for in Section  7.6;  and (h) Liens  disclosed  on
Schedule 1.2.
------------

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

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

            "Purchasing Lender" shall have the meaning set forth in Section 16.3
hereof.

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

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

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

                                       13
<PAGE>

            "Receivables  Advance  Rate"  shall  have the  meaning  set forth in
Section 2.1(a)(y)(i) hereof.

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

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

            "Required Lenders" shall mean Lenders holding at least fifty percent
(50%) of the Advances  and, if no Advances are  outstanding,  shall mean Lenders
holding fifty percent (50%) of the Commitment Percentages.

            "Reserve  Percentage" shall mean the maximum effective percentage in
effect on any day as prescribed by the Board of Governors of the Federal Reserve
System (or any successor) for determining the reserve  requirements  (including,
without limitation,  supplemental,  marginal and emergency reserve requirements)
with respect to eurocurrency funding.

            "Revolving  Advances" shall mean Advances made other than Letters of
Credit.

            "Revolving  Credit Note" shall mean the promissory  note referred to
in Section 2.1(a) hereof.

            "Revolving  Interest  Rate"  shall mean an  interest  rate per annum
equal to (a) the Base Rate with  respect to Domestic  Rate Loans and (b) the sum
of the  Eurodollar  Rate plus the Applicable  Eurodollar  Margin with respect to
Eurodollar Rate Loans.

            "Section  20  Subsidiary"  shall  mean  the  Subsidiary  of the bank
holding company  controlling PNC, which Subsidiary has been granted authority by
the  Federal  Reserve  Board  to  underwrite  and  deal  in  certain  Ineligible
Securities.

            "SeraNova" shall mean SeraNova,  Inc., a corporation of the State of
New Jersey and a majority-owned subsidiary of Intelligroup, Inc.

            "SeraNova  Spin-Off" shall mean the  distribution  by  Intelligroup,
Inc.  ("Intelligroup")  to the holders of record of Intelligroup common stock on
May 18, 2000, of all of the outstanding  shares of common stock of SeraNova held
by Intelligroup.

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

            "Subsidiary"  shall  mean a  corporation  or other  entity  of whose
shares of stock or other ownership interests having ordinary voting power (other
than stock or other ownership  interests having such power only by reason of the
happening of a contingency) to elect a majority

                                       14
<PAGE>

of the  directors  of such  corporation,  or other  Persons  performing  similar
functions for such entity, are owned, directly or indirectly, by such Person.

            "Subsidiary  Stock" shall mean with respect to all  Subsidiaries  of
Borrowers  (except  SeraNova  and  Empower,  Inc.)  (a)  all of the  issued  and
outstanding  shares  in the case of  domestic  Subsidiaries  and (b)  sixty-five
percent  (65%),  or such lesser  percentage  actually  owned,  of the issued and
outstanding shares in the case of foreign  Subsidiaries of stock owned by either
Borrower.

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

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

            "Total  Stockholders  Equity" shall mean, at a particular  date, (a)
the aggregate  amount of all assets of Borrowers on a consolidated  basis as may
be properly  classified as such in  accordance  with GAAP  consistently  applied
exclusive of Borrowers' investment in SeraNova, less (b) the aggregate amount of
all  liabilities  of the  Borrowers  on a  consolidated  basis.  Notwithstanding
anything contained herein to the contrary, the computation of Total Stockholders
Equity shall exclude any changes thereto  (positive or negative) other than from
the result of operations;  specifically  excluded from this  computation are any
non-operational  factors, events or circumstances,  such as, but not limited to,
the issuance of stock, options, warrants or similar instruments, the repurchases
or redemption of stock or unrealized currency transactions,  provided,  however,
sales of assets not in the ordinary course of business shall be included in said
computation.

            "Toxic Substance" shall mean and include any material present on the
Real Property which has been shown to have  significant  adverse effect on human
health or which is subject to regulation under the Toxic Substances  Control Act
(TSCA),  15 U.S.C.  ss.ss.  2601 et seq.,  applicable  state  law,  or any other
applicable  Federal or state laws now in force or hereafter  enacted relating to
toxic  substances.  "Toxic  Substance"  includes but is not limited to asbestos,
polychlorinated biphenyls (PCBs) and lead-based paints.

            "Transferee"  shall have the  meaning  set forth in Section  16.3(b)
hereof.

            "Unbilled Receivables Advance Rate" shall have the meaning set forth
in Section

                                       15
<PAGE>

2.1(a)(y)(ii) hereof.

            "Unconsolidated  Stockholders  Equity"  shall mean,  at a particular
date, (a) the aggregate  amount of all assets of Borrowers and their  respective
subsidiaries  which are  organized  under  the laws of one of the  states of the
United  States   (exclusive  of  Borrower's   investment  in  Sera  Nova)  on  a
consolidated basis as may be properly classified as such in accordance with GAAP
consistently  applied,  less (b) the aggregate  amount of all liabilities of the
Borrowers  and  such  subsidiaries  on  a  consolidated  basis.  Notwithstanding
anything  contained  hereto to the contrary,  the  definition of  Unconsolidated
Stockholders  Equity shall  exclude any changes  thereto  (positive or negative)
other  than from the  results of  operations;  specifically  excluded  from this
computation are any non-operational  factors, events or circumstances,  such as,
but not  limited  to,  the  issuance  of stock,  options,  warrants  or  similar
instruments,  the  repurchase  or  redemption  of stock or  unrealized  currency
transactions,  provided,  however, sales of assets not in the ordinary course of
business shall be included in said computation.

            "Undrawn  Availability"  at a  particular  date shall mean an amount
equal to (a) the lesser of (i) the Formula Amount or (ii) the Maximum  Revolving
Advance Amount, minus (b) the sum of (i) the outstanding amount of Advances plus
                -----                                                       ----
(ii)  all  amounts  due and  owing  to  Borrowers'  trade  creditors  which  are
outstanding  sixty (60) days  beyond  normal  trade  terms,  plus (iii) fees and
                                                             ----
expenses for which  Borrowers are liable  hereunder but which have not been paid
or charged to Borrowers' Account.

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

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

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

II.   ADVANCES, PAYMENTS.
      ------------------

      2.1. (a) Revolving Advances. Subject to the terms and conditions set forth
               ------------------
in this Agreement  including,  without limitation,  Section 2.1(b), each Lender,
severally  and not  jointly,  will  make  Revolving  Advances  to  Borrowers  in
aggregate  amounts  outstanding  at any time equal

                                       16
<PAGE>

to  such  Lender's  Commitment  Percentage  of the  lesser  of (x)  the  Maximum
Revolving  Advance Amount less the aggregate  amount of  outstanding  Letters of
Credit or (y) an amount equal to the sum of:

                        (i) up to  eighty-five  percent  (85%),  subject  to the
                  provisions  of Section  2.1(c)  hereof  ("Receivables  Advance
                  Rate"),  of  Eligible   Receivables  which  are  not  Eligible
                  Unbilled Receivables, plus
                                        ----

                        (ii)  up to the  lesser  of  (A)  sixty  percent  (60%),
                  subject to the provisions of Section 2.1(c) hereof  ("Unbilled
                  Receivables  Advance Rate), of Eligible  Unbilled  Receivables
                  (the  Receivables  Advance Rate and the  Unbilled  Receivables
                  Advance  Rate  shall  be  referred  to  collectively,  as  the
                  "Advance Rates") or (B) Three Million Dollars  ($3,000,000.00)
                  in the aggregate at any one time, minus
                                                    -----

                        (iii)  the  aggregate  amount of  outstanding Letters of
                  Credit, minus
                          -----

                        (iv) such reserves as Agent may  reasonably  deem proper
                  and necessary from time to time.

      The amount  derived  from the sum of (x) Sections  2.1(a)(y)(i),  (ii) and
(iii) minus (y) Section 2.1  (a)(y)(iv)  at any time and from time to time shall
be  referred  to as the  "Formula  Amount".  The  Revolving  Advances  shall  be
evidenced by one or more secured promissory notes (collectively,  the "Revolving
Credit Note") substantially in the form attached hereto as Exhibit 2.1(a).
                                                           --------------

            (b) Individual  Revolving Advances.  Each  Lender, severally and not
                ------------------------------
jointly,  will  make  Revolving  Advances  to  Borrowers  in  aggregate  amounts
outstanding at any time not greater than such Lender's Commitment  Percentage of
the lesser of the Maximum  Revolving Advance Amount less the aggregate amount of
outstanding  Letters  of Credit or (y) the  Formula  Amount  less the  aggregate
amount of outstanding Letters of Credit.

            (c) Discretionary  Rights.  The Advance  Rates may be  increased  or
                ---------------------
decreased  by Agent at any time  and from  time to time in the  exercise  of its
reasonable discretion. Each Borrower consents to any such increases or decreases
and  acknowledges  that  decreasing the Advance Rates or increasing the reserves
may limit or restrict Advances requested by Borrowers.

      2.2.  Procedure for Borrowing Advances.
            --------------------------------

            (a) Borrowers may notify Agent prior to 11:00 a.m. on a Business Day
of a Borrower's  request to incur, on that day, a Revolving  Advance  hereunder.
Should any amount required to be paid as interest hereunder, or as fees or other
charges under this Agreement or any other  agreement  with Agent or Lenders,  or
with respect to any other Obligation, become due, same shall be deemed a request
for a Revolving Advance as of the date such payment is due, in

                                       17
<PAGE>

the amount  required to pay in full such  interest,  fee,  charge or  Obligation
under this  Agreement  or any other  agreement  with Agent or Lenders,  and such
request shall be irrevocable.

            (b) Notwithstanding  the provisions of (a) above,  in the event  any
Borrower desires to obtain a Eurodollar Rate Loan, Borrowers shall give Agent at
least three (3) Business Days' prior written notice,  specifying (i) the date of
the  proposed  borrowing  (which  shall  be a  Business  Day),  (ii) the type of
borrowing  and the  amount on the date of such  Advance  to be  borrowed,  which
amount shall be in a minimum amount of One Million Dollars  ($1,000,000.00)  and
in integral multiples of One Hundred Thousand Dollars ($100,000.00)  thereafter,
and (iii) the duration of the first Interest Period  therefor.  Interest Periods
for Eurodollar Rate Loans shall be for one, two, three or six months;  provided,
                                                                       --------
if an Interest  Period  would end on a day that is not a Business  Day, it shall
end on the next  succeeding  Business  Day  unless  such  day  falls in the next
succeeding  calendar  month in which case the  Interest  Period shall end on the
next preceding  Business Day. No Eurodollar Rate Loan shall be made available to
Borrower during the continuance of a Default or an Event of Default.

            (c) Each Interest Period of a Eurodollar Rate Loan shall commence on
the date  such  Eurodollar  Rate  Loan is made  and  shall  end on such  date as
Borrowers may elect as set forth in subsection  (b)(iii) above provided that the
exact length of each Interest  Period shall be determined in accordance with the
practice of the interbank  market for offshore  Dollar  deposits and no Interest
Period shall end after the last day of the Term.

     Borrowers  shall  elect  the  initial  Interest  Period   applicable  to  a
Eurodollar  Rate Loan by its  notice of  borrowing  given to Agent  pursuant  to
Section 2.2(b) or by its notice of conversion given to Agent pursuant to Section
2.2(d),  as the  case  may  be.  Borrowers  shall  elect  the  duration  of each
succeeding Interest Period by giving irrevocable written notice to Agent of such
duration not less than three (3) Business Days prior to the last day of the then
current  Interest Period  applicable to such Eurodollar Rate Loan. If Agent does
not receive timely notice of the Interest Period elected by Borrowers, Borrowers
shall be deemed to have  elected to convert to a Domestic  Rate Loan  subject to
Section 2.2(d) hereinbelow.

            (d) Provided  that no Event of Default  shall have  occurred and  be
continuing,  any  Borrower  may, on the last  Business  Day of the then  current
Interest Period  applicable to any  outstanding  Eurodollar Rate Loan, or on any
Business Day with respect to Domestic  Rate Loans,  convert any such loan into a
loan of another type in the same aggregate  principal  amount  provided that any
conversion of a Eurodollar Rate Loan shall be made only on the last Business Day
of the then current Interest Period  applicable to such Eurodollar Rate Loan. If
a Borrower  desires to convert a loan,  Borrowers shall give Agent not less than
three (3) Business  Days' prior  written  notice to convert from a Domestic Rate
Loan to a Eurodollar Rate Loan or one (1) Business Day's prior written notice to
convert from a Eurodollar Rate Loan to a Domestic Rate Loan, specifying the date
of such  conversion,  the loans to be converted and if the  conversion is from a
Domestic Rate Loan to any other type of loan, the duration of the first Interest
Period therefor. After giving effect to each such conversion, there shall not be
outstanding more than four (4) Eurodollar Rate Loans, in the aggregate.

                                       18
<PAGE>

            (e) At its option and upon three (3)  Business  Days' prior  written
notice,  any Borrower may prepay the Eurodollar  Rate Loans in whole at any time
or in part from time to time,  without  premium  or  penalty,  but with  accrued
interest on the  principal  being  prepaid to the date of such  repayment.  Such
Borrower  shall specify the date of prepayment of Advances  which are Eurodollar
Rate Loans and the amount of such  prepayment.  In the event that any prepayment
of a Eurodollar Rate Loan is required or permitted on a date other than the last
Business Day of the then current  Interest  Period with  respect  thereto,  such
Borrower shall indemnify  Agent and Lenders  therefor in accordance with Section
2.2(f) hereof.

            (f) Each Borrower shall  indemnify  Agent and Lenders and hold Agent
and Lenders  harmless from and against any and all losses or expenses that Agent
and Lenders may sustain or incur as a consequence of any prepayment,  conversion
of or any default by any Borrower in the payment of the principal of or interest
on any  Eurodollar  Rate Loan or failure by any Borrower to complete a borrowing
of, a prepayment of or  conversion of or to a Eurodollar  Rate Loan after notice
thereof has been given,  including,  but not limited to, any interest payable by
Agent or Lenders to lenders of funds obtained by it in order to make or maintain
its Eurodollar Rate Loans hereunder.  A certificate as to any additional amounts
payable pursuant to the foregoing  sentence  submitted by Agent or any Lender to
Borrowers shall be conclusive absent manifest error.

            (g) Notwithstanding  any other provision  hereof, if any  applicable
law,  treaty,  regulation  or  directive,  or  any  change  therein  or  in  the
interpretation  or  application  thereof,  shall make it unlawful for any Lender
(for purposes of this subsection (g), the term "Lender" shall include any Lender
and the office or branch where any Lender or any corporation or bank controlling
such Lender makes or maintains  any  Eurodollar  Rate Loans) to make or maintain
its Eurodollar  Rate Loans,  the obligation of Lenders to make  Eurodollar  Rate
Loans  hereunder  shall  forthwith  be cancelled  and  Borrowers  shall,  if any
affected Eurodollar Rate Loans are then outstanding,  promptly upon request from
Agent,  either pay all such  affected  Eurodollar  Rate  Loans or  convert  such
affected  Eurodollar  Rate Loans into loans of another type. If any such payment
or conversion of any Eurodollar  Rate Loan is made on a day that is not the last
day of the Interest Period  applicable to such  Eurodollar Rate Loan,  Borrowers
shall  pay  Agent,  upon  Agent's  request,  such  amount or  amounts  as may be
necessary to compensate Lenders for any loss or expense sustained or incurred by
Lenders in respect of such  Eurodollar  Rate Loan as a result of such payment or
conversion, including (but not limited to) any interest or other amounts payable
by Lenders to lenders of funds  obtained by Lenders in order to make or maintain
such  Eurodollar  Rate Loan. A certificate as to any additional  amounts payable
pursuant to the foregoing  sentence  submitted by Lenders to Borrowers  shall be
conclusive absent manifest error.

      2.3.  Disbursement  of Advance  Proceeds.  All Advances shall be disbursed
            ----------------------------------
from whichever  office or other place Agent may designate from time to time and,
together  with any and all other  Obligations  of Borrowers to Agent or Lenders,
shall be  charged to  Borrowers'  Account  on  Agent's  books.  During the Term,
Borrowers   may  use  the  Revolving   Advances  by  borrowing,   prepaying  and
reborrowing,  all in  accordance  with the  terms  and  conditions  hereof.  The
proceeds of each Revolving Advance requested by Borrowers or deemed to have been
requested  by Borrowers  under  Section  2.2(a)  hereof  shall,  with respect to
requested Revolving

                                       19
<PAGE>

Advances to the extent Lenders make such Revolving  Advances,  be made available
to the  applicable  Borrower  on the day so  requested  by way of credit to such
Borrower's  operating  account  at PNC,  or such  other  bank as  Borrowers  may
designate  following  notification  to Agent, in immediately  available  federal
funds or other  immediately  available  funds  or,  with  respect  to  Revolving
Advances deemed to have been requested by any Borrower, be disbursed to Agent to
be applied to the outstanding Obligations giving rise to such deemed request.

      2.4.  Maximum  Advances.   The  aggregate  balance of  Revolving  Advances
            -----------------
outstanding at any time  shall not exceed the lesser of (a)  Maximum  Revolving
Advance Amount or (b) the Formula Amount.

      2.5.  Repayment of Advances.
            ---------------------

            (a) The Revolving  Advances  shall be due and payable in full on the
last day of the Term subject to earlier prepayment as herein provided.

            (b) Each Borrower  recognizes that the amounts  evidenced by checks,
notes,  drafts or any other  items of payment  relating  to and/or  proceeds  of
Collateral  may  not  be   collectible  by  Agent  on  the  date  received.   In
consideration of Agent's agreement to conditionally credit Borrowers' Account as
of the  Business  Day on which  Agent  receives  those  items of  payment,  each
Borrower agrees that, in computing the charges under this  Agreement,  all items
of payment shall be deemed  applied by Agent on account of the  Obligations  one
(1) Business Day after the Business Day Agent  receives  such  payments via wire
transfer or electronic  depository  check.  Agent is not,  however,  required to
credit  Borrowers'  Account  for the  amount  of any  item of  payment  which is
unsatisfactory to Agent and Agent may charge  Borrowers'  Account for the amount
of any item of payment which is returned to Agent unpaid.

            (c) All payments of principal,  interest and other  amounts  payable
hereunder,  or under  any of the Other  Documents  shall be made to Agent at the
Payment  Office  not  later  than 1:00 P.M.  (New  Jersey  Time) on the due date
therefor  in lawful  money of the United  States of America in federal  funds or
other  funds  immediately  available  to Agent.  Agent  shall  have the right to
effectuate  payment  on any  and all  Obligations  due and  owing  hereunder  by
charging  Borrowers'  Account or by making  Advances  as provided in Section 2.2
hereof.

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

      2.6.  Repayment  of Excess  Advances.  The  aggregate  balance of Advances
            ------------------------------
outstanding  at any time in excess of the maximum  amount of Advances  permitted
hereunder  shall be  immediately  due and payable  without the  necessity of any
demand, at the Payment Office,  whether or not a Default or Event of Default has
occurred.

      2.7.  Statement of Account.  Agent shall maintain,  in accordance with its
            --------------------
customary  procedures,  a loan  account  ("Borrowers'  Account")  in the name of
Borrowers in which shall be

                                       20
<PAGE>

recorded  the date and  amount  of each  Advance  made by Agent and the date and
amount of each payment in respect  thereof;  provided,  however,  the failure by
                                             --------   -------
Agent to record the date and amount of any Advance  shall not  adversely  affect
Agent or any  Lender.  Each  month,  Agent  shall send to  Borrowers a statement
showing the  accounting  for the  Advances  made,  payments  made or credited in
respect thereof, and other transactions between Agent and Borrowers, during such
month. The monthly statements shall be deemed correct and binding upon Borrowers
in the absence of manifest error and shall  constitute an account stated between
Lenders and Borrowers  unless Agent  receives a written  statement of Borrowers'
specific  exceptions  thereto  within  thirty (30) days after such  statement is
received by  Borrowers.  The records of Agent with  respect to the loan  account
shall be conclusive  evidence  absent  manifest error of the amounts of Advances
and other charges thereto and of payments applicable thereto.

      2.8.  Letters of Credit. Subject to the terms and conditions hereof, Agent
            -----------------
shall (a) issue or cause the issuance of Letters of Credit ("Letters of Credit")
on behalf of any Borrower; provided, however, that Agent will not be required to
                           --------  -------
issue or cause to be issued any  Letters  of Credit to the extent  that the face
amount of such Letters of Credit would then cause the sum of (i) the outstanding
Revolving Advances plus (ii) outstanding  Letters of Credit to exceed the lesser
                   ----
of (x) the  Maximum  Revolving  Advance  Amount or (y) the Formula  Amount;  The
maximum  amount of  outstanding  Letters of Credit  shall not exceed Two Million
Dollars  ($2,000,000.00)  in the  aggregate at any time.  All  disbursements  or
payments  related to Letters of Credit shall be deemed to be Domestic Rate Loans
consisting  of  Revolving  Advances  and shall bear  interest  at the  Revolving
Interest  Rate for  Domestic  Rate  Loans;  Letters of Credit that have not been
drawn upon shall not bear interest.

