Document:

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                               FINANCING AGREEMENT
                               -------------------

                       THE CIT GROUP/BUSINESS CREDIT, INC.

                                   (AS LENDER)

                                       AND

                            MERRIMAC INDUSTRIES, INC.

                                  (AS BORROWER)

                             DATED: OCTOBER 8, 2003

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                                TABLE OF CONTENTS

SECTION 1.   DEFINITIONS.....................................................3

SECTION 2.   CONDITIONS PRECEDENT...........................................14

SECTION 3.   REVOLVING LOANS................................................18

SECTION 4.   TERM LOANS.....................................................21

SECTION 5.   LETTERS OF CREDIT..............................................22

SECTION 6.   COLLATERAL.....................................................23

SECTION 7.   REPRESENTATIONS, WARRANTIES AND COVENANTS......................32

SECTION 8.   INTEREST, FEES AND EXPENSES....................................33

SECTION 9.   POWERS.........................................................38

SECTION 10.  EVENTS OF DEFAULT AND REMEDIES.................................38

SECTION 11.  TERMINATION....................................................41

SECTION 12.  MISCELLANEOUS..................................................41

EXHIBIT
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Exhibit A - Form of Term Loan A Promissory Note
Exhibit B - Form of Term Loan B Promissory Note

SCHEDULES
---------
Schedule 1-1 Permitted Encumbrances
Schedule 1-2 Permitted Indebtedness
Schedule 6-4 Equipment to be Moved
Schedule 7-1 Collateral Information
Schedule 7.1-2 Schedule of Litigation

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THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation, with offices
located at 1211 Avenue of the Americas, New York, NY 10036 (hereinafter "CIT"),
is pleased to confirm the terms and conditions under which CIT shall make
revolving loans, term loans and other financial accommodations to, Merrimac
Industries, Inc., a Delaware corporation with a principal place of business at
41 Fairfield Place, West Caldwell, NJ 07006 (herein the "Company").

SECTION 1. DEFINITIONS

ACCOUNTS shall mean all of the Company's now existing and future: (a) accounts
(as defined in the UCC), and any and all other receivables (whether or not
specifically listed on schedules furnished to CIT), including, without
limitation, all accounts created by, or arising from, all of the Company's
sales, leases, rentals of goods or renditions of services to its customers,
including but not limited to, those accounts arising under any of the Company's
trade names or styles, or through any of the Company's divisions; (b) any and
all instruments, documents, chattel paper (including electronic chattel paper)
(all as defined in the UCC); (c) unpaid seller's or lessor's rights (including
rescission, replevin, reclamation, repossession and stoppage in transit)
relating to the foregoing or arising therefrom; (d) rights to any goods
represented by any of the foregoing, including rights to returned, reclaimed or
repossessed goods; (e) reserves and credit balances arising in connection with
or pursuant hereto; (f) guarantees, supporting obligations, payment intangibles
and letter of credit rights (all as defined in the UCC); (g) insurance policies
or rights relating to any of the foregoing; (h) general intangibles pertaining
to any and all of the foregoing (including all rights to payment, including
those arising in connection with bank and non-bank credit cards), and including
books and records and any electronic media and software thereto; (i) notes,
deposits or property of account debtors securing the obligations of any such
account debtors to the Company; and (j) cash and non-cash proceeds (as defined
in the UCC) of any and all of the foregoing.

ANNIVERSARY DATE shall mean the date occurring three (3) years from the Closing
Date and the same date in every year thereafter.

APPRAISED EQUIPMENT shall mean the Equipment appraised by the appraisal
delivered to CIT pursuant to Section 2.1(u) hereof.

AVAILABILITY shall mean at any time the amount by which: (a) the Borrowing Base
exceeds (b) the outstanding aggregate amount of all Obligations, including
without limitation, all Obligations with respect to Revolving Loans, but
excluding the Letters of Credit and the Term Loans.

AVAILABILITY RESERVE shall mean the sum of: (a) (i) four (4) months rental
payments or similar charges for any of the Company's leased premises or other
Collateral locations for which the Company has not delivered to CIT a landlord's
waiver in form and substance reasonably satisfactory to CIT, plus (ii) four (4)
months estimated payments plus any other fees or charges owing by the Company to
any applicable warehousemen or third party processor (as determined by CIT in
its reasonable business judgment), provided that any of the foregoing amounts
shall be adjusted from time to time hereafter upon: (x) delivery to CIT of any
such acceptable waiver, (y) the opening or closing of a Collateral location
and/or (z) any change in the amount of rental, storage or processor payments or
similar charges; (b) any reserve which CIT may reasonably require from time to
time pursuant to this Financing Agreement, including without limitation, for
Letters of Credit pursuant to Section 5.1 hereof; (c) a $250,000.00 reserve for
potential environmental remediation of the New Jersey Property, provided that
such reserve may be adjusted upon CIT's receipt of a Phase II environmental
survey of such property from an environmental firm, and in form and substance,
acceptable to CIT and (d) such other reserves as CIT deems necessary in its
reasonable judgment as a result of (i) negative forecasts and/or trends in the
Company's business, industry, prospects, profits, operations or financial
condition or (ii) other issues, circumstances or facts that could otherwise
negatively impact the Company, its business, prospects, profits, operations,
industry, financial condition or assets.

BORROWING BASE shall mean the sum of: (a) eighty-five percent (85%) of the
Company's aggregate outstanding Eligible Accounts Receivable, provided, however,
that if the then Dilution Percentage is greater than five percent (5%), then the
rate of advance herein shall be reduced by the amount of such Dilution
Percentage above five percent

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(5%); plus (b) one hundred percent (100%) of the amount of Cash Collateral, so
long as the amount of the Cash Collateral is greater than or equal to
$1,500,000.00 and CIT shall have a perfected first priority security interest in
such Cash Collateral; less (c) the sum of (x) the Borrowing Block and (y) any
applicable Availability Reserves.

BORROWING BLOCK shall mean the aggregate amount of $500,000.00; provided,
however, that the Borrowing Block will be reduced to zero at such time as (i)
the Company shall have achieved at least a 1.0 to 1.0 Fixed Charged Coverage
Ratio for two consecutive Fiscal Quarters (as determined in CIT's sole
discretion), (ii) CIT shall have received the Company's audited financial
statements for the Fiscal Year ending January 3, 2004, and (iii) no Event of
Default has occurred, unless such Event of Default has been waived in writing by
CIT.

BUSINESS DAY shall mean any day on which CIT and JPMorgan Chase Bank are open
for business.

CANADIAN SUBSIDIARY shall mean Filtran Microcircuits Inc., a Canadian
corporation.

CAPITAL EXPENDITURES shall mean, for any period, the aggregate expenditures of
the Company during such period on account of, property, plant, equipment or
similar fixed assets that in conformity with GAAP, are required to be reflected
in the balance sheet of the Company.

CAPITAL IMPROVEMENTS shall mean operating Equipment and facilities (other than
land) acquired or installed for use in the Company's business operations.

CAPITAL LEASE shall mean any lease of property (whether real, personal or mixed)
which, in conformity with GAAP, is accounted for as a capital lease or a Capital
Expenditure in the balance sheet of the Company.

CARTER LOAN shall mean those certain loans made by the Company to Carter N.
Mason evidenced by the Carter Notes.

CARTER NOTES shall mean those notes described in Schedule A-2 of the Collateral
Assignment of Note.

CASH COLLATERAL shall mean the cash collateral pledged to CIT at closing as set
forth in Section 2.1(j) and further described in Section 6.14.

CHASE BANK RATE shall mean the rate of interest per annum announced by JPMorgan
Chase Bank from time to time as its prime rate in effect at its principal office
in New York City. (The prime rate is not intended to be the lowest rate of
interest charged by JPMorgan Chase Bank to its borrowers).

CHASE BANK RATE LOANS shall mean any loans or advances pursuant to this
Financing Agreement made or maintained at a rate of interest based upon the
Chase Bank Rate.

CLOSING DATE shall mean the date that this Financing Agreement has been duly
executed by the parties hereto and delivered to CIT.

COLLATERAL shall mean, except as limited by Section 6.13 hereof, all real and
personal property assets of the Company (both tangible and intangible),
including but not limited to, all present and future Accounts, Equipment,
Inventory, Documents of Title, General Intangibles, the New Jersey Property and
Other Collateral. It is understood and agreed that none of the assets of
Holdings or the Foreign Subsidiaries constitute Collateral.

COLLATERAL ASSIGNMENT OF NOTE shall mean that certain Collateral Assignment of
Promissory Note dated of even date herewith given by the Company in favor of
CIT.

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COLLATERAL MANAGEMENT FEE shall mean the sum of $18,000.00, which shall be paid
to CIT in accordance with Section 8.8 hereof to offset the expenses and costs
(excluding Out-of-Pocket Expenses and auditor fees) of CIT in connection with
administration, record keeping, analyzing and evaluating the Collateral.

COLLECTION DAYS shall mean one (1) Business Day to provide for the deposit,
clearance and collection of checks or other instruments representing the
proceeds of Collateral, the amount of which has been credited to the Company's
Revolving Loan Account, and for which interest may be charged on the aggregate
amount of such deposits, at the rate provided for in Section 8.1 of this
Financing Agreement.

COMMITMENT LETTER shall mean the Commitment Letter, dated September 4, 2003,
issued by CIT to, and accepted by, the Company.

CONSOLIDATED BALANCE SHEET shall mean a consolidated or compiled, as applicable,
balance sheet for the Company and its consolidated subsidiaries, eliminating all
inter-company transactions and prepared in accordance with GAAP.

CONSOLIDATING BALANCE SHEET shall mean a Consolidated Balance Sheet plus
individual balance sheets for the Company and its consolidated subsidiaries,
showing all eliminations of inter-company transactions, including a balance
sheet for the Company exclusively, all prepared in accordance with GAAP.

COPYRIGHTS shall mean all of the Company's present and hereafter acquired
copyrights, copyright registrations, recordings, applications, designs, styles,
licenses, marks, prints and labels bearing any of the foregoing, goodwill, any
and all general intangibles, intellectual property and rights pertaining
thereto, and all cash and non-cash proceeds thereof.

COSTA RICAN SUBSIDIARY shall mean Multi-Mix Microtechnologies SRL, an entity
formed under the laws of Costa Rica.

CURRENT ASSETS shall mean those assets of the Company which, in accordance with
GAAP, are classified as current.

CURRENT LIABILITIES shall mean those liabilities of the Company which, in
accordance with GAAP, are classified as "current," provided however, that,
notwithstanding GAAP, the Revolving Loans and the current portion of Permitted
Indebtedness shall be considered "current liabilities."

DEFAULT shall mean any event specified in Section 10 hereof, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, event or act, has been satisfied.

DEFAULT RATE of Interest shall mean a rate of interest per annum on any
Obligations hereunder, equal to the sum of: (a) two percent (2%) and (b) the
applicable increment over the Chase Bank Rate (as set forth in Section 8.1
hereof) plus the Chase Bank Rate, or the applicable increment over the LIBOR
Rate (as set forth in Section 8.15 hereof) plus the LIBOR Rate, which CIT shall
be entitled to charge the Company on all Obligations due CIT by the Company, as
further set forth in Section 10.2 of this Financing Agreement.

DEPOSITORY ACCOUNTS shall mean each of the Blocked Accounts, the Lock Box
Accounts and any other collection accounts, which are subject to CIT's
instructions, as specified in Section 3.4 of this Financing Agreement.

DILUTION PERCENTAGE shall mean, as of any time of calculation, the sum of the
Company's credits, claims, allowances, discounts, write-offs, contras, off-sets
and deductions, divided by the sum of Trade Accounts Receivable, all calculated
on a rolling ninety (90) day average, as determined and calculated by CIT from
time to time.

DOCUMENTATION FEE shall mean (a) all reasonable expenses incurred in connection
with or by CIT's legal counsel (including without limitation any in-house legal
counsel of CIT in negotiating, documenting, preparing for and attending a
closing with respect to this Financing Agreement, the Collateral, and/or
Obligations (all exclusive of Out-of-Pocket Expenses), plus (b) subsequent to
the Closing Date, the reasonable fees of CIT's legal counsel,

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whether or not in-house legal counsel, relating to any and all modifications,
waivers, releases, amendments or additional collateral with respect to this
Financing Agreement, the Collateral and/or the Obligations (all exclusive of
Out-of-Pocket Expenses).

DOCUMENTS OF TITLE shall mean all present and future documents (as defined in
the UCC), and any and all warehouse receipts, bills of lading, shipping
documents, chattel paper, instruments and similar documents, all whether
negotiable or not and all goods and Inventory relating thereto and all cash and
non-cash proceeds of the foregoing.

EARLY TERMINATION DATE shall mean the date on which the Company terminates this
Financing Agreement or the Revolving Line of Credit which date is prior to an
Anniversary Date.

EARLY TERMINATION FEE shall: (a) mean the fee CIT is entitled to charge the
Company in the event the Company terminates the Revolving Line of Credit or this
Financing Agreement on a date prior to fourteen (14) days before an Anniversary
Date; and (b) be determined by multiplying the Revolving Line of Credit by (x)
three percent (3%) if the Early Termination Date occurs on or before one (1)
year from the Closing Date, (y) two percent (2%) if the Early Termination Date
occurs after one (1) year from the Closing Date but on or before two (2) years
from the Closing Date; and (z) one-half of one percent (0.50%) if the Early
Termination Date occurs after two (2) years from the Closing Date but prior to
fourteen (14) days before an Anniversary Date.

EBITDA shall mean, in any period, all earnings of the Company and the Costa
Rican Subsidiary on a consolidated basis for said period before all (a) interest
and tax obligations, and (b) depreciation and amortization, determined in
accordance with GAAP on a consistent basis with the latest audited financial
statements of the Company, but excluding the effect of extraordinary or
non-recurring gains or losses for such period and any Impairment Charge.

ELIGIBLE ACCOUNTS RECEIVABLE shall mean the gross amount of the Company's Trade
Accounts Receivable that are subject to a valid, exclusive, first priority and
fully perfected security interest in favor of CIT, which conform to the
warranties contained herein and which, at all times, continue to be acceptable
to CIT in the exercise of its reasonable judgment, less, without duplication,
the sum of: (a) any returns, discounts, claims, credits and allowances of any
nature (whether issued, owing, granted, claimed or outstanding), and (b)
reserves for any such Trade Accounts Receivable that arise from or are subject
to or include: (i) sales to the United States of America, any state or other
governmental entity or to any agency, department or division thereof, except for
any such sales as to which the Company has complied with the Assignment of
Claims Act of 1940 or any other applicable statute, rules or regulation to CIT's
satisfaction in the exercise of its reasonable business judgment; (ii) foreign
sales, other than sales which otherwise comply with all of the other criteria
for eligibility hereunder and are either (x) secured by letters of credit (in
form and substance satisfactory to CIT) issued or confirmed by, and payable at,
banks having a place of business in the United States of America and as to which
CIT has a first priority perfected security interest by "control" as
contemplated by the UCC or (y) subject to a guarantee duly executed by the
Export-Import Bank of the United States ("EX-IM BANK") on terms acceptable to
CIT (together with all amendments, modifications and supplements thereto, the
"EX-IM BANK GUARANTEE") and the Company shall have entered into any and all
agreements required under the Ex-Im Bank Guarantee, which such Ex-Im Bank
Guarantee and other agreements executed in connection therewith shall at all
times be in full force and effect; (iii) Accounts that remain unpaid more than
ninety (90) days from invoice date or sixty (60) days from due date; (iv) contra
accounts; (v) sales to any subsidiary, or to any company affiliated with the
Company in any way, other than E.I. DuPont de Nemours and Company ("Dupont"),
but only so long as DuPont does not increase its ownership percentage above such
percentage as exists on the Closing Date and the Accounts generated from sales
to DuPont comply with all other requirements for eligibility hereunder; (vi)
bill and hold (deferred shipment) or consignment sales; (vii) sales to any
customer which is: (A) insolvent, (B) the debtor in any bankruptcy, insolvency,
arrangement, reorganization, receivership or similar proceedings under any
federal or state law, (C) negotiating, or has called a meeting of its creditors
for purposes of negotiating, a compromise of its debts, or (D) financially
unacceptable to CIT or has a credit rating unacceptable to CIT; (viii) all sales
to any customer if fifty percent (50%) or more of the aggregate dollar amount of
all outstanding invoices to such customer are unpaid more than ninety (90) days
from invoice date; (ix) sales to any customer and/or its affiliates to the
extent such sales exceed at any one time twenty percent (20%) or more of all
Eligible Accounts Receivable; provided that such percentage shall be thirty
percent (30%) with respect to sales to

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Raytheon Company, Northrop Grumman Corporation, The Boeing Company, Lockheed
Martin Corporation, Infineon Technologies North America, General Dynamics
Corporation and BAE Systems North America and/or their respective affiliates
(only the amount exceeding such applicable percentage shall be ineligible); (x)
pre-billed receivables and receivables arising from progress billing; (xi) an
amount representing, historically, returns, discounts, claims, credits,
allowances and applicable terms; (xii) sales not payable in United States
currency; (xiii) any other reasons deemed necessary by CIT in its reasonable
judgment, including without limitation those which are customary either in the
commercial finance industry or in the lending practices of CIT; (xiv) Accounts
or any agreements, purchase orders, invoices, proof of shipment or delivery or
any other document or information in connection therewith that are subject to
any Government Limitations, unless as otherwise determined by CIT in it its sole
discretion, or arise from or are part of an Excluded Contract; and (xv) sales to
DuPont and its affiliates unless CIT has received a no-offset letter from DuPont
in form and substance satisfactory to CIT.

EQUIPMENT shall mean all of the Company's present and hereafter acquired
equipment (as defined in the UCC) including, without limitation, all machinery,
equipment, furnishings and fixtures, and all additions, substitutions and
replacements thereof, wherever located, together with all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto and all proceeds thereof of whatever sort.

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

EUROCURRENCY RESERVE REQUIREMENTS for any day, as applied to a LIBOR Loan, shall
mean the aggregate (without duplication) of the maximum rates of reserve
requirements (expressed as a decimal fraction) in effect with respect to CIT
and/or any present or future lender or participant on such day (including,
without limitation, basic, supplemental, marginal and emergency reserves under
Regulation D or any other applicable regulations of the Board of Governors of
the Federal Reserve System or other governmental authority having jurisdiction
with respect thereto, as now and from time to time in effect, dealing with
reserve requirements prescribed for Eurocurrency funding (currently referred to
as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by CIT
and/or any such lenders or participants (such rate to be adjusted to the nearest
one sixteenth of one percent (1/16 of 1%) or, if there is not a nearest one
sixteenth of one percent (1/16 of 1%), to the next higher one sixteenth of one
percent (1/16 of 1%)).

EVENT(S) OF DEFAULT shall have the meaning provided for in Section 10 of this
Financing Agreement.

EXCLUDED CONTRACT shall have the meaning provided for in Section 6.13(b) of this
Financing Agreement.

EXECUTIVE OFFICERS shall mean the Chairman, President, Chief Executive Officer,
Chief Operating Officer, Chief Financial Officer, Executive Vice President(s),
Senior Vice President(s), Treasurer and Secretary of the Company.

FISCAL QUARTER shall mean, with respect to the Company, each thirteen (13) week
period ending within three (3) days of March 31, June 30, September 30 and
December 31 of each Fiscal Year.

FISCAL YEAR shall mean each 52 or 53 week period ending within three (3) days of
December 31.

FIXED CHARGE COVERAGE RATIO shall mean, for the relevant period and with respect
to the Company and the Costa Rican Subsidiary on a consolidated basis, the ratio
determined by dividing EBITDA for such period by the sum of (a) all interest
obligations paid or due for such period, (b) the amount of scheduled principal
repaid or scheduled principal to be repaid on the Term Loans and any
Subordinated Debt for such period, (c) non-financed Capital Expenditures
actually incurred during such period, and (d) all federal, state and local
income tax expense due and payable for such period.

FLEET shall have the meaning provided for in Section 2.1(q) of this Financing
Agreement.

FOREIGN SUBSIDIARIES shall mean each of the Canadian Subsidiary and the Costa
Rican Subsidiary.

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GAAP shall mean generally accepted accounting principles in the United States of
America as in effect from time to time and for the period as to which such
accounting principles are to apply, provided that in the event the Company
modifies its accounting principles and procedures as applied as of the Closing
Date, the Company shall provide such statements of reconciliation as shall be in
form and substance acceptable to CIT.

GENERAL INTANGIBLES shall mean all of the Company's present and hereafter
acquired general intangibles (as defined in the UCC), and shall include, without
limitation, all present and future right, title and interest in and to: (a) all
Trademarks, tradenames, corporate names, business names, logos and any other
designs or sources of business identities, (b) Patents, together with any
improvements on said Patents, utility models, industrial models, and designs,
(c) Copyrights, (d) trade secrets, (e) licenses, permits and franchises, (f) all
applications with respect to the foregoing, (g) all right, title and interest in
and to any and all extensions and renewals, (h) goodwill with respect to any of
the foregoing, (i) any other forms of similar intellectual property, (j) all
customer lists, distribution agreements, supply agreements, blueprints,
indemnification rights and tax refunds, together with all monies and claims for
monies now or hereafter due and payable in connection with any of the foregoing
or otherwise, and all cash and non-cash proceeds thereof, including, without
limitation, the proceeds or royalties of any licensing agreements between the
Company and any licensee of any of the Company's General Intangibles.

GOVERNMENT DISCLOSURE REGULATIONS shall mean federal and/or state government
statutes and regulations governing the treatment, handling, access to and
disclosure of classified information, including without limitation the
Department of Defense Industrial Security Manual.

GOVERNMENT LIMITATIONS shall mean the Government Disclosure Regulations, the
Government Property Handling Requirements and/or the Government Receivables and
Account Requirements.

GOVERNMENT PROPERTY HANDLING REQUIREMENTS shall mean federal and/or state
government statutes and regulations governing the handling of government
inventory and materials, including without limitation the Department of Defense
Regulation Federal Acquisition Supplement 245.604(4).

