Document:

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                                                                   EXHIBIT 10.26

                                GUARANTY OF LEASE

      THIS GUARANTY OF LEASE ("GUARANTY") is made as of this 25th day of March,
2002 by DAISYTEK INTERNATIONAL CORPORATION, a Delaware corporation ("GUARANTOR")
in favor of TEJON DERMODY INDUSTRIAL LLC, a Delaware limited liability company
("LANDLORD") in connection with that certain Standard Industrial Lease (Net -
Net - Net) of substantially even date herewith (the "LEASE"), pursuant to which
Landlord leases to Daisytek, Incorporated, a Delaware corporation ("TENANT"), an
approximately 325,954 rentable square foot portion (the "PREMISES") of the
larger approximately 651,909 rentable square foot building ("BUILDING"), with a
street address of 4049 Industrial Parkway, located in the project commonly known
as "Tejon Industrial Complex" in the County of Kern, California, as more
particularly described in the Lease.

      A. Landlord requires this Guaranty as a condition to its execution of the
Lease and the performance of the obligations to be performed under the Lease by
Landlord.

      B. Tenant is a wholly-owned subsidiary of Guarantor. Guarantor has agreed
to provide this Guaranty to induce Landlord to enter into the Lease with Tenant
and perform its obligations under the Lease.

      In consideration of Landlord's agreement to execute the Lease and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Guarantor does hereby agree with Landlord as follows:

      1. The Lease is hereby incorporated into and made a part of this Guaranty
by this reference.

      2. Guarantor hereby absolutely, irrevocably and unconditionally
guarantees, as a primary obligor and not as a surety, without deduction by
reason of setoff, defense or counterclaim, the full and punctual payment of all
sums of rent and other amounts payable under the Lease and the full and punctual
performance of all terms, covenants and conditions in the Lease to be kept,
performed and/or observed by Tenant. Guarantor's obligations under this Guaranty
are continuing and unconditional and shall terminate only upon full and complete
payment and performance of all guaranteed obligations.

      3. Guarantor hereby agrees that, without the consent or demand of or
notice to Guarantor and without affecting any of the obligations of Guarantor
hereunder: (a) the Lease may be extended and any other term, covenant or
condition of the Lease may be amended, compromised, released or otherwise
altered by Landlord and Tenant, and Guarantor does guarantee and promise to
perform all of the obligations of Tenant under the Lease as so extended,
amended, compromised, released or altered; (b) any guarantor of or party to the
Lease may be released, substituted or added; (c) any right or remedy under the
Lease may be exercised, not exercised, impaired, modified, limited, destroyed,
or suspended; (d) Landlord or any other person may deal in any manner with
Tenant, any guarantor, any party to the Lease or any other person; (e) Landlord
may permit Tenant to holdover the Premises beyond the Lease Term; and
<PAGE>
(f) all or any part of the Premises or of Tenant's rights or liabilities under
the Lease may be sublet, assigned or assumed. Notwithstanding any of the
foregoing actions, Guarantor shall be and remain bound by the obligations set
forth in this Guaranty. Without in any way limiting the foregoing, Guarantor
agrees not to unreasonably withhold its consent to any sublease, assignment of
the Lease or other modification of the Lease which is agreed to by Landlord and
Tenant.

      4. The obligations of Guarantor under this Guaranty are independent of the
obligations of Tenant and Guarantor hereby knowingly and voluntarily waives and
agrees not to assert or take advantage of: (a) any right to require Landlord to
proceed against Tenant, or any other guarantor or person or to pursue any other
security or remedy before proceeding against Guarantor; (b) any defense based on
the genuineness, validity, regularity or enforceability of the Lease; (c) any
right or defense that may arise by reason of the incapacity, lack of authority,
death or disability of Tenant or any other person; and (d) any right or defense
arising by reason of the absence, impairment, modification, limitation,
destruction or cessation (in bankruptcy, by an election of remedies, or
otherwise) of the liability of Tenant, of the subrogation rights of Guarantor or
of the right of Guarantor to proceed against Tenant for reimbursement. Without
limiting the generality of the foregoing, Guarantor hereby waives any and all
benefits of the provisions of Sections 2809, 2810 and 2845 of the California
Civil Code and any similar or analogous statutes of California or any other
jurisdiction.

      5. Guarantor hereby knowingly and voluntarily waives and agrees not to
assert or take advantage of (a) any right or defense based on the absence of any
or all presentments, demands (including demands for performance), notices
(including notices of any adverse change in the financial status of Tenant,
notices of any other facts which increase the risk to Guarantor, notices of
non-performance and notices of acceptance of this Guaranty) and protests of each
and every kind; (b) the defense of any statute of limitations in any action
under or related to this Guaranty or the Lease; (c) any right or defense based
on a lack of diligence or failure or delay by Landlord in enforcing its rights
under this Guaranty or the Lease. In addition to the foregoing, Guarantor
acknowledges and agrees that any partial payment or performance by Tenant or
otherwise or other circumstance which operates to toll any statute of
limitations as to Tenant shall operate to toll the statute of limitations as to
Guarantor.

      6. Guarantor hereby knowingly and voluntarily waives and agrees not to
assert or take advantage of any right to (a) exoneration if Landlord's actions
shall impair any security or collateral of Guarantor; (b) any security or
collateral held by Landlord; (c) require Landlord to proceed against or exhaust
any security or collateral before proceeding against Guarantor; (d) require
Landlord to pursue any right or remedy for the benefit of Guarantor; or (e) any
law providing that the obligations of a guarantor must not be larger in amount
nor in other respects more burdensome than that of the principal or which
reduces a guarantor's obligation in proportion to the principal obligation.
Without limiting the generality of the foregoing, Guarantor hereby waives any
and all benefits of the provisions of Sections 2819, 2822, 2849 and 2850 of the
California Civil Code and any similar or analogous statutes of California or any
other jurisdiction.