      2.9.  Issuance of Letters of Credit.
            -----------------------------

            (a) Borrowers may request Agent to issue or cause the  issuance of a
Letter of Credit by delivering to Agent at the Payment  Office,  Agent's form of
Letter of Credit Application (the "Letter of Credit  Application")  completed to
the  satisfaction of Agent;  and, such other  certificates,  documents and other
papers and information as Agent may reasonably request.  Borrowers, on behalf of
Borrowers,  also have the right to give  instructions  and make  agreements with
respect  to any  application,  any  applicable  letter  of credit  and  security
agreement,  any applicable letter of credit  reimbursement  agreement and/or any
other  applicable  agreement,  any  letter  of  credit  and the  disposition  of
documents, disposition of any unutilized funds, and to agree with Agent upon any
amendment, extension or renewal of any Letter of Credit.

            (b) Each Letter of Credit shall, among other things, (i) provide for
the payment of sight drafts or  acceptances  of usance drafts when presented for
honor  thereunder in accordance  with the terms thereof and when  accompanied by
the documents  described therein and (ii) have an expiry date not later than six
(6) months after such Letter of Credit's  date of issuance and in no event later
than the last day of the Term.  Each  Letter of Credit  shall be  subject to the
Uniform   Customs  and  Practice  for  Documentary   Credits  (1993   Revision),
International  Chamber of Commerce  Publication  No. 500, and any  amendments or
revision  thereof  adhered to by the Issuer and, to the extent not  inconsistent
therewith, the laws of the State of New Jersey.

                                       21
<PAGE>

            (c) Agent shall use its reasonable  efforts to notify Lenders of the
request by Borrowers for a Letter of Credit hereunder.

      2.10. Requirements For Issuance of Letters of Credit.
            ----------------------------------------------

            (a) In  connection  with  the  issuance  of  any  Letter  of  Credit
Borrowers  shall  indemnify,  save and hold  Agent,  each Lender and each Issuer
harmless  from  any  loss,  cost,  expense  or  liability,   including,  without
limitation,  payments  made by Agent,  any Lender or any Issuer and expenses and
reasonable  attorneys' fees incurred by Agent,  any Lender or Issuer arising out
of, or in connection  with, any Letter of Credit to be issued or created for any
Borrower.  Borrowers  shall be bound by Agent's or any Issuer's  regulations and
good  faith  interpretations  of any  Letter of Credit  issued  or  created  for
Borrowers' Account,  although this interpretation may be different from its own;
and,  neither  Agent,  nor  any  Lender,   nor  any  Issuer  nor  any  of  their
correspondents shall be liable for any error, negligence,  or mistakes,  whether
of omission or  commission,  in following any Borrower's  instructions  or those
contained  in any  Letter  of  Credit  or of any  modifications,  amendments  or
supplements  thereto or in  issuing  or paying any Letter of Credit,  except for
Agent's, any Lender's, any Issuer's or such correspondents' willful misconduct.

            (b) Borrowers  shall  authorize  and  direct any  Issuer to name the
applicable  Borrower as the  "Applicant"  or  "Account  Party" of each Letter of
Credit.  If Agent is not the  Issuer of any Letter of  Credit,  Borrowers  shall
authorize and direct the Issuer to deliver to Agent all instruments,  documents,
and other writings and property received by the Issuer pursuant to the Letter of
Credit and to accept and rely upon  Agent's  instructions  and  agreements  with
respect to all  matters  arising in  connection  with the Letter of Credit,  the
application therefor or any acceptance therefor.

            (c) In connection  with all Letters of Credit issued or caused to be
issued by Agent under this  Agreement,  each Borrower  hereby appoints Agent, or
its designee, as its attorney,  with full power and authority (i) to sign and/or
endorse such  Borrower's  name upon any warehouse or other  receipts,  letter of
credit applications and acceptances;  (ii) to sign such Borrower's name on bills
of lading; (iii) to clear Inventory through the United States of America Customs
Department  ("Customs")  in the  name of  such  Borrower  or  Agent  or  Agent's
designee, and to sign and deliver to Customs officials powers of attorney in the
name of such Borrower for such purpose;  and (iv) to complete in such Borrower's
name or  Agent's,  or in the  name  of  Agent's  designee,  any  order,  sale or
transaction, obtain the necessary documents in connection therewith, and collect
the proceeds  thereof.  Neither Agent nor its  attorneys  will be liable for any
acts or  omissions  nor for any error of  judgment  or  mistakes of fact or law,
except for Agent's or its  attorney's  willful  misconduct.  This  power,  being
coupled with an interest, is irrevocable as long as any Letters of Credit remain
outstanding.

            (d) Each Lender shall to the extent of the  percentage  amount equal
to the product of such Lender's Commitment Percentage times the aggregate amount
of all unreimbursed reimbursement obligations arising from disbursements made or
obligations

                                       22
<PAGE>

incurred  with  respect to the  Letters of Credit be deemed to have  irrevocably
purchased an undivided  participation  in each such  unreimbursed  reimbursement
obligation.  In the event  that at the time a  disbursement  is made the  unpaid
balance of Revolving  Advances exceeds or would exceed,  with the making of such
disbursement,  the lesser of the Maximum Revolving Advance Amount or the Formula
Amount,  and such  disbursement  is not  reimbursed by Borrowers  within two (2)
Business Days,  Agent shall promptly  notify each Lender and upon Agent's demand
each  Lender  shall  pay to  Agent  such  Lender's  proportionate  share of such
unreimbursed  disbursement  together with such Lender's  proportionate  share of
Agent's   unreimbursed   costs  and  expenses   relating  to  such  unreimbursed
disbursement.  Upon  receipt by Agent of a  repayment  from any  Borrower of any
amount  disbursed  by Agent  for which  Agent had  already  been  reimbursed  by
Lenders, Agent shall deliver to each Lender that Lender's pro rata share of such
repayment.  Each Lender's participation commitment shall continue until the last
to occur of any of the  following  events:  (A) Agent  ceases to be obligated to
issue or cause to be issued Letters of Credit hereunder; (B) no Letter of Credit
issued hereunder  remains  outstanding and uncancelled or (C) all Persons (other
than the applicable  Borrower) have been fully  reimbursed for all payments made
under or relating to Letters of Credit .

      2.11. Additional Payments. Any sums expended by Agent or any Lender due to
            -------------------
any  Borrower's  failure to perform or comply  with its  obligations  under this
Agreement or any Other Document including,  without  limitation,  any Borrower's
obligations  under Sections 4.2, 4.4, 4.12,  4.13,  4.14 and 6.1 hereof,  may be
charged  to  Borrowers'  Account  as  a  Revolving  Advance  and  added  to  the
Obligations.

      2.12. Manner of Borrowing and Payment.
            -------------------------------

            (a) Each borrowing of Revolving Advances shall be advanced according
to the applicable Commitment Percentages of Lenders.

            (b) Each payment (including each prepayment) by Borrowers on account
of the principal of and interest on the Revolving Advances,  shall be applied to
the  Revolving  Advances  pro  rata  according  to  the  applicable   Commitment
Percentages  of Lenders.  Except as  expressly  provided  herein,  all  payments
(including  prepayments)  to be made by any  Borrower  on account of  principal,
interest  and fees shall be made  without set off or  counterclaim  and shall be
made to Agent on behalf of the Lenders to the Payment Office, in each case on or
prior to 1:00 P.M.,  New Jersey time,  in Dollars and in  immediately  available
funds.

            (c)  (i)  Notwithstanding  anything  to the  contrary  contained  in
Sections 2.8(a) and (b) hereof, commencing with the first Business Day following
the Closing  Date,  each  borrowing of Revolving  Advances  shall be advanced by
Agent and each payment by any Borrower on account of Revolving Advances shall be
applied first to those Revolving  Advances  advanced by Agent. On or before 1:00
P.M.,  New  Jersey  time,  on each  Settlement  Date  commencing  with the first
Settlement Date following the Closing Date, Agent and Lenders shall make certain
payments as follows:  (I) if the aggregate amount of new Revolving Advances made
by Agent  during the  preceding  Week (if any) exceeds the  aggregate  amount of
repayments applied to outstanding Revolving Advances during such preceding Week,
then each Lender shall

                                       23
<PAGE>

provide  Agent  with  funds  in an  amount  equal to its  applicable  Commitment
Percentage of the difference  between (w) such  Revolving  Advances and (x) such
repayments and (II) if the aggregate amount of repayments applied to outstanding
Revolving  Advances  during  such  Week  exceeds  the  aggregate  amount  of new
Revolving  Advances made during such Week,  then Agent shall provide each Lender
with funds in an amount equal to its  applicable  Commitment  Percentage  of the
difference between (y) such repayments and (z) such Revolving Advances.

                (ii)   Each Lender  shall be  entitled  to earn  interest at the
applicable Revolving Interest Rate on outstanding Advances which it has funded.

                (iii)  Promptly  following  each  Settlement  Date,  Agent shall
submit to each  Lender a  certificate  with  respect to  payments  received  and
Advances made during the Week  immediately  preceding such Settlement Date. Such
certificate of Agent shall be conclusive in the absence of manifest error.

            (d) If any Lender or Participant (a "benefited Lender") shall at any
time receive any payment of all or part of its Advances, or interest thereon, or
receive any Collateral in respect thereof (whether  voluntarily or involuntarily
or by set-off) in a greater  proportion  than any such payment to and Collateral
received  by any  other  Lender,  if any,  in  respect  of such  other  Lender's
Advances, or interest thereon, and such greater proportionate payment or receipt
of Collateral is not expressly permitted hereunder,  such benefited Lender shall
purchase for cash from the other Lenders a participation in such portion of each
such other  Lender's  Advances,  or shall  provide  such other  Lender  with the
benefits of any such Collateral,  or the proceeds thereof, as shall be necessary
to cause such  benefited  Lender to share the excess payment or benefits of such
Collateral  or  proceeds  ratably  with  each of the  other  Lenders;  provided,
                                                                       --------
however,  that if all or any  portion  of such  excess  payment or  benefits  is
-------
thereafter  recovered  from  such  benefited  Lender,  such  purchase  shall  be
rescinded,  and the purchase price and benefits returned,  to the extent of such
recovery,  but without interest.  Each Lender so purchasing a portion of another
Lender's  Advances  may  exercise  all  rights of  payment  (including,  without
limitation,  rights of set-off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.

            (e) Unless Agent shall have been notified by telephone, confirmed in
writing,  by any Lender that such  Lender  will not make the amount  which would
constitute its  applicable  Commitment  Percentage of the Advances  available to
Agent,  Agent may (but shall not be obligated  to) assume that such Lender shall
make such amount available to Agent on the next Settlement Date and, in reliance
upon such assumption,  make available to Borrowers a corresponding amount. Agent
will promptly notify  Borrowers of its receipt of any such notice from a Lender.
If such amount is made  available to Agent on a date after such next  Settlement
Date, such Lender shall pay to Agent on demand an amount equal to the product of
(i) the daily average Federal Funds Rate (computed on the basis of a year of 360
days) during such period as quoted by Agent, times (ii) such amount, times (iii)
the number of days from and including such  Settlement Date to the date on which
such amount  becomes  immediately  available to Agent.  A  certificate  of Agent
submitted to any Lender with respect to any amounts  owing under this  paragraph
(e) shall be conclusive, in the absence of manifest error. If such amount is not
in fact

                                       24
<PAGE>

made available to Agent by such Lender within three (3) Business Days after such
Settlement  Date,  Agent  shall be  entitled  to recover  such an  amount,  with
interest  thereon  at the rate  per  annum  then  applicable  to such  Revolving
Advances hereunder,  on demand from Borrowers;  provided,  however, that Agent's
                                                --------   -------
right to such  recovery  shall  not  prejudice  or  otherwise  adversely  affect
Borrowers' rights (if any) against such Lender.

      2.13. Use of Proceeds.  Borrowers shall apply the proceeds of Advances (i)
            ---------------
to pay fees and expenses relating to this transaction; (ii) to refinance certain
existing  senior  secured  debt with Agent;  (iii) to provide for their  working
capital needs and capital expenditures in accordance herewith;  (iv) for Letters
of Credit; and (v) for Permitted Acquisitions.

      2.14. Defaulting Lender.
            -----------------

            (a)  Notwithstanding  anything to the contrary  contained herein, in
the event any Lender (x) has refused (which refusal constitutes a breach by such
Lender of its obligations under this Agreement) to make available its portion of
any Advance or (y) notifies either Agent or Borrowers that it does not intend to
make  available  its  portion  of any  Advance  (if  the  actual  refusal  would
constitute  a breach by such  Lender of its  obligations  under this  Agreement)
(each, a "Lender Default"),  all rights and obligations hereunder of such Lender
(a  "Defaulting  Lender")  as to which a Lender  Default is in effect and of the
other parties  hereto shall be modified to the extent of the express  provisions
of this Section 2.14 while such Lender Default remains in effect.

            (b)  Advances   shall   be  incurred  pro  rata  from  Lenders  (the
"Non-Defaulting  Lenders")  which  are not  Defaulting  Lenders  based  on their
respective Commitment Percentages, and no Commitment Percentage of any Lender or
any pro rata share of any  Advances  required to be advanced by any Lender shall
be increased as a result of such Lender Default.  Amounts received in respect of
principal  of any type of  Advances  shall be applied  to reduce the  applicable
Advances  of each  Lender pro rata  based on the  aggregate  of the  outstanding
Advances of that type of all Lenders at the time of such application;  provided,
that, such amount shall not be applied to any Advances of a Defaulting Lender at
any time when, and to the extent that,  the aggregate  amount of Advances of any
Non-Defaulting Lender exceeds such Non-Defaulting Lender's Commitment Percentage
of all Advances then outstanding.

            (c)  A Defaulting Lender shall not be entitled to give  instructions
to Agent or to approve,  disapprove,  consent to or vote on any matters relating
to this Agreement and the Other  Documents.  All  amendments,  waivers and other
modifications  of this  Agreement  and the Other  Documents  may be made without
regard to a Defaulting  Lender and, for purposes of the  definition of "Required
Lenders", a Defaulting Lender shall be deemed not to be a Lender and not to have
Advances outstanding.

            (d)  Other than as expressly  set forth in this  Section  2.14,  the
rights and  obligations  of a Defaulting  Lender  (including  the  obligation to
indemnify Agent) and the other parties hereto shall remain unchanged. Nothing in
this  Section  2.14 shall be deemed to release  any  Defaulting  Lender from its
obligations  under this  Agreement  and the Other  Documents,  shall  alter such
obligations,  shall operate as a waiver of any default by such Defaulting Lender

                                       25
<PAGE>

hereunder, or shall prejudice any rights which any Borrower, Agent or any Lender
may have  against  any  Defaulting  Lender  as a result of any  default  by such
Defaulting Lender hereunder.

            (e)  In the event a  Defaulting  Lender  retroactively  cures to the
satisfaction  of Agent the breach  which  caused a Lender to become a Defaulting
Lender,  such Defaulting Lender shall no longer be a Defaulting Lender and shall
be treated as a Lender under this Agreement.

III.  INTEREST AND FEES.
      -----------------

      3.1.  Interest.  Interest on  Advances  shall be payable in arrears on the
            --------
first day of each month with respect to Domestic Rate Loans and, with respect to
Eurodollar  Rate Loans,  at the end of each Interest  Period or, for  Eurodollar
Rate Loans with an Interest Period in excess of three months,  at the earlier of
(a) each  three  months  on the  anniversary  date of the  commencement  of such
Eurodollar  Rate Loan or (b) the end of the Interest  Period.  Interest  charges
shall be computed on the actual principal amount of Advances  outstanding during
the month (the "Monthly  Advances") at a rate per annum equal to with respect to
Revolving Advances, the applicable Revolving Interest Rate. Whenever, subsequent
to the date of this  Agreement,  the Base Rate is  increased or  decreased,  the
Revolving  Interest  Rate for  Domestic  Rate Loans shall be  similarly  changed
without  notice or demand of any kind by an amount  equal to the  amount of such
change in the Base Rate during the time such change or changes remain in effect.
The  Eurodollar  Rate shall be adjusted  with respect to  Eurodollar  Rate Loans
without  notice or demand of any kind on the effective date of any change in the
Reserve  Percentage as of such effective  date. Upon and after the occurrence of
an Event of Default,  and during the continuation  thereof,  all the Obligations
shall bear interest at the Revolving  Interest Rate for Domestic  Loans plus two
percent (2%) per annum (the "Default Rate").

      3.2.  Letter of Credit Fees.
            ---------------------

            (a)  Borrowers  shall pay (x) to Agent,  for the benefit of Lenders,
fees for each  Letter of Credit for the period  from and  excluding  the date of
issuance of same to and including the date of expiration or  termination,  equal
to the average daily face amount of each outstanding Letter of Credit multiplied
by two  percent  (2%) per annum,  such fees to be  calculated  on the basis of a
360-day year for the actual number of days elapsed and to be payable  monthly in
arrears  on the first day of each  month and on the last day of the Term and (y)
to the  Issuer,  any and all fees and  expenses as agreed upon by the Issuer and
the  Borrowers  in  connection  with any  Letter of Credit,  including,  without
limitation,  in  connection  with the opening,  amendment or renewal of any such
Letter of Credit and any  acceptances  created  thereunder  and shall  reimburse
Agent  for any and all such  fees  and  expenses,  if any,  paid by Agent to the
Issuer  (all of the  foregoing  fees,  the  "Letter of Credit  Fees").  All such
charges  shall be  deemed  earned  in full on the date when the same are due and
payable  hereunder  and shall not be  subject  to rebate or  proration  upon the
termination of this  Agreement for any reason.  Any such charge in effect at the
time of a  particular  transaction  shall be the  charge  for that  transaction,
notwithstanding  any subsequent  change in the Issuer's  prevailing  charges for
that type of transaction. All Letter of

                                       26
<PAGE>

Credit Fees payable  hereunder  shall be deemed  earned in full on the date when
the same are due and  payable  hereunder  and shall not be  subject to rebate or
proration upon the termination of this Agreement for any reason.

      3.3. (a) Closing Fee.  Upon the  execution  of this  Agreement,  Borrowers
               -----------
shall pay to Agent for the  ratable  benefit of  Lenders a closing  fee of Fifty
Thousand Dollars ($50,000.00) less that portion of any deposit or commitment fee
heretofore paid by Borrowers to Agent  remaining after  application of such fees
to out of pocket expenses.

           (b) Facility  Fee.   If, for any month  during the Term,  the average
               -------------
daily unpaid  balance of the Revolving  Advances for each day of such month does
not equal the Maximum  Revolving  Advance  Amount,  then Borrowers  shall pay to
Agent for the ratable benefit of Lenders a fee at a rate equal  three-eighths of
one percent  (3/8%) per annum  calculated on the basis of a year of 360 days for
the actual  number of days elapsed on the amount by which the Maximum  Revolving
Advance  Amount  exceeds such average  daily unpaid  balance.  Such fee shall be
payable to Agent in arrears on the last day of each month.

      3.4. (a) Collateral Evaluation Fee. Borrowers shall pay Agent a collateral
               -------------------------
evaluation fee equal to Two Thousand Five Hundred Dollars  ($2,500.00) per month
commencing  on the first day of the month  following the Closing Date and on the
first day of each month  thereafter  during the Term. The collateral  evaluation
fee  shall be deemed  earned  in full on the date  when same is due and  payable
hereunder and shall not be subject to rebate or proration  upon  termination  of
this Agreement for any reason.

           (b) Collateral  Monitoring Fee.   Borrowers shall pay to Agent on the
               --------------------------
first  day of each  month  following  any  month in  which  Agent  performs  any
collateral  monitoring - namely any field  examination,  collateral  analysis or
other  business  analysis,  the need for which is to be  determined by Agent and
which  monitoring is  undertaken by Agent or for Agent's  benefit - a collateral
monitoring  fee in an amount equal to Seven Hundred Fifty Dollars  ($750.00) per
day for each person  performing such  monitoring,  plus all reasonable costs and
disbursements  incurred  by  Agent in the  performance  of such  examination  or
analysis.

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

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

                                       27
<PAGE>

      3.7.  Increased  Costs.  In the event that any applicable  law,  treaty or
            ----------------
governmental  regulation,  or any  change  therein or in the  interpretation  or
application  thereof,  or compliance by any Lender (for purposes of this Section
3.7, the term "Lender" shall include Agent or any Lender and any  corporation or
bank controlling Agent or any Lender) with any request or directive  (whether or
not having the force of law) from any central bank or other financial,  monetary
or other authority, shall:

            (a) subject  Agent or any  Lender to any tax of any kind  whatsoever
with  respect to this  Agreement  or any Other  Document  or change the basis of
taxation of payments to Agent or any Lender of principal,  fees, interest or any
other amount payable  hereunder or under any Other Documents (except for changes
in the rate of tax on the  overall  net  income  of Agent or any  Lender  by the
jurisdiction in which it maintains its principal office);

            (b) impose, modify or hold applicable any reserve,  special deposit,
assessment or similar  requirement against assets held by, or deposits in or for
the account of, advances or loans by, or other credit extended by, any office of
Agent or any Lender,  including (without limitation) pursuant to Regulation D of
the Board of Governors of the Federal Reserve System; or

            (c) impose on Agent or any Lender or the London interbank Eurodollar
market any other condition with respect to this Agreement or any Other Document;

and the result of any of the  foregoing  is to increase the cost to Agent or any
Lender of making,  renewing or maintaining  its Advances  hereunder by an amount
that Agent or such  Lender  deems to be  material or to reduce the amount of any
payment  (whether of principal,  interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender deems to be material,  then,  in
any case  Borrowers  shall  promptly pay Agent or such Lender,  upon its demand,
such  additional  amount  as will  compensate  Agent  or such  Lender  for  such
additional  cost or such  reduction,  as the  case  may be,  provided  that  the
foregoing  shall  not  apply to  increased  costs  which  are  reflected  in the
Eurodollar  Rate.  Agent  or  such  Lender  shall  certify  the  amount  of such
additional cost or reduced amount to Borrowers,  and such certification shall be
conclusive absent manifest error.