GOVERNMENT RECEIVABLES AND ACCOUNT REQUIREMENTS shall mean federal and/or state
government statutes and regulations governing the assignment and disposition of
receivables and accounts owed by federal or state government agencies, including
without limitation the Assignment of Claims Act, as amended (31 U.S.C. 3727, 41
U.S.C. 15 and Federal Acquisition Regulation 32.8).

GUARANTY shall mean the guaranty document executed and delivered by any
Guarantor guaranteeing the Obligations.

GUARANTOR shall mean any party hereafter executing a Guaranty.

HOLDINGS shall mean 508790 N.B, Inc., a Canadian corporation.

HOLDINGS LOAN shall mean the intercompany loan from the Company to Holdings
described in Schedule A-1 of the Collateral Assignment of Note.

IMPAIRMENT CHARGE shall mean any charge(s) relating to the valuation of the
long-term assets located at the New Jersey Property or the Costa Rican
Subsidiary and/or goodwill associated with the Canadian Subsidiary, determined
in accordance with GAAP, and which is non-cash and non-recurring.

INDEBTEDNESS shall mean, without duplication, all liabilities, contingent or
otherwise, which are any of the following: (a) obligations in respect of
borrowed money or for the deferred purchase price of property, services or
assets, other than Inventory, or (b) lease obligations which, in accordance with
GAAP, have been, or which should be capitalized.

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INSURANCE PROCEEDS shall mean proceeds or payments from an insurance carrier
with respect to any loss, casualty or damage to Collateral.

INTERCOMPANY LOANS shall have the meaning ascribed in Section 7.9 of this
Financing Agreement.

INTEREST PERIOD shall mean:

     (a) with respect to any initial request by the Company for a LIBOR Loan, a
one month, two month, three month or six month period commencing on the
borrowing or conversion date with respect to a LIBOR Loan and ending one, two,
three or six months thereafter, as applicable; and

     (b) thereafter with respect to any continuation of, or conversion to, a
LIBOR Loan, at the option of the Company, any one month, two month, three month
or six month period commencing on the last day of the immediately preceding
Interest Period applicable to such LIBOR Loan and ending one, two, three or six
months thereafter, as applicable;

     provided that, the foregoing provisions relating to Interest Periods are
     subject to the following:

     (i) if any Interest Period would otherwise end on a day which is not a
     Working Day, that Interest Period shall be extended to the next succeeding
     Working Day, unless the result of such extension would extend such payment
     into another calendar month in which event such Interest Period shall end
     on the immediately preceding Working Day;

     (ii) any Interest Period that begins on the last Working Day of a calendar
     month (or on a day for which there is no numerically corresponding day in
     the calendar month, at the end of such Interest Period) shall end on the
     last Working Day of a calendar month; and

     (iii) for purposes of determining the availability of Interest Periods,
     such Interest Periods shall be deemed available if (x) JPMorgan Chase Bank
     quotes an applicable rate or CIT determines LIBOR, as provided in the
     definition of LIBOR, (y) the LIBOR determined by JPMorgan Chase Bank or CIT
     will adequately and fairly reflect the cost of maintaining or funding its
     loans bearing interest at LIBOR, for such Interest Period, and (z) such
     Interest Period will end on or before the earlier of Anniversary Date or
     the last day of the then current term of this Financing Agreement. If a
     requested Interest Period shall be unavailable in accordance with the
     foregoing sentence, the Company shall continue to pay interest on the
     Obligations at the applicable per annum rate based upon the Chase Bank
     Rate.

INVENTORY shall mean all of the Company's present and hereafter acquired
inventory (as defined in the UCC) and including, without limitation, all
merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods and materials
used or usable in manufacturing, processing, packaging or shipping same in all
stages of production from raw materials through work-in-process to finished
goods - and all proceeds thereof of whatever sort.

INVESTMENT PROPERTY shall mean all now owned and hereafter acquired investment
property (as defined in the UCC) and all proceeds thereof.

ISSUING BANK shall mean the bank issuing Letters of Credit for the Company.

LETTERS OF CREDIT shall mean all documentary and standby letters of credit
issued with the assistance of CIT in accordance with Section 5 hereof by the
Issuing Bank for or on behalf of the Company.

LETTER OF CREDIT GUARANTY shall mean the guaranty delivered by CIT to the
Issuing Bank of the Company's reimbursement obligations under the Issuing Bank's
reimbursement agreement, application for Letter of Credit or other like
document.

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LETTER OF CREDIT GUARANTY FEE shall mean the fee CIT may charge the Company
under Section 8.3 of this Financing Agreement for: (a) issuing a Letter of
Credit Guaranty, and/or (b) otherwise aiding the Company in obtaining Letters of
Credit, all pursuant to Section 5 hereof.

LETTER OF CREDIT SUB-LINE shall mean the commitment of CIT to assist the Company
in obtaining Letters of Credit, pursuant to Section 5 hereof, in an aggregate
amount of $750,000.00.

LIBOR shall mean, at any time of determination, and subject to availability, for
each applicable Interest Period, a variable rate of interest equal to: (a) at
CIT's election (i) the applicable LIBOR quoted to CIT by JPMorgan Chase Bank (or
any successor thereof), or (ii) the rate of interest determined by CIT at which
deposits in U.S. dollars are offered for the relevant Interest Period based on
information presented on Telerate Systems at Page 3750 as of 11:00 A.M. (London
time) on the day which is two (2) Business Days prior to the first day of such
Interest Period, provided that, if at least two such offered rates appear on the
Telerate System at Page 3750 in respect of such Interest Period, the arithmetic
mean of all such rates (as determined by CIT) will be the rate used; divided by
(b) a number equal to 1.0 minus the aggregate (but without duplication) of the
rates (expressed as a decimal fraction) of Eurocurrency Reserve Requirements in
effect on the day which is two (2) Business Days prior to the beginning of such
Interest Period.

LIBOR LENDING OFFICE shall mean, with respect to CIT the office of JPMorgan
Chase Bank, or any successor thereof, maintained at 270 Park Avenue, New York,
NY 10017.

LIBOR LOAN shall mean any loans made pursuant to this Financing Agreement which
are made or maintained at a rate of interest based upon LIBOR, provided that (i)
no Default or Event of Default has occurred hereunder, which has not been waived
in writing by CIT and (ii) no LIBOR Loan shall be made with an Interest Period
that ends subsequent to an Anniversary Date or any applicable Early Termination
Date.

LINE OF CREDIT shall mean the aggregate commitment of CIT to (a) make Revolving
Loans pursuant to Section 3 of this Financing Agreement (b) assist the Company
in opening Letters of Credit pursuant to Section 5 of this Financing Agreement
and (c) make Term Loans pursuant to Section 4 of this Financing Agreement, in
the aggregate amount equal to $9,250,000.00.

LINE OF CREDIT FEE shall: (A) mean the fee due CIT at the end of each month for
the Line of Credit, and (B) be determined by multiplying the difference between
(i) the Revolving Line of Credit and (ii) the sum, for said month, of (x) the
average daily balance of Revolving Loans plus (y) the average daily balance of
Letters of Credit outstanding for said month, by one-half of one percent (0.50%)
per annum for the number of days in said month.

LOAN DOCUMENTS shall mean this Financing Agreement, the Promissory Notes, the
Control Agreement, the mortgages and/or deeds of trust, the other closing
documents and any other ancillary loan and security agreements executed from
time to time in connection with this Financing Agreement, all as may be renewed,
amended, extended, increased or supplemented from time to time.

LOAN FACILITY FEE shall mean the fee payable to CIT in accordance with, and
pursuant to, the provisions of Section 8.7 of this Financing Agreement in the
amount of $69,375.00 ($34,687.50 of which was earned and paid upon execution of
the Commitment Letter, and the remaining $34,687.50 shall be payable upon
execution of this Financing Agreement), which fee is fully earned and payable as
of the Closing Date.

LOCK BOX TRIGGER shall mean the occurrence of a Default or an Event of Default
or such time as Availability is less than $1,000,000.00 (with all debts and
obligations of the Company being current, and all payables being handled in the
normal course of the Company's business and consistent with its past practice).

                                       10
<PAGE>

NET WORTH shall mean, at any date of determination, an amount equal to (a) Total
Assets minus (b) Total Liabilities, and shall be determined in accordance with
GAAP, on a consistent basis with the latest audited financial statements of the
Company.

NEW JERSEY PROPERTY shall mean the real property of the Company located at 41
Fairfield Place, West Caldwell, NJ 07006.

OBLIGATIONS shall mean all loans, advances and extensions of credit made or to
be made by CIT to the Company or to others for the Company's account (including,
without limitation, all Revolving Loans, Letter of Credit Guaranties and Term
Loans); any and all indebtedness and obligations which may at any time be owing
by the Company to CIT howsoever arising, whether now in existence or incurred by
the Company from time to time hereafter; whether principal, interest, fees,
costs, expenses or otherwise; whether secured by pledge, lien upon or security
interest in any of the Company's Collateral, assets or property or the assets or
property of any other person, firm, entity or corporation; whether such
indebtedness is absolute or contingent, joint or several, matured or unmatured,
direct or indirect and whether the Company is liable to CIT for such
indebtedness as principal, surety, endorser, guarantor or otherwise. Obligations
shall also include indebtedness owing to CIT by the Company under any Loan
Document or under any other agreement or arrangement now or hereafter entered
into between the Company and CIT; indebtedness or obligations incurred by, or
imposed on, CIT as a result of environmental claims arising out of the Company's
operations, premises or waste disposal practices or sites in accordance with
Section 7.7 hereof; the Company's liability to CIT as maker or endorser of any
promissory note or other instrument for the payment of money; the Company's
liability to CIT under any instrument of guaranty or indemnity, or arising under
any guaranty, endorsement or undertaking which CIT may make or issue to others
for the Company's account, including any Letter of Credit Guaranty or other
accommodation extended by CIT with respect to applications for Letters of
Credit, CIT's acceptance of drafts or CIT's endorsement of notes or other
instruments for the Company's account and benefit; and any and all indebtedness,
liabilities or obligations of every kind, nature and description owing by the
Company to any affiliate of CIT.

OPERATING LEASES shall mean all leases of property (whether real, personal or
mixed) other than Capital Leases.

OTHER COLLATERAL shall mean all now owned and hereafter acquired lockbox,
blocked account and any other deposit accounts maintained with any bank or
financial institutions into which the proceeds of Collateral are or may be
deposited; all other deposit accounts and all Investment Property (provided that
Investment Property consisting of stock of Holdings and the Costa Rican
Subsidiary shall be limited to 65% of the capital stock of such entities,
respectively); all cash and other monies and property in the possession or
control of CIT including, without limitation, the Cash Collateral; all books,
records, ledger cards, disks and related data processing software at any time
evidencing or containing information relating to any of the Collateral described
herein or otherwise necessary or helpful in the collection thereof or
realization thereon; and all cash and non-cash proceeds of the foregoing.

OUT-OF-POCKET EXPENSES shall mean all of CIT's present and future expenses
incurred relative to this Financing Agreement or any other Loan Documents,
whether incurred heretofore or hereafter, which expenses shall include, without
being limited to: appraisals conducted relating to any of the Collateral, the
cost of record searches, all costs and expenses incurred by CIT in opening bank
accounts, depositing checks, receiving and transferring funds, and wire transfer
charges, any charges imposed on CIT due to returned items and "insufficient
funds" of deposited checks and CIT's standard fees relating thereto, any amounts
paid by, incurred by or charged to, CIT by the Issuing Bank under a Letter of
Credit Guaranty or the Company's reimbursement agreement, application for
Letters of Credit or other like document which pertain either directly or
indirectly to such Letters of Credit, and CIT's standard fees relating to the
Letters of Credit and any drafts thereunder, travel, lodging and similar
expenses of CIT's personnel in connection with inspecting and monitoring the
Collateral from time to time hereunder, any applicable counsel fees and
disbursements, fees and taxes relative to the filing of financing statements,
all expenses, costs and fees set forth in Section 10.3 of this Financing
Agreement, and title insurance premiums, real estate survey costs, costs of
preparing and recording mortgages/deeds of trust against the Real Estate.

                                       11
<PAGE>

OVERADVANCE RATE shall mean a rate equal to one-half of one percent (.50%) per
annum in excess of the applicable contract rate of interest determined in
accordance with Section 8.1(a) of this Financing Agreement.

OVERADVANCES shall mean the amount by which (a) the sum of all outstanding
Revolving Loans, Letters of Credit and advances made hereunder (other than the
Term Loans) exceed (b) the Borrowing Base.

PATENTS shall mean all of the Company's present and hereafter acquired patents,
patent applications, registrations, any reissues or renewals thereof, licenses,
any inventions and improvements claimed thereunder, and all general intangible,
intellectual property and patent rights with respect thereto of the Company, and
all income, royalties, cash and non-cash proceeds thereof.

PERMITTED ENCUMBRANCES shall mean: (a) liens that are listed on Schedule 1-1
attached hereto; (b) Purchase Money Liens; (c) liens of local or state
authorities for franchise or other like Taxes, provided that the aggregate
amounts of such liens shall not exceed $100,000.00 in the aggregate at any one
time; (d) statutory liens of landlords and liens of carriers, warehousemen,
bailees, mechanics, materialmen and other like liens imposed by law, created in
the ordinary course of business and for amounts not yet due (or which are being
contested in good faith, by appropriate proceedings or other appropriate actions
which are sufficient to prevent imminent foreclosure of such liens) and with
respect to which adequate reserves or other appropriate provisions are being
maintained by the Company in accordance with GAAP; (e) deposits made (and the
liens thereon) in the ordinary course of business of the Company (including,
without limitation, security deposits for leases, indemnity bonds, surety bonds
and appeal bonds) in connection with workers' compensation, unemployment
insurance and other types of social security benefits or to secure the
performance of tenders, bids, contracts (other than for the repayment or
guarantee of borrowed money or purchase money obligations), statutory
obligations and other similar obligations arising as a result of progress
payments under government contracts; (f) easements (including, without
limitation, reciprocal easement agreements and utility agreements),
encroachments, minor defects or irregularities in title, variation and other
restrictions, charges or encumbrances (whether or not recorded) affecting the
Real Estate, if applicable, and which in the aggregate (A) do not materially
interfere with the occupation, use or enjoyment by the Company of its business
or property so encumbered and (B) in the reasonable business judgment of CIT do
not materially and adversely affect the value of such Real Estate; (g) liens
granted CIT by the Company; (h) liens of judgment creditors provided such liens
do not exceed, in the aggregate, at any time, $50,000.00 (other than liens
bonded or insured to the reasonable satisfaction of CIT); (i) tax liens which
are not yet due and payable or which are being diligently contested in good
faith by the Company by appropriate proceedings, and which liens are not (x)
filed on any public records, (y) other than with respect to Real Estate, senior
to the liens of CIT or (z) for Taxes due the United States of America or any
state thereof having similar priority statutes, as further set forth in Section
7.6 hereof; (j) liens on unexpired insurance premiums relating to insurance
payment options; (k) Government Limitations which in the reasonable business
judgment of CIT do not materially and adversely affect the value of the
Collateral; and (l) (i) for one hundred twenty (120) days after the Closing
Date, the liens of Fleet in the cash on deposit thereat for purposes of covering
payment of outstanding checks reflected as outstanding balances in the Company's
accounts payable and payroll account at Fleet in an initial aggregate amount not
to exceed $300,000; provided that such aggregate amount shall not exceed $50,000
on and after sixty (60) days after the Closing Date, and (ii) the liens of Fleet
in the cash received by Fleet referenced in clauses (ii) and (iii) of the last
paragraph of that certain payoff letter dated on or about the date hereof among
Fleet, the Company and CIT (the "Payoff Letter"), so long as, in each case
(i.e., (l)(i) and (l)(ii)), Fleet wires to the Blocked Account all amounts
specified in the Payoff Letter.

PERMITTED INDEBTEDNESS shall mean: (a) current Indebtedness maturing in less
than one year and incurred in the ordinary course of business for raw materials,
supplies, equipment, services, Taxes, labor or director and officer liability
insurance; (b) the Indebtedness secured by Purchase Money Liens; (c)
Subordinated Debt; (d) Indebtedness arising under the Letters of Credit and this
Financing Agreement; (e) deferred Taxes and other expenses incurred in the
ordinary course of business; and (f) other Indebtedness existing on the date of
execution of this Financing Agreement and listed in Schedule 1-2 attached
hereto.

PREPAYMENT PREMIUM shall: (a) mean the amount due CIT by the Company upon any
voluntary prepayment, in whole or in part, of the Term Loans and (b) be computed
by multiplying the amount so prepaid by: (i) three percent

                                       12
<PAGE>

(3%) if such prepayment occurs on or before the expiration of one (1) year from
the Closing Date; (ii) two percent (2%) if such prepayment occurs after one (1)
year from the Closing Date but on or before the expiration of two (2) years from
the Closing Date; and (iii) one-half of one percent (0.50%) if such prepayment
occurs after two (2) years from the Closing Date and prior to fourteen (14) days
before an Anniversary Date.

PROCESSOR LETTER shall have the meaning provided for in Section 3.3(i) of this
Financing Agreement.

PROMISSORY NOTES shall mean the notes, in the form of Exhibits A and B attached
hereto, delivered by the Company to CIT to evidence the Term Loans pursuant to,
and repayable in accordance with, the provisions of Section 4 of this Financing
Agreement.

PURCHASE MONEY LIENS shall mean liens on any item of Equipment acquired after
the date of this Financing Agreement provided that (a) each such lien shall
attach only to the property to be acquired, (b) a description of the Equipment
so acquired is furnished to CIT, and (c) the debt incurred in connection with
such acquisitions shall not exceed, in the aggregate, $100,000.00 in any Fiscal
Year.

REAL ESTATE shall mean the Company's fee and/or leasehold interests in the real
property, including any such real property which has been, or will be,
encumbered, mortgaged, pledged or assigned to CIT or its designee, including,
without limitation, the New Jersey Property.

REVOLVING LINE OF CREDIT shall mean the aggregate commitment of CIT to make
loans and advances pursuant to Section 3 of this Financing Agreement and issue
Letters of Credit Guaranties pursuant to Section 5 hereof to the Company, in the
aggregate amount of $5,000,000.00.

REVOLVING LOAN ACCOUNT shall mean the account on CIT's books, in the Company's
name, in which the Company will be charged with all Obligations under this
Financing Agreement.

REVOLVING LOANS shall mean the loans and advances made, from time to time, to or
for the account of the Company by CIT pursuant to Section 3 of this Financing
Agreement.

SOLVENT shall mean, with respect to the Company on a particular date, that on
such date (a) the fair value of the tangible and intangible property of the
Company is greater than the total amount of liabilities, including contingent
liabilities, of the Company; (b) the present fair salable value of the tangible
and intangible assets of the Company is not less than the amount that will be
required to pay the probable liability of the Company on its debts as it becomes
absolute and mature; (c) the Company does not intend to, nor does it believe (or
reasonably should have believed) that it will, incur debts or liabilities beyond
its ability to pay as such debts and liabilities mature; and (d) the Company is
not engaged in a business or transaction, and is not about to engage in a
business or transaction, for which the Company's property would constitute an
unreasonably small capital or would be considered unreasonably small in relation
to such business or transaction. The amount of contingent liabilities (such as
litigation, guarantees and pension plan liabilities) at any time shall be
computed as the amount which, in light of all the facts and circumstances
existing at the time, represents the net present value of the amount which can
be reasonably be expected to become an actual or matured liability.

SUBORDINATED DEBT shall mean the debt due a Subordinating Creditor (and the
note(s) evidencing such) which has been subordinated, by a Subordination
Agreement, to the prior payment and satisfaction of the Obligations of the
Company to CIT.

SUBORDINATING CREDITOR shall mean any party hereafter executing a Subordination
Agreement.

SUBORDINATION AGREEMENT shall mean the agreement (in form and substance
satisfactory to CIT) among the Company, a Subordinating Creditor and CIT
pursuant to which Subordinated Debt is subordinated to the prior payment and
satisfaction of the Company's Obligations to CIT.

                                       13
<PAGE>

TAXES shall mean all federal, state, municipal and other governmental taxes,
levies, charges, claims and assessments which are or may be due by the Company
with respect to its business, operations, Collateral or otherwise.

TERM LOAN PROMISSORY NOTE A shall mean the promissory note in the form of
Exhibit A hereto executed by the Company to evidence Term Loan A made by CIT
under Section 4 hereof.

TERM LOAN PROMISSORY NOTE B shall mean the promissory note in the form of
Exhibit B hereto executed by the Company to evidence Term Loan B made by CIT
under Section 4 hereof.

TERM LOANS shall mean the term loans in the respective principal amounts of
$1,500,000.00 (herein "TERM LOAN A") and $2,750,000.00 (herein "TERM LOAN B")
made by CIT pursuant to, and repayable in accordance with, the provisions of
Section 4 of this Financing Agreement.

TOTAL ASSETS shall mean total assets determined in accordance with GAAP, on a
basis consistent with the latest audited financial statements of the Company.

TOTAL LIABILITIES shall mean total liabilities determined in accordance with
GAAP, on a basis consistent with the latest audited financial statements of the
Company.

TRADE ACCOUNTS RECEIVABLE shall mean that portion of the Company's Accounts
which arises from the sale of Inventory or the rendition of services in the
ordinary course of the Company's business.

TRADEMARKS shall mean all of the Company's present and hereafter acquired
trademarks, trademark registrations, recordings, applications, tradenames, trade
styles, service marks, prints and labels (on which any of the foregoing may
appear), licenses, reissues, renewals, and any other intellectual property and
trademark rights pertaining to any of the foregoing, together with the goodwill
associated therewith, and all cash and non-cash proceeds thereof.

UCC shall mean the Uniform Commercial Code as the same may be amended and in
effect from time to time in the state of New York; provided, however, in the
event that, by reason of mandatory provisions of law, the attachment, perfection
or priority of CIT's security interest in any Collateral is governed by the
Uniform Commercial Code as enacted and in effect in a jurisdiction other than
the state of New York, the term "UCC" shall mean the Uniform Commercial Code as
enacted and in effect in such other jurisdiction solely for the purposes of the
provisions hereof relating to such attachment, perfection or priority and for
purposes of definitions related to such provisions.

WORKING CAPITAL shall mean Current Assets in excess of Current Liabilities.

WORKING DAY shall mean any Business Day on which dealings in foreign currencies
and exchanges between banks may be transacted.