      7. Guarantor shall not, without the prior written consent of Landlord,
commence, or join with any other person in commencing, any bankruptcy,
reorganization or insolvency

                                      -2-
<PAGE>
proceeding against Tenant. Guarantor's obligations under this Guaranty shall in
no way be affected by any bankruptcy, reorganization or insolvency of Tenant or
any successor or assignee of Tenant or by any disaffirmance or abandonment of
the Lease or any payment under this Guaranty by a trustee of Tenant in any
bankruptcy proceeding including, without limitation, any impairment, limitation,
or modification of the liability of Tenant or the estate of Tenant in
bankruptcy, or of any remedy for the enforcement of Tenant's liability under the
Lease resulting from the operation of any present or future provision of any
federal or state bankruptcy or insolvency law or other statute or from the
decision of any court. Guarantor shall file in any bankruptcy or other
proceeding in which the filing of claims is required or permitted by law all
claims which Guarantor may have against Tenant relating to any indebtedness of
Tenant to Guarantor and will assign to Landlord all rights of Guarantor
thereunder until all Lease obligations are paid in full. Landlord shall have the
sole right to accept or reject any plan proposed in such proceeding and to take
any other action that a party filing a claim is entitled to do relating to any
indebtedness of Tenant to Landlord under the Lease. In all such cases, whether
in administration, bankruptcy or otherwise, the person or persons authorized to
pay such claim shall pay to Landlord the amount payable on such claim and, to
the full extent necessary for that purpose, Guarantor hereby assigns to Landlord
all of Guarantor's rights to any such payments or distributions to which
Guarantor would otherwise be entitled; provided, however, that Guarantor's
obligations hereunder shall not be satisfied except to the extent that Landlord
receives cash by reason of any such payment or distribution. If Landlord
receives anything hereunder other than cash, the same shall be held as
collateral for amounts due under this Guaranty. In the event any payment by
Tenant to Landlord is held to constitute a preference, fraudulent conveyance or
otherwise required to be returned by Landlord, such payment by Tenant to
Landlord shall not in any way diminish Guarantor's obligations hereunder and
this Guaranty shall continue to be effective. If the aggregate amount so paid is
greater than the guaranteed obligations then outstanding, and after taking into
account any payments theretofore made to and actually received by Landlord from
Guarantor, Landlord will pay the amount of the excess to the party or parties
entitled thereto.

      8. Until all the Tenant's obligations under the Lease are fully performed,
Guarantor: (a) shall have no right of subrogation, contribution or reimbursement
against the Tenant by reason of any payments or acts of performance by Guarantor
under this Guaranty; (b) subordinates any liability or indebtedness of the
Tenant now or hereafter held by Guarantor to the obligations of the Tenant
under, arising out of or related to the Lease or Tenant's use of the Premises;
and (c) acknowledges that the actions of Landlord may affect or eliminate any
rights of subrogation, contribution or reimbursement of Guarantor as against
Tenant without any liability or recourse against Landlord. Without limiting the
generality of the foregoing, Guarantor hereby waives any and all benefits of the
provisions of Section 2848 of the California Civil Code and any similar or
analogous statutes of California or any other jurisdiction.

      9. Prior to the execution of this Guaranty and at any time during the Term
of the Lease upon ten (10) days prior written notice from Landlord, Guarantor
agrees to provide Landlord with an annual financial statement of Guarantor for
each year. Guarantor's financial statements are to be prepared in accordance
with generally accepted accounting principles and, if such is the normal
practice of Guarantor, audited by an independent certified public accountant.
Guarantor represents and warrants that all such financial statements shall be
true and correct

                                      -3-
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statements of Guarantor's financial condition and an officer of Guarantor shall
certify in writing to Landlord to that effect.

      10. The liability of Guarantor and all rights, powers and remedies of
Landlord hereunder and under any other agreement now or at any time hereafter in
force between Landlord and Guarantor relating to the Lease shall be cumulative
and not alternative and such rights, powers and remedies shall be in addition to
all rights, powers and remedies given to Landlord by law.

      11. Subject to the limitations hereinafter set forth, this Guaranty
applies to, inures to the benefit of and binds all parties hereto, their heirs,
devisees, legatees, executors, administrators, representatives, successors and
assigns. This Guaranty may be assigned by Landlord voluntarily or by operation
of law. Guarantor may not assign, delegate or otherwise transfer all or any part
of its rights and obligations under this Guaranty without the express prior
written consent of Landlord, which consent may be withheld in Landlord's sole
and absolute discretion, it being understood that Landlord is relying upon the
financial strength and integrity of Guarantor in this transaction.

      12. This Guaranty shall constitute the entire agreement between Guarantor
and the Landlord with respect to the subject matter hereof. No provision of this
Guaranty or right of Landlord hereunder may be waived nor may any guarantor be
released from any obligation hereunder except by a writing duly executed by an
authorized officer, director or trustee of Landlord. The waiver or failure to
enforce any provision of this Guaranty shall not operate as a waiver of any
other breach of such provision or any other provisions hereof. No course of
dealing between Landlord and Tenant shall alter or affect the enforceability of
this Guaranty or Guarantor's obligations hereunder.