      3.8.  Basis For  Determining  Interest Rate  Inadequate or Unfair.  In the
            -----------------------------------------------------------
event that Agent or any Lender shall have determined that:

            (a) reasonable  means do not exist for  ascertaining  the Eurodollar
Rate for any Interest Period; or

            (b) Dollar  deposits  in the  relevant  amount and for the  relevant
maturity  are not  available in the London  interbank  Eurodollar  market,  with
respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate Loan,
or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate Loan,

                                       28
<PAGE>

then Agent shall give Borrowers prompt written, telephonic or telegraphic notice
of  such  determination.  If such  notice  is  given,  (i)  any  such  requested
Eurodollar  Rate Loan shall be made as a Domestic  Rate Loan,  unless  Borrowers
shall notify  Agent no later than 10:00 a.m.  (New Jersey time) two (2) Business
Days prior to the date of such  proposed  borrowing,  that its  request for such
borrowing  shall be cancelled or made as an unaffected  type of Eurodollar  Rate
Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which was to have been
converted to an affected type of  Eurodollar  Rate Loan shall be continued as or
converted  into a Domestic Rate Loan,  or, if Borrowers  shall notify Agent,  no
later than 10:00  a.m.  (New  Jersey  time) two (2)  Business  Days prior to the
proposed  conversion,  shall be maintained  as an unaffected  type of Eurodollar
Rate Loan, and (iii) any  outstanding  affected  Eurodollar  Rate Loans shall be
converted  into a Domestic Rate Loan,  or, if Borrowers  shall notify Agent,  no
later than 10:00 a.m.  (New Jersey time) two (2) Business Days prior to the last
Business Day of the then current  Interest  Period  applicable  to such affected
Eurodollar  Rate Loan,  shall be converted into an unaffected type of Eurodollar
Rate Loan, on the last Business Day of the then current Interest Period for such
affected  Eurodollar Rate Loans.  Until such notice has been withdrawn,  Lenders
shall have no obligation  to make an affected  type of  Eurodollar  Rate Loan or
maintain  outstanding  affected Eurodollar Rate Loans and no Borrower shall have
the right to convert a Domestic  Rate Loan or an  unaffected  type of Eurodollar
Rate Loan into an affected type of Eurodollar Rate Loan.

      3.9.  Capital Adequacy.
            ----------------

            (a) In the event that Agent or any Lender shall have determined that
any applicable law, rule, regulation or guideline regarding capital adequacy, or
any  change  therein,  or any  change in the  interpretation  or  administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by Agent or any
Lender (for purposes of this Section 3.9, the term "Lender"  shall include Agent
or any Lender and any corporation or bank  controlling  Agent or any Lender) and
the  office  or  branch  where  Agent or any  Lender  (as so  defined)  makes or
maintains  any  Eurodollar  Rate Loans with any request or  directive  regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable  agency, has or would have the effect of reducing the
rate of  return  on  Agent  or any  Lender's  capital  as a  consequence  of its
obligations  hereunder  to a level below that which  Agent or such Lender  could
have  achieved  but  for  such  adoption,  change  or  compliance  (taking  into
consideration  Agent's  and each  Lender's  policies  with  respect  to  capital
adequacy) by an amount deemed by Agent or any Lender to be material,  then, from
time to time,  Borrowers  shall  pay upon  demand to Agent or such  Lender  such
additional  amount or amounts as will  compensate  Agent or such Lender for such
reduction.  In determining such amount or amounts,  Agent or such Lender may use
any reasonable  averaging or attribution methods. The protection of this Section
3.9 shall be  available  to Agent and each  Lender  regardless  of any  possible
contention of invalidity or inapplicability  with respect to the applicable law,
regulation or condition.

            (b) A certificate  of Agent or such Lender setting forth such amount
or amounts as shall be necessary to compensate Agent or such Lender with respect
to Section 3.9(a) hereof when delivered to Borrowers shall be conclusive  absent
manifest error.

                                       29
<PAGE>

IV.   COLLATERAL:  GENERAL TERMS
      --------------------------

      4.1. Security Interest in the Collateral. To secure the prompt payment and
           -----------------------------------
performance to Agent and each Lender of the  Obligations,  each Borrower  hereby
assigns, pledges and grants to Agent for its benefit and for the ratable benefit
of each Lender a continuing  security  interest in and to all of its Collateral,
whether now owned or existing or hereafter  acquired or arising and  wheresoever
located.  Each Borrower  shall mark its books and records as may be necessary or
appropriate to evidence, protect and perfect Agent's security interest and shall
cause  its   financial   statements   to   reflect   such   security   interest.
Notwithstanding  anything contained herein to the contrary, with respect to each
Borrower's grant of a security interest in the General  Intangibles,  such grant
shall be ineffective if the grant thereof to Agent in accordance  with the terms
of this  Agreement  and the Other  Documents  would  constitute a default of the
obligations  of any  Borrower  under  any  agreements  to  which  it is a party,
relating to such General  Intangibles  unless the person licensing,  granting or
authorizing  any Borrower's  use thereof  consents or approves of any Borrower's
grant of a security  interest therein or if applicable law (whether now existing
or hereafter  enacted) has the effect of authorizing  the grant of such security
interest notwithstanding the contrary provisions in the operative agreements.

      4.2. Perfection of Security Interest.  Each Borrower shall take all action
           -------------------------------
that may be necessary  or  desirable,  or that Agent may  request,  so as at all
times to maintain  the  validity,  perfection,  enforceability  and  priority of
Agent's  security  interest  in the  Collateral  or to enable  Agent to protect,
exercise or enforce its rights hereunder and in the Collateral,  including,  but
not  limited to, (i)  immediately  discharging  all Liens  other than  Permitted
Encumbrances,  (ii)  obtaining  landlords' or  mortgagees'  lien waivers,  (iii)
delivering to Agent,  endorsed or accompanied by such  instruments of assignment
as Agent may  specify,  and  stamping  or  marking,  in such manner as Agent may
specify, any and all chattel paper, instruments,  letters of credits and advices
thereof  and  documents  evidencing  or forming a part of the  Collateral,  (iv)
entering into warehousing, lockbox and other custodial arrangements satisfactory
to Agent, and (v) executing and delivering financing statements,  instruments of
pledge, mortgages,  notices and assignments,  in each case in form and substance
satisfactory  to  Agent,  relating  to  the  creation,   validity,   perfection,
maintenance  or  continuation  of Agent's  security  interest  under the Uniform
Commercial  Code or other  applicable  law.  Agent is hereby  authorized to file
financing  statements  signed by Agent  instead of Borrower in  accordance  with
Section  9-402(2)  of  Uniform  Commercial  Code as  adopted in the State of New
Jersey.  All  charges,  expenses  and fees  Agent  may incur in doing any of the
foregoing,  and any local taxes relating thereto, shall be charged to Borrowers'
Account  as a  Revolving  Advance  of a  Domestic  Rate  Loan  and  added to the
Obligations,  or, at  Agent's  option,  shall be paid to Agent  for the  ratable
benefit of Lenders immediately upon demand.

      4.3. Disposition of Collateral.  Each Borrower will safeguard and  protect
           -------------------------
all  Collateral  for Agent's  general  account and make no  disposition  thereof
whether by sale,  lease or  otherwise  except the  disposition  or  transfer  of
obsolete and worn-out  Equipment in the ordinary  course of business  during any
fiscal year having an aggregate  fair market value of not more than Five

                                       30
<PAGE>

Hundred Thousand Dollars ($500,000.00).

      4.4.  Preservation  of Collateral.  In addition to the rights and remedies
            ---------------------------
set forth in Section 11.1 hereof,  Agent: (a) may at any time take such steps as
Agent  deems  necessary  to protect  Agent's  interest  in and to  preserve  the
Collateral, including the hiring of such security guards or the placing of other
security protection  measures as Agent may deem appropriate;  (b) may employ and
maintain  at any of any  Borrower's  premises  a  custodian  who shall have full
authority  to do  all  acts  necessary  to  protect  Agent's  interests  in  the
Collateral;  (c) may lease  warehouse  facilities to which Agent may move all or
part of the  Collateral;  (d) may use any  Borrower's  owned  or  leased  lifts,
hoists,  trucks and other  facilities  or equipment for handling or removing the
Collateral;  and (e) 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  Borrower's  owned  or  leased  property.  Each  Borrower  shall
cooperate  fully with all of Agent's efforts to preserve the Collateral and will
take such actions to preserve the Collateral as Agent may direct. All of Agent's
expenses of preserving the  Collateral,  including any expenses  relating to the
bonding of a custodian,  shall be charged to  Borrowers'  Account as a Revolving
Advance of a Domestic Rate Loan and added to the Obligations.

      4.5.  Ownership of Collateral. With respect to the Collateral, at the time
            -----------------------
the Collateral becomes subject to Agent's security  interest:  (a) each Borrower
shall be the sole  owner of and  fully  authorized  and able to sell,  transfer,
pledge and/or grant a first priority security interest in each and every item of
its respective Collateral to Agent; and, except for Permitted Encumbrances,  the
Collateral shall be free and clear of all Liens and encumbrances whatsoever; (b)
each document and  agreement  executed by each Borrower or delivered to Agent or
any Lender in connection  with this  Agreement  shall be true and correct in all
respects;  (c) all signatures and  endorsements  of each Borrower that appear on
such documents and agreements shall be genuine and each Borrower shall have full
capacity to execute same; and (d) with the exception of lap-top  computers owned
by Borrowers  and utilized by their  employees,  each  Borrower's  Equipment and
Inventory shall be located as set forth on Schedule 4.5 and shall not be removed
                                           ------------
from such  location(s)  without the prior  written  consent of Agent except with
respect to Equipment to the extent permitted in Section 4.3 hereof.

      4.6.  Defense of Agent's  and  Lenders'  Interests.  Until (a) payment and
            --------------------------------------------
performance  in  full of all of the  Obligations  and  (b)  termination  of this
Agreement,  Agent's interests in the Collateral shall continue in full force and
effect.  During such period no Borrower  shall,  without  Agent's  prior written
consent,  pledge,  sell (except Equipment to the extent permitted in Section 4.3
hereof), assign, transfer,  create or suffer to exist a Lien upon or encumber or
allow or suffer to be encumbered  in any way except for Permitted  Encumbrances,
any part of the Collateral.  Each Borrower shall defend Agent's interests in the
Collateral against any and all Persons whatsoever.  At any time following demand
by Agent for  payment  of all  Obligations,  Agent  shall have the right to take
possession  of the  indicia of the  Collateral  and the  Collateral  in whatever
physical form  contained,  including  without  limitation:  labels,  stationery,
documents,  instruments and advertising materials. If Agent exercises this right
to take possession of the Collateral,  Borrowers shall, upon demand, assemble it
in the best manner possible and make it available to Agent at a place reasonably
convenient to Agent.  In addition, with respect to all Collateral,

                                       31
<PAGE>

Agent and Lenders  shall be entitled to all of the rights and remedies set forth
herein and further  provided by the Uniform  Commercial Code or other applicable
law. Each Borrower shall, and Agent may, at its option,  instruct all suppliers,
carriers,  forwarders,  warehousers or others receiving or holding cash, checks,
Inventory,  documents or instruments in which Agent holds a security interest to
deliver  same to Agent  and/or  subject to Agent's  order and if they shall come
into any Borrower's  possession,  they, and each of them,  shall be held by such
Borrower in trust as Agent's trustee, and such Borrower will immediately deliver
them to Agent in their original form together with any necessary endorsement.

      4.7.  Books and  Records.  Each  Borrower  shall (a) keep proper  books of
            ------------------
record and account in which full,  true and correct  entries will be made of all
dealings or transactions of or in relation to its business and affairs;  (b) set
up on its books accruals with respect to all taxes, assessments, charges, levies
and claims;  and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables,  advances and investments and
all  other  proper  accruals   (including   without   limitation  by  reason  of
enumeration,  accruals  for  premiums,  if any,  due on  required  payments  and
accruals for depreciation,  obsolescence, or amortization of properties),  which
should be set aside from such  earnings in  connection  with its  business.  All
determinations  pursuant to this subsection shall be made in accordance with, or
as required  by, GAAP  consistently  applied in the opinion of such  independent
public accountant as shall then be regularly engaged by Borrowers.

      4.8.  Financial Disclosure.   Each Borrower hereby irrevocably  authorizes
            --------------------
and directs all accountants  and auditors  employed by such Borrower at any time
during the Term to exhibit and deliver to Agent and each Lender copies of any of
any Borrower's financial statements,  trial balances or other accounting records
of any sort in the  accountant's  or  auditor's  possession,  and to disclose to
Agent and each Lender any information  such accountants may have concerning such
Borrower's  financial  status and  business  operations.  Each  Borrower  hereby
authorizes all federal,  state and municipal authorities to furnish to Agent and
each Lender copies of reports or examinations relating to such Borrower, whether
made by such Borrower or otherwise;  however, Agent and each Lender will attempt
to obtain such  information  or materials  directly from such Borrower  prior to
obtaining  such   information  or  materials  from  such   accountants  or  such
authorities.

      4.9.  Compliance  with Laws.  Each  Borrower  shall  comply with all acts,
            ---------------------
rules,  regulations and orders of any  legislative,  administrative  or judicial
body or official applicable to its respective  Collateral or any part thereof or
to the operation of such Borrower's business the non-compliance with which could
reasonably be expected to have a Material  Adverse Effect on such Borrower.  The
assets of  Borrowers at all times shall be  maintained  in  accordance  with the
requirements of all insurance  carriers which provide  insurance with respect to
the assets of  Borrowers so that such  insurance  shall remain in full force and
effect.

      4.10. Inspection  of  Premises.   At all  reasonable  times Agent and each
            ------------------------
Lender shall have full access to and the right to audit, check, inspect and make
abstracts and copies from each Borrower's books, records, audits, correspondence
and all other  papers  relating  to the  Collateral  and the  operation  of each
Borrower's business.  Agent, any Lender and their agents may enter

                                       32
<PAGE>

upon any of each  Borrower's  premises at any time during  business hours and at
any other  reasonable time, and from time to time, for the purpose of inspecting
the Collateral and any and all records  pertaining  thereto and the operation of
such Borrower's business.

      4.11. Insurance. Each Borrower shall bear the full risk of any loss of any
            ---------
nature  whatsoever with respect to the  Collateral.  At each Borrower's own cost
and expense in amounts and with  carriers  acceptable  to Agent,  each  Borrower
shall  (a)  keep all its  insurable  properties  and  properties  in which  each
Borrower has an interest insured against the hazards of fire,  flood,  sprinkler
leakage,  those hazards  covered by extended  coverage  insurance and such other
hazards,  and for such amounts, as is customary in the case of companies engaged
in businesses similar to such Borrower's including, without limitation, business
interruption  insurance;  (b) maintain a bond in such amounts as is customary in
the case of companies  engaged in businesses  similar to such Borrower  insuring
against larceny,  embezzlement or other criminal  misappropriation  of insured's
officers and  employees who may either singly or jointly with others at any time
have access to the assets or funds of such Borrower  either  directly or through
authority to draw upon such funds or to direct generally the disposition of such
assets;  (c) maintain public and product liability  insurance against claims for
personal injury,  death or property damage suffered by others;  (d) maintain all
such worker's  compensation  or similar  insurance as may be required  under the
laws of any state or jurisdiction in which such Borrower is engaged in business;
(e)  furnish  Agent  with  (i)  copies  of  all  policies  and  evidence  of the
maintenance  of such  policies by the renewal  thereof at least thirty (30) days
before any expiration date, and (ii)  appropriate  loss payable  endorsements in
form and substance  satisfactory to Agent, naming Agent as a co-insured and loss
payee as its  interests  may  appear  with  respect  to all  insurance  coverage
referred to in clauses (a) and (c) above,  and  providing  (A) that all proceeds
thereunder shall be payable to Agent, (B) no such insurance shall be affected by
any act or neglect of the  insured or owner of the  property  described  in such
policy,  and (C) that such policy and loss payable clauses may not be cancelled,
amended or terminated  unless at least thirty (30) days' prior written notice is
given to Agent. In the event of any loss thereunder,  the carriers named therein
hereby are  directed by Agent and the  applicable  Borrower to make  payment for
such loss to Agent and not to such Borrower and Agent jointly.  If any insurance
losses are paid by check,  draft or other instrument payable to any Borrower and
Agent jointly,  Agent may endorse such Borrower's name thereon and do such other
things as Agent may deem  advisable to reduce the same to cash.  Agent is hereby
authorized to adjust and compromise claims under insurance  coverage referred to
in clauses  (a) and (b) above.  All loss  recoveries  received by Agent upon any
such insurance may be applied to the Obligations,  in such order as Agent in its
sole discretion shall determine. Any surplus shall be paid by Agent to Borrowers
or applied as may be otherwise  required by law. Any deficiency thereon shall be
paid by Borrowers to Agent, on demand.

      4.12. Failure to Pay Insurance.  If any Borrower fails to obtain insurance
            ------------------------
as  hereinabove  provided,  or to keep the  same in  force,  Agent,  if Agent so
elects, may obtain such insurance and pay the premium therefor on behalf of such
Borrower,  and charge  Borrowers'  Account therefor as a Revolving  Advance of a
Domestic Rate Loan and such expenses so paid shall be part of the Obligations.

      4.13. Payment of Taxes.  Each  Borrower  will pay,  when due,  all  taxes,
            ----------------
assessments and

                                       33
<PAGE>

other  Charges  lawfully  levied or  assessed  upon such  Borrower or any of the
Collateral  including,  without  limitation,  real and personal  property taxes,
assessments and charges and all franchise,  income, employment,  social security
benefits, withholding, and sales taxes. If any tax by any governmental authority
is or may be imposed on or as a result of any  transaction  between any Borrower
and Agent or any Lender which Agent or any Lender may be required to withhold or
pay or if any taxes, assessments,  or other Charges remain unpaid after the date
fixed for their payment,  or if any claim shall be made which, in Agent's or any
Lender's opinion, may possibly create a valid Lien on the Collateral,  Agent may
without notice to Borrowers pay the taxes, assessments or other Charges and each
Borrower hereby  indemnifies and holds Agent and each Lender harmless in respect
thereof.  The amount of any  payment by Agent under this  Section  4.13 shall be
charged to Borrowers' Account as a Revolving Advance of a Domestic Rate Loan and
added to the  Obligations  and,  until  Borrowers  shall  furnish  Agent with an
indemnity therefor (or supply Agent with evidence satisfactory to Agent that due
provision  for the  payment  thereof  has been  made),  Agent  may hold  without
interest any balance  standing to  Borrowers'  credit and Agent shall retain its
security interest in any and all Collateral held by Agent.

      4.14. Payment of Leasehold  Obligations.  Each Borrower shall at all times
            ---------------------------------
pay, when and as due, its rental  obligations under all leases under which it is
a tenant, and shall otherwise comply, in all material  respects,  with all other
terms of such  leases  and keep them in full force and  effect  and,  at Agent's
request will provide evidence of having done so.

      4.15. Receivables.
            -----------

            (a)  Nature of Receivables.  Each of the Receivables shall be a bona
                 ---------------------
fide and valid account  representing  a bona fide  indebtedness  incurred by the
Customer  therein  named,  for a fixed sum as set forth in the invoice  relating
thereto (provided immaterial or unintentional invoice errors shall not be deemed
to be a breach hereof) with respect to an absolute sale or lease and delivery of
goods upon stated terms of a Borrower,  or work,  labor or services  theretofore
rendered by a Borrower as of the date each Receivable is created.  Same shall be
due and owing in accordance  with the  applicable  Borrower's  standard terms of
sale  without  dispute,  setoff or  counterclaim  except as may be stated on the
accounts receivable schedules delivered by Borrowers to Agent.

            (b)  Solvency  of  Customers.  Each  Customer,  to the  best of each
                 -----------------------
Borrower's knowledge,  as of the date each Receivable is created, is and will be
solvent and able to pay all  Receivables  on which the  Customer is obligated in
full when due or with  respect to such  Customers  of any  Borrower  who are not
solvent such Borrower has set up on its books and in its  financial  records bad
debt reserves adequate to cover such Receivables.

            (c)  Locations of Borrower.  Each Borrower's chief executive  office
                 ---------------------
is located at the addresses set forth on Schedule 4.15(c) hereto.  Until written
                                         ----------------
notice is given to Agent by  Borrowers of any other office at which any Borrower
keeps its records  pertaining to Receivables,  all such records shall be kept at
such executive office.