SECTION 2.   CONDITIONS PRECEDENT

     2.1 The obligation of CIT to make the initial loans hereunder is subject to
the satisfaction of, extension of or waiver of in writing, on or prior to, the
Closing Date, the following conditions precedent:

     (A) LIEN SEARCHES - CIT shall have received tax, judgment, litigation,
bankruptcy and Uniform Commercial Code searches satisfactory to CIT for all
locations presently occupied or used by the Company or where any of the
Collateral may be located.

     (B) CASUALTY INSURANCE - The Company shall have delivered to CIT evidence
satisfactory to CIT that casualty insurance policies listing CIT as additional
insured, loss payee or mortgagee, as the case may be, are in full force and
effect, all as set forth in Section 7.5 of this Financing Agreement.

                                       14
<PAGE>

     (C) UCC FILINGS - Any financing statements required to be filed in order to
create, in favor of CIT, a first perfected security interest in the Collateral,
subject only to the Permitted Encumbrances, shall have been properly filed in
each office in each United States jurisdiction required in order to create in
favor of CIT a perfected lien on the Collateral. CIT shall have received
acknowledgment copies of all such filings (or, in lieu thereof, CIT shall have
received other evidence satisfactory to CIT that all such filings have been
made) and CIT shall have received evidence that all necessary filing fees and
all taxes or other expenses related to such filings have been paid in full.

     (D) BOARD RESOLUTION - CIT shall have received a copy of the resolutions of
the (i) Board of Directors of the Company authorizing a special committee (the
"Special Committee") of the Board of Directors to authorize the execution,
delivery and performance of this Financing Agreement and any related agreements,
and (ii) the Special Committee of the Board of Directors authorizing the
execution, delivery and performance of this Financing Agreement and any related
agreements, in each case certified by the Secretary or Assistant Secretary of
the Company as of the date hereof, together with a certificate of the Secretary
or Assistant Secretary of the Company as to the incumbency and signature of the
officers of the Company executing such Loan Documents and any certificate or
other documents to be delivered by them pursuant hereto, together with evidence
of the incumbency of such Secretary or Assistant Secretary.

     (E) CORPORATE ORGANIZATION - CIT shall have received (i) a copy of the
Certificate of Incorporation of the Company certified by the Secretary of State
of the state of its organization, (ii) a copy of the By-Laws of the Company
certified by the Secretary or Assistant Secretary thereof, all as amended
through the date hereof and (iii) a Certificate of Good Standing from the state
of the Company's organization, together with a certificate from every state
where the Company is required to be registered to do business.

     (F) OFFICER'S CERTIFICATE - CIT shall have received an executed Officer's
Certificate of the Company, satisfactory in form and substance to CIT,
certifying that (i) the representations and warranties contained herein are true
and correct in all material respects on and as of the Closing Date; (ii) the
Company is in compliance with all of the terms and provisions set forth herein;
and (iii) no Default or Event of Default has occurred.

     (G) OPINIONS - Counsel for the Company shall have delivered to CIT opinions
satisfactory to CIT opining, inter alia, that, subject to the (i) filing,
priority and remedies provisions of the Uniform Commercial Code, (ii) the
provisions of the Bankruptcy Code, insolvency statutes or other like laws, (iii)
the equity powers of a court of law and (iv) such other matters as may be agreed
upon with CIT: this Financing Agreement, and all other Loan Documents of the
Company are (A) valid, binding and enforceable according to their terms, (B) are
duly authorized, executed and delivered, and (C) do not violate any terms,
provisions, representations or covenants in the charter or by-laws of the
Company or, to the best knowledge of such counsel, of any loan agreement,
mortgage, deed of trust, note, security or pledge agreement, indenture or other
contract to which the Company is a signatory or by which the Company or its
assets are bound.

     (H) ABSENCE OF DEFAULT - No Default or Event of Default shall have occurred
and other than an Impairment Charge, no material adverse change shall have
occurred in the financial condition, business, prospects, profits, operations or
assets of the Company.

     (I) LEGAL RESTRAINTS/LITIGATION - As of the Closing Date, there shall be
no: (x) litigation, investigation or proceeding (judicial or administrative)
pending or threatened against the Company, or its assets, by any agency,
division or department of any county, city, state or federal government arising
out of this Financing Agreement; (y) injunction, writ or restraining order
restraining or prohibiting the financing arrangements contemplated under this
Financing Agreement; or (z) suit, action, investigation or proceeding (judicial
or administrative) pending against the Company or its assets, which, in the
opinion of CIT, if adversely determined, could have a material adverse effect on
the business, operation, assets, financial condition or Collateral of the
Company.

                                       15
<PAGE>

     (J) CASH COLLATERAL. - Company shall have pledged and delivered to CIT at
least $1,500,000 in Cash Collateral as collateral security for the Obligations.

     (K) CASH BUDGET PROJECTIONS - CIT shall have received, reviewed and been
satisfied with a twelve (12) month cash budget projection prepared by the
Company on the form provided by CIT.

     (L) PLEDGE AGREEMENT - Company shall (i) execute and deliver to CIT a
pledge and security agreement pledging to CIT as additional collateral for the
Obligations of the Company not less than (x) 100% of the issued and outstanding
stock of all subsidiaries of the Company (excluding the Foreign Subsidiaries and
Holdings) and (y) 65% of the issued and outstanding stock of Holdings and the
Costa Rican Subsidiary and (ii) deliver to CIT the stock certificates evidencing
such stock together with duly executed stock powers (undated and in-blank) with
respect thereto, all in form and substance satisfactory to CIT.

     (M) ADDITIONAL DOCUMENTS - The Company shall have executed and delivered to
CIT all Loan Documents necessary to consummate the lending arrangement
contemplated between the Company and CIT.

     (N) DISBURSEMENT AUTHORIZATION - The Company shall have delivered to CIT
all information necessary for CIT to issue wire transfer instructions on behalf
of the Company for the initial and subsequent loans and/or advances to be made
under this Financing Agreement including, but not limited to, disbursement
authorizations in form acceptable to CIT.

     (O) EXAMINATION & VERIFICATION - An independent auditor chosen by CIT, but
paid for by the Company or CIT (as CIT shall determine) shall have completed, to
CIT's satisfaction, an examination and verification of the Accounts, Inventory,
financial statements, books and records of the Company which examination shall
indicate that, after giving effect to all Revolving Loans, Letters of Credit and
other advances and extensions of credit to be made at closing (excluding the
Term Loans), the Company shall have an opening additional Availability of at
least $1,250,000, as evidenced by a Borrowing Base certificate delivered by the
Company to CIT as of the Closing Date, all as more fully required by the CIT
Commitment Letter. It is understood that such requirement contemplates that all
debts and obligations are current, and that all payables are being handled in
the normal course of the Company's business and consistent with its past
practice.

     (P) DEPOSITORY ACCOUNTS - The Company shall have established a system of
Blocked Accounts and/or Lock Box Accounts, as the case may be, and bank accounts
with respect to the collection of Accounts and the deposit of proceeds of
Collateral as shall be acceptable to CIT in all respects. Such accounts shall be
subject to three party agreements (between the Company, CIT and the depository
bank), which shall be in form and substance satisfactory to CIT.

     (Q) EXISTING REVOLVING CREDIT AGREEMENT - The Company's existing credit
agreement with Fleet National Bank (the "FLEET") shall be: (i) terminated; (ii)
all loans and obligations of the Company thereunder shall be paid or satisfied
in full, including through utilization of the proceeds of the initial Revolving
Loans and Term Loans to be made under this Financing Agreement; and (iii) all
liens or security interests in favor of Fleet on the Collateral and otherwise in
connection therewith shall be terminated and/or released upon such payment.

     (R) MORTGAGES/DEEDS OF TRUST - The Company shall have executed and
delivered to CIT, an agent of CIT or to a title insurance company acceptable to
CIT, such mortgages and/or deeds of trust as CIT may reasonably require to
obtain first liens on the Real Estate.

     (S) TITLE INSURANCE POLICIES - CIT shall have received, in respect of each
mortgage or deed of trust, a mortgagee's title policy or marked-up unconditional
binder for such insurance. Each such policy shall (i) be in an amount
satisfactory to CIT; (ii) insure that the mortgage or deed of trust insured
thereby creates a valid first lien on the property covered by such mortgage or
deed of trust, free and clear of all defects and encumbrances except those

                                       16
<PAGE>

acceptable to CIT; (iii) name CIT as the insured thereunder; and (iv) contain
such endorsements and effective coverage as CIT may reasonably request,
including, without limitation, the revolving line of credit endorsement. CIT
shall also have received evidence that all premiums in respect of such policies
have been paid and that all charges for mortgage recording taxes, if any, shall
have been paid.

     (T) SURVEYS - CIT and the title insurance company issuing each policy
referred to in the immediately preceding paragraph (each, a "TITLE INSURANCE
COMPANY") shall have received maps or plats of a perimeter or boundary of the
site of each of the properties covered by the mortgages or deeds of trust, dated
a date satisfactory to CIT and the relevant Title Insurance Company prepared by
an independent professional licensed land surveyor satisfactory to CIT and the
relevant Title Insurance Company, which maps or plats and the surveys on which
they are based shall be made in accordance with the Minimum Standard Detail
Requirements for Land Title Surveys jointly established and adopted by the
American Land Title Association and the American Congress on Surveying and
Mapping; and, without limiting the generality of the foregoing, there shall be
surveyed and shown on the maps or plats or surveys the following: (i) the
locations on such sites of all the buildings, structures and other improvements
and the established building setback lines insofar as the foregoing affect the
perimeter or boundary of such property; (ii) the lines of streets abutting the
sites and width thereof; (iii) all access and other easements appurtenant to the
sites or necessary or desirable to use the sites; (iv) all roadways, paths,
driveways, easements, encroachments and overhanging projections and similar
encumbrances affecting the sites, whether recorded, apparent from a physical
inspection of the sites or otherwise known to the surveyor; (v) any
encroachments on any adjoining property by the building, structures and
improvements on the sites; and (vi) if the site is designated as being on a
filed map, a legend relating the survey to said map. Further, the survey shall
(x) be certified to CIT and the Title Insurance Company and (y) contain a legend
reciting as to whether or not the site is located in a flood zone.

     (U) APPRAISALS - CIT shall have received and reviewed satisfactory
appraisals on the Company's Appraised Equipment and the New Jersey Property,
which appraisals: (i) shall be by an appraiser acceptable to CIT, and (ii) shall
indicate (x) a net orderly liquidation value of not less than $1,851,000 with
respect to the Appraised Equipment, and (y) and quick sale value of not less
than $3,920,000 with respect to the New Jersey Property.

     (V) ENVIRONMENTAL REPORT - CIT shall have received environmental audit
reports on (i) all of the Company's leasehold and fee interests, and (ii) the
Company's waste disposal practices. The reports must (x) be satisfactory to CIT
and (y) not disclose or indicate any material liability (real or potential)
stemming from the Company's premises, its operations, its waste disposal
practices or waste disposal sites used by Company.

     (W) SCHEDULES - The Company or its counsel shall provide CIT with schedules
of: (a) any of the Company's (i) Trademarks, (ii) Patents, and (iii) Copyrights,
as applicable and all in such detail as to provide appropriate recording
information with respect thereto, (b) any tradenames, (c) monthly rental
payments for any leased premises or any other premises where any Collateral may
be stored or processed and (d) Permitted Encumbrances, all of the foregoing, as
set forth in Schedule 7-1 and in form and substance satisfactory to CIT.

     (X) DUE DILIGENCE - CIT shall have satisfactorily completed its business,
environmental and legal due diligence of the Company and its operations,
including, without limitation, (i) review of the Company's existing sales
contracts, (ii) review of all existing financing agreements of the Company's
direct and indirect subsidiaries and (iii) receipt of a satisfactory credit
reference from Fleet.

     (Y) CIT COMMITMENT LETTER - The Company shall have fully complied, to the
reasonable satisfaction of CIT, with all of the terms and conditions of the CIT
Commitment Letter.

Upon the execution of this Financing Agreement and the initial disbursement of
loans hereunder, all of the above Conditions Precedent shall have been deemed
satisfied except as otherwise set forth hereinabove or as the Company and CIT
shall otherwise agree in writing.

                                       17
<PAGE>

     2.2 Except to the extent expressly set forth in this Financing Agreement,
the agreement of CIT to make any extension of credit requested to be made by it
to the Company on any date (including without limitation, the initial extension
of credit) is subject to the satisfaction of the following conditions precedent:

     (A) REPRESENTATIONS AND WARRANTIES - Each of the representations and
warranties made by the Company in or pursuant to this Financing 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 Default that has not been cured or Event of Default
that has not been waived in writing by CIT shall have occurred on such date or
after giving effect to the extension of credit requested to be made on such
date.

     (C) BORROWING BASE - Except as may be otherwise agreed to from time to
time by CIT and the Company in writing, after giving effect to the extension of
credit requested to be made by the Company on such date, the aggregate
outstanding balance of the Revolving Loans and outstanding Letters of Credit
owing by the Company will not exceed the lesser of (i) the Revolving Line of
Credit or (ii) the Borrowing Base.

Each borrowing by the Company hereunder shall constitute a representation and
warranty by the Company as of the date of such loan or advance that each of the
representations, warranties and covenants contained in the Financing Agreement
have been satisfied and are true and correct, except as the Company and CIT
shall otherwise agree herein or in a separate writing.

SECTION 3. REVOLVING LOANS

     3.1 CIT agrees, subject to the terms and conditions of this Financing
Agreement, from time to time (but subject to CIT's right to make
"OVERADVANCES"), to make loans and advances to the Company on a revolving basis
(i.e. subject to the limitations set forth herein, the Company may borrow, repay
and re-borrow Revolving Loans). Such requests for loans and advances shall be in
amounts not to exceed the lesser of (a) the Availability or (b) the Revolving
Line of Credit. All requests for loans and advances must be received by an
officer of CIT no later than (i) 1:00 p.m., New York time, of the Business Day
on which any such Chase Bank Rate Loans and advances are required or (ii) three
Business Days prior to any requested LIBOR Loan. Should CIT for any reason honor
requests for Overadvances, any such Overadvances shall be made in CIT's sole
discretion and subject to any additional terms CIT deems necessary.

     3.2 In furtherance of the continuing assignment and security interest in
the Company's Accounts and Inventory, the Company will, upon the creation of
Accounts and purchase or acquisition of Inventory, execute and deliver to CIT in
such form and manner as CIT may reasonably require, solely for CIT's convenience
in maintaining records of Collateral, such confirmatory schedules of Accounts
and Inventory as CIT may reasonably request, including, without limitation,
daily schedules of Accounts and monthly schedules of Inventory, all in form and
substance satisfactory to CIT, and, subject to Government Disclosure Regulations
and Government Receivables and Accounts Requirements, such other appropriate
reports designating, identifying and describing the Accounts and Inventory as
CIT may reasonably request, and provided further that CIT may request any such
information more frequently, from time to time, upon its reasonable prior
request. In addition, the Company shall provide, upon CIT's request, CIT with
copies of agreements with, subject to Government Disclosure Regulations and
Government Receivables and Accounts Requirements, or purchase orders from, the
Company's customers, and copies of invoices to customers, proof of shipment or
delivery, access to its computers, electronic media and software programs
associated therewith (including any electronic records, contracts and
signatures) and such other documentation and information relating to said
Accounts and other Collateral as CIT may reasonably require, subject to
Government Disclosure Regulations and Government Receivables and Accounts
Requirements. Failure to provide CIT with any of the foregoing shall in no way
affect, diminish, modify or otherwise limit the security interests granted
herein. The Company hereby authorizes CIT to regard the Company's printed name
or rubber stamp signature on assignment schedules or invoices as the equivalent
of a manual signature by one of the Company's authorized officers or agents.

                                       18
<PAGE>

     3.3 The Company hereby represents and warrants that: each Trade Account
Receivable is based on an actual and bona fide sale and delivery of Inventory or
rendition of services to customers, made by the Company in the ordinary course
of its business; the Inventory being sold, and the Trade Accounts Receivable
created, are the exclusive property of the Company and are not and shall not be
subject to any lien, consignment arrangement, encumbrance, security interest or
financing statement whatsoever, other than the Permitted Encumbrances; the
invoices evidencing such Trade Accounts Receivable are in the name of the
Company; and the customers of the Company have accepted the Inventory or
services, owe and are obligated to pay the full amounts stated in the invoices
according to their terms, without dispute, offset, defense, counterclaim or
contra, except for disputes and other matters arising in the ordinary course of
business with respect to which the Company has complied with the notification
requirements of Section 3.5. The Company confirms to CIT that any and all Taxes
or fees relating to its business, its sales, the Accounts or Inventory relating
thereto, are its sole responsibility and that same will be paid by the Company
when due, subject to Section 7.6 of this Financing Agreement, and that none of
said Taxes or fees represent a lien on or claim against the Accounts. The
Company hereby further represents and warrants that (i) it shall not acquire any
Inventory on a consignment basis, nor co-mingle its Inventory with any of its
customers or any other person, including pursuant to any bill and hold sale or
otherwise; provided that the Company may provide Inventory and/or Equipment to
its Foreign Subsidiaries for finishing work consistent with its past practices;
provided, further, that CIT has received on or before the Closing Date a
processor letter ("Processor Letter") from each Foreign Subsidiary in form and
substance satisfactory to CIT, and (ii) its Inventory is marketable to its
customers in the ordinary course of business of the Company, except as it may
otherwise report in writing to CIT pursuant to Section 3.5 hereof from time to
time and except for any Inventory subject of an Impairment Charge. The Company
also warrants and represents that it is a duly and validly existing corporation
and is qualified in all states where the failure to so qualify would have (a) a
material adverse effect on the business of the Company, or (b) an adverse effect
on the ability of the Company to enforce collection of Accounts due from
customers residing in that state. The Company agrees to maintain such books and
records regarding Accounts and Inventory as CIT may reasonably require and
agrees that the books and records of the Company will reflect CIT's interest in
the Accounts and Inventory. All of the books and records of the Company will be
available to CIT at normal business hours, including any records handled or
maintained for the Company by any other company or entity, subject to Government
Disclosure Regulations and Government Receivables and Accounts Requirements.

     3.4 (a) Until CIT advises the Company to the contrary after the occurrence
of an Event of Default, the Company shall at its own expense, and in the
ordinary course of its business, enforce the terms of the Accounts, the terms
governing the remittance and payment of proceeds of the other Collateral, and
direct that all amounts owing on the foregoing be subject to and remitted in
accordance with the terms of Section 3.4(b) and/or 3.4(c), as the case may be.
Any checks, cash, credit card sales and receipts, notes, payments, proceeds or
other instruments or property received by the Company with respect to any
Collateral, including Accounts, shall be held by the Company in trust for CIT,
separate from the Company's own property and funds, and promptly after receipt
thereof, turned over to CIT with proper assignments or endorsements by deposit
into the applicable Depository Account.

     (b) Until such time as CIT notifies the Company otherwise, the Company
shall establish and maintain, in its name and at its expense, deposit accounts
with such banks as are acceptable to CIT (the "BLOCKED ACCOUNTS") into which the
Company shall promptly cause to be deposited: (i) all proceeds of Collateral
received by the Company, including all amounts payable to the Company from
credit card issuers and credit card processors, and (ii) all amounts on deposit
in deposit accounts used by the Company at each of its locations. The banks at
which the Blocked Accounts are established shall enter into an agreement, in
form and substance satisfactory to CIT (the "BLOCKED ACCOUNT AGREEMENTS"),
providing that, among other things, (a) all cash, checks and items received or
deposited in the Blocked Accounts are the property of CIT, (b) the depository
bank has no lien upon, or right of set off against the Blocked Accounts and (c)
any cash, checks, items, wires or other funds from time to time on deposit
therein, except as otherwise provided in the Blocked Account Agreements, and
that automatically, on a daily basis the depository bank will wire, or otherwise
transfer, in immediately available funds, all funds received or deposited into
the Blocked Accounts to such bank account as CIT may from time to time designate
for such purpose. The Company hereby confirms and agrees that all amounts
deposited in such Blocked Accounts and any other funds received and collected by
CIT, whether as proceeds of Accounts, Inventory or other Collateral or otherwise
(together with all funds and proceeds received by the Company in trust for CIT),
shall be the property of CIT.

                                       19
<PAGE>

     (c) Following the occurrence of a Lock Box Trigger and until such time as
the Lock Box Trigger is waived in writing by CIT, the Company will, at its
expense as CIT requests, direct that all remittances and all other proceeds of
Accounts and other Collateral be sent to a post office box designated by and/or
in the name of CIT (the "LOCK BOX"), and deposited into a deposit account with
JPMorgan Chase Bank or such other financial institution reasonably satisfactory
to CIT (the "LOCK BOX ACCOUNTS") and the banks at which the Lock Box Accounts
are established shall enter into an agreement, in form and substance
satisfactory to CIT (the "LOCK BOX AGREEMENTS") under arrangements therewith
reasonably satisfactory to CIT providing that, among other things, (i) all cash,
checks and items received or deposited in the Lock Box Accounts are the property
of CIT, (ii) that the depository bank has no lien upon, or right of set off
against the Lock Box Accounts and any cash, checks, items, wires or other funds
from time to time on deposit therein, except as otherwise provided in the Lock
Box Account Agreements and (iii) automatically, on a daily basis, the depository
bank will wire, or otherwise transfer, in immediately available funds, all funds
received or deposited into the Lock Box Accounts to such bank account as CIT may
from time to time designate for such purpose. In furtherance of the foregoing,
the Company shall (i) execute such Lock Box Agreements and other Depository
Account agreements as CIT shall specify and (ii) indicate on all of its invoices
that payments shall be remitted to such Lock Box. The Company hereby confirms
and agrees that all amounts deposited in such Lock Box Accounts and any other
funds received and collected by CIT, whether as proceeds of Accounts, Inventory
or other Collateral or otherwise (together with all funds and proceeds received
by the Company in trust for CIT), shall be the property of CIT.