      13. In giving this Guaranty, Guarantor has independently investigated, to
the extent deemed necessary by Guarantor, Tenant's financial condition and
hereby knowingly and irrevocably waive any right Guarantor may possess to
require Landlord to disclose to Guarantor any information Landlord may now or
hereafter possess concerning Tenant's present or future character, credit,
collateral or financial condition. Guarantor assumes the responsibility for
being and keeping informed of the financial condition of Tenant and of all
circumstances bearing upon the risk of non-payment and nonperformance of the
guaranteed obligations which diligent inquiry would reveal.

      14. The term "Landlord" whenever hereinabove used refers to and means the
Landlord in the foregoing Lease specifically named and also any assignee of said
Landlord, whether by outright assignment or by assignment for security, and also
any successor to the interest of said Landlord or of any assignee of such Lease
or any part thereof, whether by assignment or otherwise. The term "Tenant"
whenever hereinabove used refers to and means the Tenant in the foregoing Lease
specifically named and also any assignee or subtenant of said Lease and also any
successor to the interests of said Tenant, assignee or sublessee of such Lease
or any part thereof, whether by assignment, sublease or otherwise including,
without limitation, any trustee in bankruptcy and any bankruptcy estate of
Tenant, Tenant's assignee or sublessee.

                                      -4-
<PAGE>
      15. If Guarantor shall become bankrupt or insolvent, or any application
shall be made to have Guarantor declared bankrupt or insolvent, or Guarantor
shall make an assignment for the benefit of creditors, or Guarantor shall enter
into a proceeding for the dissolution of marriage, or in the event of death of
Guarantor, notice of such occurrence or event shall be promptly furnished to
Landlord by such Guarantor or Guarantor's fiduciary. This Guaranty shall extend
to and be binding upon each Guarantor's legal heirs and representatives, and
successors and assigns, including, but not limited to, trustees in bankruptcy
and Guarantor's estate.

      16. Any notice, request, demand, instruction or other communication to be
given to any party hereunder shall be in writing and sent by registered or
certified mail, return receipt requested in accordance with the notice
provisions of the Lease. The Tenant shall be deemed Guarantor's agent for
service of process and notice to Guarantor delivered to the Tenant at the
address set forth in the Lease shall constitute proper notice to Guarantor for
all purposes. Notices to Landlord shall be delivered to Landlord's address set
forth in the Lease. Landlord, at its election, may provide an additional notice
to Guarantor at the address provided under Guarantor's signature below.

      17. If either party hereto participates in an action against the other
party arising out of or in connection with this Guaranty, the prevailing party
shall be entitled to have and recover from the other party reasonable attorneys'
fees, collection costs and other costs incurred in and in preparation for the
action. In addition to the foregoing, Guarantor shall be responsible for any
attorneys' fees, collection costs and other costs of Tenant arising out of any
dispute under the Lease, including, without limitation, all interest, default
interest, post-petition bankruptcy interest and other post-petition obligations,
late charges, court costs and attorneys' fees, which may be suffered or incurred
by Landlord in enforcing or compromising any rights under this Guaranty or in
enforcing or compromising the performance of Tenant's obligations under the
Lease. Guarantor hereby waives any right to trial by jury and further waives and
agrees not to assert or take advantage of any defense based on any claim that
any arbitration decision binding upon Landlord and Tenant is not binding upon
Guarantor.

      18. Guarantor represents and warrants to Landlord that: (a) this Guaranty
has been duly executed and delivered to Landlord by Guarantor; (b) this Guaranty
is a valid and legally binding obligation of Guarantor, enforceable in
accordance with its terms, except as such validity, binding nature or
enforceability may be limited by bankruptcy, insolvency, reorganization,
arrangement, moratorium or other laws or court decisions relating to or
affecting the rights of creditors generally; (c) Guarantor has received a true,
correct and complete copy of and is fully familiar with the Lease and represents
and warrants that to the best of Guarantor's knowledge, all necessary action has
been taken by Tenant to authorize Tenant's execution and delivery of the Lease;
and (d) Tenant is under no disability in connection with its execution and
delivery of the Lease and there are no defenses to Tenant's full payment and
performance of all of its obligations under the Lease. Within ten (10) days
following Landlord's request, Guarantor shall deliver to Landlord an estoppel
certificate certifying, among other things, that this Guaranty is in full force
and effect and has not been amended or terminated.

      19. Guarantor agrees that all questions, actions and disputes with respect
to this Guaranty or the performance or enforcement thereof shall be governed by,
and decided in

                                      -5-
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accordance with, the laws of the State of California, and venue shall be set in
any federal or state court located in Kern County, California.

      20. Should any one or more provisions of this Guaranty be determined to be
illegal or unenforceable, all other provisions shall nevertheless be effective.

      21. Time is strictly of the essence under this Guaranty and any amendment,
modification or revision hereof.

      22. If Guarantor is a corporation, each individual executing this Guaranty
on behalf of said corporation represents and warrants that he is duly authorized
to execute and deliver this Guaranty on behalf of said corporation, in
accordance with a duly adopted resolution of the Board of Directors of said
corporation or in accordance with the by-laws of said corporation, and that this
Guaranty is binding upon said corporation in accordance with its terms. If
Guarantor is a corporation, Landlord, at its option, may require Guarantor to
concurrently, with the execution of this Guaranty, deliver to Landlord a
certified copy of a resolution of the Board of Directors of said corporation
authorizing or ratifying the execution of this Guaranty. If Guarantor is another
form of entity, each individual executing this Guaranty on behalf of said entity
represents and warrants that he or she is duly authorized to execute and deliver
this Guaranty on behalf of said entity in accordance with the governing and/or
formation documents of said entity.

      23. If more than one party executes a Guaranty of Lease guaranteeing
Tenant's obligations under the Lease, then each party's obligations shall be
joint and several.