            (d)  Collection of Receivables. Until any Borrower's authority to do
                 -------------------------
so is

                                       34
<PAGE>

terminated  by Agent  (which  notice  Agent may give at any time  following  the
occurrence  of an  Event  of  Default  or a  Default  or when  Agent in its sole
discretion  deems it to be in Lenders'  best  interest to do so),  each Borrower
will, at such  Borrower's  sole cost and expense,  but on Agent's behalf and for
Agent's account,  collect as Agent's property and in trust for Agent all amounts
received on  Receivables,  and shall not  commingle  such  collections  with any
Borrower's funds or use the same except to pay Obligations.  Each Borrower shall
deliver to Agent, or deposit in the Blocked Account, in original form and on the
date of receipt thereof, all checks,  drafts, notes, money orders,  acceptances,
cash and other evidences of Indebtedness.

            (e)  Notification of Assignment of Receivables.   At any  time after
                 -----------------------------------------
the  occurrence  of a Default,  Agent shall have the right to send notice of the
assignment of, and Agent's security  interest in, the Receivables to any and all
Customers  or any third party  holding or  otherwise  concerned  with any of the
Collateral.  Thereafter,  Agent  shall  have  the  sole  right  to  collect  the
Receivables,  take  possession  of  the  Collateral,  or  both.  Agent's  actual
collection  expenses,  including,  but not limited to,  stationery  and postage,
telephone and telegraph,  secretarial and clerical  expenses and the salaries of
any  collection  personnel  used for  collection,  may be charged to  Borrowers'
Account and added to the Obligations.

            (f)  Power of Agent to Act on Borrowers' Behalf.   Agent shall  have
                 ------------------------------------------
the right to receive, endorse, assign and/or deliver in the name of Agent or any
Borrower  any and all checks,  drafts and other  instruments  for the payment of
money  relating to the  Receivables,  and each Borrower  hereby waives notice of
presentment,  protest  and  non-payment  of any  instrument  so  endorsed.  Each
Borrower  hereby  constitutes  Agent  or  Agent's  designee  as such  Borrower's
attorney  with  power  (i) to  endorse  such  Borrower's  name  upon any  notes,
acceptances,  checks,  drafts,  money  orders or other  evidences  of payment or
Collateral;  (ii) to sign such  Borrower's name on any invoice or bill of lading
relating to any of the Receivables,  drafts against  Customers,  assignments and
verifications of Receivables;  (iii) to send verifications of Receivables to any
Customer;  (iv) to sign such Borrower's name on all financing  statements or any
other  documents or  instruments  deemed  necessary or  appropriate  by Agent to
preserve,  protect,  or perfect  Agent's  interest in the Collateral and to file
same; (v) to demand payment of the  Receivables;  (vi) to enforce payment of the
Receivables  by  legal  proceedings  or  otherwise;  (vii)  to  exercise  all of
Borrowers' rights and remedies with respect to the collection of the Receivables
and any other Collateral;  (viii) to settle, adjust, compromise, extend or renew
the  Receivables;  (ix) to settle,  adjust or compromise  any legal  proceedings
brought to collect  Receivables;  (x) to prepare,  file and sign such Borrower's
name on a proof of claim in bankruptcy or similar document against any Customer;
(xi) to  prepare,  file and sign  such  Borrower's  name on any  notice of Lien,
assignment or  satisfaction  of Lien or similar  document in connection with the
Receivables;  and (xii) to do all other acts and things  necessary  to carry out
this  Agreement.  It is  expressly  understood  that Agent will not exercise the
aforesaid rights enumerated in clauses (v), (vi),  (viii),  (ix) and (x) of this
Section  4.15(f),  unless  there  shall  have  occurred a Default or an Event of
Default. All acts of said attorney or designee are hereby ratified and approved,
and said  attorney or  designee  shall not be liable for any acts of omission or
commission  nor for any error of judgment  or mistake of fact or of law,  unless
done maliciously or with gross (not mere)  negligence;  this power being coupled
with an interest is  irrevocable  while any of the  Obligations  remain  unpaid.
Agent shall have the right at any time following the

                                       35
<PAGE>

occurrence of an Event of Default or Default, to change the address for delivery
of mail  addressed to any Borrower to such address as Agent may designate and to
receive, open and dispose of all mail addressed to any Borrower.

            (g)  No Liability.  Neither  Agent nor any Lender  shall,  under any
                 ------------
circumstances  or in any event  whatsoever,  have any liability for any error or
omission or delay of any kind occurring in the settlement, collection or payment
of any of the Receivables or any instrument  received in payment thereof, or for
any damage resulting therefrom.  Following the occurrence of an Event of Default
or Default,  Agent may, without notice or consent from any Borrower, sue upon or
otherwise collect, extend the time of payment of, compromise or settle for cash,
credit  or upon  any  terms  any of the  Receivables  or any  other  securities,
instruments or insurance  applicable thereto and/or release any obligor thereof.
Agent is  authorized  and empowered to accept,  following  the  occurrence of an
Event of Default or Default,  the return of the goods  represented by any of the
Receivables,  without  notice  to  or  consent  by  any  Borrower,  all  without
discharging or in any way affecting any Borrower's liability hereunder.

            (h)  Establishment  of a  Lockbox  Account,  Dominion  Account.  All
                 ---------------------------------------------------------
proceeds of  Collateral  shall,  at the  direction  of Agent,  be  deposited  by
Borrowers  into a lockbox  account,  dominion  account  or such  other  "blocked
account"  ("Blocked  Accounts") as Agent may require  pursuant to an arrangement
with such bank as may be  selected  by  Borrowers  and be  acceptable  to Agent.
Borrowers  shall issue to any such bank, an  irrevocable  letter of  instruction
directing said bank to transfer such funds so deposited to Agent,  either to any
account  maintained  by Agent at said bank or by wire  transfer  to  appropriate
account(s)  of  Agent.  All  funds  deposited  in  such  Blocked  Account  shall
immediately  become  the  property  of Agent  and  Borrowers  shall  obtain  the
agreement  by such  bank to  waive  any  offset  rights  against  the  funds  so
deposited.  Neither  Agent nor any Lender  assumes any  responsibility  for such
blocked account arrangement,  including without limitation,  any claim of accord
and  satisfaction  or release  with  respect to  deposits  accepted  by any bank
thereunder.  Alternatively, Agent may establish depository accounts ("Depository
Accounts") in the name of Agent at a bank or banks for the deposit of such funds
and  Borrowers  shall  deposit all  proceeds of  Collateral  or cause same to be
deposited,  in kind, in such Depository  Accounts of Agent in lieu of depositing
same to the Blocked Accounts.

            (i)  Adjustments.   No  Borrower  will,   without  Agent's  consent,
                 -----------
compromise or adjust any material  amount of the Receivables (or extend the time
for payment  thereof) or grant any additional  discounts,  allowances or credits
thereon except for those compromises,  adjustments,  returns, discounts, credits
and  allowances  as have  been  heretofore  customary  in the  business  of such
Borrower.

      4.16. Inventory.   To the extent Inventory held for sale or lease has been
            ---------
produced by any  Borrower,  it has been and will be produced by such Borrower in
accordance  with the Federal Fair Labor  Standards Act of 1938, as amended,  and
all rules, regulations and orders thereunder.

      4.17. Maintenance of Equipment.  The Equipment shall be maintained in good
            ------------------------
operating  condition  and repair  (reasonable  wear and tear  excepted)  and all
necessary

                                       36
<PAGE>

replacements  of and  repairs  thereto  shall  be  made so that  the  value  and
operating  efficiency of the Equipment  shall be maintained  and  preserved.  No
Borrower  shall use or operate the  Equipment in violation of any law,  statute,
ordinance, code, rule or regulation.

      4.18. Exculpation  of  Liability.    Nothing  herein  contained  shall  be
            --------------------------
construed  to  constitute  Agent or any Lender as any  Borrower's  agent for any
purpose  whatsoever,  nor shall Agent or any Lender 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.
Neither Agent nor any Lender, whether by anything herein or in any assignment or
otherwise,  assume  any of any  Borrower's  obligations  under any  contract  or
agreement  assigned to Agent or such  Lender,  and neither  Agent nor any Lender
shall be  responsible  in any way for the  performance by any Borrower of any of
the terms and conditions thereof.

      4.19. Environmental  Matters.  (a)  Borrowers shall ensure  that the  Real
            ----------------------
Property  remains in compliance with all  Environmental  Laws and they shall not
place or permit to be  placed  any  Hazardous  Substances  on any Real  Property
except as permitted by applicable law or appropriate governmental authorities.

            (b)  Borrowers  shall  establish and maintain a system to assure and
monitor continued compliance with all applicable Environmental Laws which system
shall include periodic reviews of such compliance.

            (c)  Borrowers  shall (i) employ in  connection  with the use of the
Real Property  appropriate  technology necessary to maintain compliance with any
applicable  Environmental  Laws and (ii) dispose of any and all Hazardous  Waste
generated  at the  Real  Property  only at  facilities  and with  carriers  that
maintain valid permits under RCRA and any other applicable  Environmental  Laws.
Borrowers shall use their best efforts to obtain certificates of disposal,  such
as hazardous waste manifest receipts, from all treatment,  transport, storage or
disposal  facilities or operators  employed by Borrowers in connection  with the
transport or disposal of any Hazardous Waste generated at the Real Property.

            (d)  In the event any Borrower obtains,  gives or receives notice of
any  Release or threat of  Release of a  reportable  quantity  of any  Hazardous
Substances at the Real Property (any such event being hereinafter referred to as
a  "Hazardous  Discharge")  or  receives  any notice of  violation,  request for
information or notification that it is potentially responsible for investigation
or cleanup of  environmental  conditions at the Real Property,  demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of Environmental  Laws affecting the Real Property or any
Borrower's  interest  therein (any of the  foregoing is referred to herein as an
"Environmental   Complaint")  from  any  Person,   including  any  state  agency
responsible in whole or in part for environmental  matters in the state in which
the Real  Property  is  located or the United  States  Environmental  Protection
Agency (any such person or entity  hereinafter the "Authority"),  then Borrowers
shall,  within five (5)  Business  Days,  give  written  notice of same to Agent
detailing facts and  circumstances of which any Borrower is aware giving rise to
the Hazardous  Discharge or Environmental  Complaint.  Such information is to be
provided to allow Agent to protect its  security  interest in the Real  Property

                                       37
<PAGE>

and the  Collateral  and is not  intended  to create  nor  shall it  create  any
obligation upon Agent or any Lender with respect thereto.

            (e) Borrowers shall promptly  forward to Agent copies of any request
for information,  notification of potential liability, demand letter relating to
potential  responsibility  with  respect  to the  investigation  or  cleanup  of
Hazardous  Substances at any other site owned,  operated or used by any Borrower
to dispose of  Hazardous  Substances  and shall  continue  to forward  copies of
correspondence  between any Borrower and the Authority  regarding such claims to
Agent  until the claim is settled.  Borrowers  shall  promptly  forward to Agent
copies of all documents and reports concerning a Hazardous Discharge at the Real
Property  that any  Borrower is required to file under any  Environmental  Laws.
Such  information  is to be provided  solely to allow  Agent to protect  Agent's
security interest in the Real Property and the Collateral.

            (f) Borrowers shall respond  promptly to any Hazardous  Discharge or
Environmental  Complaint and take all necessary action in order to safeguard the
health of any Person and to avoid  subjecting the Collateral or Real Property to
any Lien.  If any  Borrower  shall fail to  respond  promptly  to any  Hazardous
Discharge or  Environmental  Complaint or any Borrower shall fail to comply with
any of the  requirements of any  Environmental  Laws, Agent on behalf of Lenders
may, but without the  obligation  to do so, for the sole  purpose of  protecting
Agent's interest in Collateral: (A) give such notices or (B) enter onto the Real
Property (or authorize  third parties to enter onto the Real  Property) and take
such  actions  as Agent (or such  third  parties  as  directed  by  Agent)  deem
reasonably  necessary or advisable,  to clean up, remove,  mitigate or otherwise
deal  with  any  such  Hazardous  Discharge  or  Environmental   Complaint.  All
reasonable  costs and  expenses  incurred  by Agent and  Lenders  (or such third
parties)  in the  exercise  of any  such  rights,  including  any  sums  paid in
connection  with any judicial or  administrative  investigation  or proceedings,
fines and  penalties,  together with interest  thereon from the date expended at
the Default Rate for Domestic Rate Loans  constituting  Revolving Advances shall
be paid upon demand by Borrowers,  and until paid shall be added to and become a
part of the  Obligations  secured  by the  Liens  created  by the  terms of this
Agreement or any other agreement between Agent, any Lender and any Borrower.

            (g) Promptly upon the reasonable  written request of Agent from time
to  time,  Borrowers  shall  provide  Agent,  at  Borrowers'  expense,  with  an
environmental  site  assessment  or  environmental  audit report  prepared by an
environmental engineering firm acceptable in the reasonable opinion of Agent, to
assess  with a  reasonable  degree of  certainty  the  existence  of a Hazardous
Discharge and the  potential  costs in connection  with  abatement,  cleanup and
removal  of any  Hazardous  Substances  found on,  under,  at or within the Real
Property.  Any report or investigation of such Hazardous  Discharge proposed and
acceptable to an  appropriate  Authority that is charged to oversee the clean-up
of such Hazardous  Discharge  shall be acceptable to Agent.  If such  estimates,
individually or in the aggregate, exceed $100,000, Agent shall have the right to
require Borrowers to post a bond, letter of credit or other security  reasonably
satisfactory to Agent to secure payment of these costs and expenses.

            (h) Borrowers  shall defend and indemnify Agent and Lenders and hold
Agent, Lenders and their respective  employees,  agents,  directors and officers
harmless from and against

                                       38
<PAGE>

all loss,  liability,  damage and expense,  claims,  costs, fines and penalties,
including  attorney's fees, suffered or incurred by Agent or Lenders under or on
account of any Environmental Laws, including,  without limitation, the assertion
of any Lien thereunder, with respect to any Hazardous Discharge, the presence of
any Hazardous  Substances  affecting the Real Property,  whether or not the same
originates  or emerges  from the Real  Property or any  contiguous  real estate,
including  any loss of value of the Real  Property as a result of the  foregoing
except to the extent such loss, liability, damage and expense is attributable to
any  Hazardous  Discharge  resulting  from  actions  on the part of Agent or any
Lender.  Borrowers'  obligations  under this  Section  4.19 shall arise upon the
discovery  of the presence of any  Hazardous  Substances  at the Real  Property,
whether or not any federal,  state, or local  environmental  agency has taken or
threatened  any  action  in  connection  with  the  presence  of  any  Hazardous
Substances.  Borrowers'  obligation  and the  indemnifications  hereunder  shall
survive the termination of this Agreement.

            (i) For  purposes of Section 4.19 and 5.7,  all  references  to Real
Property shall be deemed to include all of Borrowers' right,  title and interest
in and to its owned and leased premises.

      4.20. Financing  Statements.  Except as respects the financing  statements
            ---------------------
filed by Agent and the  financing  statements  described  on  Schedule  1.2,  no
                                                              -------------
financing statement covering any of the Collateral or any proceeds thereof is on
file in any public office.

V.    REPRESENTATIONS AND WARRANTIES.
      ------------------------------

      Each Borrower represents and warrants as follows:

      5.1.  Authority.   Each Borrower has full power, authority and legal right
            ---------
to enter into this  Agreement  and the Other  Documents  and to perform  all its
respective  Obligations  hereunder and thereunder.  This Agreement and the Other
Documents  constitute the legal,  valid and binding  obligation of such Borrower
enforceable in accordance with their terms, except as such enforceability may be
limited by any  applicable  bankruptcy,  insolvency,  moratorium or similar laws
affecting creditors' rights generally.  The execution,  delivery and performance
of this  Agreement  and of the Other  Documents  (a) are within such  Borrower's
corporate powers, have been duly authorized,  are not in contravention of law or
the terms of such  Borrower's  by-laws,  certificate of  incorporation  or other
applicable  documents relating to such Borrower's formation or to the conduct of
such  Borrower's  business or of any material  agreement or undertaking to which
such  Borrower is a party or by which such  Borrower is bound,  and (b) will not
conflict with nor result in any breach in any of the provisions of or constitute
a  default  under  or  result  in the  creation  of any  Lien  except  Permitted
Encumbrances  upon any  asset  of such  Borrower  under  the  provisions  of any
agreement,  charter document,  instrument,  by-law, or other instrument to which
such Borrower is a party or by which it or its property may be bound.

      5.2.  Formation and Qualification.  (a) Each Borrower is duly incorporated
            ---------------------------
and in good standing  under the laws of the state listed on Schedule  5.2(a) and
                                                            ----------------
is  qualified  to do business  and is in good  standing in the states  listed on
Schedule 5.2(a) which constitute all states in which
---------------

                                       39
<PAGE>

qualification  and good  standing are necessary for such Borrower to conduct its
business  and own its  property  and  where  the  failure  to so  qualify  could
reasonably be expected to have a Material Adverse Effect on such Borrower.  Each
Borrower has delivered to Agent true and complete  copies of its  certificate of
incorporation  and by-laws and will  promptly  notify Agent of any  amendment or
changes thereto.

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

      5.3. Survival of Representations  and Warranties.  All representations and
           -------------------------------------------
warranties of such Borrower  contained in this Agreement and the Other Documents
shall be true at the time of such Borrower's execution of this Agreement and the
Other  Documents,  and shall  survive the  execution,  delivery  and  acceptance
thereof by the parties  thereto and the  closing of the  transactions  described
therein or related thereto.

      5.4. Tax Returns. Each Borrower's federal tax identification number is set
           -----------
forth on  Schedule  5.4.  Each  Borrower  has  filed or  caused  to be filed all
          -------------
federal,  state and local tax returns and other  reports each is required by law
to file and has paid all taxes, assessments, fees and other governmental charges
that are due and  payable.  Federal,  state and local income tax returns of each
Borrower  have  been  examined  and  reported  upon  by the  appropriate  taxing
authority or closed by  applicable  statute and  satisfied  for all fiscal years
except as listed on Schedule  5.4(a).  The  provision  for taxes on the books of
each Borrower are adequate for all years not closed by applicable statutes,  and
for its current fiscal year, and no Borrower has any knowledge of any deficiency
or additional assessment in connection therewith not provided for on its books.

      5.5. Financial Statements.
           --------------------

           The consolidated and consolidating  balance sheets of the  Borrowers,
their  Subsidiaries  and such other Persons  described  therein  (including  the
accounts  of  all  Subsidiaries  for  the  respective  periods  during  which  a
subsidiary  relationship  existed)  as of  December  31,  1999,  and the related
statements of income,  changes in stockholder's equity, and changes in cash flow
for the period ended on such date, all accompanied by reports thereon containing
opinions  without  qualification by independent  certified  public  accountants,
copies of which have been  delivered to Agent,  have been prepared in accordance
with GAAP, consistently applied (except for changes in application in which such
accountants  concur) and present fairly the financial  position of the Borrowers
and their Subsidiaries at such date and the results of their operations for such
period.  Since  December  31, 1999,  there has been no change in the  condition,
financial  or  otherwise,  of Borrowers  or their  Subsidiaries  as shown on the
consolidated  balance sheet as of such date and no change in the aggregate value
of  machinery,  equipment  and  Real  Property  owned  by  Borrowers  and  their
respective Subsidiaries, except changes in the ordinary course of business, none
of which individually or in the aggregate has been materially adverse.

      5.6. Corporate Name.  Except as set forth on Schedule 5.6, no Borrower has
           --------------                          ------------
been known by any other  corporate name in the past five years and does not sell
Inventory  under  any  other  name  nor  has any  Borrower  been  the  surviving
corporation of a merger or consolidation or

                                       40
<PAGE>

acquired  all or  substantially  all of the  assets  of any  Person  during  the
preceding five (5) years.

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

            (a)  Each  Borrower  has duly  complied  with,  and its  facilities,
business,  assets,  property,  leaseholds and Equipment are in compliance in all
material  respects with, the provisions of the Federal  Occupational  Safety and
Health Act, the Environmental  Protection Act, RCRA and all other  Environmental
Laws;  there  have  been  no  outstanding   citations,   notices  or  orders  of
non-compliance  issued to any  Borrower  or relating  to its  business,  assets,
property, leaseholds or Equipment under any such laws, rules or regulations.

            (b)  Each Borrower has been issued all required  federal,  state and
local licenses, certificates or permits relating to all applicable Environmental
Laws.

            (c)  (i) There are no visible signs of releases, spills, discharges,
leaks  or  disposal  (collectively  referred  to  as  "Releases")  of  Hazardous
Substances  at,  upon,  under or within  any Real  Property;  (ii)  there are no
underground  storage tanks or  polychlorinated  biphenyls on the Real  Property;
(iii) the Real Property has never been used as a treatment,  storage or disposal
facility of Hazardous Waste; and (iv) no Hazardous Substances are present on the
Real Property or any premises leased by any Borrower,  excepting such quantities
as are handled in accordance with all applicable manufacturer's instructions and
governmental  regulations and in proper storage  containers and as are necessary
for the operation of the commercial business of any Borrower or of its tenants.