     (d) Subject to Collection Days, all amounts received by CIT in payment of
Accounts or other Collateral will be credited to the Company's Revolving Loan
Account when CIT is advised by its bank of its receipt of "collected funds" at
CIT's bank account in New York, New York on the Business Day of such advice if
advised no later than 1:00 p.m. EST or on the next succeeding Business Day if so
advised after 1:00 PM EST. No checks, drafts or other instrument received by CIT
shall constitute final payment to CIT unless and until such instruments have
actually been collected.

     3.5 The Company agrees to notify CIT: (a) of any matters affecting the
value, enforceability or collectibility of any Account and of all customer
disputes, offsets, defenses, counterclaims, returns, rejections and all
reclaimed or repossessed merchandise or goods, and of any adverse effect in the
value of its Inventory, in its daily and monthly collateral reports (as
applicable) provided to CIT hereunder, in such detail and format as CIT may
reasonably require from time to time; and (b) promptly of any such matters which
(i) are material, as a whole, to the Accounts and/or the Inventory, or (ii)
which adversely affect the value of any Account or Inventory in an amount of
$25,000 or more. The Company agrees to issue credit memoranda promptly (with
duplicates to be immediately forwarded to CIT) upon accepting returns or
granting allowances. Upon the occurrence of an Event of Default (which is not
waived in writing by CIT) and on notice from CIT, the Company agrees that all
returned, reclaimed or repossessed merchandise or goods shall be set aside by
the Company, marked with CIT's name (as secured party) and held by the Company
for CIT's account.

     3.6 CIT shall maintain a Revolving Loan Account on its books in which the
Company will be charged with all loans and advances made by CIT to it or for its
account, and with any other Obligations, including any and all costs, expenses
and reasonable attorney's fees which CIT may incur in connection with the
exercise by or for CIT of any of the rights or powers herein conferred upon CIT,
or in the prosecution or defense of any action or proceeding to enforce or
protect any rights of CIT in connection with this Financing Agreement, the other
Loan Documents or the Collateral assigned hereunder, or any Obligations owing by
the Company. The Company will be credited with all amounts received by CIT from
the Company or from others for the Company's account, including, as above set
forth, all amounts received by CIT in payment of Accounts and other Collateral,
and such amounts will be applied to payment of the Obligations as set forth
herein. In no event shall prior recourse to any Accounts or other security
granted to or by the Company be a prerequisite to CIT's right to demand payment
of any Obligation. Further, it is understood that CIT shall have no obligation
whatsoever to perform in any respect any of the Company's contracts or
obligations relating to the Accounts.

                                       20
<PAGE>

     3.7 After the end of each month, CIT shall promptly send the Company a
statement showing the accounting for the charges, loans, advances and other
transactions occurring between CIT and the Company during that month. The
monthly statements shall be deemed correct and binding upon the Company and
shall constitute an account stated between the Company and CIT unless CIT
receives a written statement of the exceptions within thirty (30) days of the
date of the monthly statement.

     3.8 In the event that any requested advance exceeds Availability or that
(a) the sum of (i) the outstanding balance of Revolving Loans and (ii)
outstanding balance of Letters of Credit exceeds (b)(x) the Borrowing Base or
(y) the Revolving Line of Credit, any such nonconsensual Overadvance shall be
due and payable to CIT immediately upon CIT's demand therefor.

SECTION 4. TERM LOANS

     TERM LOAN A

     4.1 The Company hereby agrees to execute and deliver to CIT Term Loan
Promissory Note A, to evidence Term Loan A to be extended by CIT.

     4.2 Upon receipt of such Term Loan Promissory Note A, CIT hereby agrees to
extend to the Company Term Loan A.

     4.3 The principal amount of Term Loan A shall be repaid to CIT by the
Company by sixty (60) equal consecutive monthly principal installments of
$25,000.00 each, whereof the first installment shall be due and payable on
November 3, 2003 and the subsequent installments shall be due and payable on the
first Business Day of each month thereafter until paid in full, subject to
acceleration and payment in full, as more fully set forth in Section 4.7.

     TERM LOAN B

     4.4 The Company hereby agrees to execute and deliver to CIT Term Loan
Promissory Note B, to evidence Term Loan B to be extended by CIT.

     4.5 Upon receipt of such Term Loan Promissory Note B, CIT hereby agrees to
extend to the Company Term Loan B.

     4.6 The principal amount of Term Loan B shall be repaid CIT by the Company
by eighty-four (84) equal consecutive monthly principal installments of
$32,738.00 each, whereof the first installment shall be due and payable on
November 3, 2003 and the subsequent installments shall be due and payable on the
first Business Day of each month thereafter until paid in full, subject to
acceleration and payment in full, as more fully set forth in Section 4.7.

     ADDITIONAL PROVISIONS FOR TERM LOANS

     4.7 In the event this Financing Agreement or the Line of Credit is
terminated by either CIT or the Company for any reason whatsoever, the Term
Loans shall become due and payable on the effective date of such termination
notwithstanding any provision to the contrary in the Term Loan Promissory Note
A, the Term Loan Promissory Note B or this Financing Agreement.

     4.8 The Company may prepay at any time, at its option, in whole or in part,
the Term Loans, provided that on each such prepayment, the Company shall pay:
(a) accrued interest on the principal so prepaid to the date of such prepayment
and (b) the Prepayment Premium, if any.

     4.9 Each prepayment (whether voluntary or mandatory) shall be applied as
follows: first to the Prepayment Premium, if any, then to any unpaid expenses,
charges or fees due and owing to CIT, then to accrued but unpaid interest, and
thereafter to installments of principal in their inverse order of maturity.

                                       21
<PAGE>

     4.10 The Company hereby authorizes CIT to charge its Revolving Loan Account
with the amount of all Obligations owing under this Section 4 as such amounts
become due. The Company confirms that any charges which CIT may so make to its
Revolving Loan Account as herein provided will be made as an accommodation to
the Company and solely at CIT's discretion.

SECTION 5. LETTERS OF CREDIT

     In order to assist the Company in establishing or opening Letters of Credit
with an Issuing Bank, the Company has requested CIT to join in the applications
for such Letters of Credit, and/or guarantee payment or performance of such
Letters of Credit and any drafts or acceptances thereunder through the issuance
of the Letters of Credit Guaranty, thereby lending CIT's credit to the Company
and CIT has agreed to do so. These arrangements shall be handled by CIT subject
to the terms and conditions set forth below.

     5.1 Within the Revolving Line of Credit and Availability, CIT shall assist
the Company in obtaining Letter(s) of Credit in an amount not to exceed the
outstanding amount of the Letter of Credit Sub-Line. CIT's assistance for
amounts in excess of the limitation set forth herein shall at all times and in
all respects be in CIT's sole discretion. It is understood that the term, form
and purpose of each Letter of Credit and all documentation in connection
therewith, and any amendments, modifications or extensions thereof, must be
mutually acceptable to CIT, the Issuing Bank and the Company, provided that
Letters of Credit shall not be used for the purchase of domestic Inventory or to
secure present or future debt of Inventory suppliers. Any and all outstanding
Letters of Credit shall be reserved dollar for dollar from Availability as an
Availability Reserve.

     5.2 CIT shall have the right, without notice to the Company, to charge the
Company's Revolving Loan Account with the amount of any and all indebtedness,
liability or obligation of any kind incurred by CIT under the Letters of Credit
Guaranty at the earlier of (a) payment by CIT under the Letters of Credit
Guaranty; or (b) the occurrence of an Event of Default. Any amount charged to
Company's Revolving Loan Account shall be deemed a Revolving Loan hereunder and
shall incur interest at the rate provided in Section 8.1 of this Financing
Agreement.

     5.3 The Company unconditionally indemnifies CIT and holds CIT harmless from
any and all loss, claim or liability incurred by CIT arising from any
transactions or occurrences relating to Letters of Credit established or opened
for the Company's account, the collateral relating thereto and any drafts or
acceptances thereunder, and all Obligations thereunder, including any such loss
or claim due to any errors, omissions, negligence, misconduct or action taken by
any Issuing Bank, other than for any such loss, claim or liability arising out
of the gross negligence or willful misconduct by CIT under the Letters of Credit
Guaranty. This indemnity shall survive termination of this Financing Agreement.
The Company agrees that any charges incurred by CIT for the Company account by
the Issuing Bank shall be conclusive on CIT, absent manifest error, and may be
charged to the Company's Revolving Loan Account.

     5.4 CIT shall not be responsible for: (a) the existence, character,
quality, quantity, condition, packing, value or delivery of the goods purporting
to be represented by any documents; (b) any difference or variation in the
character, quality, quantity, condition, packing, value or delivery of the goods
from that expressed in the documents; (c) the validity, sufficiency or
genuineness of any documents or of any endorsements thereon, even if such
documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; (d) the time, place, manner or order in
which shipment is made; (e) partial or incomplete shipment, or failure or
omission to ship any or all of the goods referred to in the Letters of Credit or
documents; (f) any deviation from instructions; (g) delay, default, or fraud by
the shipper and/or anyone else in connection with the goods or the shipping
thereof; or (h) any breach of contract between the shipper or vendors and the
Company.

     5.5 The Company agrees that any action taken by CIT, if taken in good
faith, or any action taken by any Issuing Bank, under or in connection with the
Letters of Credit, the Letter of Credit Guarantees, the drafts or acceptances,
or the Collateral, shall be binding on the Company and shall not result in any
liability whatsoever of CIT to the Company. In furtherance thereof, CIT shall
have the full right and authority to: (a) clear and resolve any

                                       22
<PAGE>

questions of non-compliance of documents; (b) give any instructions as to
acceptance or rejection of any documents or goods; (c) execute any and all
steamship or airways guaranties (and applications therefore), indemnities or
delivery orders; (d) grant any extensions of the maturity of, time of payment
for, or time of presentation of, any drafts, acceptances, or documents; and (e)
agree to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications,
Letters of Credit, drafts or acceptances; all in CIT's sole name. The Issuing
Bank shall be entitled to comply with and honor any and all such documents or
instruments executed by or received solely from CIT, all without any notice to
or any consent from the Company. Notwithstanding any prior course of conduct or
dealing with respect to the foregoing including amendments and non-compliance
with documents and/or the Company's instructions with respect thereto, CIT may
exercise its rights hereunder in its sole and reasonable business judgment. In
addition, without CIT's express consent and endorsement in writing, the Company
agrees: (a) not to execute any and all applications for steamship or airway
guaranties, indemnities or delivery orders; to grant any extensions of the
maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents; or to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the applications, Letters of Credit, drafts or acceptances; and (b) after the
occurrence of an Event of Default which is not cured within any applicable grace
period, if any, or waived in writing by CIT, not to (i) clear and resolve any
questions of non-compliance of documents, or (ii) give any instructions as to
acceptances or rejection of any documents or goods.

     5.6 The Company agrees that: (a) any necessary import, export or other
licenses or certificates for the import or handling of the Collateral will have
been promptly procured; (b) all foreign and domestic governmental laws and
regulations in regard to the shipment and importation of the Collateral, or the
financing thereof will have been promptly and fully complied with; and (c) any
certificates in that regard that CIT may at any time request will be promptly
furnished. In connection herewith, the Company warrants and represents that all
shipments made under any such Letters of Credit are in accordance with the laws
and regulations of the countries in which the shipments originate and terminate,
and are not prohibited by any such laws and regulations. The Company assumes all
risk, liability and responsibility for, and agrees to pay and discharge, all
present and future local, state, federal or foreign Taxes, duties, or levies.
Any embargo, restriction, laws, customs or regulations of any country, state,
city, or other political subdivision, where the Collateral is or may be located,
or wherein payments are to be made, or wherein drafts may be drawn, negotiated,
accepted, or paid, shall be solely the Company's risk, liability and
responsibility.

     5.7 Upon any payments made to the Issuing Bank under the Letter of Credit
Guaranty, CIT shall acquire by subrogation, any rights, remedies, duties or
obligations granted or undertaken by the Company to the Issuing Bank in any
application for Letters of Credit, any standing agreement relating to Letters of
Credit or otherwise, all of which shall be deemed to have been granted to CIT
and apply in all respects to CIT and shall be in addition to any rights,
remedies, duties or obligations contained herein.

SECTION 6. COLLATERAL

     6.1 As security for the prompt payment and performance in full of all
Obligations, the Company hereby pledges and grants to CIT a continuing general
lien upon, and security interest in, all of its assets (except as limited by
Section 6.13 below), including without limitation, all of its:

     (a) Accounts;

     (b) Inventory;

     (c) General Intangibles;

     (d) Documents of Title;

     (e) Other Collateral;

                                       23
<PAGE>

     (f) Equipment;

     (g) Real Estate;

     (h) Pledged Account; and

     (i) All proceeds and products, whether tangible or intangible, of all of
the foregoing, including proceeds of insurance covering any or all of the
foregoing.

     6.2 The security interests granted hereunder shall extend and attach to:

     (a) All Collateral which is owned or hereafter acquired by the Company or
in which the Company has any interest, whether held by the Company or others for
its account, and, if any Collateral is Equipment, whether the Company's interest
in such Equipment is as owner, finance lessee or conditional vendee;

     (b) All Equipment, whether the same constitutes personal property or
fixtures, including, but without limiting the generality of the foregoing, all
dies, jigs, tools, benches, molds, tables, accretions, component parts thereof
and additions thereto, as well as all accessories, motors, engines and auxiliary
parts used in connection with, or attached to, the Equipment; and

     (c) All Inventory and any portion thereof which may be returned, rejected,
reclaimed or repossessed by either CIT or the Company from the Company's
customers, as well as to all supplies, goods, incidentals, packaging materials,
labels and any other items which contribute to the finished goods or products
manufactured or processed by the Company, or to the sale, promotion or shipment
thereof.

     6.3 The Company agrees to safeguard, protect and hold all Inventory for
CIT's account and make no disposition thereof except in the ordinary course of
its business of the Company, as herein provided, and except as permitted in
Section 3.3(i) hereof. The Company represents and warrants that Inventory will
be sold and shipped by the Company to its customers only in the ordinary course
of the Company's business, and then only on open account and on terms currently
being extended by the Company to its customers, provided that, absent the prior
written consent of CIT, the Company shall not sell Inventory on a consignment
basis nor retain any lien or security interest in any sold Inventory. Upon the
sale, exchange, or other disposition of Inventory, as herein provided, the
security interest in the Inventory provided for herein shall, without break in
continuity and without further formality or act, continue in, and attach to, all
proceeds, including any instruments for the payment of money, Trade Accounts
Receivable, documents of title, shipping documents, chattel paper and all other
cash and non-cash proceeds of such sale, exchange or disposition. As to any such
sale, exchange or other disposition, CIT shall have all of the rights of an
unpaid seller, including stoppage in transit, replevin, rescission and
reclamation. The Company hereby agrees to immediately forward any and all
proceeds of Collateral to the Depository Account, and to hold any such proceeds
(including any notes and instruments), in trust for CIT pending delivery to CIT.
Irrespective of CIT's perfection status in any and all of the General
Intangibles, including, without limitations, any Patents, Trademarks, Copyrights
or licenses with respect thereto, the Company hereby irrevocably grants CIT a
royalty free license to sell, or otherwise dispose or transfer, in accordance
with Section 10.3 of this Financing Agreement, and the applicable terms hereof,
of any of the Inventory upon the occurrence of an Event of Default which has not
been waived in writing by CIT.

     6.4 The Company agrees at its own cost and expense to keep the Equipment in
as good and substantial repair and condition as the same is now or at the time
the lien and security interest granted herein shall attach thereto, reasonable
wear and tear excepted, making any and all repairs and replacements when and
where necessary. The Company also agrees to safeguard, protect and hold all
Equipment in accordance with the terms hereof and subject to CIT's security
interest. Any sale, exchange or other disposition of any Equipment shall be made
by the Company only with CIT's prior written consent. Upon the sale, exchange,
or other disposition of the Equipment, as herein provided, the security interest
provided for herein shall, without break in continuity and without further
formality or

                                       24
<PAGE>

act, continue in, and attach to, all proceeds, including any instruments for the
payment of money, Accounts, documents of title, shipping documents, chattel
paper and all other cash and non-cash proceeds of such sales, exchange or
disposition. As to any such sale, exchange or other disposition, CIT shall have
all of the rights of an unpaid seller, including stoppage in transit, replevin,
rescission and reclamation. Notwithstanding anything contained herein to the
contrary, the Company may send the Equipment listed in Schedule 6.4 to its Costa
Rican Subsidiary so long as (i) no Default or Event of Default then exists, and
(ii) the Costa Rican Subsidiary has signed and delivered a Processor Letter to
CIT.

     6.5 The rights and security interests granted to CIT hereunder are to
continue in full force and effect, notwithstanding the termination of this
Financing Agreement or the fact that the Revolving Loan Account may from time to
time be temporarily in a credit position, until the final payment in full to CIT
of all Obligations and the termination of this Financing Agreement. Any delay,
or omission by CIT to exercise any right hereunder shall not be deemed a waiver
thereof, or be deemed a waiver of any other right, unless such waiver shall be
in writing and signed by CIT. A waiver on any one occasion shall not be
construed as a bar to, or waiver of, any right or remedy on any future occasion.

     6.6 Notwithstanding CIT's security interest in the Collateral and to the
extent that the Obligations are now or hereafter secured by any assets or
property other than the Collateral or by the guarantee, endorsement, assets or
property of any other person, CIT shall have the right in its sole discretion to
determine which rights, liens, security interests or remedies CIT shall at any
time pursue, foreclose upon, relinquish, subordinate, modify or take any other
action with respect to, without in any way modifying or affecting any of them,
or any of CIT's rights hereunder.

     6.7 Any balances to the credit of the Company and any other property or
assets of the Company in the possession or control of CIT may be held by CIT as
security for any Obligations and applied in whole or partial satisfaction of
such Obligations when due. The liens and security interests granted herein, and
any other lien or security interest CIT may have in any other assets of the
Company, shall secure payment and performance of all now existing and future
Obligations. CIT may in its discretion charge any or all of the Obligations to
the Revolving Loan Account when due.

     6.8 The Company owns or has the right to use all General Intangibles and
rights thereto necessary to conduct its business as conducted as of the Closing
Date and the Company shall maintain its rights in, and the value of, the
foregoing in the ordinary course of its business, including, without limitation,
by making timely payment with respect to any applicable licensed rights and
enforcing and policing its General Intangibles. The Company shall deliver to
CIT, and/or shall cause the appropriate party to deliver to CIT, from time to
time such pledge or security agreements with respect to General Intangibles (now
or hereafter acquired) of the Company and its subsidiaries as CIT shall require
to obtain valid first liens thereon. In furtherance of the foregoing, the
Company shall provide timely notice to CIT of any additional Patents,
Trademarks, tradenames, service marks, Copyrights, brand names, trade names,
logos and other trade designations acquired or applied for subsequent to the
Closing Date and the Company shall execute such documentation as CIT may
reasonably require to obtain and perfect its lien thereon. The Company hereby
confirms that it shall deliver, or cause to be delivered, any pledged stock
issued subsequent to the Closing Date to CIT in accordance with the applicable
terms of the Pledge Agreement and prior to such delivery, shall hold any such
stock in trust for CIT. The Company hereby irrevocably grants to CIT a
royalty-free, non-exclusive license in the General Intangibles, including trade
names, Trademarks, Copyrights, Patents, licenses, and any other proprietary and
intellectual property rights and any and all right, title and interest in any of
the foregoing, subject to Government Disclosure Regulations and Government
Receivables and Accounts Requirements, for the sole purpose, upon the occurrence
of an Event of Default and until waived in writing by CIT, of the right to: (i)
advertise for sale and sell or transfer any Inventory bearing any of the General
Intangibles, and (ii) make, assemble, prepare for sale or complete, or cause
others to do so, any applicable raw materials or Inventory bearing any of the
General Intangibles, including use of the Equipment and Real Estate for the
purpose of completing the manufacture of unfinished goods, raw materials or
work-in-process comprising Inventory, and apply the proceeds thereof to the
Obligations hereunder, all as further set forth in this Financing Agreement and
irrespective of CIT's lien and perfection in any General Intangibles.

                                       25
<PAGE>

     6.9 This Financing Agreement and the obligation of the Company to perform
all of its covenants and obligations hereunder are further secured by
mortgage(s), deed(s) of trust or assignment(s) on the Real Estate.

     6.10 The Company shall give to CIT from time to time such mortgage(s),
deed(s) of trust or assignment(s) on the Real Estate or real estate acquired
after the date hereof as CIT shall require to obtain a valid first lien thereon
subject only to those exceptions of title as set forth in future title insurance
policies that are satisfactory to CIT.

     6.11 The Company agrees that all chattel paper created by the Company will
be marked: "This chattel paper has been assigned to The CIT Group/Business
Credit, Inc. Further assignment of this chattel paper violates the rights of The
CIT Group/Business Credit, Inc."

     6.12 The Company shall promptly notify CIT if the Company acquires a
commercial tort claim (as defined in the UCC) and shall take such actions as CIT
shall request in order to grant to CIT a perfected and first priority security
interest in such commercial tort claim and the proceeds thereof.

     6.13 Notwithstanding anything in this Agreement to the contrary, CIT's
pledge and grant of a lien upon and security interest in the Company's assets is
subject to the following limitations:

     (a) with respect to the Company's Investment Property consisting of stock
of Holdings and the Costa Rican Subsidiary, such grant, lien and security
interest shall be limited to 65% of the capital stock of such entities,
respectively;

     (b) with respect to each item of Collateral constituting an agreement,
contract, instrument, license or permit of the Company, such item shall be
subject to the security interest created hereunder and constitute Collateral for
all purposes of this Agreement only to the extent that the granting of such
security interest does not, under the terms of such agreement, contract,
instrument, license or permit, or as provided by applicable law, cause any
default under or termination of such agreement, contract, instrument, license or
permit, or the loss of any material right of the Company thereunder, provided
that the exclusion of such items of Collateral, taken as a whole, will not
materially reduce the aggregate value of the Collateral, taken as a whole (the
excluded agreements, contracts, instruments, licenses or permits of the Company
shall be referred to individually as an "Excluded Contract" and collectively as
the "Excluded Contracts"); and

     (c) with respect to the Company's Instruments consisting of the Carter
Notes, such Carter Notes shall be excluded from the definition of Collateral.