      THE UNDERSIGNED HAS READ AND UNDERSTANDS THE TERMS AND CONDITIONS
CONTAINED IN THIS GUARANTY INCLUDING, WITHOUT LIMITATION, ALL WAIVERS CONTAINED
IN THIS GUARANTY.

      Executed as of the date of the Lease.

                                    DAISYTEK INTERNATIONAL CORPORATION,
                                    a Delaware corporation

                                    By:     /S/ MICHAEL BISHOFF
                                       ---------------------------------------
                                       Name:  Michael Bishoff
                                       Title:  VP - Distribution

                                    By:     /S/ GEORGE MANEY
                                       ---------------------------------------
                                       Name:  George Maney
                                       Title:  SVP - Operations

Address of Guarantor:

Daisytek International Corporation
1025 Central Expressway, South

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Allen, Texas  75013
Attn: Michael Bishoff

*NOTE:

IF TENANT IS A CALIFORNIA CORPORATION, then one of the following alternative
requirements must be satisfied:

(A)   This Lease must be signed by two (2) officers of such corporation: one
      being the chairman of the board, the president or a vice president, and
      the other being the secretary, an assistant secretary, the chief financial
      officer or an assistant treasurer. If one (1) individual is signing in two
      (2) of the foregoing capacities, that individual must sign twice; once as
      one officer and again as the other officer.

(B)   If there is only one (1) individual signing in two (2) capacities, or if
      the two (2) signatories do not satisfy the requirements of (A) above, then
      Tenant shall deliver to Landlord a certified copy of a corporate
      resolution in a form reasonably acceptable to Landlord authorizing the
      signatory(ies) to execute this Lease.

IF TENANT IS A CORPORATION INCORPORATED IN A STATE OTHER THAN CALIFORNIA, then
Tenant shall deliver to Landlord a certified copy of a corporate resolution in a
form reasonably acceptable to Landlord authorizing the signatory(ies) to execute
this Lease.

                                      -7-<PAGE>

                                                                   EXHIBIT 10.27

                                CREDIT AGREEMENT

                           Dated as of April 24, 2002

                                      among

                    THE FINANCIAL INSTITUTIONS NAMED HEREIN,
                                 as the Lenders,

                     BANK OF AMERICA, NATIONAL ASSOCIATION,
                                  as the Agent,

                       DAISYTEK INTERNATIONAL CORPORATION,
                             as an Obligated Party,

                                       and

                             DAISYTEK, INCORPORATED
                                       and
                    CERTAIN OF ITS SUBSIDIARIES PARTY HERETO,
                                as the Borrowers

                         BANC OF AMERICA SECURITIES LLC
                       Lead Arranger and Syndication Agent
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<TABLE>
<CAPTION>
                                TABLE OF CONTENTS
<S>                                                                                                                    <C>
ARTICLE 1 - LOANS AND LETTERS OF CREDIT...........................................................................      1
           Section 1.1         Total Facility.....................................................................      1
           Section 1.2         Revolving Loans....................................................................      1
           Section 1.3         Letters of Credit and Credit Support...............................................      5
           Section 1.4         Bank Products......................................................................     10

ARTICLE 2 - INTEREST AND FEES.....................................................................................     10
           Section 2.1         Interest...........................................................................     10
           Section 2.2         Continuation and Conversion Elections..............................................     11
           Section 2.3         Maximum Interest Rate..............................................................     12
           Section 2.4         Unused Line Fee....................................................................     14
           Section 2.5         Letter of Credit Fee...............................................................     14
           Section 2.6         Collection Days Fee................................................................     14
           Section 2.7         Other Fees.........................................................................     15

ARTICLE 3 - PAYMENTS AND PREPAYMENTS..............................................................................     15
           Section 3.1         Revolving Loans....................................................................     15
           Section 3.2         Termination of Total Facility......................................................     15
           Section 3.3         Prepayment of the Revolving Loans..................................................     16
           Section 3.4         LIBOR Rate Revolving Loan Prepayments..............................................     17
           Section 3.5         Payments by the Borrowers..........................................................     17
           Section 3.6         Payments as Revolving Loans........................................................     17
           Section 3.7         Apportionment, Application, and Reversal of Payments...............................     18
           Section 3.8         Indemnity for Returned Payments....................................................     18
           Section 3.9         The Agent's and the Lenders' Books and Records; Monthly Statements.................     19

ARTICLE 4 - TAXES, YIELD PROTECTION, AND ILLEGALITY...............................................................     19
           Section 4.1         Taxes..............................................................................     19
           Section 4.2         Illegality.........................................................................     20
           Section 4.3         Increased Costs and Reduction of Return............................................     21
           Section 4.4         Funding Losses.....................................................................     21
           Section 4.5         Inability to Determine Rates.......................................................     22
           Section 4.6         Certificates of the Agent..........................................................     22
           Section 4.7         Survival...........................................................................     22

ARTICLE 5 - BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES.....................................................     22
           Section 5.1         Books and Records..................................................................     22
           Section 5.2         Financial Information..............................................................     23
           Section 5.3         Notices to the Lender..............................................................     27

ARTICLE 6 - GENERAL WARRANTIES AND REPRESENTATIONS................................................................     29
           Section 6.1         Authorization, Validity, and Enforceability of this Agreement and
                               the other Loan Documents; No Conflicts.............................................     29
           Section 6.2         Validity and Priority of Security Interest.........................................     30
</TABLE>