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

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

            (b)  Except as disclosed in Schedule 5.8(b), no Borrower has (i) any
                                        ---------------
pending or threatened  litigation,  arbitration,  actions or  proceedings  which
involve the  possibility  of having a Material  Adverse Effect on such Borrower,
and (ii) any  liabilities  nor  indebtedness  for borrowed  money other than the
Obligations.

            (c)  To the knowledge of any  Borrower, no Borrower is in  violation
of any  applicable  statute,  regulation or ordinance in any respect which could
reasonably be expected to have a Material  Adverse Effect on such  Borrower.  No
Borrower is in  violation of any order of any court,  governmental  authority or
arbitration board or tribunal.

            (d)  No Borrower nor any member of the Controlled Group maintains or
contributes  to any Plan other  than those  listed on  Schedule  5.8(d)  hereto.
                                                       ----------------
Except as set forth in

                                       41
<PAGE>

Schedule 5.8(d), (i) no Plan has incurred any "accumulated  funding deficiency,"
---------------
as defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code, whether
or not waived, and each Borrower and each member of the Controlled Group has met
all  applicable  minimum  funding  requirements  under  Section  302 of ERISA in
respect of each Plan,  (ii) each Plan which is intended  to be a qualified  plan
under Section  401(a) of the Code as currently in effect has been  determined by
the Internal  Revenue  Service to be qualified  under Section 401(a) of the Code
and the trust  related  thereto is exempt from federal  income tax under Section
501(a) of the Code, (iii) no Borrower nor any member of the Controlled Group has
incurred any  liability to the PBGC other than for the payment of premiums,  and
there are no premium  payments  which have become due which are unpaid,  (iv) no
Plan has been terminated by the plan administrator  thereof nor by the PBGC, and
there is no occurrence which would cause the PBGC to institute proceedings under
Title IV of ERISA to terminate any Plan,  (v) at this time, the current value of
the assets of each Plan  exceeds the present  value of the accrued  benefits and
other  liabilities of such Plan and no Borrower nor any member of the Controlled
Group  knows of any facts or  circumstances  which would  materially  change the
value of such  assets  and  accrued  benefits  and  other  liabilities,  (vi) no
Borrower  nor  any  member  of the  Controlled  Group  has  breached  any of the
responsibilities,  obligations  or duties imposed on it by ERISA with respect to
any Plan,  (vii) no Borrower nor any member of a  Controlled  Group has incurred
any  liability  for any excise tax arising  under  Section  4972 or 4980B of the
Code, and no fact exists which could give rise to any such liability,  (viii) no
Borrower nor any member of the  Controlled  Group nor any  fiduciary of, nor any
trustee to, any Plan,  has engaged in a  "prohibited  transaction"  described in
Section 406 of the ERISA or Section  4975 of the Code nor taken any action which
would constitute or result in a Termination  Event with respect to any such Plan
which is subject to ERISA,  (ix) each Borrower and each member of the Controlled
Group has made all  contributions due and payable with respect to each Plan, (x)
there  exists no event  described  in Section  4043(b)  of ERISA,  for which the
thirty (30) day notice period contained in 29 CFR ss.2615.3 has not been waived,
(xi) no  Borrower  nor any  member of the  Controlled  Group  has any  fiduciary
responsibility for investments with respect to any plan existing for the benefit
of persons  other than  employees  or former  employees  of any Borrower and any
member of the  Controlled  Group,  and (xii) no  Borrower  nor any member of the
Controlled Group has withdrawn,  completely or partially, from any Multiemployer
Plan so as to incur  liability under the  Multiemployer  Pension Plan Amendments
Act of 1980.

      5.9. Patents, Trademarks,  Copyrights and Licenses. Except as set forth on
           ---------------------------------------------
Schedule  5.9:  (a) All  patents,  patent  applications,  trademarks,  trademark
-------------
applications,  service marks, service mark applications,  copyrights,  copyright
applications,  design  rights,  tradenames,  assumed names and licenses owned or
utilized by any  Borrower,  if any,  are set forth on Schedule  5.9 (except that
                                                      -------------
such  licenses are not listed on Schedule  5.9),  are, to the best of Borrowers'
knowledge,  information and belief, valid and have been duly registered or filed
with  all  appropriate  governmental  authorities  and  constitute  all  of  the
intellectual  property  rights  which are  necessary  for the  operation  of its
business;  there is no objection to or pending  challenge to the validity of any
such patent,  trademark,  copyright,  design right,  tradename or license and no
Borrower  is aware of any  grounds  for any  challenge,  except  as set forth in
Schedule 5.9 hereto;  (b) To the best of Borrowers'  knowledge,  information and
------------
belief, each patent, patent application,  patent license,  trademark,  trademark
application,  trademark license, service mark, service mark application, service
mark  license,  design right,  copyright,  copyright  application  and copyright

                                       42
<PAGE>

license owned or held by any Borrower and all trade secrets used by any Borrower
consist of  original  material  or property  developed  by such  Borrower or was
lawfully acquired by such Borrower from the proper and lawful owner thereof; (c)
Each of such items has been  maintained so as to preserve the value thereof from
the  date of  creation  or  acquisition  thereof;  and (d) With  respect  to all
software  used by any  Borrower,  such  Borrower,  to the extent its use of such
software requires source or object codes and/or source code escrow agreement, is
in  possession of such source and object codes related to each piece of software
or is the beneficiary of applicable source code escrow agreements, except to the
extent that the failure to so possess or be a  beneficiary  will not result in a
Material Adverse Effect.

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

      5.11. Default of Indebtedness. No Borrower is in default in the payment of
            -----------------------
the  principal of or interest on any  Indebtedness  or under any  instrument  or
agreement  under or subject  to which any  Indebtedness  has been  issued and no
event has occurred  under the  provisions  of any such  instrument  or agreement
which  with or  without  the  lapse of time or the  giving of  notice,  or both,
constitutes or would constitute an event of default thereunder.

      5.12. No Default.  No Borrower is in default in the payment or performance
            ----------
of any of its contractual obligations and no Default has occurred.

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

      5.14. No Labor Disputes.  Except as set forth on Schedule 5.14 hereto,  no
            -----------------                          -------------
Borrower is involved in any labor  dispute;  there are no strikes or walkouts or
union organization of any Borrower's employees threatened or in existence and no
labor contract is scheduled to expire during the Term other than as set forth on
Schedule 5.14 hereto.
-------------

      5.15. Margin  Regulations.  No Borrower  is engaged,  nor will it  engage,
            -------------------
principally or as one of its important activities,  in the business of extending
credit for the purpose of  "purchasing"  or "carrying" any "margin stock" within
the  respective  meanings  of each of the quoted  terms  under  Regulation  U or
Regulation G of the Board of Governors of the Federal  Reserve System as now and
from time to time  hereafter  in effect.  No part of the proceeds of any Advance
will be used for  "purchasing"  or  "carrying"  "margin  stock"  as  defined  in
Regulation U of such Board of Governors.

                                       43
<PAGE>

      5.16. Investment  Company Act.   No  Borrower is an  "investment  company"
            -----------------------
registered or  required to be  registered  under the  Investment  Company Act of
1940, as amended,  nor is it controlled by such a company.

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

      5.18. Swaps.  No  Borrower  is a party to,  nor will it be a party to, any
            -----
swap  agreement  whereby such Borrower has agreed or will agree to swap interest
rates or currencies unless same provides that damages upon termination following
an event of default  thereunder  are  payable on an  unlimited  "two-way  basis"
without regard to fault on the part of either party.

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

      5.19. Application  of Certain Laws and  Regulations.   No Borrower nor any
            -----------------------
Affiliate of any Borrower is subject to any statute,  rule or  regulation  which
regulates the  incurrence of any  Indebtedness,  including  without  limitation,
statutes or regulations relative to common or interstate carriers or to the sale
of electricity, gas, steam, water, telephone,  telegraph or other public utility
services.

      5.20. Business and Property of Borrowers.   Borrowers did not prior to the
            ----------------------------------
Closing Date and upon and after the Closing Date do not propose to engage in any
business  other  than  providing  information  technology   consulting,   system
integration and implementation,  and outsourced  application management services
and  activities  necessary to conduct the foregoing.  On the Closing Date,  each
Borrower  will own all the  property  and possess all of the rights and Consents
necessary for the conduct of the business of such Borrower.

      5.21. Year 2000. Borrowers and their respective Subsidiaries have reviewed
            ---------
the areas within their business and operations which could be adversely affected
by, and have  developed  a program to address on a timely  basis,  the risk that
certain computer applications used by Borrowers or their respective Subsidiaries
(or any of their  respective  material  suppliers,  customers or vendors) may be
unable to recognize  and perform  properly  date-sensitive  functions  involving
dates after December 31, 1999 (the "Year 2000  Problem").  The Year 2000 Problem
has not had and will not have a Material Adverse Effect on Borrowers.

                                       44
<PAGE>

      5.22. Section 20  Subsidiaries.   Borrowers do not intend to use and shall
            ------------------------
not use any portion of the proceeds of the Advances,  directly or indirectly, to
purchase during the underwriting  period, or for 30 days thereafter,  Ineligible
Securities being underwritten by a Section 20 Subsidiary.

VI.   AFFIRMATIVE COVENANTS.
      ---------------------

      Each  Borrower  shall,  until  payment  in  full  of the  Obligations  and
termination of this Agreement:

      6.1.  Payment of Fees. Pay to Agent on demand all usual and customary fees
            ---------------
and expenses which Agent incurs in connection with (a) the forwarding of Advance
proceeds and (b) the  establishment  and maintenance of any Blocked  Accounts or
Depository  Accounts  as provided  for in Section  4.15(h).  Agent may,  without
making demand, charge Borrowers' Account for all such fees and expenses.

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

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

      6.4.  Government Receivables.  Take all steps necessary to protect Agent's
            ----------------------
interest in the Collateral  under the Federal  Assignment of Claims Act or other
applicable   state  or  local  statutes  or  ordinances  and  deliver  to  Agent
appropriately  endorsed,  any  instrument  or chattel paper  connected  with any
Receivable  arising out of contracts between any Borrower and the United States,
any state or any department, agency or instrumentality of any of them.

      6.5.  INTENTIONALLY OMITTED.

                                       45
<PAGE>

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

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

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

VII.  NEGATIVE COVENANTS.
      ------------------

      No Borrower  shall,  until  satisfaction  in full of the  Obligations  and
termination of this Agreement:

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

            (a) Enter into any  merger,  consolidation  or other  reorganization
with or into any other Person or, except for Permitted Acquisitions, acquire all
or a  substantial  portion  of the  assets or stock of any  Person or permit any
other Person to consolidate with or merge with it.

            (b)  Sell,  lease,  transfer  or  otherwise  dispose  of  any of its
properties or assets,  except: (i) in the ordinary course of its business;  (ii)
as provided in Section 4.3; and (iii) in conjunction with the SeraNova Spin-Off.

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

      7.3.  Guarantees.  Become  liable upon the  obligations  of any  Person by
            ----------
assumption, endorsement or guaranty thereof or otherwise (other than to Lenders)
except the endorsement of checks in the ordinary course of business.

      7.4.  Investments.  Purchase  or acquire  obligations  or stock of, or any
            -----------
other interest in,

                                       46
<PAGE>

any Person,  except (a) obligations issued or guaranteed by the United States of
America or any agency thereof,  (b) commercial paper with maturities of not more
than  180  days  and a  published  rating  of not  less  than A-1 or P-1 (or the
equivalent  rating),  (c) certificates of time deposit and bankers'  acceptances
having maturities of not more than 180 days and repurchase  agreements backed by
United States government  securities of a commercial bank if (i) such bank has a
combined  capital  and  surplus  of at  least  $500,000,000,  or (ii)  its  debt
obligations,  or those of a holding  company  of which it is a  Subsidiary,  are
rated not less than A (or the  equivalent  rating)  by a  nationally  recognized
investment rating agency,  and (d) U.S. money market funds that invest solely in
obligations  issued or  guaranteed  by the United States of America or an agency
thereof.

      7.5.  Loans.  Make advances,  loans or extensions of credit to any Person,
            -----
including  without  limitation,  any Parent,  Subsidiary or Affiliate  except as
hereinafter  provided and loans made in the ordinary course of business:  (a) to
employees not to exceed the aggregate  amount of Four Hundred  Thousand  Dollars
($400,000.00) at any time  outstanding;  (b) to SeraNova after the Closing Date,
except in connection with the SeraNova Spin-Off,  as set forth in Section 7.5(c)
below;  (c) to SeraNova  prior to the  SeraNova  Spin-Off  (i) not to exceed the
aggregate   amount   of   Fifteen   Million   One   Hundred   Thousand   Dollars
($15,100,000.00)  at any time outstanding and (ii) to be repaid in full no later
than December 31, 2000;  and (d) after the Closing Date to foreign  subsidiaries
or  divisions,  not to exceed the  aggregate  amount of One  Million Two Hundred
Fifty Thousand Dollars ($1,250,000.00) at any time outstanding.  Notwithstanding
anything contained herein to the contrary, Borrowers may make advances, loans or
extensions of credit to their Subsidiaries which are organized under the laws of
a United States jurisdiction  without restriction as to dollar amount,  provided
Agent shall have received executed Guarantee,  Guarantor Security Agreements and
such other documents as Agent may require all in form and substance satisfactory
to Agent.

      7.6.  Capital Expenditures. Contract for, purchase or make any expenditure
            --------------------
or commitments  for fixed or capital assets  (including  capitalized  leases but
excluding capitalized internally developed software costs) in any fiscal year in
an  aggregate  amount for all  Borrowers  in excess:  (a) Four  Million  Dollars
($4,000,000.00) during fiscal year 2000; (b) Five Million Dollars ($5,000,000.00
during  fiscal year 2001;  and (c) Five Million Five  Hundred  Thousand  Dollars
($5,500,000.00) during fiscal year 2002.

      7.7.  Dividends.  Declare, pay or make any dividend or distribution on any
            ---------
shares of the  common  stock or  preferred  stock of any  Borrower  (other  than
dividends   or   distributions   payable  in  its   stock,   or   split-ups   or
reclassifications of its stock) or apply any of its funds, property or assets to
the purchase,  redemption or other  retirement of any common or preferred stock,
or of any options to purchase or acquire any such shares of common or  preferred
stock of any Borrower.

      7.8.  Indebtedness.   Create,  incur,  assume  or  suffer  to   exist  any
            ------------
Indebtedness  (exclusive of trade debt) except in respect of (i) Indebtedness to
Lenders;  (ii) Indebtedness  incurred for capital  expenditures  permitted under
Section  7.6  hereof.;  and (iii)  Indebtedness  incurred in  connection  with a
Permitted  Acquisition,  the terms and  conditions  of which must be  reasonably

                                       47
<PAGE>

acceptable to Agent and Lenders,  provided,  however,  (a) the Indebtedness of a
corporation  which  becomes a  Subsidiary  of a Borrower  after the date  hereof
existed at the time such corporation  became a Subsidiary and was not created in
anticipation of the acquisition,  and (b) immediately after giving effect to the
acquisition of such  corporation  by a Borrower,  no Default or Event of Default
shall have occurred or be continuing.

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

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

      7.11. Leases.  Enter as  lessee  into any  lease  arrangement  for real or
            ------
personal property (unless  capitalized and permitted under Section 7.6 hereof or
leases directly associated with ASP+ and providing hosting services to Customers
pursuant to which said Customers are obligated to reimburse or pay to a Borrower
the payments due under said leases) if after giving  effect  thereto,  aggregate
additional  annual  rental  payments  (after  the  Closing  Date) for all leased
property would exceed Five Hundred  Thousand  Dollars  ($500,000.00)  in any one
fiscal year in the aggregate for all Borrowers.

      7.12. Subsidiaries.
            ------------

            (a) Form any Subsidiary unless (i) such Subsidiary expressly becomes
a  Guarantor  hereunder  and  Agent  receives  a pledge of all the stock of each
Subsidiary  formed in a United States  jurisdiction  or not less than sixty five
percent (65%) of the stock of each Subsidiary  formed in a jurisdiction  outside
of the United States and (ii) Agent shall have received all documents, including
legal opinions,  it may reasonably require to establish  compliance with each of
the foregoing conditions.

            (b)  Enter   into  any   partnership,   joint   venture  or  similar
arrangement,   without   Agent's  prior  written  consent  which  shall  not  be
unreasonably withheld.

                                       48
<PAGE>

      7.13. Fiscal Year and Accounting Changes.  Change its fiscal year-end from
            ----------------------------------
December  31 or make  any  change  (i) in  accounting  treatment  and  reporting
practices  except as required by GAAP or (ii) in tax reporting  treatment except
as required by law.

      7.14. Pledge of Credit.  Now or hereafter pledge  Agent's or any  Lender's
            ----------------
credit on any purchases or for any purpose  whatsoever or use any portion of any
Advance in or for any business other than such  Borrower's business as conducted
on the date of this Agreement.

      7.15. Amendment of Articles of Incorporation,  By-Laws.   Amend, modify or
            ------------------------------------------------
waive any material term or material  provision of its Articles of  Incorporation
or By-Laws unless required by law.

      7.16. Compliance with ERISA. (i) (x) Maintain, or permit any member of the
            ---------------------
Controlled Group to maintain,  or (y) become obligated to contribute,  or permit
any member of the Controlled  Group to become  obligated to  contribute,  to any
Plan,  other than those Plans  disclosed on Schedule  5.8(d),  (ii)  engage,  or
                                            ----------------
permit  any  member  of the  Controlled  Group  to  engage,  in  any  non-exempt
"prohibited  transaction",  as that term is defined in section  406 of ERISA and
Section 4975 of the Code,  (iii) incur,  or permit any member of the  Controlled
Group to incur, any "accumulated funding deficiency", as that term is defined in
Section 302 of ERISA or Section 412 of the Code, (iv)  terminate,  or permit any
member of the  Controlled  Group to  terminate,  any Plan where such event could
result in any liability of any Borrower or any member of the Controlled Group or
the  imposition  of a lien on the  property of any Borrower or any member of the
Controlled  Group pursuant to Section 4068 of ERISA,  (v) assume,  or permit any
member of the  Controlled  Group to assume,  any obligation to contribute to any
Multiemployer  Plan not disclosed on Schedule 5.8(d),  (vi) incur, or permit any
                                     ---------------
member  of the  Controlled  Group to  incur,  any  withdrawal  liability  to any
Multiemployer Plan; (vii) fail promptly to notify Agent of the occurrence of any
Termination  Event,  (viii) fail to comply, or permit a member of the Controlled
Group to fail to  comply,  with the  requirements  of ERISA or the Code or other
applicable  laws in respect of any Plan, (ix) fail to meet, or permit any member
of the Controlled Group to fail to meet, all minimum funding  requirements under
ERISA or the Code or  postpone  or delay or allow any  member of the  Controlled
Group to postpone or delay any funding requirement with respect of any Plan.

      7.17. Prepayment of  Indebtedness.  At any time,  directly or  indirectly,
            ---------------------------
prepay any Indebtedness  (other than to Lenders),  or repurchase, redeem, retire
or otherwise acquire any Indebtedness of any Borrower.

      7.18. Total  Stockholders  Equity.   Cause,  suffer  or  permit  the Total
            ---------------------------
Stockholders Equity to be or become: (a) as at June 30, 2000, September 30, 2000
and December 31, 2000, less than Forty-Two Million Dollars ($42,000,000.00); (b)
as at each fiscal quarter after  Borrowers'  December 31, 2000 fiscal  year-end,
not less than ninety-five percent (95%) of the Total Stockholders Equity for the
immediately  preceding  fiscal  year-end;  and  (c) as at each  fiscal  year-end
subsequent to Borrowers' December 31, 2000 fiscal year-end, at least one hundred
five  percent  (105%) of the  Total  Stockholders  Equity as of the  immediately
preceding fiscal year-end;  provided, however, the foregoing covenants set forth
in Sections 7.18(a), (b) and (c) shall

                                       49
<PAGE>

not be tested for any quarter  during the Term so long as Borrowers  maintain at
all times  during such fiscal  quarter  Undrawn  Availability  of more than Five
Million Dollars ($5,000,000.00).

      7.19. Unconsolidated  Stockholders  Equity.   Cause,  suffer or permit the
            ------------------------------------
Unconsolidated  Stockholders  Equity to be or become:  (a) as at June 30,  2000,
September 30, 2000 and December 31, 2000, less than Thirty-Nine  Million Dollars
($39,000,000.00);  (b) as at each fiscal quarter after  Borrower's  December 31,
2000  fiscal  year-end,   not  less  than  ninety-five   percent  (95%)  of  the
Unconsolidated   Stockholders  Equity  for  the  immediately   preceding  fiscal
year-end;  and (c) as at each fiscal year-end  subsequent to Borrowers' December
31,  2000  fiscal  year-end,  at least one hundred  five  percent  (105%) of the
Unconsolidated  Stockholders  Equity  as of  the  immediately  preceding  fiscal
year-end;  provided,  however,  the  foregoing  covenants  set forth in Sections
7.19(a), (b) and (c) shall not be tested for any quarter during the Term so long
as  Borrowers   maintain  at  all  times  during  such  fiscal  quarter  Undrawn
Availability of more than Five Million Dollars ($5,000,000.00).