     6.14 The Cash Collateral may be commingled with, and need not be segregated
from, CIT's general funds. The Company hereby acknowledges and agrees that (i)
CIT will, within ten (10) days of the Closing Date, purchase one or more
certificates of deposit with the Cash Collateral (the "Certificate of Deposit
"), and (ii) CIT will not be responsible for breakage costs or other fees or
penalties (collectively, "Breakage Costs") associated with redemption of the
Certificate of Deposit prior to the stated maturity date thereof after the
occurrence of an Event of Default which has not been waived in writing by CIT
and/or in connection with the Company's payment of the Obligations upon
termination of the Financing Agreement. Interest shall be payable on the Cash
Collateral at a rate equal to the rate actually earned by CIT on the Certificate
of Deposit, and shall be credited to the Revolving Loan Account within a
reasonable time after receipt of the same by CIT; provided that after an Event
of Default has occurred and until such Event of Default has been waived in
writing by CIT, interest shall accrue and be applied as set forth herein. After
all Obligations have been paid and satisfied in full and this Financing
Agreement has been terminated, CIT shall deliver to the Company the Cash
Collateral and accrued but unpaid interest thereon, less Breakage Costs, to the
extent the Cash Collateral and accrued interest thereon was not applied to
satisfy the Obligations.

                                       26
<PAGE>

SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS

     7.1 The Company warrants and represents that: (i) Schedule 7-1 hereto
correctly and completely sets forth the Company's (A) state of organization or
formation, (B) exact legal name in such state of organization or formation (C)
chief executive office, (D) Collateral locations, (E) Trademarks, Patents,
Copyrights and tradenames, (F) the Company's subsidiaries and (G) all the other
information listed on said Schedule; (ii) (a) except for the Permitted
Encumbrances, after filing of financing statements in the applicable filing
clerks office at the locations set forth in Schedule 7-1, this Financing
Agreement creates a valid, perfected and first priority security interest in the
Collateral which can be perfected by filing and the security interests granted
herein constitute and shall at all times constitute the first and only liens on
the Collateral, and (b) after execution and delivery of the stock pledge
agreement, stock certificates and stock powers referenced in Section 2.1(l)
hereof, such stock pledge agreement creates a valid, perfected and first
priority security interest in 65% of the capital stock of Holding and the Coast
Rican Subsidiary and the security interests granted herein and therein
constitute and shall at all times constitute the first and only liens on such
Collateral, and (c) after execution and delivery the Blocked Account Agreement
referenced in Section 3.4(b) hereof, such Blocked Account Agreement creates a
valid, perfected and first priority security interest in the Depository Account
subject thereof and the security interests granted herein and therein constitute
and shall at all times constitute the first and only liens on such Collateral;
(iii) except for the Permitted Encumbrances, the Company is, or will be, at the
time additional Collateral is acquired by it, the absolute owner of the
Collateral with full right to pledge, sell, consign, transfer and create a
security interest therein, free and clear of any and all claims or liens in
favor of others; (iv) the Company will, at its expense, forever warrant and, at
CIT's request, defend the same from any and all claims and demands of any other
person other than a holder of a Permitted Encumbrance; (v) the Company will not
grant, create or permit to exist, any lien upon, or security interest in, the
Collateral, or any proceeds thereof, in favor of any other person other than the
holders of the Permitted Encumbrances; (vi) that the Equipment does not comprise
a part of the Inventory of the Company; (vii) the Equipment is and will only be
used by the Company in its business and will not be held for sale or lease, or
removed from its premises, or otherwise disposed of by the Company except as
otherwise permitted in this Financing Agreement; and (viii) except as described
on Schedule 7.1-2 attached hereto, the Company is not party to or, to its best
knowledge, threatened with, any litigation, suit, action, investigation (whether
civil or criminal), proceedings or controversy before any Court, administrative
agency or other governmental authority and the Company is not in violation of or
in default with respect to any judgment, order, writ, injunction, decree or rule
of any court, administrative agency or governmental instrumentality or in any
material respect under any regulation of any administrative agency or
governmental instrumentality.

     7.2 The Company agrees to maintain books and records pertaining to the
Collateral in accordance with GAAP and in such additional detail, form and scope
as CIT shall reasonably require. The Company agrees that CIT or its agents may
enter upon the Company's premises at any time during normal business hours, and
from time to time in its reasonable business judgment, for the purpose of
inspecting the Collateral and any and all records pertaining thereto, subject to
Government Disclosure Regulations and Government Receivables and Accounts
Requirements. The Company irrevocably authorizes all accountants and third
parties to disclose and deliver directly to CIT, at the Company's expense, all
financial statements and information, books, records, work papers, management
reports and other information generated by them or in their possession regarding
the Company and/or the Collateral, subject to Government Disclosure Regulations
and Government Receivables and Accounts Requirements.. The Company agrees to
afford CIT thirty (30) days prior written notice of any change in the location
of any Collateral, will cooperate with CIT in connection with obtaining
appropriate landlord, mortgagee and/or bailee waivers in form and substance
satisfactory to CIT. The Company is also to advise CIT promptly, in sufficient
detail, of any material adverse change relating to the type, quantity or quality
of the Collateral or on the security interests granted to CIT therein.

     7.3 The Company agrees to: (a) execute and deliver to CIT, from time to
time, solely for CIT's convenience in maintaining a record of the Collateral,
such written statements, and schedules as CIT may reasonably require,
designating, identifying or describing the Collateral and (b) provide CIT, on
request, but no more frequently than semi-annually, an environmental audit
report on its leasehold and fee interests, and its waste disposal practices,
which report shall be (i) at the Company's expense and otherwise acceptable to
CIT and (ii) not disclose or indicate any material liability (real or potential)
stemming from the Company's premises, its operations, its waste disposal

                                       27
<PAGE>

practices or waste disposal sites used by the Company. The Company's failure,
however, to promptly give CIT such statements, or schedules shall not affect,
diminish, modify or otherwise limit CIT's security interests in the Collateral.

     7.4 The Company agrees to comply with the requirements of all state and
federal laws (and with respect to pledged stock, all applicable foreign laws) in
order to grant to CIT valid and perfected first security interests in the
Collateral, subject only to the Permitted Encumbrances. CIT is hereby authorized
by the Company to file (including pursuant to the applicable terms of the UCC)
from time to time any financing statements, continuations or amendments covering
the Collateral. The Company hereby consents to and ratifies any and all
execution and/or filing of financing statements on or prior to the Closing Date
by CIT. The Company agrees to do whatever CIT may reasonably request, from time
to time, by way of: (a) filing notices of liens, financing statements,
amendments, renewals and continuations thereof; (b) cooperating with CIT's
agents and employees; (c) keeping Collateral records; (d) transferring proceeds
of Collateral to CIT's possession; and (e) performing such further acts as CIT
may reasonably require in order to effect the purposes of this Financing
Agreement, including but not limited to obtaining control agreements with
respect to deposit accounts and/or Investment Property.

     7.5(A) The Company agrees to maintain insurance on the Real Estate,
Equipment and Inventory under such policies of insurance, with such insurance
companies, in such reasonable amounts and covering such insurable risks as are
at all times reasonably satisfactory to CIT. All policies covering the Real
Estate, Equipment and Inventory are, subject to the rights of any holders of
Permitted Encumbrances holding claims senior to CIT, to be made payable to CIT,
in case of loss, under a standard non-contributory "mortgagee", "lender" or
"secured party" clause and are to contain such other provisions as CIT may
require to fully protect CIT's interest in the Real Estate, Inventory and
Equipment and to any payments to be made under such policies. All original
policies or true copies thereof are to be delivered to CIT, premiums prepaid or
with premiums paid in accordance with payment options provided by the insurer,
consistent with past practices, with the loss payable endorsement in CIT's
favor, and shall provide for not less than thirty (30) days prior written notice
to CIT of the exercise of any right of cancellation. At the Company's request,
or if the Company fails to maintain such insurance, CIT may arrange for such
insurance, but at the Company's expense and without any responsibility on CIT's
part for: (i) obtaining the insurance; (ii) the solvency of the insurance
companies; (iii) the adequacy of the coverage; or (iv) the collection of claims.
Upon the occurrence of an Event of Default which is not waived in writing by
CIT, CIT shall, subject to the rights of any holders of Permitted Encumbrances
holding claims senior to CIT, have the sole right, in the name of CIT or the
Company, to file claims under any insurance policies, to receive, receipt and
give acquittance for any payments that may be payable thereunder, and to execute
any and all endorsements, receipts, releases, assignments, reassignments or
other documents that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies.

     (B)(I) In the event of any loss or damage by fire or other casualty,
insurance proceeds relating to Inventory shall first reduce the Company's
Revolving Loan, and then the Term Loans. Upon the occurrence of a Default or
Event of Default, such Insurance Proceeds may be applied to the Obligations in
such order as CIT may elect;

     (II) In the event any part of the Company's Real Estate or Equipment is
damaged by fire or other casualty and the Insurance Proceeds for such damage or
other casualty is less than or equal to $100,000.00, CIT shall promptly apply
such Proceeds to reduce the Company's outstanding balance in the Revolving Loan
Account. Upon the occurrence of a Default or Event of Default, CIT may apply
Insurance Proceeds to the Obligations in such manner as CIT may deem advisable
in its sole discretion;

     (III) In the event any part of the Company's Real Estate or Equipment is
damaged by fire or other casualty, and the Insurance Proceeds is greater than
$100,000.00, CIT may, subject to the rights of any holders of Permitted
Encumbrances holding claims senior to CIT, apply the Insurance Proceeds to the
payment of the Obligations in such manner and in such order as CIT may
reasonably elect; and

                                       28
<PAGE>

     (IV) Notwithstanding anything contained in this Section 7.5(b) to the
contrary, if the amount of any such Insurance Proceeds is less than $25,000, and
absent the occurrence of an Event of Default which has not been waived in
writing by CIT, the Company may keep and retain such $25,000.

     7.6 The Company agrees to pay, when due, all Taxes, including sales taxes,
assessments, claims and other charges lawfully levied or assessed upon the
Company or the Collateral unless such Taxes are being diligently contested in
good faith by the Company by appropriate proceedings and adequate reserves are
established in accordance with GAAP. Notwithstanding the foregoing, if any lien
shall be filed or claimed thereunder (a) for Taxes due the United States of
America, or (b) which in CIT's opinion might create a valid obligation having
priority over the rights granted to CIT herein (exclusive of Real Estate), such
lien shall not be deemed to be a Permitted Encumbrance hereunder and the Company
shall immediately pay such tax and remove the lien of record. If the Company
fails to do so promptly, then at CIT's election, CIT may (i) create an
Availability Reserve in such amount as it may deem appropriate in its business
judgment, or (ii) upon the occurrence of a Default or Event of Default, imminent
risk of seizure, filing of any priority lien, forfeiture, or sale of the
Collateral, pay Taxes on the Company's behalf, and the amount thereof shall be
an Obligation secured hereby and due on demand.

     7.7 The Company: (a) agrees to comply with all acts, rules, regulations and
orders of any legislative, administrative or judicial body or official, which
the failure to comply with would have a material and adverse impact on the
Collateral, or any material part thereof, or on the business or operations of
the Company, provided that the Company may contest any acts, rules, regulations,
orders and directions of such bodies or officials in any reasonable manner which
will not, in CIT's reasonable opinion, materially and adversely effect CIT's
rights or priority in the Collateral; (b) agrees to comply with all
environmental statutes, acts, rules, regulations or orders as presently existing
or as adopted or amended in the future, applicable to the Collateral, the
ownership and/or use of its real property and operation of its business, which
the failure to comply with would have a material and adverse impact on the
Collateral, or any material part thereof, or on the operation of the business of
the Company; and (c) shall not be deemed to have breached any provision of this
Section 7.7 if (i) the failure to comply with the requirements of this Section
7.7 resulted from good faith error or innocent omission, (ii) the Company
promptly commences and diligently pursues a cure of such breach, and (iii) such
failure is cured within (30) days following the Company's receipt of notice of
such failure, or if such cannot in good faith be cured within thirty (30) days,
then such breach is cured within a reasonable time frame based upon the extent
and nature of the breach and the necessary remediation, and in conformity with
any applicable consent order, consensual agreement and applicable law.

     7.8 Until termination of this Financing Agreement and payment and
satisfaction of all Obligations due hereunder, the Company agrees that, unless
CIT shall have otherwise consented in writing, the Company will furnish to CIT:
(a) within ninety (90) days after the end of each Fiscal Year of the Company or
within the applicable time period permitted under Rule 12b-25 ("Rule 12b-25") of
the Securities and Exchange Act of 1934, as amended, not to exceed 105 days
after the end of such Fiscal Year, the Company's Form 10-KSB for such year in
the form filed with the Securities and Exchange Commission, an audited
Consolidated Balance Sheet, with a Consolidating Balance Sheet attached thereto,
as at the close of such year, and statements of profit and loss, cash flow and
reconciliation of surplus of each the Company and its consolidated subsidiaries
for such year, audited by independent public accountants selected by the Company
and satisfactory to CIT; (b) within forty five (45) days after the end of each
Fiscal Year of the Company or within the applicable time period permitted under
Rule 12b-25, not to exceed fifty (50) days after the end of such Fiscal Quarter,
the Company's Form 10-QSB for such period in the form filed with the Securities
and Exchange Commission, a Consolidated Balance Sheet and Consolidating Balance
Sheet as at the end of such period and statements of profit and loss, cash flow
and surplus of the Company and its consolidated subsidiaries, certified by an
authorized financial or accounting officer of the Company; (c) within thirty
(30) days after the end of each month, a Consolidated Balance Sheet as at the
end of such period and statements of profit and loss, cash flow and surplus of
the Company and all subsidiaries for such period, certified by an authorized
financial or accounting officer of the Company; and (d) from time to time, such
further information regarding the business affairs and financial condition of
the Company and its consolidated subsidiaries as CIT may reasonably request,
including, without limitation (i) the accountant's management practice letter
and (ii) annual cash flow projections in form satisfactory to CIT. Each
financial statement which the Company is required to submit hereunder must be
accompanied by an officer's certificate, signed by the President, Vice
President, Controller, or Treasurer, pursuant to

                                       29
<PAGE>

which any one such officer must certify that: (x) the financial statement(s)
fairly and accurately represent(s) the Company's financial condition at the end
of the particular accounting period, as well as the Company's operating results
during such accounting period, subject to year-end audit adjustments; and (y)
during the particular accounting period: (A) there has been no Default or Event
of Default under this Financing Agreement, provided, however, that if any such
officer has knowledge that any such Default or Event of Default, has occurred
during such period, the existence of and a detailed description of same shall be
set forth in such officer's certificate; (B) the Company has not received any
notice of cancellation with respect to its property insurance policies; (C) the
Company has not received any notice that could result in a material adverse
effect on the value of the Collateral taken as a whole; and (D) the exhibits
attached to such financial statement(s) constitute detailed calculations showing
compliance with all financial covenants contained in this Financing Agreement.

     7.9 Until termination of the Financing Agreement and payment and
satisfaction of all Obligations hereunder, the Company agrees that, without the
prior written consent of CIT, except as otherwise herein provided, the Company
will not:

     (A) Mortgage, assign, pledge, transfer or otherwise permit any lien,
         charge, security interest, encumbrance or judgment, (whether as a
         result of a purchase money or title retention transaction, or other
         security interest, or otherwise) to exist on any of the Company's
         Collateral or any other assets, whether now owned or hereafter
         acquired, except for the Permitted Encumbrances;

     (B) Incur or create any Indebtedness other than the Permitted Indebtedness;

     (C) Sell, lease, assign, transfer or otherwise dispose of (i) Collateral,
         except as otherwise specifically permitted by this Financing Agreement,
         or (ii) either all or substantially all of the Company's assets, which
         do not constitute Collateral; provided that nothing contained herein
         shall prevent the Company from forgiving all or a portion of the Carter
         Loan;

     (D) Merge, consolidate or otherwise alter or modify its corporate name,
         principal place of business, structure, or existence, re-incorporate or
         re-organize, or enter into or engage in any operation or activity
         materially different from that presently being conducted by the
         Company, except that the Company may change its corporate name or
         address; provided that: (i) the Company shall give CIT thirty (30) days
         prior written notice thereof and (ii) the Company shall execute and
         deliver, prior to or simultaneously with any such action, any and all
         documents and agreements requested by CIT to confirm the continuation
         and preservation of all security interests and liens granted to CIT
         hereunder;

     (E) Assume, guarantee, endorse, or otherwise become liable upon the
         obligations of any person, firm, entity or corporation, except by the
         endorsement of negotiable instruments for deposit or collection or
         similar transactions in the ordinary course of business;

     (F) Declare or pay any dividend or distributions of any kind on, or
         purchase, acquire, redeem or retire, any of the capital stock or equity
         interest, of any class whatsoever, whether now or hereafter
         outstanding;

     (G) Other than the Carter Loan and the Holdings Loan that exist on the
         Closing Date, make any advance or loan to, or any investment in, any
         firm, entity, person, direct or indirect subsidiary or corporation, or
         purchase or acquire all or substantially all of the stock or assets of
         any entity, person or corporation; provided, however, that the Company
         may only make intercompany loans or advances (individually an
         "INTERCOMPANY LOAN" and collectively the "INTERCOMPANY LOANS") to the
         Costa Rican Subsidiary so long as and to the extent that (i) the Costa
         Rican Subsidiary shall have executed and delivered to the Company a
         revolving demand note (an "INTERCOMPANY NOTE") to evidence any such
         Intercompany Loan owing at any time by the Costa Rican Subsidiary to
         the Company in an amount not to exceed $7,400,000, unless otherwise
         mutually agreed upon between the Company and CIT, which Intercompany
         Note shall be in form and substance satisfactory to CIT and shall be
         pledged to CIT as additional security hereunder; (ii) the Company shall
         record all Intercompany Loans on its books and records in a manner
         satisfactory to CIT; (iii) at the time any such Intercompany Loan is
         made by the Company to the Costa Rican Subsidiary and after giving
         effect thereto, the Company shall be Solvent; (iv) the

                                       30
<PAGE>

         Company is not and would not otherwise be in default of any of its
         Obligations under this Financing Agreement after giving effect to any
         such proposed Intercompany Loan; (v) the Company shall have
         Availability after giving effect to each such Intercompany Loan and
         (vi) CIT (in its sole discretion) has determined that the financial
         performance of the Costa Rican Subsidiary is consistent with the
         financial projections provided to CIT by the Company on or prior to the
         Closing Date; and

     (H) Pay any management, consulting or other similar (non-legal) fees to any
         person, corporation or other entity affiliated with the Company, other
         than to (i) DuPont in connection with development, manufacturing or
         distribution activities related to the Company's business in an amount
         not to exceed $160,000 per Fiscal Year, (ii) Career Consultants, Inc.
         and SK Associates in connection with executive searches and other human
         resource services to the Company in an amount to exceed $120,000 per
         Fiscal Year, and (iii) Arthur Oliner in connection with
         technology-related consulting services in an amount not to exceed
         $40,000 per Fiscal.

     7.10 Until termination of the Financing Agreement and payment and
satisfaction in full of all Obligations hereunder, the Company shall:

     (a) maintain at the end of each Fiscal Quarter (commencing with the Fiscal
Quarter ending January 3, 2004, a Fixed Charge Coverage Ratio of not less than
1.0 to 1.0, calculated on: (i) a three month basis for the Fiscal Quarter ending
January 3, 2004; (ii) a six month basis for the Fiscal Quarter ending April 3,
2004; (iii) a nine month basis for the Fiscal Quarter ending July 3, 2004; and
(iv) a rolling twelve month basis for the Fiscal Quarter ending October 2, 2004
and for each Fiscal Quarter thereafter.

     (b) without the prior written consent of CIT, the Company will not contract
for, purchase, make expenditures for, lease pursuant to a Capital Lease or
otherwise incur obligations with respect to Capital Expenditures (whether
subject to a security interest or otherwise) during any Fiscal Year in the
aggregate amount in excess of (i) $300,000.00 for the fourth quarter of the
current Fiscal Year, and (ii) $1,200,000.00 for the Fiscal Year ending January
1, 2005 and for each Fiscal Year thereafter.

     7.11 The Company agrees to advise CIT in writing of: (a) all expenditures
(actual or anticipated) in excess of $150,000.00 from the budgeted amount
therefor in any Fiscal Year for (i) environmental clean-up, (ii) environmental
compliance or (iii) environmental testing and the impact of said expenses on the
Company's Working Capital; and (b) any notices the Company receives from any
local, state or federal authority advising the Company of any environmental
liability (real or potential) stemming from the Company's operations, its
premises, its waste disposal practices, or waste disposal sites used by the
Company and to provide CIT with copies of all such notices if so required.

     7.12 The Company hereby agrees to indemnify and hold harmless CIT and its
officers, directors, employees, attorneys and agents (each an "INDEMNIFIED
PARTY") from, and holds each of them harmless against, any and all losses,
liabilities, obligations, claims, actions, damages, costs and expenses
(including attorney's fees) and any payments made by CIT pursuant to any
indemnity provided by CIT with respect to or to which any Indemnified Party
could be subject insofar as such losses, liabilities, obligations, claims,
actions, damages, costs, fees or expenses with respect to the Loan Documents,
including without limitation those which may arise from or relate to: (a) the
Depository Account, the Blocked Accounts, the lockbox and/or any other
depository account and/or the agreements executed in connection therewith; and
(b) any and all claims or expenses asserted against CIT as a result of any
environmental pollution, hazardous material or environmental clean-up relating
to the Real Estate; or any claim or expense which results from the Company's
operations (including, but not limited to, the Company's off-site disposal
practices) and use of the Real Estate, which CIT may sustain or incur (other
than solely as a result of the physical actions of CIT on the Company's premises
which are determined to constitute gross negligence or willful misconduct by a
court of competent jurisdiction), all whether through the alleged or actual
negligence of such person or otherwise, except and to the extent that the same
results solely and directly from the gross negligence or willful misconduct of
such Indemnified Party as finally determined by a court of competent
jurisdiction. The Company hereby agrees that this indemnity shall survive
termination of this Financing Agreement, as well as payments of

                                       31
<PAGE>

Obligations which may be due hereunder. CIT may, in its sole business judgment,
establish such Availability Reserves with respect thereto as it may deem
advisable under the circumstances and, upon any termination hereof, hold such
reserves as cash reserves for any such contingent liabilities.