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<S>                                                                                                                    <C>
           Section 6.3         Corporate Name; Prior Transactions.................................................     30
           Section 6.4         Capitalization and Subsidiaries....................................................     30
           Section 6.5         Financial Statements and Projections...............................................     30
           Section 6.6         Solvency...........................................................................     31
           Section 6.7         Debt...............................................................................     31
           Section 6.8         Distributions......................................................................     31
           Section 6.9         Real Estate; Leases................................................................     31
           Section 6.10        Proprietary Rights.................................................................     31
           Section 6.11        Trade Names........................................................................     32
           Section 6.12        Litigation.........................................................................     32
           Section 6.13        Labor Disputes.....................................................................     32
           Section 6.14        Environmental Laws.................................................................     32
           Section 6.15        No Violation of Law................................................................     33
           Section 6.16        No Default.........................................................................     34
           Section 6.17        ERISA Compliance...................................................................     34
           Section 6.18        Taxes..............................................................................     35
           Section 6.19        Regulated Entities.................................................................     35
           Section 6.20        Use of Proceeds; Margin Regulations................................................     35
           Section 6.21        No Material Adverse Change.........................................................     35
           Section 6.22        Full Disclosure....................................................................     35
           Section 6.23        Material Agreements................................................................     35
           Section 6.24        Bank Accounts......................................................................     35
           Section 6.25        Governmental Authorization.........................................................     36
           Section 6.26        Investment Property................................................................     36

ARTICLE 7 - AFFIRMATIVE AND NEGATIVE COVENANTS....................................................................     37
           Section 7.1         Taxes and Other Obligations........................................................     37
           Section 7.2         Legal Existence and Good Standing..................................................     37
           Section 7.3         Compliance with Law and Agreements; Maintenance of Licenses........................     37
           Section 7.4         Maintenance of Property; Inspection of Property....................................     38
           Section 7.5         Insurance..........................................................................     38
           Section 7.6         Insurance and Condemnation Proceeds................................................     39
           Section 7.7         Environmental Laws.................................................................     39
           Section 7.8         Compliance with ERISA and Similar Foreign Laws.....................................     41
           Section 7.9         Mergers, Consolidations, or Sales..................................................     41
           Section 7.10        Distributions; Capital Change; Restricted Investments..............................     42
           Section 7.11        Transactions Resulting in a Material Adverse Effect................................     42
           Section 7.12        Guaranties.........................................................................     42
           Section 7.13        Debt...............................................................................     42
           Section 7.14        Prepayment.........................................................................     43
           Section 7.15        Transactions with Affiliates.......................................................     43
           Section 7.16        Investment Banking and Finder's Fees...............................................     43
           Section 7.17        Business Conducted.................................................................     43
           Section 7.18        Liens..............................................................................     43
           Section 7.19        Sale and Leaseback Transactions....................................................     44
           Section 7.20        New Subsidiaries; Addition of Subsidiaries as Borrowers............................     44
</TABLE>

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<S>                                                                                                                    <C>
           Section 7.21        Fiscal Year........................................................................     45
           Section 7.22        Capital Expenditures...............................................................     45
           Section 7.23        Parent's Fixed Charge Coverage Ratio...............................................     45
           Section 7.24        Borrowers' Fixed Charge Coverage Ratio.............................................     45
           Section 7.25        Adjusted Tangible Net Worth........................................................     45
           Section 7.26        Use of Proceeds....................................................................     45
           Section 7.27        Solvency...........................................................................     45
           Section 7.28        Interest Rate Protection...........................................................     45
           Section 7.29        Guaranties of the Obligations......................................................     46
           Section 7.30        Landlord and Mortgagee Agreements..................................................     46
           Section 7.31        Additional Collateral; Further Assurances..........................................     46

ARTICLE 8 - CONDITIONS OF LENDING.................................................................................     47
           Section 8.1         Conditions Precedent to Making of Revolving Loans on the
                               Closing Date.......................................................................     47
           Section 8.2         Conditions Precedent to Each Loan..................................................     51

ARTICLE 9 - DEFAULT; REMEDIES.....................................................................................     52
           Section 9.1         Events of Default..................................................................     52
           Section 9.2         Remedies...........................................................................     55

ARTICLE 10 - TERM AND TERMINATION.................................................................................     57
           Section 10.1        Term and Termination...............................................................     57

ARTICLE 11 - AMENDMENTS; WAIVERS; PARTICIPATIONS;
                      ASSIGNMENTS; SUCCESSORS.....................................................................     57
           Section 11.1        Amendments and Waivers.............................................................     57
           Section 11.2        Assignments; Participations........................................................     59

ARTICLE 12 - THE AGENT............................................................................................     62
           Section 12.1        Appointment and Authorization......................................................     62
           Section 12.2        Delegation of Duties...............................................................     62
           Section 12.3        Liability of the Agent.............................................................     62
           Section 12.4        Reliance by the Agent..............................................................     63
           Section 12.5        Notice of Default..................................................................     63
           Section 12.6        Credit Decision....................................................................     63
           Section 12.7        Indemnification....................................................................     64
           Section 12.8        The Agent in Individual Capacity...................................................     64
           Section 12.9        Successor Agent....................................................................     64
           Section 12.10       Withholding Tax....................................................................     65
           Section 12.11       Collateral Matters.................................................................     66
           Section 12.12       Restrictions on Actions by the Lenders; Sharing of Payments........................     67
           Section 12.13       Agency for Perfection..............................................................     68
           Section 12.14       Payments by the Agent to the Lenders...............................................     68
           Section 12.15       Settlement.........................................................................     69
           Section 12.16       Letters of Credit; Intra-Lender Issues.............................................     72
</TABLE>

                                      iii
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<TABLE>
<S>                                                                                                                    <C>
           Section 12.17       Concerning the Collateral and the Related Loan Documents...........................     74
           Section 12.18       Field Audit and Examination Reports; Disclaimer by the Lenders.....................     75
           Section 12.19       Relation Among the Lenders.........................................................     75