VIII. CONDITIONS PRECEDENT.
      --------------------

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

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

            (b) Filings, Registrations and Recordings. Each document (including,
                -------------------------------------
without limitation, any Uniform Commercial Code financing statement) required by
this Agreement,  any related  agreement or under law or reasonably  requested by
the Agent to be filed,  registered  or recorded in order to create,  in favor of
Agent, a perfected  security  interest in or lien upon the Collateral shall have
been properly  filed,  registered or recorded in each  jurisdiction in which the
filing,  registration  or recordation  thereof is so required or requested,  and
Agent shall have received an acknowledgment copy, or other evidence satisfactory
to it,  of each  such  filing,  registration  or  recordation  and  satisfactory
evidence of the payment of any necessary fee, tax or expense relating thereto;

            (c) Corporate Proceedings of Borrowers.  Agent shall have received a
                ----------------------------------
copy of the resolutions in form and substance reasonably  satisfactory to Agent,
of the  Board of  Directors  of each  Borrower  authorizing  (i) the  execution,
delivery and performance of this Agreement, the Note and any related agreements,
(collectively  the  "Documents")  and (ii) the granting by each  Borrower of the
security  interests in and liens upon the  Collateral in each case  certified by
the Secretary or an Assistant Secretary of each Borrower as of the Closing Date;
and, such certificate  shall state that the resolutions  thereby  certified have
not  been  amended,  modified,  revoked  or  rescinded  as of the  date  of such
certificate;

                                       50
<PAGE>

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

            (e) Intentionally Omitted;
                ---------------------

            (f) Intentionally Omitted;
                ---------------------

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

            (h) Good  Standing  Certificates.  Agent  shall have  received  good
                ----------------------------
standing  certificates  for each Borrower  dated not more than fifteen (15) days
prior to the Closing Date, issued by the Secretary of State or other appropriate
official of each Borrower's  jurisdiction of incorporation and each jurisdiction
where the conduct of each Borrower's business activities or the ownership of its
properties necessitates qualification;

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

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

            (k)   Financial  Condition  Certificates.  Agent shall have received
                  ----------------------------------
an executed Financial Condition Certificate in the form of Exhibit 8.1(k).
                                                           --------------

            (l)   Collateral Examination.  Agent shall have completed Collateral
                  ----------------------
examinations and received appraisals, the results of which shall be satisfactory
in form  and  substance  to  Lenders,  of the  Receivables,  Inventory,  General
Intangibles,  and  Equipment  of each  Borrower  and all  books and  records  in
connection therewith;

                                       51
<PAGE>

            (m)   Fees.  Agent shall have received all fees payable to Agent and
                  ----
Lenders on or prior to the Closing Date pursuant to Article III hereof;

            (n)   Insurance.  Agent shall have  received  in form and  substance
                  --------
satisfactory  to  Agent,  certified  copies  of  Borrowers'  casualty  insurance
policies,  together with loss payable  endorsements on Agent's  standard form of
loss payee  endorsement  naming  Agent as loss payee,  and  certified  copies of
Borrowers' liability insurance policies, together with endorsements naming Agent
as a co-insured;

            (o)   Payment  Instructions.   Agent  shall  have  received  written
                  ---------------------
instructions from Borrowers directing the application of proceeds of the initial
Advances made pursuant to this Agreement;

            (p)   Blocked  Accounts.  Agent shall have  received  duly  executed
                  -----------------
agreements  establishing  the  Blocked  Accounts  or  Depository  Accounts  with
financial  institutions  acceptable to Agent for the  collection or servicing of
the Receivables and proceeds of the Collateral;

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

            (r)   No Material Adverse Change.  (i) since March 31,  2000,  there
                  --------------------------
shall not have  occurred  any event,  condition  or state of facts  which  could
reasonably  be  expected  to  have  a  Material   Adverse  Effect  and  (ii)  no
representations  made or information supplied to Agent shall have been proven to
be inaccurate or misleading in any material respect;

            (s)   Leasehold  Agreements.   Agent shall have  received  landlord,
                  ---------------------
mortgagee or warehouseman  agreements  satisfactory to Agent with respect to all
premises leased by Borrowers at which Inventory is located;

            (t)   Stock Pledge  Agreements  and Other  Documents.   Agent  shall
                  ----------------------------------------------
have received (i) the executed  Stock Pledge  Agreements by Borrowers;  and (ii)
the executed Other Documents, all in form and substance satisfactory to Agent;

            (u)   Contract Review.   Agent  shall  have  reviewed  all  material
                  ---------------
contracts of Borrowers including,  without limitation,  leases, union contracts,
labor contracts, vendor supply contracts, license agreements and distributorship
agreements  and such  contracts  and  agreements  shall be  satisfactory  in all
respects to Agent;

            (v)   Closing Certificate.  Agent  shall  have  received  a  closing
                  -------------------
certificate  signed by the Chief Financial  Officer of each Borrower dated as of
the date hereof,  stating that (i) all  representations and warranties set forth
in this Agreement and the Other Documents are true and correct on and as of such
date,  (ii)  Borrowers  are on such  date in  compliance  with all the terms and
provisions set forth in this Agreement and the Other Documents and (iii) on such
date no

                                       52
<PAGE>

Default or Event of Default has occurred or is continuing;

            (w)   Borrowing  Base.   Agent  shall have  received  evidence  from
                  ---------------
Borrowers  that the  aggregate  amount  of  Eligible  Receivables  and  Eligible
Inventory is  sufficient  in value and amount to support  Advances in the amount
requested by Borrowers on the Closing Date;

            (x)   Undrawn  Availability.   After giving  effect to  the  initial
                  ---------------------
Advances hereunder,  Borrowers shall have Undrawn Availability  of at least Five
Million Dollars ($5,000,000.00); and

            (y)   SeraNova Note.  Borrower  shall  have  delivered  to Agent and
                  -------------
endorsed to Agent a promissory note, in form and substance  acceptable to Agent,
evidencing   the  obligation  of  SeraNova  to  repay  to   Intelligroup,   Inc.
indebtedness outstanding as of the Closing Date in the sum of $15,100,000.00 and
the repayment schedule of and interest accruing upon such indebtedness.

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

      8.2.  Conditions  to Each  Advance.  The  agreement of Lenders to make any
            ----------------------------
Advance  requested to be made on any date (including,  without  limitation,  the
initial  Advance),  is subject to the  satisfaction of the following  conditions
precedent as of the date such Advance is made:

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

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

            (c) Maximum  Advances.  In the case of any Advances  requested to be
                -----------------
made, after giving effect thereto,  the aggregate  Advances shall not exceed the
maximum amount of Advances permitted under Section 2.1 hereof.

Each  request  for an Advance  by any  Borrower  hereunder  shall  constitute  a
representation and warranty by each Borrower as of the date of such Advance that
the conditions contained in this subsection shall have been satisfied.

                                       53
<PAGE>

IX.   INFORMATION AS TO BORROWERS.
      ---------------------------

      Each Borrower shall, until satisfaction in full of the Obligations and the
termination of this Agreement:

      9.1.  Disclosure of Material  Matters.  Immediately upon learning thereof,
            -------------------------------
report to Agent all matters  materially  affecting the value,  enforceability or
collectibility of any portion of the Collateral  including,  without limitation,
any Borrower's reclamation or repossession of, or the return to any Borrower of,
a material  amount of goods or claims or disputes  asserted  by any  Customer or
other obligor.

      9.2.  Schedules. Deliver to Agent on or before the fifteenth (15th) day of
            ---------
each  month as and for the prior  month (a)  accounts  receivable  ageings,  (b)
accounts payable schedules and (c) a Borrowing Base Certificate  (which shall be
calculated  as of the last day of the prior month and which shall not be binding
upon Agent or restrictive of Agent's rights under this Agreement).  In addition,
each Borrower will deliver to Agent at such intervals as Agent may require:  (i)
confirmatory  assignment  schedules,  (ii) copies of Customer's invoices,  (iii)
evidence of shipment or  delivery,  and (iv) such further  schedules,  documents
and/or  information  regarding the  Collateral  as Agent may require  including,
without limitation, trial balances and test verifications.  Agent shall have the
right to confirm and verify all Receivables by any manner and through any medium
it  considers  advisable  and do whatever it may deem  reasonably  necessary  to
protect its interests hereunder. The items to be provided under this Section are
to be in form  satisfactory to Agent and executed by each Borrower and delivered
to Agent from time to time solely for Agent's convenience in maintaining records
of the  Collateral,  and any Borrower's  failure to deliver any of such items to
Agent shall not affect,  terminate,  modify or otherwise limit Agent's Lien with
respect to the Collateral.

      9.3.  Environmental Reports. Furnish Agent, concurrently with the delivery
            ---------------------
of the  financial  statements  referred  to in  Sections  9.7  and  9.8,  with a
certificate signed by the President of each Borrower stating, to the best of his
knowledge, that each Borrower is in compliance in all material respects with all
federal,  state and local laws relating to environmental  protection and control
and  occupational  safety  and  health.  To the extent  any  Borrower  is not in
compliance  with the  foregoing  laws,  the  certificate  shall set  forth  with
specificity  all areas of  non-compliance  and the proposed action such Borrower
will implement in order to achieve full compliance.

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

      9.5.  Material  Occurrences.  Promptly  notify  Agent in writing  upon the
            ---------------------
occurrence of (a) any Event of Default or Default; (b) any event, development or
circumstance  whereby any financial  statements  or other  reports  furnished to
Agent fail in any material  respect to present  fairly,  in accordance with GAAP
consistently  applied,  the  financial  condition  or  operating  results of any
Borrower as of the date of such statements;  (c) any accumulated retirement plan
funding

                                       54
<PAGE>

deficiency  which, if such  deficiency  continued for two plan years and was not
corrected as provided in Section 4971 of the Code, could subject any Borrower to
a tax  imposed by Section  4971 of the Code;  (d) each and every  default by any
Borrower  which  might  result  in  the  acceleration  of  the  maturity  of any
Indebtedness,  including  the  names  and  addresses  of  the  holders  of  such
Indebtedness  with respect to which there is a default  existing or with respect
to which the maturity has been or could be  accelerated,  and the amount of such
Indebtedness;  and (e) any other  development  in the business or affairs of any
Borrower which could  reasonably be expected to have a Material  Adverse Effect;
in each case describing the nature thereof and the action  Borrowers  propose to
take with respect thereto.

      9.6.  Government  Receivables.   Notify  Agent  immediately  if any of its
            -----------------------
Receivables  arise out of contracts  between any Borrower and the United States,
any state, or any department, agency or instrumentality of any of them.

      9.7.  Annual Financial Statements.  Furnish Agent within  ninety-five (95)
            ---------------------------
days after the end of each fiscal year of  Borrowers,  financial  statements  of
Borrowers on a consolidating and consolidated  basis including,  but not limited
to,  statements  of  income  and  stockholders'  equity  and cash  flow from the
beginning  of the  current  fiscal  year to the end of such  fiscal year and the
balance sheet as at the end of such fiscal year, all prepared in accordance with
GAAP  applied on a basis  consistent  with prior  practices,  and in  reasonable
detail and  reported  upon without  qualification  by an  independent  certified
public  accounting  firm  selected by Borrowers and  satisfactory  to Agent (the
"Accountants").  The  report  of  the  Accountants  shall  be  accompanied  by a
statement  of the  Accountants  certifying  that (i) they have  caused  the Loan
Agreement to be reviewed,  (ii) in making the examination upon which such report
was based either no information came to their attention which to their knowledge
constituted an Event of Default or a Default under this Agreement or any related
agreement or, if such information  came to their attention,  specifying any such
Default or Event of  Default,  its nature,  when it  occurred  and whether it is
continuing,  and such report shall contain or have appended thereto calculations
which set forth  Borrowers'  compliance  with the  requirements  or restrictions
imposed by Sections 6.5, 7.6 and 7.11 hereof. In addition,  the reports shall be
accompanied by a certificate of each Borrower's  Chief  Financial  Officer which
shall state that,  based on an  examination  sufficient to permit him to make an
informed  statement,  no Default or Event of Default exists,  or, if such is not
the case,  specifying  such  Default or Event of Default,  its  nature,  when it
occurred,  whether it is  continuing  and the steps being taken by such Borrower
with respect to such event,  and such  certificate  shall have appended  thereto
calculations  which set forth  Borrowers'  compliance  with the  requirements or
restrictions imposed by Sections 6.5, 7.5, 7.6 and 7.11 hereof.

      9.8. Quarterly Financial Statements. Furnish Agent within forty-seven (47)
           ------------------------------
days  after  the end of each  fiscal  quarter,  an  unaudited  balance  sheet of
Borrowers on a consolidated and consolidating basis and unaudited  statements of
income and stockholders' equity and cash flow of Borrowers on a consolidated and
consolidating  basis reflecting  results of operations from the beginning of the
fiscal year to the end of such quarter and for such quarter, prepared on a basis
consistent  with prior  practices  and  complete  and  correct  in all  material
respects, subject to normal and recurring year end adjustments that individually
and in the aggregate are not material to the business of Borrowers.  The reports
shall be accompanied by a certificate signed by the

                                       55
<PAGE>

Chief Financial  Officer of each Borrower,  which shall state that,  based on an
examination  sufficient to permit him to make an informed statement,  no Default
or Event of Default exists, or, if such is not the case, specifying such Default
or Event of Default, its nature, when it occurred,  whether it is continuing and
the steps  being taken by  Borrowers  with  respect to such  default  and,  such
certificate shall have appended thereto  calculations which set forth Borrowers'
compliance with the  requirements or restrictions  imposed by Sections 6.5, 7.5,
7.6 and 7.11 hereof.

      9.9.  Monthly Financial Statements.  Furnish Agent within thirty (30) days
            ----------------------------
after the end of each  month,  an  unaudited  balance  sheet of  Borrowers  on a
consolidated  and  consolidating  basis and  unaudited  statements of income and
stockholders'   equity  and  cash  flow  of  Borrowers  on  a  consolidated  and
consolidating  basis reflecting  results of operations from the beginning of the
fiscal  year to the end of such month and for such  month,  prepared  on a basis
consistent  with prior  practices  and  complete  and  correct  in all  material
respects, subject to normal and recurring year end adjustments that individually
and in the aggregate are not material to the business of Borrowers.  The reports
shall  be  accompanied  by a  certificate  of each  Borrower's  Chief  Financial
Officer,  which shall state that,  based on an examination  sufficient to permit
him to make an informed statement, no Default or Event of Default exists, or, if
such is not the case,  specifying such Default or Event of Default,  its nature,
when it  occurred,  whether  it is  continuing  and the  steps  being  taken  by
Borrowers with respect to such event and, such  certificate  shall have appended
thereto calculations which set forth Borrowers' compliance with the requirements
or restrictions imposed by Sections 6.5, 7.5, 7.6 and 7.11 hereof.

      9.10. Other Reports.  Furnish Agent as soon as available, but in any event
            -------------
within ten (10) days after the issuance  thereof,  with copies of such financial
statements,  reports and returns as each Borrower shall send to its stockholders
and/or to the Securities Exchange Commission.

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

      9.12. Projected Operating Budget. Furnish Agent, no later than thirty (30)
            --------------------------
days subsequent to the beginning of each Borrower's fiscal years commencing with
fiscal year 2001, a quarter by quarter projected  operating budget and cash flow
of  Borrowers on a  consolidated  and  consolidating  basis for such fiscal year
(including an income statement and balance sheet for each fiscal quarter),  such
projections to be accompanied by a certificate  signed by the President or Chief
Financial Officer of each Borrower to the effect that such projections have been
prepared on the basis of sound financial planning practice  consistent with past
budgets and

                                       56
<PAGE>

financial  statements  and that  such  officer  has no reason  to  question  the
reasonableness  of any  material  assumptions  on which  such  projections  were
prepared.

      9.13. Variances From Operating Budget.  Furnish  Agent,  concurrently with
            -------------------------------
the  delivery of the  financial  statements  referred to in Section 9.7 and each
monthly report, a written report summarizing all material variances from budgets
submitted by Borrowers pursuant to Section 9.12 and a discussion and analysis by
management  with respect to such  variances,  consistent with what is ordinarily
furnished to the Borrowers' Boards of Directors and management, unless otherwise
requested by Agent.

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

      9.15. ERISA Notices and  Requests.  Furnish Agent with  immediate  written
            ---------------------------
notice in the event that (i) any Borrower or any member of the Controlled  Group
knows or has reason to know that a Termination Event has occurred, together with
a written  statement  describing such Termination  Event and the action, if any,
which such Borrower or any member of the Controlled  Group has taken, is taking,
or proposes to take with respect  thereto and,  when known,  any action taken or
threatened  by the Internal  Revenue  Service,  Department of Labor or PBGC with
respect  thereto,  (ii) any Borrower or any member of the Controlled Group knows
or has reason to know that a prohibited  transaction (as defined in Sections 406
of ERISA and 4975 of the Code) has occurred  together  with a written  statement
describing such  transaction and the action which such Borrower or any member of
the  Controlled  Group has taken,  is taking or  proposes  to take with  respect
thereto,  (iii) a funding waiver request has been filed with respect to any Plan
together with all  communications  received by any Borrower or any member of the
Controlled Group with respect to such request, (iv) any increase in the benefits
of any existing Plan or the establishment of any new Plan or the commencement of
contributions  to any Plan to which any Borrower or any member of the Controlled
Group was not  previously  contributing  shall  occur,  (v) any  Borrower or any
member of the Controlled Group shall receive from the PBGC a notice of intention
to  terminate  a Plan or to  have a  trustee  appointed  to  administer  a Plan,
together with copies of each such notice, (vi) any Borrower or any member of the
Controlled Group shall receive any favorable or unfavorable determination letter
from the Internal  Revenue Service  regarding the  qualification of a Plan under
Section 401(a) of the Code, together with copies of each such letter;  (vii) any
Borrower or any member of the Controlled  Group shall receive a notice regarding
the  imposition  of  withdrawal  liability,  together  with  copies of each such
notice;  (viii) any Borrower or any member of the Controlled Group shall fail to
make a required  installment or any other required  payment under Section 412 of
the Code on or before the due date for such  installment  or  payment;  (ix) any
Borrower or any member of the Controlled Group

                                       57
<PAGE>

knows that (a) a Multiemployer  Plan has been terminated,  (b) the administrator
or plan sponsor of a  Multiemployer  Plan  intends to terminate a  Multiemployer
Plan, or (c) the PBGC has instituted or will institute proceedings under Section
4042 of ERISA to terminate a Multiemployer Plan.

      9.16  Account Debtor  Information.  On the first (1st)  Business Day after
            ---------------------------
January 1 and July 1 of each year and at such other  time as Agent may  request,
provide to Agent a list of all  Account  Debtors to whom  Borrowers  have made a
sale within the last six (6) months  including the name of each Account  Debtor,
the current address of each Account Debtor,  the name of each Borrowers' current
contact at each Account Debtor and the current  telephone number of each Account
Debtor.