     7.13 Without the prior written consent of CIT or as otherwise permitted
hereunder, the Company agrees that it will not enter into any transaction
(including, without limitation, any purchase, sale, lease, loan or exchange of
property) with any subsidiary or affiliate of the Company, provided that, except
as otherwise set forth in this Financing Agreement, the Company may enter into
sale and service transactions in the ordinary course of its business and
pursuant to the reasonable requirements of the Company, and upon standard terms
and conditions and fair and reasonable terms, no less favorable to the Company
than the Company could obtain in a comparable arms length transaction with an
unrelated third party, provided further that no Default or Event of Default
exists or will occur hereunder prior to and after giving effect to any such
transaction.

     7.14 The Company is Solvent both before and after giving effect to (a) the
Revolving Loans, the Term Loans and the Letters of Credit to be made or extended
on the Closing Date or such other date as the Revolving Loans, the Term Loans
and Letters of Credit requested hereunder are made or extended, (b) the
disbursement of the proceeds of such Revolving Loans, Term Loans and Letters of
Credit pursuant to the instructions of the Company and (c) the payment and
accrual of all transaction costs in connection with the foregoing.

     7.15 From time to time, but not more frequently than annually (provided the
Company is not in default) as requested by CIT, at the sole expense of the
Company, the Company will have updated appraisals performed on the Appraised
Equipment by independent appraisers acceptable to CIT. If any updated appraisals
shall indicate that eighty percent (80%) of the appraised net orderly
liquidation value (the "UPDATED NOLV ") of the Appraised Equipment is less than
the then-outstanding principal balance due under the Term Loan A, then at CIT's
discretion, the Company shall make prepayments against such Term Loan A so that
the outstanding principal balance due thereon is not more than the Updated NOLV.

     7.16 From time to time, but not more frequently than annually (provided the
Company is not in default) as requested by CIT, at the sole expense of the
Company, the Company will have updated appraisals performed on the New Jersey
Property by independent appraisers acceptable to CIT. If any updated appraisals
shall indicate that seventy percent (70%) of the appraised quick sale value (the
"UPDATED QSV") of the New Jersey Property is less than the then-outstanding
principal balance due under the Term Loan B, then at CIT's discretion, the
Company shall make prepayments against such Term Loan B so that the outstanding
principal balance due thereon is not more than the Updated QSV.

     7.17 The aggregate value of the stock owned by the Company in other
companies (other than its subsidiaries) does not exceed $10,000 as of the
Closing Date. At such time, if any, that the aggregate value thereof exceeds
$10,000, the Company will pledge such stock to CIT pursuant to a stock pledge
agreement in form and substance substantially the same as delivered by the
Company to CIT on the Closing Date.

SECTION 8. INTEREST, FEES AND EXPENSES

     8.1 (A) Interest on the Revolving Loans shall be payable monthly as of the
end of each month in an amount equal to the Chase Bank Rate plus one-half of one
percent (.50%) per annum on the average of the net balances owing by the Company
to CIT in the Revolving Loan Account at the close of each day during such month.
In the event of any change in the Chase Bank Rate for such Chase Bank Rate
Loans, the rate hereunder for such Chase Bank Rate Loans shall change, as of the
date of such change, so as to remain one-half of one percent (.50%) above the
Chase Bank Rate. The Chase Bank Rate hereunder shall be calculated based on a
360-day year. CIT shall be entitled to charge the Revolving Loan Account at the
rate provided for herein when due until all Obligations have been paid in full.

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<PAGE>

     (B) Notwithstanding any provision to the contrary contained in this Section
8, in the event that the sum of (i) the outstanding Revolving Loans and (ii) the
outstanding Letters of Credit exceed the lesser of either (x) the maximum
aggregate amount available under Sections 3 and 5 of this Financing Agreement or
(y) the Revolving Line of Credit: (A) as a result of Revolving Loans advanced by
CIT at the request of the Company (herein "REQUESTED OVERADVANCES"), for any one
(1) or more days in any month, or (B) for any other reason whatsoever (herein
"OTHER OVERADVANCES") and such Other Overadvances continue for five (5) or more
days in any month , the average net balance of all Revolving Loans for such
month shall bear interest at the Overadvance Rate.

     (C) Upon and after the occurrence of an Event of Default and the giving of
any required notice by CIT in accordance with the provisions of Section 10.2
hereof, all Obligations shall bear interest at the Default Rate of Interest.

     8.2 (A) Interest on Term Loan A shall be payable monthly as of the end of
each month on the unpaid balance or on payment in full prior to maturity. The
Term Loans (or any portion thereof) that are Chase Bank Rate Loans shall be
charged in an amount equal to the Chase Bank Rate plus one percent (1%) per
annum. In the event of any change in the Chase Bank Rate for such Chase Bank
Rate Loans, the rate hereunder shall change, as of the date of such change, so
as to remain one percent (1%) above the Chase Bank Rate. The Chase Bank Rate
shall be calculated based on a 360-day year. CIT shall be entitled to charge the
Revolving Loan Account at the rate provided for herein when due until all
Obligations have been paid in full. The Term Loans (or any portion thereof) that
are not designated LIBOR Loans pursuant to the terms of this Section 8, shall be
deemed to be Chase Bank Rate Loans.

     (B) Interest on Term Loan B shall be payable monthly as of the end of each
month on the unpaid balance or on payment in full prior to maturity. The Term
Loans (or any portion thereof) that are Chase Bank Rate Loans shall be charged
in an amount equal to the Chase Bank Rate plus one percent (1%) per annum. In
the event of any change in the Chase Bank Rate for such Chase Bank Rate Loans,
the rate hereunder shall change, as of the date of such change, so as to remain
one percent (1%) above the Chase Bank Rate. The Chase Bank Rate shall be
calculated based on a 360-day year. CIT shall be entitled to charge the
Revolving Loan Account at the rate provided for herein when due until all
Obligations have been paid in full. The Term Loans (or any portion thereof) that
are not designated LIBOR Loans pursuant to the terms of this Section 8, shall be
deemed to be Chase Bank Rate Loans.

     8.3 In consideration of the Letter of Credit Guaranty of CIT, the Company
shall pay CIT the Letter of Credit Guaranty Fee which shall be an amount equal
to (a) one percent (1%) on the face amount of each documentary Letter of Credit
payable upon issuance thereof and (b) three percent (3%) per annum, payable
monthly, on the face amount of each standby Letter of Credit less the amount of
any and all amounts previously drawn under such standby Letter of Credit.

     8.4 Any and all charges, fees, commissions, costs and expenses charged to
CIT for the Company's account by any Issuing Bank in connection with, or arising
out of, Letters of Credit or out of transactions relating thereto will be
charged to the Revolving Loan Account in full when charged to, or paid by CIT,
or as may be due upon any termination of this Financing Agreement hereof, and
when made by any such Issuing Bank shall be conclusive on CIT.

     8.5 The Company shall reimburse or pay CIT, as the case may be, for: (a)
all Out-of-Pocket Expenses, (b) any applicable Documentation Fee; and (c)
without the payment of such constituting a waiver by CIT of a Default or Event
of Default hereunder, a non-refundable fee of $500.00 for each document or
report requested by, but not promptly delivered, to CIT.

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<PAGE>

     8.6 Upon the last Business Day of each month, commencing on October 31,
2003, the Company shall pay to CIT (i) the Line of Credit Fee, and (ii) interest
on the Collection Days. Interest will be computed at the rate, and in the
manner, set forth in Section 8.1 of this Financing Agreement.

     8.7 To induce CIT to enter into this Financing Agreement and to extend to
the Company the Revolving Loan, Letters of Credit Guaranties and the Term Loans,
the Company shall pay to CIT the Loan Facility Fee.

     8.8 On the Closing Date and each anniversary of the Closing Date
thereafter, the Company shall pay to CIT an annual Collateral Management Fee,
which shall be deemed fully earned when due (and payable in monthly installments
of $1,500.00, due and payable on the first Business Day of each month).

     8.9 The Company shall pay CIT's standard charges and fees for CIT's
personnel used by CIT for reviewing the books and records of the Company and for
verifying, testing, protecting, safeguarding, preserving or disposing of all or
any part of the Collateral (which fees shall be in addition to the Collateral
Management Fee and any Out-of-Pocket Expenses). As of the date hereof, the per
diem fee charged for personnel in connection with any of the foregoing is
$850.00 per person, provided, however, that the per diem rate is subject to
change in CIT's sole discretion.

     8.10 The Company hereby authorizes CIT to charge the Revolving Loan Account
with the amount of all payments due hereunder as such payments become due. The
Company confirms that any charges which CIT may so make to the Revolving Loan
Account as herein provided will be made as an accommodation to the Company and
solely at CIT's discretion.

     8.11 In the event that CIT or any participant hereunder (or any financial
institution which may from time to time become a participant or lender
hereunder) shall have determined in the exercise of its reasonable business
judgment that, subsequent to the Closing Date, any change in applicable law,
rule, regulation or guideline regarding capital adequacy, or any change in the
interpretation or administration thereof, or compliance by CIT or such
participant with any new 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 CIT's or such participant's capital as a consequence of its obligations
hereunder to a level below that which CIT or such participant could have
achieved but for such adoption, change or compliance (taking into consideration
CIT or such participant's policies with respect to capital adequacy) by an
amount reasonably deemed by CIT or such participant to be material, then, from
time to time, the Company shall pay no later than five (5) days following demand
to CIT or such participant such additional amount or amounts as will compensate
CIT's or such participant's for such reduction. In determining such amount or
amounts, CIT or such participant may use any reasonable averaging or attribution
methods. The protection of this Section 8.11 shall be available to CIT or such
participant regardless of any possible contention of invalidity or
inapplicability with respect to the applicable law, regulation or condition. A
certificate of CIT or such participant setting forth such amount or amounts as
shall be necessary to compensate CIT or such participant with respect to this
Section 8 and the calculation thereof when delivered to the Company shall be
conclusive on the Company absent manifest error. Notwithstanding anything in
this Section to the contrary, in the event CIT or such participant has exercised
its rights pursuant to this Section, and subsequent thereto determines that the
additional amounts paid by the Company in whole or in part exceed the amount
which CIT or such participant actually required to be made whole, the excess, if
any, shall be returned to the Company by CIT or such participant, as applicable.

     8.12 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 CIT or such participant 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 CIT or such participant to any tax of any kind whatsoever with
respect to this Financing Agreement or change the basis of taxation of payments
to CIT or such participant 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

                                       34
<PAGE>

net income of CIT or such participant by the federal government or 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 CIT or such
participant by reason of or in respect to this Financing Agreement and the Loan
Documents, including (without limitation) pursuant to Regulation D of the Board
of Governors of the Federal Reserve System; or

     (C) impose on CIT or such participant any other condition with respect to
this Financing Agreement or any other document, and the result of any of the
foregoing is to increase the cost to CIT or such participant of making, renewing
or maintaining its loans hereunder by an amount that CIT or such participant
deems to be material in the exercise of its reasonable business judgment or to
reduce the amount of any payment (whether of principal, interest or otherwise)
in respect of any of the loans by an amount that CIT or such participant deems
to be material in the exercise of its reasonable business judgment, then, in any
case the Company shall pay CIT or such participant, within five (5) days
following its demand, such additional cost or such reduction, as the case may
be. CIT or such participant shall certify the amount of such additional cost or
reduced amount to the Company and the calculation thereof and such certification
shall be conclusive upon the Company absent manifest error. Notwithstanding
anything in this Section to the contrary, in the event CIT or such participant
has exercised its rights pursuant to this Section, and subsequent thereto
determine that the additional amounts paid by the Company in whole or in part
exceed the amount which CIT or such participant actually required pursuant
hereto, the excess, if any, shall be returned to the Company by CIT or such
participant, as applicable.

     8.13 For purposes of this Financing Agreement and Section 8 thereof, any
reference to CIT shall include any financial institution, which may become a
participant or co-lender subsequent to the Closing Date.

     8.14 The Company may request LIBOR Loans on the following terms and
conditions:

     (a) The Company may elect, subsequent to the Closing Date and from time to
time thereafter (i) to request any Term Loan (or, subject to the below
conditions, a portion thereof) made hereunder to be a LIBOR Loan as of the date
of such loan or (ii) to convert Chase Bank Rate Loans that are Term Loans (or,
subject to the below conditions, a portion thereof) to LIBOR Loans, and may
elect from time to time to convert LIBOR Loans to Chase Bank Rate Loans by
giving CIT at least three (3) Business Days prior irrevocable notice of such
election, provided that any such conversion of LIBOR Loans to Chase Bank Rate
Loans shall only be made, subject to the second following sentence, on the last
day of an Interest Period with respect thereto. Should the Company elect to
convert Chase Bank Rate Loans that are Term Loans (or, subject to the below
conditions, a portion thereof) to LIBOR Loans, it shall give CIT at least four
Business Days prior irrevocable notice of such election. If the last day of an
Interest Period with respect to a loan that is to be converted is not a Business
Day or Working Day, then such conversion shall be made on the next succeeding
Business Day or Working Day, as the case may be, and during the period from such
last day of an Interest Period to such succeeding Business Day, as the case may
be, such loan shall bear interest as if it were an Chase Bank Rate Loan. All or
any part of outstanding Chase Bank Rate Loans then outstanding with respect to
Term Loans may be converted to LIBOR Loans as provided herein, provided that
partial conversions shall be in multiples in an aggregate principal amount of
$1,000,000 or more. The aggregate amount of all such LIBOR Loans shall not
exceed $3,000,000 at any one time outstanding. CIT shall be entitled to charge
the Company a $500 fee upon the first effective day of any such election for a
LIBOR Loan.

     (b) Any LIBOR Loans may be continued as such upon the expiration of an
Interest Period, provided the Company so notifies CIT, at least three (3)
Business Days prior to the expiration of said Interest Period, and provided
further that no LIBOR Loan may be continued as such upon the occurrence of any
Default or Event of Default under this Financing Agreement, but shall be
automatically converted to a Chase Bank Rate Loan on the last day of the
Interest Period during which occurred such Default or Event of Default. Absent
such notification, LIBOR Rate Loans shall convert to Chase Bank Rate Loans on
the last day of the applicable Interest Period. Each notice of election,
conversion or continuation furnished by the Company pursuant hereto shall
specify whether such election, conversion or continuation is for a one, two,
three or six month period. Notwithstanding anything to the contrary

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<PAGE>

contained herein, CIT (or any participant, if applicable) shall not be required
to purchase United States Dollar deposits in the London interbank market or from
any other applicable LIBOR Rate market or source or otherwise "match fund" to
fund LIBOR Rate Loans, but any and all provisions hereof relating to LIBOR Rate
Loans shall be deemed to apply as if CIT (and any participant, if applicable)
had purchased such deposits to fund any LIBOR Rate Loans.

     (c) The Company may request a LIBOR Loan, convert any Term Loans to a Chase
Bank Rate Loan or continue any LIBOR Loan provided there is then no Default or
Event of Default in effect.

     8.15 (a) The LIBOR Loans shall bear interest for each Interest Period with
respect thereto on the unpaid principal amount thereof at a rate per annum equal
to the LIBOR determined for each Interest Period in accordance with the terms
hereof plus three and one quarter percent (3.25%).

     (b) If all or a portion of the outstanding principal amount of the
Obligations shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such outstanding amount, to the extent it is a LIBOR
Loan, shall be converted to a Chase Bank Rate Loan at the end of the last
Interest Period therefor.

     (c) The Company may not have more than four (4) LIBOR Loans outstanding at
any given time.

     8.16 (a) Interest in respect of the LIBOR Loans shall be calculated on the
basis of a 360-day year and shall be payable as of the end of each month.

     (b) CIT shall, at the request of the Company, deliver to the Company a
statement showing the quotations given by JPMorgan Chase Bank and the
computations used in determining any interest rate pursuant to Section 8.15.

     8.17 As further set forth in paragraph 8.12 above, in the event that CIT
(or any financial institution which may become a participant hereunder) shall
have determined in the exercise of its reasonable business judgment (which
determination shall be conclusive and binding upon the Company) that by reason
of circumstances affecting the interbank LIBOR market, adequate and reasonable
means do not exist for ascertaining LIBOR applicable for any Interest Period
with respect to: (a) a proposed loan that the Company has requested be made as a
LIBOR Loan; (b) a LIBOR Loan that will result from the requested conversion of a
Chase Bank Rate Loan into a LIBOR Loan; or (c) the continuation of LIBOR Loans
beyond the expiration of the then current Interest Period with respect thereto,
CIT shall forthwith give written notice of such determination to the Company at
least one day prior to, as the case may be, the requested borrowing date for
such LIBOR Loan, the conversion date of such Chase Bank Rate Loan or the last
day of such Interest Period. If such notice is given (i) any requested LIBOR
Loan shall be made as a Chase Bank Rate Loan, (ii) any Chase Bank Rate Loan that
was to have been converted to a LIBOR Loan shall be continued as a Chase Bank
Rate Loan, and (iii) any outstanding LIBOR Loan shall be converted, on the last
day of then current Interest Period with respect thereto, to a Chase Bank Rate
Loan. Until such notice has been withdrawn by CIT, no further LIBOR Loan shall
be made nor shall the Company have the right to convert a Chase Bank Rate Loan
to a LIBOR Loan.

     8.18 If any payment on a LIBOR Loan becomes due and payable on a day other
than a Business Day or Working Day, the maturity thereof shall be extended to
the next succeeding Business Day or Working Day unless the result of such
extension would be to extend such payment into another calendar month in which
event such payment shall be made on the immediately preceding Business Day or
Working Day.

     8.19 Notwithstanding any other provisions herein, if any law, regulation,
treaty or directive or any change therein or in the interpretation or
application thereof, shall make it unlawful for CIT to make or maintain LIBOR
Loans as contemplated herein, the then outstanding LIBOR Loans, if any, shall be
converted automatically to Chase Bank Rate Loans as of the end of such month, or
within such earlier period as required by law. The Company hereby agrees
promptly to pay CIT, upon demand, any additional amounts necessary to compensate
CIT for any costs incurred by CIT in making any conversion in accordance with
this Section 8 including, but not limited to, any

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<PAGE>

interest or fees payable by CIT to lenders of funds obtained by CIT in order to
make or maintain LIBOR Loans hereunder.

     8.20 The Company agrees to indemnify and to hold CIT (including any
participant ) harmless from any loss or expense which CIT or such participant
may sustain or incur as a consequence of: (a) Default by the Company in payment
of the principal amount of or interest on any LIBOR Loans, as and when the same
shall be due and payable in accordance with the terms of this Financing
Agreement, including, but not limited to, any such loss or expense arising from
interest or fees payable by CIT or such participant to lenders of funds obtained
by either of them in order to maintain the LIBOR Loans hereunder; (b) default by
the Company in making a borrowing or conversion after the Company has given a
notice in accordance with Section 8.14 hereof; (c) any prepayment of LIBOR Loans
on a day which is not the last day of the Interest Period applicable thereto,
including, without limitation, prepayments arising as a result of the
application of the proceeds of Collateral to the Revolving Loans; and (d)
default by the Company in making any prepayment after the Company had given
notice to CIT thereof. The determination by CIT of the amount of any such loss
or expense, when set forth in a written notice to the Company, containing CIT's
calculations thereof in reasonable detail, shall be conclusive on the Company in
the absence of manifest error. Calculation of all amounts payable under this
paragraph with regard to LIBOR Loans shall be made as though CIT had actually
funded the LIBOR Loans through the purchase of deposits in the relevant market
and currency, as the case may be, bearing interest at the rate applicable to
such LIBOR Loans in an amount equal to the amount of the LIBOR Loans and having
a maturity comparable to the relevant interest period; provided, however, that
CIT may fund each of the LIBOR Loans in any manner CIT sees fit and the
foregoing assumption shall be used only for calculation of amounts payable under
this paragraph. In addition, notwithstanding anything to the contrary contained
herein, CIT shall apply all proceeds of Collateral and all other amounts
received by it from or on behalf of the Company (i) initially to the Chase Bank
Rate Loans and (ii) subsequently to LIBOR Loans; provided, however, (x) upon the
occurrence of an Event of Default or (y) in the event the aggregate amount of
outstanding LIBOR Rate Loans exceeds Availability or the applicable maximum
levels set forth therefor, CIT may apply all such amounts received by it to the
payment of Obligations in such manner and in such order as CIT may elect in its
reasonable business judgment. This covenant shall survive termination of this
Financing Agreement and payment of the outstanding Obligations.

     8.21 Notwithstanding anything to the contrary in this Agreement, in the
event that, by reason of any Regulatory Change (for purposes hereof "REGULATORY
CHANGE" shall mean, with respect to CIT, any change after the date of this
Financing Agreement in United States federal, state or foreign law or
regulations (including, without limitation, Regulation D) or the adoption or
making after such date of any interpretation, directive or request applying to a
class of banks including CIT of or under any United States federal, state or
foreign law or regulations (whether or not having the force of law and whether
or not failure to comply therewith would be unlawful), CIT either (a) incurs any
material additional costs based on or measured by the excess above a specified
level of the amount of a category of deposits or other liabilities of such bank
which includes deposits by reference to which the interest rate on LIBOR Loans
is determined as provided in this Financing Agreement or a category of
extensions of credit or other assets of CIT which includes LIBOR Loans, or (b)
becomes subject to any material restrictions on the amount of such a category of
liabilities or assets which it may hold, then, if CIT so elects by notice to the
Company, the obligation of CIT to make or continue, or to convert Chase Bank
Rate Loans into LIBOR Loans hereunder shall be suspended until such Regulatory
Change ceases to be in effect.

     8.22 For purposes of this Financing Agreement and Section 8 hereof, any
reference to CIT shall include any financial institution which may become a
participant or co-lender subsequent to the Closing Date.