ARTICLE 13 - MISCELLANEOUS........................................................................................     75
           Section 13.1        No Waivers; Cumulative Remedies....................................................     75
           Section 13.2        Severability.......................................................................     76
           Section 13.3        Governing Law; Choice of Forum; Service of Process.................................     76
           Section 13.4        Waiver of Jury Trial...............................................................     77
           Section 13.5        Survival of Representations and Warranties.........................................     77
           Section 13.6        Other Security and Guaranties......................................................     77
           Section 13.7        Fees and Expenses..................................................................     78
           Section 13.8        Notices............................................................................     78
           Section 13.9        Waiver of Notices..................................................................     79
           Section 13.10       Binding Effect.....................................................................     79
           Section 13.11       Indemnity of the Agent and the Lenders by the Borrower.............................     79
           Section 13.12       Limitation of Liability............................................................     81
           Section 13.13       Final Agreement....................................................................     81
           Section 13.14       Counterparts.......................................................................     81
           Section 13.15       Captions...........................................................................     81
           Section 13.16       Right of Setoff....................................................................     82
           Section 13.17       Confidentiality....................................................................     82
           Section 13.18       Conflicts with other Loan Documents................................................     83
           Section 13.19       Joint and Several Liability........................................................     83
           Section 13.20       Contribution and Indemnification among the Borrowers...............................     84
           Section 13.21       Agency of the Parent and Daisytek for each Other Obligated Party...................     84
           Section 13.22       Additional Borrowers and Guarantors................................................     85
           Section 13.23       Express Waivers By the Obligated Parties In Respect of Cross
                               Guaranties and Cross Collateralization.............................................     85
</TABLE>

                                       iv
<PAGE>
EXHIBITS

Exhibit A-           Form of Revolving Loan Note
Exhibit B-           Form of Borrowing Base Certificate
Exhibit C-           Form of Compliance Certificate
Exhibit D-           Form of Notice of Borrowing
Exhibit E-           Form of Notice of Continuation/Conversion
Exhibit F-           Form of Assignment and Acceptance

SCHEDULES

Schedule 6.3  -         Prior Names
Schedule 6.4  -         Capitalization; Subsidiaries
Schedule 6.7  -         Debt
Schedule 6.9  -         Real Estate; Leases
Schedule 6.10 -         Proprietary Rights
Schedule 6.11 -         Trade Names
Schedule 6.14 -         Environmental Matters
Schedule 6.17 -         ERISA
Schedule 6.23 -         Material Agreements
Schedule 6.24 -         Bank Accounts
Schedule 6.26 -         Investment Property
Schedule 6.28 -         Affiliate Transactions
Schedule A-1  -         Commitments
Schedule A-2  -         Permitted Liens
Schedule A-3  -         Investments

                                      viii
<PAGE>
                                CREDIT AGREEMENT

         This Credit Agreement, dated as of April 24, 2002, ("Agreement") among
the financial institutions from time to time parties hereto (such financial
institutions, together with their respective successors and assigns, are
referred to hereinafter each individually as a "Lender" and collectively as the
"Lenders"), Bank of America, National Association, with an office at 901 Main
Street, Sixth Floor, Dallas, Texas 75202, as administrative agent for the
Lenders (in its capacity as administrative agent, the "Agent"), and Daisytek
International Corporation, a Delaware corporation, and each of its Subsidiaries
party hereto.

                                    RECITALS:

         A. Capitalized terms used in this Agreement and not otherwise defined
herein shall have the meanings ascribed thereto in Annex A which is attached
hereto and incorporated herein. The rules of construction contained in Annex A
shall govern the interpretation of this Agreement, and all Annexes, Exhibits,
and Schedules attached hereto are incorporated herein by reference.

         B. The Obligated Parties have requested the Lenders to make available
to the Borrowers a revolving credit facility for loans and letters of credit in
the aggregate principal amount of $200,000,000, which extensions of credit the
Borrowers will use for the purposes permitted by Section 7.26.

         C. The Lenders have agreed to make available to the Borrowers a
revolving credit facility upon the terms and conditions set forth in this
Agreement.

         NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth in this Agreement, and for good and valuable consideration,
the receipt of which is hereby acknowledged, the Lenders, the Agent, and the
Obligated Parties hereby agree as follows.

ARTICLE 1

                           LOANS AND LETTERS OF CREDIT

         Section 1.1 Total Facility. Subject to all of the terms and conditions
of this Agreement, the Lenders agree to make available a total credit facility
of up to $200,000,000 (the "Total Facility") for use by any one or more of the
Borrowers from time to time during the term of this Agreement. The Total
Facility shall be composed of a revolving line of credit consisting of Revolving
Loans and Letters of Credit and Credit Support as described in Section 1.2 and
Section 1.3.

         Section 1.2 Revolving Loans.

                  (1) Amounts. Subject to the satisfaction of the conditions
         precedent set forth in Article 8, each Lender severally, but not
         jointly, agrees, upon a Borrower's request from time to time on any
         Business Day during the period from the Closing Date to the Termination
         Date, to make revolving loans (the "Revolving Loans") to the Borrowers
         in amounts not to

CREDIT AGREEMENT - Page 1
<PAGE>
         exceed such Lender's Pro Rata Share of the Availability, except for
         Non-Ratable Loans and Agent Advances. The Lenders, however, in their
         unanimous discretion, may elect to make Revolving Loans or issue or
         arrange to have issued Letters of Credit or Credit Support in excess of
         the Availability or the Borrowing Base on one or more occasions, but if
         they do so, neither the Agent nor the Lenders shall be deemed thereby
         to have changed the limits of the Availability or the Borrowing Base or
         to be obligated to exceed such limits on any other occasion. If any
         requested Borrowing would exceed Availability, then the Lenders may
         refuse to make or may otherwise restrict the making of Revolving Loans
         and the issuance of Letters of Credit and Credit Support, subject to
         the Agent's authority, in its sole discretion, to make Agent Advances
         pursuant to the terms of Section 1.2(j).