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

X.    EVENTS OF DEFAULT.
      -----------------

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

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

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

      10.3. failure by any  Borrower to  (i) furnish financial information  when
due or when  requested,  or (ii) permit the  inspection  of its books or records
upon reasonable prior notice;

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

      10.5. except as otherwise  provided for in Sections 10.1 and 10.3, failure
or neglect of any  Borrower  to perform,  keep or observe  any term,  provision,
condition,  covenant  herein  contained,  or contained in any other agreement or
arrangement, now or hereafter entered into between any Borrower and Agent or any
Lender  except  for a failure or neglect of any  Borrower  to  perform,  keep or
observe any term, provision, condition or covenant, contained in Sections

                                       58
<PAGE>

4.6,  4.7,  4.9, 6.3, 6.4, 9.4 or 9.6 hereof which is cured within ten (10) days
from the occurrence of such failure or neglect;

      10.6.  any  judgment or  judgments  are  rendered or judgment  liens filed
against any Borrower for an aggregate  amount in excess of Five Hundred Thousand
Dollars  ($500,000.00) which within thirty (30) days of such rendering or filing
is not either satisfied, stayed or discharged of record;

      10.7.  any  Borrower  shall  (i)  apply  for,  consent  to or  suffer  the
appointment of, or the taking of possession by, a receiver,  custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its
property,  (ii) make a general  assignment  for the benefit of creditors,  (iii)
commence a voluntary case under any state or federal  bankruptcy laws (as now or
hereafter in effect),  (iv) be  adjudicated a bankrupt or insolvent,  (v) file a
petition  seeking to take advantage of any other law providing for the relief of
debtors, (vi) acquiesce to, or fail to have dismissed,  within thirty (30) days,
any petition  filed  against it in any  involuntary  case under such  bankruptcy
laws,  or  (vii)  take  any  action  for the  purpose  of  effecting  any of the
foregoing;

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

      10.9. any Affiliate or any  Subsidiary of any Borrower,  or any Guarantor,
shall (i) apply for,  consent to or suffer the  appointment of, or the taking of
possession by, a receiver,  custodian,  trustee, liquidator or similar fiduciary
of itself or of all or a substantial part of its property, (ii) admit in writing
its inability,  or be generally  unable,  to pay its debts as they become due or
cease operations of its present  business,  (iii) make a general  assignment for
the benefit of  creditors,  (iv)  commence a  voluntary  case under any state or
federal  bankruptcy  laws (as now or hereafter in effect),  (v) be adjudicated a
bankrupt or  insolvent,  (vi) file a petition  seeking to take  advantage of any
other law  providing for the relief of debtors,  (vii)  acquiesce to, or fail to
have  dismissed,  within thirty (30) days,  any petition filed against it in any
involuntary  case under such bankruptcy  laws, or (viii) take any action for the
purpose of effecting any of the foregoing;

      10.10.  any change in any  Borrower's  condition or affairs  (financial or
otherwise) which in Agent's opinion has a Material Adverse Effect;

      10.11.  any Lien  created  hereunder or  provided  for hereby or under any
related  agreement  for any reason  ceases to be or is not a valid and perfected
Lien having a first priority interest;

      10.12.  a  default of the  obligations  of any  Borrower  under  any other
agreement  to  which it is a party  shall  occur  which  adversely  affects  its
condition,  affairs or prospects  (financial or otherwise)  which default is not
cured within any applicable grace period;

      10.13.  termination  or  breach  of  any  Guaranty  or  Guaranty  Security
Agreement or similar  agreement  executed and  delivered to Agent in  connection
with the Obligations of any Borrower, or if any Guarantor attempts to terminate,
challenges  the  validity  of, or its  liability  under,  any such  Guaranty  or
Guaranty Security Agreement or similar agreement;

                                       59
<PAGE>

      10.14.  any Change of Management shall occur;

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

      10.16.  (i) any Governmental Body shall (A) revoke, terminate,  suspend or
adversely  modify any  license,  permit,  patent  trademark  or tradename of any
Borrower, or (B) commence proceedings to suspend, revoke, terminate or adversely
modify  any such  license,  permit,  trademark,  tradename  or  patent  and such
proceedings  shall not be dismissed or discharged within sixty (60) days, or (c)
schedule or conduct a hearing on the renewal of any license, permit,  trademark,
tradename or patent  necessary for the  continuation of any Borrower's  business
and the  staff  of such  Governmental  Body  issues a  report  recommending  the
termination,  revocation,  suspension or material,  adverse modification of such
license,  permit,  trademark,  tradename or patent;  (ii) any agreement which is
necessary  or material to the  operation  of any  Borrower's  business  shall be
revoked or  terminated  and not  replaced by a  substitute  acceptable  to Agent
within thirty (30) days after the date of such  revocation or  termination,  and
such revocation or termination and non-replacement  would reasonably be expected
to have a Material Adverse Effect on any Borrower;

      10.17.  any  portion  of the  Collateral  shall  be  seized  or taken by a
Governmental  Body,  or any  Borrower or the title and rights of any Borrower or
any Original Owner which is the owner of any material  portion of the Collateral
shall have become the subject matter of litigation  which might,  in the opinion
of Agent, upon final determination, result in impairment or loss of the security
provided by this Agreement or the Other Documents; or

      10.18.  an event or condition  specified  in Sections  7.16 or 9.15 hereof
shall occur or exist with  respect to any Plan and, as a result of such event or
condition,  together with all other such events or  conditions,  any Borrower or
any member of the  Controlled  Group shall incur,  or in the opinion of Agent be
reasonably  likely to incur,  a liability to a Plan or the PBGC (or both) which,
in the reasonable judgment of Agent, would have a Material Adverse Effect on any
Borrower.

XI.   LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
      ------------------------------------------

      11.1. Rights and Remedies.  Upon the occurrence of (i) an Event of Default
            -------------------
pursuant to Section 10.7 all  Obligations  shall be immediately  due and payable
and this  Agreement  and the  obligation  of Lenders to make  Advances  shall be
deemed terminated;  and, (ii) any of the other Events of Default and at any time
thereafter  (such default not having  previously  been cured),  at the option of
Required  Lenders  all  Obligations  shall be  immediately  due and  payable and
Lenders  shall have the right to terminate  this  Agreement and to terminate the
obligation  of Lenders to make  Advances.  Upon the  occurrence  of any Event of
Default,  Agent  shall have the right to exercise  any and all other  rights and
remedies  provided for herein,  under the Uniform  Commercial Code and at law or
equity  generally,  including,  without  limitation,  the right to foreclose the
security  interests  granted  herein and to realize upon any  Collateral  by any
available

                                       60
<PAGE>

judicial  procedure  and/or  to take  possession  of and  sell any or all of the
Collateral  with  or  without  judicial  process.  Agent  may  enter  any of any
Borrower's  premises  or  other  premises  without  legal  process  and  without
incurring liability to any Borrower therefor, and Agent may thereupon, or at any
time thereafter, in its discretion without notice or demand, take the Collateral
and  remove  the same to such  place as Agent may deem  advisable  and Agent may
require  Borrowers  to make the  Collateral  available  to Agent at a convenient
place. With or without having the Collateral at the time or place of sale, Agent
may sell the Collateral,  or any part thereof, at public or private sale, at any
time or place,  in one or more  sales,  at such price or  prices,  and upon such
terms, either for cash, credit or future delivery, as Agent may elect. Except as
to that part of the  Collateral  which is  perishable  or  threatens  to decline
speedily in value or is of a type customarily sold on a recognized market, Agent
shall give Borrowers  reasonable  notification  of such sale or sales,  it being
agreed that in all events  written  notice mailed to Borrowers at least five (5)
days prior to such sale or sales is reasonable notification.  At any public sale
Agent or any Lender may bid for and become the purchaser,  and Agent, any Lender
or any other  purchaser at any such sale  thereafter  shall hold the  Collateral
sold absolutely free from any claim or right of whatsoever  kind,  including any
equity of redemption and such right and equity are hereby  expressly  waived and
released by each  Borrower.  In  connection  with the exercise of the  foregoing
remedies,  Agent is granted permission to use all of each Borrower's trademarks,
trade styles, trade names, patents,  patent applications,  licenses,  franchises
and other proprietary rights which are used in connection with (a) Inventory for
the purpose of disposing of such  Inventory and (b) Equipment for the purpose of
completing the manufacture of unfinished  goods. The proceeds  realized from the
sale of any  Collateral  shall be applied as follows:  first,  to the reasonable
costs,  expenses  and  attorneys'  fees  and  expenses  incurred  by  Agent  for
collection and for acquisition,  completion,  protection, removal, storage, sale
and  delivery  of the  Collateral;  second,  to  interest  due  upon  any of the
Obligations  and any fees  payable  under this  Agreement;  and,  third,  to the
principal of the  Obligations.  If any deficiency  shall arise,  Borrowers shall
remain liable to Agent and Lenders therefor.

      11.2.  Agent's  Discretion.  Agent  shall  have  the  right  in  its  sole
             -------------------
discretion to determine  which  rights,  Liens,  security  interests or remedies
Agent may at any time pursue, relinquish,  subordinate, or modify or to take any
other action with  respect  thereto and such  determination  will not in any way
modify or affect any of Agent's or Lenders' rights hereunder.

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

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

                                       61
<PAGE>

XII.  WAIVERS AND JUDICIAL PROCEEDINGS.
      --------------------------------

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

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

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

XIII. EFFECTIVE DATE AND TERMINATION.
      ------------------------------

      13.1. Term.  This Agreement, which shall inure to the benefit of and shall
            ----
be  binding  upon  the  respective  successors  and  permitted  assigns  of each
Borrower,  Agent and each Lender,  shall become effective on the date hereof and
shall  continue in full force and effect until May 31, 2003 (the "Term")  unless
sooner terminated as herein provided.  Borrowers may terminate this Agreement at
any time upon ninety (90) days' prior written notice upon payment in full of the
Obligations.  In the event the  Obligations  are  prepaid  in full  prior to the
second  annual  anniversary  of the  Closing  Date (the date of such  prepayment
hereinafter referred to as the "Early Termination Date"), Borrowers shall pay to
Agent for the benefit of Lenders an early  termination fee in an amount equal to
one-half of one percent  (1/2%) of the maximum  Revolving  Advance Amount if the
Early  Termination Date occurs on or after the Closing Date to and including the
date  immediately  preceding  the  first  anniversary  of the  Closing  Date and
one-quarter of one percent (1/4%) of the Maximum Revolving Advance Amount if the
Early

                                       62
<PAGE>

Termination Date occurs on or after the first anniversary of the Closing Date to
and  including the date  immediately  preceding  the second  anniversary  of the
Closing Date, provided, also, however, (a) no Early Termination Fee shall be due
in the  event  of a  refinancing  of the  Obligations  by PNC and (b) the  Early
Termination  Fee will be  reduced  to  one-quarter  of one  percent  (1/4%)  and
one-eighth  of one  percent  (1/8%) in years one and two,  respectively,  in the
event of a repayment of the  Obligations  out of the proceeds of equity invested
in Borrowers after the Closing Date.

      13.2.  Termination.  The termination of the Agreement shall not affect any
             -----------
Borrower's,  Agent's or any Lender's  rights,  or any of the Obligations  having
their  inception  prior  to the  effective  date  of such  termination,  and the
provisions  hereof shall continue to be fully operative  until all  transactions
entered  into,  rights or  interests  created  or  Obligations  have been  fully
disposed of, concluded or liquidated.  The security interests,  Liens and rights
granted  to Agent and  Lenders  hereunder  and the  financing  statements  filed
hereunder  shall  continue  in  full  force  and  effect,   notwithstanding  the
termination of this Agreement or the fact that Borrowers'  Account may from time
to  time  be  temporarily  in a  zero  or  credit  position,  until  all  of the
Obligations  of each  Borrower  have been paid or  performed  in full  after the
termination of this  Agreement or each Borrower has furnished  Agent and Lenders
with an indemnification  satisfactory to Agent and Lenders with respect thereto.
Accordingly,  each  Borrower  waives any rights which it may have under  Section
9-404(1)  of the  Uniform  Commercial  Code to demand the filing of  termination
statements  with respect to the  Collateral,  and Agent shall not be required to
send such  termination  statements  to each  Borrower,  or to file them with any
filing  office,  unless and until this Agreement  shall have been  terminated in
accordance  with  its  terms  and all  Obligations  paid in full in  immediately
available  funds.  All  representations,   warranties,  covenants,  waivers  and
agreements   contained  herein  shall  survive   termination  hereof  until  all
Obligations are paid or performed in full.

XIV.  REGARDING AGENT.
      ---------------

      14.1.  Appointment.  Each Lender hereby designates PNC to act as Agent for
             -----------
such Lender under this  Agreement  and the Other  Documents.  Each Lender hereby
irrevocably  authorizes  Agent to take  such  action  on its  behalf  under  the
provisions of this Agreement and the Other Documents and to exercise such powers
and to  perform  such  duties  hereunder  and  thereunder  as  are  specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest,  fees (except the fees set forth in Sections
3.3(a)  and  3.4),  charges  and  collections  (without  giving  effect  to  any
collection days) received pursuant to this Agreement, for the ratable benefit of
Lenders.  Agent may perform any of its duties hereunder by or through its agents
or  employees.  As to any matters not expressly  provided for by this  Agreement
(including  without  limitation,  collection  of the  Note)  Agent  shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain  from  acting  (and shall be fully  protected  in so acting or
refraining from acting) upon the instructions of the Required Lenders,  and such
instructions  shall be  binding;  provided,  however,  that  Agent  shall not be
                                  --------   -------
required  to take  any  action  which  exposes  Agent to  liability  or which is
contrary to this Agreement or the Other Documents or applicable law unless Agent
is furnished with an

                                       63
<PAGE>

indemnification  reasonably  satisfactory  to Agent with respect thereto.

      14.2.  Nature of Duties.  Agent  shall have no duties or  responsibilities
             ----------------
except those  expressly  set forth in this  Agreement  and the Other  Documents.
Neither Agent nor any of its officers,  directors,  employees or agents shall be
(i)  liable for any action  taken or  omitted  by them as such  hereunder  or in
connection  herewith,  unless  caused by their  gross (not mere)  negligence  or
willful  misconduct,  or  (ii)  responsible  in any  manner  for  any  recitals,
statements,  representations  or warranties  made by any Borrower or any officer
thereof contained in this Agreement,  or in any of the Other Documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection  with,  this Agreement or any of the
Other  Documents or for the value,  validity,  effectiveness,  genuineness,  due
execution,  enforceability or sufficiency of this Agreement, or any of the Other
Documents  or for  any  failure  of any  Borrower  to  perform  its  obligations
hereunder. Agent shall not be under any obligation to any Lender to ascertain or
to  inquire  as to the  observance  or  performance  of  any  of the  agreements
contained in, or conditions of, this Agreement or any of the Other Documents, or
to inspect the properties, books or records of any Borrower. The duties of Agent
as respects the Advances to Borrowers shall be mechanical and  administrative in
nature;   Agent  shall  not  have  by  reason  of  this  Agreement  a  fiduciary
relationship in respect of any Lender; and nothing in this Agreement,  expressed
or implied,  is intended to or shall be so construed as to impose upon Agent any
obligations in respect of this Agreement except as expressly set forth herein.

      14.3. Lack of Reliance on Agent and Resignation. Independently and without
            -----------------------------------------
reliance upon Agent or any other Lender, each Lender has made and shall continue
to make (i) its own  independent  investigation  of the financial  condition and
affairs of each Borrower in connection  with the making and the  continuance  of
the Advances  hereunder and the taking or not taking of any action in connection
herewith,  and (ii) its own appraisal of the  creditworthiness of each Borrower.
Agent shall have no duty or responsibility,  either initially or on a continuing
basis, to provide any Lender with any credit or other  information  with respect
thereto,  whether coming into its possession before making of the Advances or at
any time or  times  thereafter  except  as shall  be  provided  by any  Borrower
pursuant to the terms hereof.  Agent shall not be  responsible to any Lender for
any recitals, statements,  information,  representations or warranties herein or
in any agreement,  document,  certificate or a statement delivered in connection
with or for the execution, effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement or any Other Document, or of the
financial  condition  of any  Borrower,  or be  required  to  make  any  inquiry
concerning either the performance or observance of any of the terms,  provisions
or conditions of this Agreement,  the Note, the Other Documents or the financial
condition  of any  Borrower,  or the  existence  of any Event of  Default or any
Default.

      Agent may resign on sixty (60) days' written notice to each of Lenders and
Borrowers  and  upon  such  resignation,  the  Required  Lenders  will  promptly
designate a successor Agent reasonably satisfactory to Borrowers.

      Any such successor Agent shall succeed to the rights, powers and duties of
Agent,  and the term "Agent" shall mean such successor  agent effective upon its
appointment, and the former

                                       64
<PAGE>

Agent's  rights,  powers and duties as Agent  shall be  terminated,  without any
other or further act or deed on the part of such former Agent. After any Agent's
resignation  as Agent,  the  provisions  of this  Article XIV shall inure to its
benefit as to any actions  taken or omitted to be taken by it while it was Agent
under this Agreement.

      14.4.  Certain Rights of Agent. If Agent shall request  instructions  from
             -----------------------
Lenders  with  respect  to any  act or  action  (including  failure  to  act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain  from such act or taking such  action  unless and until Agent shall have
received  instructions  from the  Required  Lenders;  and Agent  shall not incur
liability  to any  Person by  reason  of so  refraining.  Without  limiting  the
foregoing,  Lenders shall not have any right of action whatsoever  against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.

      14.5.  Reliance.  Agent  shall be  entitled  to rely,  and  shall be fully
             --------
protected in relying,  upon any note, writing,  resolution,  notice,  statement,
certificate,  telex, teletype or telecopier message,  cablegram,  order or other
document or  telephone  message  believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters  pertaining to this  Agreement and the Other  Documents and
its duties  hereunder,  upon advice of counsel  selected by it. Agent may employ
agents  and  attorneys-in-fact  and  shall  not be  liable  for the  default  or
misconduct  of any such  agents  or  attorneys-in-fact  selected  by Agent  with
reasonable care.

      14.6.  Notice of Default.  Agent shall not be deemed to have  knowledge or
             -----------------
notice of the  occurrence of any Default or Event of Default  hereunder or under
the  Other  Documents,  unless  Agent  has  received  notice  from a Lender or a
Borrower  referring to this Agreement or the Other  Documents,  describing  such
Default  or Event of  Default  and  stating  that such  notice  is a "notice  of
default".  In the event  that Agent  receives  such a notice,  Agent  shall give
notice  thereof to Lenders.  Agent  shall take such action with  respect to such
Default or Event of  Default as shall be  reasonably  directed  by the  Required
Lenders;  provided,  that,  unless  and until  Agent  shall have  received  such
          --------   ----
directions,  Agent may (but  shall not be  obligated  to) take such  action,  or
refrain  from  taking  such  action,  with  respect to such  Default or Event of
Default as it shall deem advisable in the best interests of Lenders.

      14.7.  Indemnification.   To  the  extent  Agent  is  not  reimbursed  and
             ---------------
indemnified  by Borrowers,  each Lender will  reimburse  and indemnify  Agent in
proportion  to its  respective  portion of the Advances  (or, if no Advances are
outstanding,  according to its Commitment Percentage),  from and against any and
all liabilities,  obligations,  losses, damages, penalties,  actions, judgments,
suits,  costs,  expenses or disbursements of any kind or nature whatsoever which
may be imposed on,  incurred  by or asserted  against  Agent in  performing  its
duties hereunder,  or in any way relating to or arising out of this Agreement or
any Other Document;  provided that,  Lenders shall not be liable for any portion
                     -------- ----
of  such  liabilities,   obligations,   losses,  damages,  penalties,   actions,
judgments,  suits, costs, expenses or disbursements resulting from Agent's gross
(not mere) negligence or willful misconduct.

      14.8. Agent in its Individual Capacity.  With respect to the obligation of
            --------------------------------
Agent to lend

                                       65
<PAGE>

under this  Agreement,  the  Advances  made by it shall have the same rights and
powers hereunder as any other Lender and as if it were not performing the duties
as Agent  specified  herein;  and the term  "Lender" or any similar  term shall,
unless the context clearly otherwise indicates,  include Agent in its individual
capacity as a Lender.  Agent may engage in business  with any  Borrower as if it
were not performing the duties specified  herein,  and may accept fees and other
consideration  from any Borrower for services in connection  with this Agreement
or otherwise without having to account for the same to Lenders.

      14.9.  Delivery  of  Documents.  To the extent  Agent  receives  financial
             -----------------------
statements  required under Sections 9.7, 9.8, and 9.9 from any Borrower pursuant
to the terms of this Agreement,  Agent will promptly  furnish such documents and
information to Lenders.

      14.10.  Borrowers'  Undertaking  to  Agent.  Without  prejudice  to  their
              ----------------------------------
respective  obligations to Lenders under the other provisions of this Agreement,
each Borrower hereby  undertakes with Agent to pay to Agent from time to time on
demand all  amounts  from time to time due and  payable by it for the account of
Agent or Lenders or any of them  pursuant  to this  Agreement  to the extent not
already  paid.  Any payment  made  pursuant  to any such demand  shall pro tanto
satisfy the relevant Borrower's  obligations to make payments for the account of
Lenders or the relevant one or more of them pursuant to this Agreement.

XV.   CO-BORROWERS/EXISTING DEBT..
      ---------------------------

            15.1  Co-Borrowers.   (a)  The  deletion  of  SeraNova,  Inc.  as  a
                  ------------
co-borrower  with respect to the Existing  Revolving Loan (as defined below) and
the handling of this credit facility as a co-borrowing  facility is solely as an
accommodation  to Borrowers and at their  request.  Neither Agent nor any Lender
shall incur  liability  to Borrowers  as a result  thereof.  To induce Agent and
Lenders to do so and in consideration  thereof, each Borrower hereby indemnifies
Agent and each Lender and holds Agent and each Lender  harmless from and against
any and all  liabilities,  expenses,  losses,  damages  and  claims of damage or
injury  asserted  against  Agent or any  Lender by any  Person  arising  from or
incurred by reason of the handling of the financing arrangements of Borrowers as
provided  herein,  reliance by Agent or any Lender on any request or instruction
from  Borrowers or any other  action taken by Agent or any Lender  except due to
willful misconduct or gross (not mere) negligence by the indemnified party.

            (b) All  Obligations  shall be joint and several,  and each Borrower
shall make payment  upon the  maturity of the  Obligations  by  acceleration  or
otherwise,  and such obligation and liability on the part of each Borrower shall
in no way be affected by any  extensions,  renewals and  forbearance  granted to
Agent or any Lender to any Borrower,  failure of Agent or any Lender to give any
Borrower  notice of borrowing or any other  notice,  any failure of Agent or any
Lender to pursue or preserve  its rights  against any  Borrower,  the release by
Agent or any  Lender  of any  Collateral  now or  thereafter  acquired  from any
Borrower,  and such  agreement  by each  Borrower to pay upon any notice  issued
pursuant thereto is  unconditional  and unaffected by prior recourse by Agent or
any  Lender  to the  other  Borrowers  or any  Collateral  for  such  Borrower's
Obligations or the lack thereof.