SECTION 9. POWERS

     The Company hereby constitutes CIT, or any person or agent CIT may
designate, as its attorney-in-fact, at the Company's cost and expense, to
exercise all of the following powers, which being coupled with an interest,
shall be irrevocable until all Obligations to CIT have been paid in full:

                                       37
<PAGE>

     (a) To receive, take, endorse, sign, assign and deliver, all in the name of
CIT or the Company, any and all checks, notes, drafts, and other documents or
instruments relating to the Collateral;

     (b) To receive, open and dispose of all mail addressed to the Company and
to notify postal authorities to change the address for delivery thereof to such
address as CIT may designate;

     (c) To request from customers indebted on Accounts at any time, in the name
of CIT information concerning the amounts owing on the Accounts;

     (d) To request from customers indebted on Accounts at any time, in the name
of the Company, in the name of certified public accountant designated by CIT or
in the name of CIT's designee, information concerning the amounts owing on the
Accounts;

     (e) To transmit to customers indebted on Accounts notice of CIT's interest
therein and to notify customers indebted on Accounts to make payment directly to
CIT for the Company's account; and

     (f) To take or bring, in the name of CIT or the Company, all steps,
actions, suits or proceedings deemed by CIT necessary or desirable to enforce or
effect collection of the Accounts.

     Notwithstanding anything hereinabove contained to the contrary, the powers
set forth in (b) and (f) above may only be exercised after the occurrence of an
Event of Default and until such time as such Event of Default is waived in
writing by CIT.

SECTION 10. EVENTS OF DEFAULT AND REMEDIES

     10.1 Notwithstanding anything hereinabove to the contrary, CIT may
terminate this Financing Agreement immediately upon the occurrence of any of the
following Events of Default:

     (a) cessation of the business of the Company or of any Guarantor or the
         calling of a meeting of the creditors of the Company or of any
         Guarantor for purposes of compromising the debts and obligations of the
         Company or any Guarantor;

     (b) the failure of the Company or of any Guarantor to generally meet its
         debts as they mature;

     (c) (i) the commencement by the Company or by any Guarantor of any
         bankruptcy, insolvency, arrangement, reorganization, receivership or
         similar proceedings under any federal or state law; (ii) the
         commencement against the Company or any Guarantor of any bankruptcy,
         insolvency, arrangement, reorganization, receivership or similar
         proceeding under any federal or state law by creditors of the Company
         or of any Guarantor, provided that such Default shall not be deemed an
         Event of Default if such proceeding is controverted within ten (10)
         days and dismissed and vacated within thirty (30) days of commencement,
         except in the event that any of the actions sought in any such
         proceeding shall occur or the Company or any Guarantor shall take
         action to authorize or effect any of the actions in any such
         proceeding; or (iii) the commencement (x) by the Company's or any
         Guarantor's subsidiaries, or any one of them, of any bankruptcy,
         insolvency, arrangement, reorganization, receivership or similar
         proceeding under any applicable state law, or (y) against the Company's
         or any Guarantor's subsidiaries, or any one of them, of any involuntary
         bankruptcy, insolvency, arrangement, reorganization, receivership or
         similar proceeding under applicable law, provided that such Default
         shall not be deemed an Event of Default if such proceeding is
         controverted within ten (10) days and dismissed or vacated within
         thirty (30) days of commencement, except in the event that any of the
         actions sought in any such proceeding shall occur or the Company's or
         any Guarantor's subsidiaries, or any one of them, shall take action to
         authorize or effect any of the actions in any such proceeding;

                                       38
<PAGE>

     (d) breach by the Company of any warranty, representation or covenant
         contained herein (other than those referred to in Subsection (e) below)
         or in any other written agreement between the Company or CIT, provided
         that such Default by the Company of any of the warranties,
         representations or covenants referred in this clause (d) shall be
         deemed to be an Event of Default only if such Default has not been
         cured to CIT's satisfaction within a period of ten (10) days from the
         date of such breach;

     (e) breach by the Company of any warranty, representation or covenant of
         Section 3.3 (other than the fourth sentence of Section 3.3) and Section
         3.4; Section 6.3 and Section 6.4 (other than the first sentence of
         Section 6.4); Sections 7.1, 7.5, 7.6 and 7.8 through 7.16 hereof;

     (f) failure of the Company to pay any of the Obligations within five (5)
         Business Days of the due date thereof, provided that nothing contained
         herein shall prohibit CIT from charging such amounts to the Revolving
         Loan Account on the due date thereof;

     (g) the Company shall (i) engage in any "prohibited transaction" as defined
         in ERISA, (ii) have any "accumulated funding deficiency" as defined in
         ERISA, (iii) have any "reportable event" as defined in ERISA, (iv)
         terminate any "plan", as defined in ERISA or (v) be engaged in any
         proceeding in which the Pension Benefit Guaranty Corporation shall seek
         appointment, or is appointed, as trustee or administrator of any
         "plan", as defined in ERISA, and with respect to this Subsection (h)
         such event or condition (x) remains uncured for a period of thirty (30)
         days from date of occurrence and (y) could, in the reasonable opinion
         of CIT, subject the Company to any tax, penalty or other liability
         material to the business, operations or financial condition of the
         Company;

     (h) without the prior written consent of CIT and, except as permitted in
         the Subordination Agreement, the Company shall (x) amend or modify the
         Subordinated Debt, or (y) make any payment on account of the
         Subordinated Debt;

     (i) the occurrence of any default or event of default (after giving effect
         to any applicable grace or cure periods) under any instrument or
         agreement evidencing (x) Subordinated Debt or (y) any other
         Indebtedness of the Company having a principal amount in excess of
         $250,000;

     (j) Mason N. Carter ceases for any reason whatsoever (other than as a
         result of death or disability) to be actively engaged in the management
         of the Company;

     (k) if any Guarantor dies or terminates its respective Guaranty or
         otherwise fails to perform any of the terms of the Guaranty, all prior
         to termination of this Financing Agreement and payment in full of all
         Obligations; or

     (l) any judgment or judgments aggregating in excess of $100,000.00 or any
         injunction or attachment is obtained or enforced against the Company or
         any Guarantor and which remains unstayed for more than ten (10)
         Business Days.

     10.2 Upon the occurrence of a Default and/or an Event of Default, at the
option of CIT, all loans, advances and extensions of credit provided for in
Sections 3, 4 and 5 of this Financing Agreement shall be thereafter in CIT's
sole discretion and the obligation of CIT to make Revolving Loans, and/or open
Letters of Credit and provide Letters of Credit Guaranties shall cease unless
such Default is cured to CIT's satisfaction or Event of Default is waived in
writing by CIT, and at the option of CIT upon the occurrence of an Event of
Default and until such time as such Event of Default is waived in writing by
CIT: (A) all Obligations shall become immediately due and payable; (B) CIT may
charge the Company the Default Rate of Interest on all then outstanding or
thereafter incurred Obligations in lieu of the interest provided for in Section
8 of this Financing Agreement, and (C) CIT may immediately terminate this
Financing Agreement upon notice to the Company; provided, however, that, upon
the occurrence of an Event of Default listed in Section 10.1(c), this Financing
Agreement shall automatically terminate and all Obligations shall become due and
payable, without any action, declaration, notice or demand by CIT. The exercise
of any option is not exclusive of any other option, which may be exercised at
any time by CIT.

     10.3 Immediately upon the occurrence of any Event of Default and until such
time as such Event of Default is waived in writing, CIT may, to the extent
permitted by law and Government Limitations: (A) remove from any premises where
same may be located any and all books and records, computers, electronic media
and software programs associated with any Collateral (including any electronic
records, contracts and signatures pertaining

                                       39
<PAGE>

thereto), documents, instruments, files and records, and any receptacles or
cabinets containing same, relating to the Accounts, or CIT may use, at the
Company's expense, such of the Company's personnel, supplies or space at the
Company's places of business or otherwise, as may be necessary to properly
administer and control the Accounts or the handling of collections and
realizations thereon; (B) bring suit, in the name of the Company or CIT, and
generally shall have all other rights respecting said Accounts, including
without limitation the right to: accelerate or extend the time of payment,
settle, compromise, release in whole or in part any amounts owing on any
Accounts and issue credits in the name of the Company or CIT; (C) sell, assign
and deliver the Collateral and any returned, reclaimed or repossessed Inventory,
with or without advertisement, at public or private sale, for cash, on credit or
otherwise, at CIT's sole option and discretion, and CIT may bid or become a
purchaser at any such sale, free from any right of redemption, which right is
hereby expressly waived by the Company; (D) foreclose the security interests in
the Collateral created herein or by the Loan Documents by any available judicial
procedure, or to take possession of any or all of the Collateral, including any
Inventory, Equipment and/or Other Collateral without judicial process, and to
enter any premises where any Inventory and Equipment and/or Other Collateral may
be located for the purpose of taking possession of or removing the same; and (E)
exercise any other rights and remedies provided in law, in equity, by contract
or otherwise. CIT shall have the right, without notice or advertisement, to
sell, lease, or otherwise dispose of all or any part of the Collateral, whether
in its then condition or after further preparation or processing, in the name of
the Company or CIT, or in the name of such other party as CIT may designate,
either at public or private sale or at any broker's board, in lots or in bulk,
for cash or for credit, with or without warranties or representations (including
but not limited to warranties of title, possession, quiet enjoyment and the
like), and upon such other terms and conditions as CIT in its sole discretion
may deem advisable, and CIT shall have the right to purchase at any such sale.
If any Inventory and Equipment shall require rebuilding, repairing, maintenance
or preparation, CIT shall have the right, at its option, to do such of the
aforesaid as is necessary, for the purpose of putting the Inventory and
Equipment in such saleable form as CIT shall deem appropriate and any such costs
shall be deemed an Obligation hereunder. Any action taken by CIT pursuant to
this Section shall not effect commercial reasonableness of the sale. The Company
agrees, at the request of CIT, to assemble the Inventory and Equipment and to
make it available to CIT at premises of the Company or elsewhere and to make
available to CIT the premises and facilities of the Company for the purpose of
CIT's taking possession of, removing or putting the Inventory and Equipment in
saleable form. If notice of intended disposition of any Collateral is required
by law, it is agreed that ten (10) days notice shall constitute reasonable
notification and full compliance with the law. The net cash proceeds resulting
from CIT's exercise of any of the foregoing rights, (after deducting all
charges, costs and expenses, including reasonable attorneys' fees) shall be
applied by CIT to the payment of the Obligations, whether due or to become due,
in such order as CIT may elect, and the Company shall remain liable to CIT for
any deficiencies, and CIT in turn agrees to remit to the Company or its
successors or assigns, any surplus resulting therefrom. The enumeration of the
foregoing rights is not intended to be exhaustive and the exercise of any right
shall not preclude the exercise of any other rights, all of which shall be
cumulative. The Company hereby indemnifies CIT and holds CIT harmless from any
and all costs, expenses, claims, liabilities, Out-of-Pocket Expenses or
otherwise, incurred or imposed on CIT by reason of the exercise of any of its
rights, remedies and interests hereunder, including, without limitation, from
any sale or transfer of Collateral, preserving, maintaining or securing the
Collateral, defending its interests in Collateral (including pursuant to any
claims brought by the Company, the Company as debtor-in-possession, any secured
or unsecured creditors of the Company, any trustee or receiver in bankruptcy, or
otherwise), and the Company hereby agrees to so indemnify and hold CIT harmless,
absent CIT's gross negligence or willful misconduct as finally determined by a
court of competent jurisdiction. The foregoing indemnification shall survive
termination of this Financing Agreement until such time as all Obligations
(including the foregoing) have been finally and indefeasibly paid in full. In
furtherance thereof CIT, may establish such reserves for Obligations hereunder
(including any contingent Obligations) as it may deem advisable in its
reasonable business judgment. Any applicable mortgage(s), deed(s) of trust or
assignment(s) issued to CIT on the Real Estate shall govern the rights and
remedies of CIT thereto.

SECTION 11. TERMINATION

     Except as otherwise permitted herein, CIT may terminate this Financing
Agreement only as of the initial or any subsequent Anniversary Date and then
only by giving the Company at least sixty (60) days prior written notice of
termination. Notwithstanding the foregoing CIT may terminate the Financing
Agreement immediately upon the

                                       40
<PAGE>

occurrence of an Event of Default, provided, however, that if the Event of
Default is an event listed in Section 10.1(c) of this Financing Agreement, this
Financing Agreement shall terminate in accordance with Section 10.2. This
Financing Agreement, unless terminated as herein provided, shall automatically
continue from Anniversary Date to Anniversary Date. The Company may terminate
this Financing Agreement at any time upon sixty (60) days' prior written notice
to CIT, provided that the Company pays to CIT immediately on demand an Early
Termination Fee and/or the Prepayment Premium, if applicable. All Obligations
shall become due and payable as of any termination hereunder or under Section 10
hereof and, pending a final accounting, CIT may withhold any balances in the
Company's account (unless supplied with an indemnity satisfactory to CIT) to
cover all of the Obligations, whether absolute or contingent, including, but not
limited to, cash reserves for any contingent Obligations, including an amount of
110% of the face amount of any outstanding Letters of Credit with an expiry date
on, or within thirty (30) days of the effective date of termination of this
Financing Agreement. All of CIT's rights, liens and security interests shall
continue after any termination until all Obligations have been paid and
satisfied in full, at which time CIT, at the sole cost and expense of the
Company, will provide all reasonably necessary releases and/or terminations
statements in order to release and terminate all such rights, liens and security
interests. If there are any monies remaining in the Revolving Loan Account after
all Obligations have been paid and satisfied in full and the Financing Agreement
has been terminated, CIT will promptly remit the amount thereof to the Company.

SECTION 12. MISCELLANEOUS

     12.1 The Company hereby waives diligence, notice of intent to accelerate,
notice of acceleration, demand, presentment and protest and any notices thereof
as well as notice of nonpayment. No delay or omission of CIT or the Company to
exercise any right or remedy hereunder, whether before or after the happening of
any Event of Default, shall impair any such right or shall operate as a waiver
thereof or as a waiver of any such Event of Default. No single or partial
exercise by CIT of any right or remedy precludes any other or further exercise
thereof, or precludes any other right or remedy.

     12.2 This Financing Agreement and the Loan Documents executed and delivered
in connection therewith constitute the entire agreement between the Company and
CIT; supersede any prior agreements; can be changed only by a writing signed by
both the Company and CIT; and shall bind and benefit the Company and CIT and
their respective successors and assigns, except that Company shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of CIT.

     12.3 In no event shall the Company, upon demand by CIT for payment of any
Indebtedness relating hereto, by acceleration of the maturity thereof, or
otherwise, be obligated to pay interest and fees in excess of the amount
permitted by law. Regardless of any provision herein or in any agreement made in
connection herewith, CIT shall never be entitled to receive, charge or apply, as
interest on any indebtedness relating hereto, any amount in excess of the
maximum amount of interest permissible under applicable law. If CIT ever
receives, collects or applies any such excess, it shall be deemed a partial
repayment of principal and treated as such; and if principal is paid in full,
any remaining excess shall be refunded to the Company. This Section shall
control every other provision hereof, the Loan Documents and of any other
agreement made in connection herewith.

     12.4 If any provision hereof or of any other agreement made in connection
herewith is held to be illegal or unenforceable, such provision shall be fully
severable, and the remaining provisions of the applicable agreement shall remain
in full force and effect and shall not be affected by such provision's
severance. Furthermore, in lieu of any such provision, there shall be added
automatically as a part of the applicable agreement a legal and enforceable
provision as similar in terms to the severed provision as may be possible.

     12.5 THE COMPANY AND CIT EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING ARISING OUT OF THE LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREUNDER. THE COMPANY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE
OF PROCESS AND CONSENTS TO SERVICE OF PROCESS BY CERTIFIED OR REGISTERED MAIL,
RETURN RECEIPT REQUESTED. IN NO EVENT WILL CIT BE LIABLE FOR LOST PROFITS OR
OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.

                                       41
<PAGE>

     12.6 Except as otherwise herein provided, any notice or other communication
required hereunder shall be in writing (provided that, any electronic
communications from the Company with respect to any request, transmission,
document, electronic signature, electronic mail or facsimile transmission shall
be deemed binding on the Company for purposes of this Financing Agreement,
provided further that any such transmission shall not relieve the Company from
any other obligation hereunder to communicate further in writing), and shall be
deemed to have been validly served, given or delivered when hand delivered or
sent by facsimile, or three days after deposit in the United State mails, with
proper first class postage prepaid and addressed to the party to be notified or
to such other address as any party hereto may designate for itself by like
notice, as follows:

     (A) if to CIT, at:

               The CIT Group/Business Credit, Inc.
               1211 Avenue of the Americas
               New York, NY  10036
               Attn:  Regional Credit Manager - Merrimac Industries, Inc.
               Fax No.:  (212) 536-1297

With a courtesy copy of any material notice to CIT's counsel at:

               Stradley, Ronon, Stevens & Young, LLP
               2600 One Commerce Square
               Philadelphia, PA  19103
               Attention: Michael Bonner, Esquire
               Fax No.: (215) 564-8120

     (B) if to the Company at:

               Merrimac Industries, Inc.
               41 Fairfield Place
               West Caldwell, NJ 07006
               Attention: Robert Condon, Chief Financial Officer
               Fax No.: (973) 882-5981

With a courtesy copy of any material notice to the Company's counsel at:

               Katten Muchin Zavis Rosenman
               575 Madison Avenue
               New York, New York  10022
               Attn: Eric M. Lerner, Esquire
               Fax No.: (212) 940-6455

provided, however, that the failure of CIT to provide the Company's counsel with
a copy of such notice shall not invalidate any notice given to the Company and
shall not give the Company any rights, claims or defenses due to the failure of
CIT to provide such additional notice.

     12.7 THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT ANY OTHER LOAN DOCUMENT INCLUDES AN
EXPRESS ELECTION TO BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.

                                       42
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Financing Agreement
to be effective, executed, accepted and delivered at New York, New York, by
their proper and duly authorized officers as of the date first set forth above.

MERRIMAC INDUSTRIES, INC.                THE CIT GROUP/BUSINESS CREDIT, INC.

By: /s/ Robert V. Condon                 By: /s/ Robert E. Chimenti
    --------------------                     ----------------------
Name:  Robert V. Condon                  Name:  Robert E. Chimenti
Title:  Chief Financial Officer          Title:  AVP
and Vice Presiden, Finance

                                       43
<PAGE>

                                    EXHIBIT A
                                    ---------

                           TERM LOAN PROMISSORY NOTE A
                           ---------------------------

October 8, 2003
$1,500,000.00

FOR VALUE RECEIVED, the undersigned, Merrimac Industries, Inc., a Delaware
corporation (the "Company"), promises to pay to the order of THE CIT
GROUP/BUSINESS CREDIT, INC. (herein "CIT") at its office located at 1211 Avenue
of the Americas, New York, New York 10036, in lawful money of the United States
of America and in immediately available funds, the principal amount of ONE
MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000.00) in sixty (60) equal
consecutive monthly principal installments of $25,000.00 each, whereof the first
such installment shall be due and payable on November 3, 2003 and subsequent
installments shall be due and payable on the first Business Day of each month
thereafter until paid in full, subject to the payment and acceleration
provisions set forth in the last paragraph of this Note.

The Company further agrees to pay interest at said office, in like money, on the
unpaid principal amount owing hereunder from time to time from the date hereof
on the date and at the rate specified in Section 8 of the Financing Agreement,
of even date herewith between the Company and CIT (the "Financing Agreement").
Capitalized terms used herein and defined in the Financing Agreement shall have
the same meanings as set forth therein unless otherwise specifically defined
herein.

If any payment on this Note becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.

This Note is the Term Loan Promissory Note A referred to in the Financing
Agreement, evidences the Term Loan A thereunder, and is subject to, and entitled
to, all provisions and benefits thereof and is subject to prepayment, in whole
or in part, as provided therein.

Upon the occurrence of any Event of Default specified in the Financing Agreement
or upon termination of the Financing Agreement, all amounts then remaining
unpaid on this Note may become, or be declared to be, at the sole election of
CIT, immediately due and payable as provided in the Financing Agreement.

                                              MERRIMAC INDUSTRIES, INC

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

                                       44
<PAGE>

                                    EXHIBIT B
                                    ---------

                           TERM LOAN PROMISSORY NOTE B
                           ---------------------------

                                                                 October 8, 2003
$2,750,000.00

FOR VALUE RECEIVED, the undersigned, Merrimac Industries, Inc., a Delaware
corporation (the "Company"), promises to pay to the order of THE CIT
GROUP/BUSINESS CREDIT, INC. (herein "CIT") at its office located at 1211 Avenue
of the Americas, New York, New York 10036, in lawful money of the United States
of America and in immediately available funds, the principal amount of TWO
MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($2,750,000.00) equal consecutive
monthly principal installments of $32,738.00 each, whereof the first such
installment shall be due and payable on November 3, 2003 and subsequent
installments shall be due and payable on the first Business Day of each month
thereafter until paid in full, subject to the payment and acceleration
provisions set forth in the last paragraph of this Note.

The Company further agrees to pay interest at said office, in like money, on the
unpaid principal amount owing hereunder from time to time from the date hereof
on the date and at the rate specified in Section 8 of the Financing Agreement,
of even date herewith between the Company and CIT (the "Financing Agreement").
Capitalized terms used herein and defined in the Financing Agreement shall have
the same meanings as set forth therein unless otherwise specifically defined
herein.

If any payment on this Note becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.

This Note is the Term Loan Promissory Note B referred to in the Financing
Agreement, evidences the Term Loan B thereunder, and is subject to, and entitled
to, all provisions and benefits thereof and is subject to prepayment, in whole
or in part, as provided therein.

Upon the occurrence of any Event of Default specified in the Financing Agreement
or upon termination of the Financing Agreement, all amounts then remaining
unpaid on this Note may become, or be declared to be, at the sole election of
CIT, immediately due and payable as provided in the Financing Agreement.

                                                MERRIMAC INDUSTRIES, INC

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

                                       45<PAGE>

                     TRADEMARK AND PATENT SECURITY AGREEMENT

     THIS TRADEMARK AND PATENT SECURITY AGREEMENT (the "Agreement") is made as
of the 8th day of October, 2003, between MERRIMAC INDUSTRIES, INC., having an
office at 41 Fairfield Place, West Caldwell, NJ 07006 ("BORROWER"), and THE CIT
GROUP/BUSINESS CREDIT, INC., having an office at 1211 Avenue of the Americas,
New York, New York 10036 ("LENDER").