                  (2) Revolving Loan Notes. The Borrowers shall execute and
         deliver to each Lender a promissory note to evidence the Revolving
         Loans of that Lender (each a "Revolving Loan Note" and, collectively,
         the "Revolving Loan Notes"). Each Revolving Loan Note shall be in the
         principal amount of the applicable Lender's Pro Rata Share of the
         Commitments, dated as of the Closing Date or the date of any assignment
         of a portion of any Lender's Revolving Loans, and substantially in the
         form of Exhibit A. Each Revolving Loan Note shall represent the
         obligation of the Borrowers to pay the amount of the applicable
         Lender's Pro Rata Share of the Commitments, or, if less, such Lender's
         Pro Rata Share of the aggregate unpaid principal amount of all
         Revolving Loans to the Borrowers together with interest thereon as
         prescribed in this Agreement. The entire unpaid balance of the
         Revolving Loans and all other non-contingent Obligations shall be
         immediately due and payable in full in immediately available funds on
         the Termination Date.

                  (3) Procedure for Borrowing.

                           (1) Each Borrowing of Revolving Loans shall be made
                  upon a Borrower's irrevocable written notice delivered to the
                  Agent in the form of a notice of borrowing in the form
                  attached hereto as Exhibit D (a "Notice of Borrowing"), which
                  must be received by the Agent prior to 12:00 noon (Dallas,
                  Texas time) (y) three (3) Business Days prior to the requested
                  Funding Date, in the case of LIBOR Rate Revolving Loans and
                  (z) on the requested Funding Date, in the case of Base Rate
                  Revolving Loans, specifying:

                                    (1) the amount of the Borrowing, which in
                           the case of LIBOR Rate Revolving Loans shall be in an
                           amount that is not less than $5,000,000 or an
                           integral multiple of $1,000,000 in excess thereof or
                           in the case of Base Rate Revolving Loans shall be in
                           an amount that is not less than $100,000 or an
                           integral multiple of $10,000 in excess thereof;

                                    (2) the requested Funding Date, which shall
                           be a Business Day;

                                    (3) whether the Revolving Loans requested
                           are to be Base Rate Revolving Loans or LIBOR Rate
                           Revolving Loans; provided that if such Borrower fails
                           to specify whether any Revolving Loans are to be Base
                           Rate

CREDIT AGREEMENT - Page 2
<PAGE>
                           Revolving Loans or LIBOR Rate Revolving Loans, such
                           request shall be deemed a request for Base Rate
                           Revolving Loans;

                                    (4) the duration of the Interest Period if
                           the requested Revolving Loans are to be LIBOR Rate
                           Revolving Loans; provided that if such Borrower fails
                           to select the duration of the Interest Period with
                           respect to any requested LIBOR Rate Revolving Loans,
                           such Borrower shall be deemed to have requested such
                           Revolving Loans be made as LIBOR Rate Revolving Loans
                           with an Interest Period of one month in duration; and

                                    (5) whether the proceeds of such Borrowing
                           are to be deposited to the Designated Account or sent
                           by wire transfer to a third party, in which case such
                           Borrower shall provide the Agent with wire transfer
                           instructions satisfactory to the Agent;

                  provided, however, that with respect to the Borrowing to be
                  made on the Closing Date, such Borrowing will consist of Base
                  Rate Revolving Loans only.

                           (2) With respect to any request for Base Rate
                  Revolving Loans, in lieu of delivering a Notice of Borrowing,
                  a Borrower may give the Agent telephonic notice of such
                  request for advances to the Designated Account not later than
                  the required time specified in clause (i) preceding. The Agent
                  at all times shall be entitled to rely on such telephonic
                  notice in making any such Revolving Loans, regardless of
                  whether any written confirmation is received by the Agent.

                           (3) The Borrowers shall have no right to request a
                  LIBOR Rate Revolving Loan while a Default or an Event of
                  Default exists.

                  (4) Disbursement. The Borrowers shall deliver to the Agent,
         prior to the Closing Date, a notice setting forth the deposit account
         of the Borrowers (the "Designated Account") to which the Agent is
         authorized by the Borrowers to transfer the proceeds of the Revolving
         Loans requested hereunder. The Borrowers may designate a replacement
         Designated Account from time to time by written notice to the Agent.
         Any designation by the Borrowers of the Designated Account must be
         reasonably acceptable to the Agent.

                  (5) Reliance Upon Authority; No Liability. The Agent is
         entitled to rely conclusively on any individual's request for Revolving
         Loans on behalf of a Borrower, so long as the proceeds thereof are to
         be transferred to the Designated Account or according to such other
         instructions as may be provided to the Agent pursuant to Section
         1.2(c)(i)(E). The Agent shall have no duty to verify the identity of
         any individual representing himself or herself as a person authorized
         by any Borrower to make such requests on its behalf. The Agent shall
         not incur any liability to the Borrowers as a result of acting upon any
         notice referred to in Section 1.2(c) and Section 1.2(d), which the
         Agent reasonably believes to have been given by an officer or other
         person duly authorized by a Borrower to request Revolving Loans on its
         behalf or for otherwise acting under this Section 1.2. The crediting of

CREDIT AGREEMENT - Page 3
<PAGE>
         Revolving Loans to the Designated Account, or wire transfer to such
         Person as a Borrower shall direct, shall conclusively establish the
         obligation of the Borrowers to repay such Revolving Loans as provided
         herein.