                                       66
<PAGE>

      15.2.  Waiver of Subrogation.  Each Borrower  expressly waives any and all
             ---------------------
rights of subrogation,  reimbursement,  indemnity, exoneration,  contribution or
any other claim which such Borrower may now or hereafter  have against the other
Borrowers or other Person  directly or  contingently  liable for the Obligations
hereunder,  or  against  or  with  respect  to  the  other  Borrowers'  property
(including,  without  limitation,  any  property  which  is  Collateral  for the
Obligations), arising from the existence or performance of this Agreement, until
termination of this Agreement and repayment in full of the Obligations.

      15.3  Existing Obligations.  Each Borrower hereby  acknowledges and agrees
            --------------------
that:

            (a)  Intelligroup,  Inc.  and PNC  Bank,  National  Association  are
parties to that certain  Revolving  Credit Loan Agreement dated January 29, 1999
(the  "Existing  Loan  Agreement")  whereby  certain  loans,  advances and other
accommodations have been made to Intelligroup, Inc.

            (b)  This  Agreement is intended to amend and restate  the  Existing
Loan Agreement in its entirety.

            (c)  All Obligations of Intelligroup, Inc.  incurred pursuant to the
Existing Loan Agreement  shall,  commencing the Closing Date, be governed by the
terms and  conditions  set forth in this Agreement and secured by the Collateral
granted by each of the Borrowers pursuant to this Agreement.

            (d)  As of the date hereof the  principal sum of Three Million Forty
Thousand Four Hundred Eight Dollars  ($3,040,408.00) is outstanding  pursuant to
the Existing Loan  Agreement,  together with certain accrued and unpaid interest
(the  "Existing  Revolving  Loan").  All such sums are due without any  defense,
offset, counterclaim or recoupment whatsoever.

            (e)  In consideration for the Lenders'  agreement to enter into this
Agreement,  each Borrower  agrees that it shall be jointly and severally  liable
for the Existing Revolving Loan.

XVI.  MISCELLANEOUS.
      -------------

      16.1.  Governing Law. This Agreement shall be governed by and construed in
             -------------
accordance  with the laws of the State of New Jersey  applied to contracts to be
performed wholly within the State of New Jersey. Any judicial proceeding brought
by or  against  any  Borrower  with  respect  to any of  the  Obligations,  this
Agreement  or any  related  agreement  may be brought in any court of  competent
jurisdiction  in the State of New  Jersey,  United  States of  America,  and, by
execution and delivery of this Agreement,  each Borrower  accepts for itself and
in  connection  with  its  properties,   generally  and   unconditionally,   the
non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment  rendered thereby in connection with this Agreement.  Each
Borrower hereby waives personal service of any and all process upon it

                                       67
<PAGE>

and  consents  that all such service of process may be made by  registered  mail
(return  receipt  requested)  directed to  Borrowers at the address set forth in
Section 16.6 and service so made shall be deemed  completed  five (5) days after
the same  shall  have been so  deposited  in the mails of the  United  States of
America,  or, at the  Agent's  and/or  any  Lender's  option,  by  service  upon
Borrowers which each Borrower  irrevocably appoints as such Borrower's Agent for
the purpose of accepting service within the State of New Jersey.  Nothing herein
shall affect the right to serve process in any manner  permitted by law or shall
limit the right of Agent or any Lender to bring proceedings against any Borrower
in the courts of any other  jurisdiction.  Each Borrower waives any objection to
jurisdiction and venue of any action  instituted  hereunder and shall not assert
any  defense  based on lack of  jurisdiction  or venue or based  upon  forum non
                                                                       ---------
conveniens.  Any judicial proceeding by any Borrower against Agent or any Lender
----------
involving,  directly or  indirectly,  any matter or claim in any way arising out
of, related to or connected with this Agreement or any related agreement,  shall
be brought only in a federal or state court  located in the County of Middlesex,
State of New Jersey.

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

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

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

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

                                       68
<PAGE>

                  (iii) alter the  definition  of the term  Required  Lenders or
alter, amend or modify this Section 16.2(b).

                  (iv)  release any  Collateral during any calendar  year (other
than in accordance  with the provisions of this  Agreement)  having an aggregate
value in excess of Five Million Dollars ($5,000,000.00).

                  (v)   change the rights and duties of Agent.

                  (vi)  permit any Revolving  Advance to be made if after giving
effect  thereto the total of  Revolving  Advances  outstanding  hereunder  would
exceed the Formula Amount for more than sixty (60) consecutive  Business Days or
exceed one hundred and ten percent (110%) of the Formula Amount.

                  (vii) increase the  Advance  Rates above the Advance  Rates in
effect on the Closing Date.

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

      In the event that Agent requests the consent of a Lender  pursuant to this
Section  16.2 and such  Lender  shall not  respond  or reply to Agent in writing
within ten (10) days of delivery of such request, such Lender shall be deemed to
have consented to matter that was the subject of the request.  In the event that
Agent  requests  the consent of a Lender  pursuant to this Section 16.2 and such
consent is denied,  then PNC may, at its option,  require  such Lender to assign
its interest in the Advances to PNC or to another  Lender or to any other Person
designated by the Agent (the "Designated Lender"), for a price equal to the then
outstanding  principal  amount thereof plus accrued and unpaid interest and fees
due such  Lender,  which  interest  and fees shall be paid when  collected  from
Borrowers.  In the event PNC elects to require any Lender to assign its interest
to PNC or to the  Designated  Lender,  PNC will so notify such Lender in writing
within forty five (45) days following such Lender's denial, and such Lender will
assign its interest to PNC or the Designated  Lender no later than five (5) days
following  receipt of such notice pursuant to a Commitment  Transfer  Supplement
executed by such Lender,  PNC or the  Designated  Lender,  as  appropriate,  and
Agent.

      Notwithstanding the foregoing, Agent may at its discretion and without the
consent of the Required Lenders,  voluntarily  permit the outstanding  Revolving
Advances at any time to exceed the  Formula  Amount by up to one hundred and ten
percent (110%) of the Formula Amount for up to thirty (30) consecutive  Business
Days. For purposes of the preceding  sentence,  the discretion  granted to Agent
hereunder shall not preclude involuntary  overadvances that may

                                       69
<PAGE>

result  from  time  to  time  due  to the  fact  that  the  Formula  Amount  was
unintentionally  exceeded  for  any  reason,  including,  but  not  limited  to,
Collateral  previously  deemed to be either "Eligible  Receivables" or "Eligible
Inventory",  as  applicable,  becomes  ineligible,  collections  of  Receivables
applied to reduce  outstanding  Revolving  Advances are thereafter  returned for
insufficient  funds  or  overadvances  are  made  to  protect  or  preserve  the
Collateral.  In the event Agent involuntarily  permits the outstanding Revolving
Advances to exceed the  Formula  Amount by more than ten  percent  (10%),  Agent
shall endeavor to have Borrowers decrease such excess in as expeditious a manner
as is practicable  under the  circumstances and not inconsistent with the reason
for such  excess.  Revolving  Advances  made  after  Agent  has  determined  the
existence  of  involuntary  overadvances  shall  be  deemed  to  be  involuntary
overadvances and shall be decreased in accordance with the preceding sentence.

      16.3. Successors and Assigns; Participations; New Lenders.
            ---------------------------------------------------

            (a) This Agreement shall be binding upon and inure to the benefit of
Borrowers,  Agent, each Lender,  all future holders of the Obligations and their
respective  successors  and  assigns,  except  that no  Borrower  may  assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Agent and each Lender.

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

            (c)  Any Lender may with the  consent  of Agent  which  shall not be
unreasonably withheld or delayed sell, assign or transfer all or any part of its
rights under this  Agreement and the Other  Documents to one or more  additional
banks or financial  institutions  and one or more additional  banks or financial
institutions may commit to make Advances hereunder (each a "Purchasing Lender"),
in  minimum  amounts  of not less  than  Ten  Million  Dollars  ($10,000,000.00)
pursuant to a Commitment Transfer  Supplement,  executed by a Purchasing Lender,
the transferor Lender, and Agent and delivered to Agent for recording. Upon such
execution,  delivery,  acceptance  and  recording,  from and after the  transfer
effective date determined pursuant to such Commitment Transfer  Supplement,  (i)
Purchasing Lender thereunder shall be a party hereto and, to the extent provided
in such Commitment Transfer

                                       70
<PAGE>

Supplement,  have the  rights  and  obligations  of a Lender  thereunder  with a
Commitment  Percentage  as set forth  therein,  and (ii) the  transferor  Lender
thereunder shall, to the extent provided in such Commitment Transfer Supplement,
be released from its obligations under this Agreement,  the Commitment  Transfer
Supplement  creating a  novation  for that  purpose.  Such  Commitment  Transfer
Supplement  shall be deemed to amend this  Agreement to the extent,  and only to
the extent,  necessary to reflect the addition of such Purchasing Lender and the
resulting adjustment of the Commitment  Percentages arising from the purchase by
such Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the Other Documents. Borrowers hereby
consent to the addition of such Purchasing  Lender and the resulting  adjustment
of the  Commitment  Percentages  arising  from the  purchase by such  Purchasing
Lender of all or a portion  of the  rights and  obligations  of such  transferor
Lender under this Agreement and the Other Documents. Borrowers shall execute and
deliver such further  documents  and do such further acts and things in order to
effectuate the foregoing.

            (d)  Agent shall maintain  at its address a copy of each  Commitment
Transfer  Supplement  delivered to it and a register  (the  "Register")  for the
recordation of the names and addresses of the Advances owing to each Lender from
time to time. The entries in the Register shall be conclusive, in the absence of
manifest  error,  and  Borrowers,  Agent and Lenders may treat each Person whose
name is recorded in the  Register as the owner of the Advance  recorded  therein
for the  purposes  of this  Agreement.  The  Register  shall  be  available  for
inspection  by Borrowers or any Lender at any  reasonable  time and from time to
time upon  reasonable  prior notice.  Agent shall receive a fee in the amount of
$3,500  payable by the applicable  Purchasing  Lender upon the effective date of
each transfer or assignment to such Purchasing Lender.

            (e)  Each  Borrower  authorizes  each  Lender  to  disclose  to  any
Transferee or  Purchasing  Lender and any  prospective  Transferee or Purchasing
Lender any and all financial  information in such Lender's possession concerning
such  Borrower  which has been  delivered to such Lender by or on behalf of such
Borrower  pursuant to this Agreement or in connection  with such Lender's credit
evaluation of such Borrower.

      16.4. Application  of  Payments.   Agent  shall  have the  continuing  and
            -------------------------
exclusive  right to apply or reverse  and  re-apply  any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that any
Borrower makes a payment or Agent or any Lender receives any payment or proceeds
of  the  Collateral  for  any  Borrower's   benefit,   which  are   subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, debtor in possession,  receiver,  custodian or any other
party under any bankruptcy  law,  common law or equitable  cause,  then, to such
extent,  the  Obligations  or part  thereof  intended to be  satisfied  shall be
revived and  continue as if such  payment or proceeds  had not been  received by
Agent or such Lender.

      16.5. Indemnity. Each Borrower shall indemnify Agent, each Lender and each
            ---------
of their respective officers, directors,  Affiliates,  employees and agents from
and against any and all liabilities,  obligations,  losses, damages,  penalties,
actions,  judgments,  suits,  costs,  expenses and  disbursements of any kind or
nature whatsoever (including, without limitation, fees and

                                       71
<PAGE>

disbursements  of  counsel)  which may be imposed on,  incurred  by, or asserted
against  Agent or any  Lender in any  litigation,  proceeding  or  investigation
instituted or conducted by any  governmental  agency or  instrumentality  or any
other Person with respect to any aspect of, or any transaction  contemplated by,
or  referred  to in, or any  matter  related  to,  this  Agreement  or the Other
Documents,  whether or not Agent or any Lender is a party thereto, except to the
extent that any of the foregoing  arises out of the gross  negligence or willful
misconduct of the party being  indemnified.  Notwithstanding  anything contained
herein to the contrary,  the gross negligence  exception to Borrowers' indemnity
obligations as set forth in the immediately  preceding  sentence shall not apply
to the specific indemnity obligations set forth in Section 2.10 above.

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

      (A)   If to Agent or          PNC Bank, National Association
            PNC at:                 Two Tower Center Boulevard
                                    East Brunswick, New Jersey 08816
                                    Attention: John Speiser, V.P.
                                    Telephone: (732) 220-4336
                                    Telecopier: (732) 220-4393

            with a copy to:         Pitney, Hardin, Kipp & Szuch LLP
                                    (mailing address)
                                    P.O. Box 1945
                                    Morristown, New Jersey 07962
                                    (courier address)
                                    200 Campus Drive
                                    Florham Park, New Jersey 07936
                                    Attention: Peter A. Forgosh, Esq.
                                    Telephone: (973) 966-8422
                                    Telecopier: (973) 966-1550

      (B)   If to a Lender other than Agent, as specified on the signature pages
            hereof

                                       72
<PAGE>

      (C)   If to Borrowers
            or any Borrower, at:    Intelligroup, Inc.
                                    499 Thornall Street
                                    Edison, New Jersey 08837
                                    Attention: Nicholas Visco, CFO
                                    Telephone: (732) 362-2134
                                    Telecopier: (732) 362-2106

            with a copy to:         Buchanan Ingersoll, Professional Corporation
                                    500 College Road East
                                    Princeton, New Jersey 08540
                                    Attention: Douglas A. Beimfohr, Esq.
                                    Telephone: (609) 987-6803
                                    Telecopier: (609) 520-0360

      16.7.   Survival. The obligations of Borrowers under Sections 2.2(f), 3.7,
              --------
3.8, 3.9, 4.19(h), 14.7 and 15.5 shall survive termination of this Agreement and
the Other Documents and payment in full of the Obligations.

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

      16.9.   Expenses.  All costs and expenses including,  without  limitation,
              --------
reasonable  attorneys'  fees (including the allocated costs of in house counsel)
and disbursements  incurred by Agent, Agent on behalf of Lenders and Lenders (a)
in all efforts made to enforce payment of any Obligation or effect collection of
any  Collateral,  or (b) in  connection  with the entering  into,  modification,
amendment,  administration  and enforcement of this Agreement or any consents or
waivers hereunder and all related agreements,  documents and instruments, or (c)
in instituting,  maintaining,  preserving,  enforcing and foreclosing on Agent's
security interest in or Lien on any of the Collateral,  whether through judicial
proceedings  or  otherwise,  or (d) in defending or  prosecuting  any actions or
proceedings  arising out of or relating to Agent's or any Lender's  transactions
with any Borrower,  or (e) in  connection  with any advice given to Agent or any
Lender with respect to its rights and  obligations  under this Agreement and all
related  agreements,  may be charged to Borrowers'  Account and shall be part of
the Obligations.

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

      16.11.  Consequential Damages. Neither Agent nor any Lender, nor any agent
              ---------------------
or

                                       73
<PAGE>

attorney  for any of them,  shall be liable to any  Borrower  for  consequential
damages arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Obligations.

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

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

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

      16.15.  Confidentiality;  Sharing Information.  (a) Agent, each Lender and
              -------------------------------------
each Transferee shall hold all non-public  information  obtained by Agent,  such
Lender or such  Transferee  pursuant to the  requirements  of this  Agreement in
accordance  with  Agent's,   such  Lender's  and  such  Transferee's   customary
procedures  for handling  confidential  information  of this  nature;  provided,
                                                                       --------
however,  Agent,  each Lender and each Transferee may disclose such confidential
-------
information  (a) to its examiners,  affiliates,  outside  auditors,  counsel and
other  professional  advisors,  (b) to Agent,  any Lender or to any  prospective
Transferees  and  Purchasing  Lenders,  and (c) as required or  requested by any
Governmental  Body or  representative  thereof  or  pursuant  to legal  process;
provided,  further that (i) unless specifically  prohibited by applicable law or
--------   -------
court order,  Agent,  each Lender and each Transferee shall use its best efforts
prior to disclosure thereof, to notify the applicable Borrower of the applicable
request for disclosure of such non-public information (A) by a Governmental Body
or  representative  thereof  (other than any such request in connection  with an
examination  of the  financial  condition  of a Lender or a  Transferee  by such
Governmental  Body) or (B) pursuant to legal  process and (ii) in no event shall
Agent,  any  Lender or any  Transferee  be  obligated  to return  any  materials
furnished  by any  Borrower  other  than  those  documents  and  instruments  in
possession of Agent or any Lender in order to perfect its Lien on the Collateral
once  the  Obligations  have  been  paid in full  and  this  Agreement  has been
terminated.

            (b)  Each Borrower  acknowledges  that from  time to time  financial
advisory,  investment  banking and other  services may be offered or provided to
such  Borrower  or one or  more  of its  Affiliates  (in  connection  with  this
Agreement  or  otherwise)  by  any  Lender  or by one or  more  Subsidiaries  or
Affiliates of such Lender and each  Borrower  hereby  authorizes  each Lender to
share  any  information  delivered  to  such  Lender  by such  Borrower  and its
Subsidiaries  pursuant to this Agreement,  or in connection with the decision of
such Lender to enter into this Agreement, to any such Subsidiary or Affiliate of
such Lender,  it being  understood  that any such Subsidiary or Affiliate of any
Lender  receiving  such  information  shall be bound by the provision

                                       74
<PAGE>

of Section  16.15 as if it were a Lender  hereunder.  Such  authorization  shall
survive the repayment of the other  Obligations  and the termination of the Loan
Agreement.

      16.16. Publicity. Each Borrower and each Lender hereby authorizes Agent to
             ---------
make appropriate  announcements of the financial  arrangement entered into among
Borrowers, Agent and Lenders, including, without limitation, announcements which
are commonly  known as  tombstones,  in such  publications  and to such selected
parties as Agent shall in its sole and absolute discretion deem appropriate.

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

                                    INTELLIGROUP, INC.

                                    By: /s/ Nicholas Visco
                                        ----------------------
                                    Name:  Nicholas Visco
                                    Title: Chief Financial Officer

                                    EMPOWER, INC.

                                    By: /s/ Nicholas Visco
                                        ----------------------
                                    Name:  Nicholas Visco
                                    Title: Secretary

                                    c/o Intelligroup, Inc.
                                    499 Thornall Street
                                    Edison, New Jersey 08837

                                    PNC BANK, NATIONAL ASSOCIATION, as
                                    Lender and as Agent

                                    By: /s/ David Raphaels
                                        ----------------------
                                    Name:  David Raphaels
                                    Title: Vice President

                                    Two Tower Center Boulevard
                                    East Brunswick, New Jersey 08816

                                    Commitment Percentage:  100%

                                       75
<PAGE>

STATE OF NEW JERSEY     )
                        ) ss.
COUNTY OF MORRIS  )

      On this 31st  day of May, 2000,  before me personally came NICHOLAS VISCO,
              ----
to me known,  who,  being by me duly  sworn,  did  depose and say that he is the
Chief Financial Officer of INTELLIGROUP,  INC., the corporation described in and
which  executed the foregoing  instrument and that he signed his name thereto by
order of the board of directors of said corporation.

                                    /s/ Patricia L. Donnelly
                                    -------------------------
                                    Notary Public

STATE OF NEW JERSEY     )
                        ) ss.
COUNTY OF MORRIS  )

      On this 31st  day of May, 2000,  before me personally came NICHOLAS VISCO,
              ----
to me known,  who,  being by me duly  sworn,  did  depose and say that he is the
Secretary of EMPOWER,  INC., the corporation described in and which executed the
foregoing instrument; that he knows the seal of said corporation;  that the seal
affixed to said  instrument is such  corporate  seal;  that it was so affixed by
order of the board of directors of said corporation, and that he signed his name
thereto by like order.

                                    /s/ Patricia L. Donnelly
                                    -------------------------
                                    Notary Public

STATE OF NEW JERSEY     )
                        ) ss.
COUNTY OF MORRIS  )

      On this 31st  day of May, 2000, before me personally came  DAVID RAPHAELS,
              ----
to me known,  who, being by me duly sworn,  did depose and say that he is a Vice
President of PNC BANK,  NATIONAL  ASSOCIATION,  the national banking association
described in and which executed the foregoing  instrument and that he signed his
name thereto by on behalf of said national banking association.

                                    /s/ Patricia L. Donnelly
                                    -------------------------
                                    Notary Public

                                       76
<PAGE>

List of Exhibits and Schedules

Exhibits

Exhibit 2.1(a)          Revolving Credit Note
Exhibit 5.5(b)          Financial Projections
Exhibit 8.1(k)          Financial Condition Certificate
Exhibit 16.3            Commitment Transfer Supplement
Exhibit A               Borrowing Base Certificate

Schedules

Schedule 1.2            Permitted Encumbrances
Schedule 4.5            Equipment and Inventory Locations
Schedule 4.15(c)        Location of Executive Offices
Schedule 4.19           Real Property
Schedule 5.2(a)         States of Qualification and Good Standing
Schedule 5.2(b)         Subsidiaries
Schedule 5.4            Federal Tax Identification Number
Schedule 5.4(a)         Tax Return Examination Status
Schedule 5.6            Prior Names
Schedule 5.8(b)         Litigation
Schedule 5.8(d)         Plans
Schedule 5.9            Intellectual Property, Source Code Escrow Agreements
Schedule 5.10           Licenses and Permits
Schedule 5.14           Labor Disputes

                                        -i-

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