     1. SECURITY INTEREST.

     WHEREAS, Borrower has adopted, used and is using, and is the owner of the
entire right, title, and interest in and to the trademarks, trade names, service
marks, designs, registrations and applications therefor described in Schedule A
annexed hereto, and the patents and applications therefor described in Schedule
B annexed hereto and made a part hereof; and

     WHEREAS, Lender has agreed to enter into or has entered into financing
arrangements, pursuant to a Financing Agreement (the "FINANCING AGREEMENT"), and
Term Loan Promissory Note A (as defined in the Financing Agreement) and the Term
Loan Promissory Note B (as defined in the Financing Agreement) (all of the
foregoing, together with this Agreement, and all other related documents,
agreements, instruments or notes, as the same may now exist or may hereafter be
amended or supplemented, are collectively referred to herein as the
"AGREEMENTS").

     NOW, THEREFORE, in order to induce Lender to enter into the Agreements and
in consideration thereof, Borrower hereby grants to Lender a security interest
in: (a) all of Borrower's now existing or hereafter acquired right, title, and
interest in and to: all of Borrower's trademarks, trade names, and service
marks, and all designs and general intangibles of a like nature, now existing or
hereafter adopted or acquired; all applications, registrations and recordings
relating to the foregoing in the United States Patent and Trademark Office or in
any similar office or agency of the United States, any state thereof, any
political subdivision thereof or in any other countries, all whether now owned
or hereafter acquired by Borrower, and all reissues, extensions and renewals and
licenses thereof, including, but not limited to, those trademarks, service
marks, designs and applications described in Schedule A annexed hereto and made
a part hereof (collectively, the "TRADEMARKS"); (b) the goodwill of the business
symbolized by each of the Trademarks, including, without limitation, all
customer lists and other records relating to the distribution of products or
services bearing the Trademarks; (c) all of Borrower's now existing or hereafter
acquired right, title and interest in and to: all of Borrower's interests in any
patents; all applications, registrations and recordings relating to such patents
in the United States Patent and Trademark Office or in any similar office or
agency of the United States, any state thereof, any political subdivision
thereof or in any other countries and all reissues, continuations,
continuations-in-part, extensions and renewals and licenses thereof, including,
without limitation, those patents, applications, registrations and recordings
described in Schedule B annexed hereto and made a part hereof (collectively, the
"PATENTS"); and (d) any and all proceeds of any of the foregoing, including,
without limitation, any claims by Borrower against third parties for
infringement of the Trademarks, Patents or any licenses with respect thereto
(all of the foregoing are collectively referred to herein as the "COLLATERAL").

     2. OBLIGATIONS SECURED.

     The security interests granted to Lender in this Agreement shall secure the
prompt and indefeasible payment and performance of all now existing and future
obligations, liabilities and indebtedness of Borrower to Lender of every kind,
nature and description, direct or indirect, absolute or contingent, whether
arising under this Agreement, the other Agreements, or any other agreement,
document or instrument or by operation of law or otherwise, including, without
limitation, "Obligations" as defined in the Financing Agreement (all the
foregoing hereinafter collectively referred to as "OBLIGATIONS").

<PAGE>

     3. WARRANTIES AND COVENANTS.

     Borrower hereby covenants, represents and warrants that (all of such
covenants, representations and warranties being continuing in nature so long as
any of the Obligations are outstanding):

     A. Borrower will pay and perform all of the Obligations according to their
terms.

     B. All of the existing and hereafter acquired (i) trademark registrations
and applications described or required to be described in Schedule A and (ii)
letters patent and patent applications described or required to be described in
Schedule B are, to Borrower's knowledge, and shall remain, valid and subsisting
in full force and effect, and Borrower owns and will remain the owner of sole,
full, and clear title thereto, and has and will have the right and power to make
the assignment and grant the security interests granted hereunder. Borrower
will, at Borrower's expense, perform all acts and execute all documents
necessary to maintain valid and subsisting U.S. (or foreign, as applicable)
registration of all trademarks which are then in use in commerce and U.S.
patents (or foreign patents, as applicable) for all inventions which are then in
use, including, without limitation, the filing of any use affidavits, renewal
affidavits and applications and other maintenance filings. The Collateral is not
subject to any liens, claims, mortgages, assignments, licenses, security
interests, or encumbrances of any nature whatsoever except the security
interests granted hereunder, and the licenses, if any, which are specifically
described in Schedule C hereto.

     C. Other than as provided in the last sentence of Section 3B hereof,
Borrower will not assign, sell, mortgage, lease, transfer, pledge, hypothecate,
grant a security interest in or lien upon, encumber, or grant an exclusive or
non-exclusive license relating to the Collateral, except to Lender, or otherwise
dispose of any of the Collateral without the prior written consent of Lender;
provided, however, that with respect solely to the granting of an exclusive or
non-exclusive license relating to the Collateral, such consent will not be
unreasonably withheld.

     D. Borrower will, at Borrower's expense, perform all acts and execute all
documents, including, without limitation, security agreements in form suitable
for filing with the United States Patent and Trademark Office substantially in
the form of Exhibits 1 and 2 hereof, requested at any time by Lender to
evidence, perfect, maintain, record, or enforce the security interest in the
Collateral granted hereunder or to otherwise further the provisions of this
Agreement. Borrower hereby authorizes Lender to execute and file one or more
financing statements (or similar documents) with respect to the Collateral
signed only by Lender. Borrower further authorizes Lender, at Borrower's
expense, to have this or any other similar security agreement filed with the
Commissioner of Patents and Trademarks or other appropriate federal, state or
government office or similar office of any other country or political
subdivision thereof, and Borrower shall execute such documents, and take such
further actions as Lender may request to facilitate the terms and provisions of
this section.

     E. Borrower will, concurrently with the execution and delivery of this
Agreement, execute and deliver to Lender five (5) originals of a Power of
Attorney in the form of Exhibit 3 annexed hereto for the implementation of the
assignment, sale or other disposition of the Collateral pursuant to Lender's
exercise of the rights and remedies granted to Lender hereunder, subject to any
applicable Government Limitations (as defined in the Financing Agreement).
Borrower hereby releases Lender from any claims, causes of action and demands at
any time arising out of or with respect to any actions taken or omitted to be
taken by Lender under the powers of attorney granted herein, other than actions
taken or omitted to be taken through the gross negligence or willful misconduct
of Lender; provided however, Lender's decision not to take any action or
exercise its remedies hereunder shall not constitute gross negligence or willful
misconduct.

     F. Lender may, in its sole discretion, pay any amount or do any act which
Borrower fails to pay or do as required hereunder or as requested by Lender to
maintain and preserve the Collateral, defend, protect, record, amend or enforce
the Obligations, the Collateral, or the security interest granted hereunder,
including, but not limited to, paying all filing or recording fees, court costs,
collection charges and reasonable attorneys' fees. Borrower will be liable to
Lender for any such payment, which payment shall be deemed a borrowing by
Borrower

                                       2
<PAGE>

from Lender, and shall be payable on demand together with interest at the
default rate of interest set forth in the Financing Agreement and shall be part
of the Obligations secured hereby.

     G. As of the date hereof, Borrower does not own any Trademarks or Patents
or have any Trademarks or Patents registered, or subject to pending
applications, in the United States Patent and Trademark Office or any similar
office or agency in the United States or any other country or any political
subdivision thereof other than those described in Schedules A and B annexed
hereto.

     H. Borrower shall notify Lender in writing of (i) the filing of any
application for the registration of a Trademark or Patent with the United States
Patent and Trademark Office or any similar office or agency in the United
States, any state therein or any other country or any political subdivision
thereof and (ii) the filing of any assignment of any Patent or Trademark that
Borrower may acquire from a third party with the United States Patent and
Trademark Office or any similar office or agency in the United States, any state
therein or any other country or political subdivision thereof, within thirty
(30) days of such filing. Upon request of Lender, Borrower shall execute and
deliver to Lender any and all assignments, agreements, instruments, documents,
and such other papers as may be requested by Lender to evidence the security
interests of Lender in such Trademark or Patent, and Borrower hereby constitutes
Lender its attorney-in-fact to execute and file all such writings for the
foregoing purposes, all acts of such attorney being hereby ratified and
confirmed; such power being coupled with an interest is irrevocable until the
Obligations are paid in full.

     I. Borrower has not abandoned any of the Trademarks or Patents set forth on
the Schedules hereto. Except to the extent that Lender, upon prior written
notice of Borrower, shall consent, Borrower (either itself or through licensees)
will continue to use the Trademarks on each and every trademark, class of goods,
and services applicable to its current line as reflected in its current
catalogs, brochures and price lists in order to maintain the Trademarks in full
force, free from any claim of abandonment for nonuse, and Borrower will not (and
will not permit any licensee to) do any act, nor omit to do any act, whereby the
Trademarks or Patents may become abandoned, canceled, invalidated,
unenforceable, avoided, or avoidable. Except to the extent that Lender, upon
prior written notice by Borrower, shall consent, Borrower will not (and will not
permit any licensee to) do any act, or omit to do any act, whereby the Patents
may become abandoned or dedicated. Borrower shall notify Lender immediately if
Borrower knows or has reason to know of any reason why any application,
registration, or recording of any Trademark or Patent may become abandoned,
dedicated, canceled, invalidated, unenforceable, avoided, or avoidable.

     J. Borrower will take all necessary steps and render any assistance, as
Lender may determine is necessary, to Lender in any proceeding before the United
States Patent and Trademark Office, any federal or state court, or any similar
office or agency in the United States or any state therein or any other country
to maintain such application and registration of the Trademarks or Patents as
Borrower's exclusive property and to protect Lender's interest therein,
including, without limitation, filing of renewals, affidavits of use, affidavits
of incontestability and opposition, interference, and cancellation proceedings
(except to the extent that dedication, abandonment or invalidation is permitted
under subparagraph 3I hereof).

     K. Borrower will promptly notify Lender if Borrower (or any affiliate or
subsidiary thereof) learns of any use by any person of any term or design likely
to cause confusion with any Trademark or of any use by any person of any other
process or product which infringes upon any Patent or Trademark. If requested by
Lender, Borrower, at Borrower's expense, shall take such action, or shall join
with Lender in such action as Lender, in Lender's discretion, may deem advisable
for the protection of Lender's interest in and to the Trademarks or Patents.

     L. Borrower assumes all responsibility and liability arising from the use
of the Trademarks or Patents, and Borrower hereby indemnifies and holds Lender
harmless from and against any claim, suit, loss, damage, or expense (including
reasonable attorneys' fees) arising out of any alleged defect in any product
manufactured, promoted, or sold by Borrower (or any affiliate or subsidiary
thereof) in connection with any Trademark and Patent or out of the manufacture,
promotion, labeling, sale or advertisement of any such product by Borrower (or
any affiliate or subsidiary thereof). Borrower agrees that Lender does not
assume, and shall have no responsibility for, the payment of any sums due or to
become due under any agreement or contract included in the

                                       3
<PAGE>

Collateral or the performance of any obligations to be performed under or with
respect to any such agreement or contract by Borrower, and Borrower hereby
agrees to indemnify and hold Lender harmless with respect to any and all claims
by any person relating thereto.

     M. In any action or proceeding instituted by Lender in connection with any
matters arising at any time out of or with respect to this Agreement, Borrower
will not interpose any counterclaim of any nature other than compulsory
counterclaims.

     N. Prior to an Event of Default, Lender hereby acknowledges Borrower's
exclusive nontransferable right to use the Trademarks and the goodwill of the
business symbolized by the marks for Borrower's own benefit. Borrower will
maintain the quality of the products and services associated with the Trademarks
at a level consistent with the quality at the time of this Agreement, other than
in the ordinary course of business consistent with past practice. Borrower will
not change the quality of the products or services associated with the
Trademarks without the Lender's prior written consent. Borrower hereby grants to
Lender the right to visit Borrower's plant and facilities which manufacture or
store products sold under any of the Trademarks and to inspect the products and
quality-control records relating thereto at any time during regular business
hours, or at such other times as Lender may reasonably request.

     4. EVENTS OF DEFAULT.

     All Obligations shall, at Lender's option, become immediately due and
payable without notice of demand upon the occurrence of any of the following
events of default ("Events of Default"):

     A. Borrower fails to pay or perform any Obligations when due, subject to
any applicable cure periods related thereto which are contained in the Financing
Agreement.

     B. Borrower defaults in the observance or performance of any agreements,
covenants or conditions contained herein or in any of the Agreements or in any
other document or instrument referred to herein or therein, subject to any
applicable cure periods related thereto which are contained in the Financing
Agreement.

     C. Any present or future representation or warranty made by or on behalf of
the Borrower, whether contained herein or in any of the other Agreements or in
any other document or instrument referred to herein or therein in connection
with any of the transactions contemplated herein or therein, shall be false or
incorrect in any material respect, subject to any applicable cure periods
related thereto which are contained in the Financing Agreement.

     D. An "Event of Default" shall occur under the Financing Agreement

     5. RIGHTS AND REMEDIES.

     Upon the occurrence of any such Event of Default and at any time thereafter
until such time as it has been waived in writing by Lender, in addition to all
other rights and remedies of Lender, whether provided under law, the Agreements
or otherwise, and after expiration of any grace period, Lender shall have the
following rights and remedies which may be exercised without notice to, or
consent by, Borrower except as such notice or consent is expressly provided for
hereunder:

     A. Lender may require that neither Borrower nor any affiliate or subsidiary
of Borrower make any use of the Trademarks or any marks similar thereto or any
Patent for any purpose whatsoever. Subject to any applicable Government
Limitations, Lender may make use of any Trademarks or Patents for the sale of
goods, or rendering of services in connection with enforcing any other security
interest granted to Lender by Borrower or any subsidiary of Borrower.

                                       4
<PAGE>

     B. Subject to any applicable Government Limitations, Lender may, at any
time and from time to time, grant such license or licenses relating to the
Collateral for such term or terms, on such conditions, and in such manner, as
Lender shall in its sole discretion deem appropriate. Such license or licenses
may be general, special, or otherwise, and may be granted on an exclusive or
non-exclusive basis throughout all or any part of the United States of America,
its territories and possessions, and all foreign countries.

     C. Subject to any applicable Government Limitations, Lender may assign,
sell, or otherwise dispose of the Collateral or any part thereof, either with or
without special conditions or stipulations, except that Lender agrees to provide
Borrower with ten (10) days prior written notice of any proposed disposition of
the Collateral. Lender shall have the power to buy the Collateral or any part
thereof, and Lender shall also have the power to execute assurances and perform
all other acts, which Lender may, in Lender's sole discretion, deem appropriate
or proper to complete such assignment, sale or disposition. In any such event,
Borrower shall be liable for any deficiency.

     D. In addition to the foregoing, in order to implement the assignment,
sale, or other disposition of any of the Collateral pursuant to subparagraph 5C
hereof, Lender may at any time execute and deliver on behalf of Borrower,
pursuant to the authority granted in the Powers of Attorney described in
subparagraph 3E hereof, one or more instruments of assignment of the Trademarks
or Patents (or any application, registration, or recording relating thereto), in
form suitable for filing, recording or registration. Borrower agrees to pay
Lender on demand all costs incurred in any such transfer of the Collateral,
including, but not limited to, any taxes, fees, attorneys' fees, together with
interest thereon at the default rate of interest provided in the Financing
Agreement.

     E. Lender may apply the proceeds actually received from any such license,
assignment, sale, or other disposition of Collateral first to the reasonable
costs and expenses thereof, including, without limitation, reasonable attorneys'
fees and all legal, travel, and other expenses which may be incurred by Lender.
Thereafter, Lender may apply any remaining proceeds to such of the Obligations
as Lender may in its sole discretion determine. Borrower shall remain liable to
Lender for any expenses or obligations remaining unpaid after the application of
such proceeds, and Borrower will pay Lender on demand any such unpaid amount,
together with interest thereon at the default rate of interest provided in the
Financing Agreement.

     F. In the event that any such license, assignment, sale or disposition of
the Collateral (or any part thereof) is made after the occurrence of an Event of
Default, Borrower shall, subject to any applicable Government Limitations,
supply to Lender or Lender's designee Borrower's knowledge and expertise
relating to the manufacture and sale of the products and services bearing the
Trademarks or to which the Patents relate and Borrower's customer lists and
other records relating to the Trademarks and Patents and the distribution
thereof.

     G. Lender may (without assuming any obligations or liability thereunder),
at any time, enforce (and shall have the exclusive right to enforce) against any
licensee or sublicensee all rights and remedies of Borrower in, to and under any
one or more license agreements with respect to the Collateral, and take or
refrain from taking any action with respect thereto, and Borrower hereby
releases Lender from, and agrees to hold Lender free and harmless from and
against any claims arising out of, or any action taken or omitted to be taken
with respect to, any such license agreement.

     H. Nothing contained in this Agreement shall be construed as requiring
Lender to take any of the actions or exercise any of the rights and remedies
referenced herein at any time. All of Lender's rights and remedies, whether
provided under law, the Agreements, this Agreement, or otherwise, shall be
cumulative and none is exclusive. Such rights and remedies may be enforced
alternatively, successively, or concurrently.

     6. MISCELLANEOUS.

     A. Any failure or delay by Lender to require strict performance by Borrower
of any of the provisions, warranties, terms and conditions contained herein or
in any other agreement, document, or instrument, shall not affect Lender's right
to demand strict compliance and performance therewith, and any waiver of any
default shall not waive or affect any other default, whether prior or subsequent
thereto, and whether of the same or

                                       5
<PAGE>

of a different type. None of the warranties, conditions, provisions, and terms
contained herein or in any other agreement, document, or instrument shall be
deemed to have been waived by any act or knowledge of Lender, its agents,
officers, or employees, except by an instrument in writing, signed by an officer
of Lender and directed to Borrower, specifying such waiver.

     B. All notices, requests and demands to or upon the respective parties
hereto shall be deemed to have been duly given or made: if by hand, immediately
upon delivery; if by telecopy, telex or telegram, immediately upon sending; if
by any nationally recognized overnight delivery service, one day after dispatch;
and if mailed by certified mail, return receipt requested, forty-eight (48)
hours after mailing. All notices, requests and demands are to be given or made
to the respective parties at the following addresses (or to such other addresses
as either party may designate by notice in accordance with the provisions of
this paragraph):

     If to Borrower:  Merrimac Industries, Inc.
                      41 Fairfield Place
                      West Caldwell, NJ 07006
                      Attention: Robert V. Condon,
                      Chief Financial Officer
                      Fax No.: (973) 882-5981

     If to Lender:    The CIT Group/Business Credit, Inc.
                      1211 Avenue of the Americas
                      New York, NY 10036
                      Attn:  Regional Credit Manager - Merrimac Industries, Inc.
                      Fax No.:  (212) 536-1297

     With a courtesy copy of any material notice to CIT's counsel at:

                      Stradley, Ronon, Stevens & Young, LLP
                      2600 One Commerce Square
                      Philadelphia, Pennsylvania 19103
                      Attn.:  Michael P. Boner, Esquire
                      Fax No.: (215) 564-8158

     C. In the event any term or provision of this Agreement conflicts with any
term or provision of the Financing Agreement, the term or provision of the
Financing Agreement shall control.

     D. In the event that any provision hereof shall be deemed to be invalid by
any court of competent jurisdiction, such invalidity shall not affect the
remainder of this Agreement or the application of such remaining provisions to
persons or circumstances other than to those which it is held invalid, and this
Agreement will be construed and enforced as if such invalid provisions had never
been inserted.

     E. This Agreement shall be binding upon and for the benefit of the parties
hereto and their respective legal representatives, successors and assigns;
provided however, Borrower shall not assign its rights or obligations hereunder
without Lender's prior written consent. No provision hereof shall be modified,
altered or limited except by a written instrument expressly referring to this
Agreement signed by the party to be charged thereby.

     F. The security interest granted to Lender hereunder shall terminate and be
released and the Collateral will be reassigned to Borrower, at Borrower's sole
expense, upon termination of the Financing Agreement and indefeasible payment in
full to Lender of all Obligations thereunder and hereunder. Lender will
thereupon execute such release and other documents as Borrower may reasonably
request, at Borrower's sole expense, to evidence such termination and
reassignment.

                                       6
<PAGE>

     G. The validity, interpretation and effect of this Agreement, together with
the associated assignments for security referenced as Exhibits 1 and 2 hereof,
shall be governed by the laws of the United States of America and the laws of
the State of New York without giving effect to any conflict of law principles.
Borrower hereby irrevocably consents and submits in advance to the non-exclusive
jurisdiction of the courts of the Southern District of New York, to hear and
determine any claims or disputes pertaining directly or indirectly to this
Agreement, the other Agreements or to any matter arising therefrom in any such
action or proceeding. Borrower hereby waives personal service of the summons and
complaint, or other process or notice of motion or other application or papers
issued therein, and agrees that service of such summons and complaint or other
process or papers may be made outside the Southern District of New York by
registered or certified mail, return receipt requested, addressed to the
Borrower at the address set forth herein or in such other manner as may be
permissible under the rules of said courts.

     H. The parties hereto waive trial by jury in any action or proceeding of
ANY KIND or nature in any court whether arising out of, under or by reason of
this Agreement, the other Agreements or any matter or proceeding relating
thereto.

                           [INTENTIONALLY LEFT BLANK]

                                       7
<PAGE>

     IN WITNESS WHEREOF, and intending to be legally bound hereby, Borrower and
Lender have executed this Agreement as of the day and year first above written.

                                           Borrower:

                                           MERRIMAC INDUSTRIES, INC.

                                           By: /s/ Robert V. Condon
                                              -------------------------------
                                              Robert V. Condon,
                                              Chief Financial Officer and
                                              Vice President, Finance

                                           Lender:

                                           THE CIT GROUP/BUSINESS CREDIT, INC.

                                           By:  /s/ Robert E. Chimenti
                                               ------------------------------
                                           Name:  Robert E. Chimenti
                                           Title: AVP

                                       8
<PAGE>

STATE OF NEW YORK         )
                          ) ss.:
COUNTY OF NEW YORK        )

     On this 8th day of October, 2003, before me personally came Robert V.
Condon, to me known, who being duly sworn, did depose and say, that he is the
Chief Financial Officer and Vice President-Finance of MERRIMAC INDUSTRIES, 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/ Ellen Warren
                                             -------------------------
                                             Notary Public

                                       9

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