                  (6) Notice Irrevocable. Any Notice of Borrowing (or telephonic
         notice in lieu thereof) made pursuant to Section 1.2(c) shall be
         irrevocable and such Borrowers shall be bound to borrow the funds
         requested therein in accordance therewith.

                  (7) The Agent's Election. Subject to the requirements of
         Section 1.2(i), promptly after receipt of a Notice of Borrowing (or
         telephonic notice in lieu thereof) other than a request for LIBOR Rate
         Revolving Loans, the Agent shall elect in its discretion to have the
         terms of Section 1.2(h), Section 1.2(i), or Section 1.2(j) apply to
         such requested Borrowing. If the Bank declines in its sole discretion
         to make a Non-Ratable Loan pursuant to Section 1.2(i) or an Agent
         Advance pursuant to Section 1.2(j), the terms of Section 1.2(h) shall
         apply to the requested Borrowing.

                  (8) Making of Revolving Loans. If the Agent elects to have the
         terms of this Section 1.2(h) apply to a requested Borrowing or if the
         requested Borrowing is for a LIBOR Rate Revolving Loan, then promptly
         after receipt of a Notice of Borrowing or telephonic notice in lieu
         thereof, the Agent shall notify the Lenders by telecopy, telephone, or
         e-mail of the requested Borrowing. Each Lender shall transfer its Pro
         Rata Share of the requested Borrowing to the Agent in immediately
         available funds, to the account from time to time designated by the
         Agent, not later than 1:00 p.m. (Dallas, Texas time) on the applicable
         Funding Date. After the Agent's receipt of all proceeds of such
         requested Borrowing, the Agent shall make the proceeds of such
         requested Borrowing available to the applicable Borrower on the
         applicable Funding Date by transferring same day funds to the
         Designated Account; provided, however, that the amount of Revolving
         Loans so made on any date shall not exceed the Availability on such
         date.

                  (9) Making of Non-Ratable Loans. Subject to Section 1.2(g), if
         the Agent elects, with the consent of the Bank, to have the terms of
         this Section 1.2(i) apply to a requested Borrowing, the Bank shall make
         a Revolving Loan in the amount of such requested Borrowing available to
         the Borrowers on the applicable Funding Date by transferring same day
         funds to the Designated Account. Each Revolving Loan made solely by the
         Bank pursuant to this Section 1.2(i) is referred to hereinafter as a
         "Non-Ratable Loan," and such Revolving Loans are collectively referred
         to as the "Non-Ratable Loans." Each Non-Ratable Loan shall be subject
         to all the terms and conditions applicable to other Revolving Loans
         except that all payments thereon shall be payable to the Bank solely
         for its own account. The aggregate amount of Non-Ratable Loans
         outstanding at any time shall not exceed $15,000,000. The Agent shall
         not request the Bank to make any Non-Ratable Loan if (A) the Agent has
         received written notice from any Lender that one or more of the
         applicable conditions precedent set forth in Article 8 will not be
         satisfied on the requested Funding Date for the applicable Borrowing,
         or (B) the requested Borrowing would exceed the Availability on the
         applicable Funding Date. The Non-Ratable Loans shall be secured by the
         Agent's

CREDIT AGREEMENT - Page 4
<PAGE>
         Liens in and to the Collateral and shall constitute Base Rate Revolving
         Loans and Obligations hereunder.

                  (10) Agent Advances. Subject to the limitations set forth
         below, the Agent is authorized by the Borrowers and the Lenders, from
         time to time in the Agent's sole discretion, (i) after the occurrence
         of a Default or an Event of Default, or (ii) at any time that any of
         the other conditions precedent set forth in Article 8 have not been
         satisfied, to make Base Rate Revolving Loans to the Borrowers or any
         Borrower on behalf of the Lenders in an aggregate amount outstanding at
         any time not to exceed $20,000,000 which the Agent, in its reasonable
         business judgment, deems necessary or desirable (A) to preserve or
         protect the Collateral, or any portion thereof, (B) to enhance the
         likelihood of, or maximize the amount of, repayment of the Loans and
         other Obligations, or (C) to pay any other amount chargeable to the
         Borrowers pursuant to the terms of this Agreement, including costs,
         fees, and expenses as described in Section 13.7 (any of such advances
         are herein referred to as "Agent Advances"); provided that the Required
         Lenders may at any time revoke the Agent's authorization to make Agent
         Advances. Any such revocation must be in writing and shall become
         effective prospectively upon the Agent's receipt thereof. Absent such
         revocation, the Agent's determination that the making of an Agent
         Advance is required for any such purposes shall be conclusive. The
         Agent Advances shall be secured by the Agent's Liens in and to the
         Collateral and shall constitute Base Rate Revolving Loans and
         Obligations hereunder.

         Section 1.3 Letters of Credit and Credit Support.

                  (1) Agreement to Issue or Cause to Issue. Subject to the terms
         and conditions of this Agreement, the Agent agrees (i) to cause the
         Letter of Credit Issuer to issue for the account of any of the
         Borrowers (whether one or more) in support of an obligation of any
         Borrower or, subject to the limitation in the definition of Letter of
         Credit Subfacility, in support of an obligation of the Parent or any of
         its Subsidiaries which are not Borrowers one or more
         commercial/documentary and standby letters of credit (each a "Letter of
         Credit" and collectively, the "Letters of Credit") and/or (ii) to
         provide credit support or other enhancement to an alternate issuer
         acceptable to the Agent, which issues a Letter of Credit for the
         account of a Borrower in support of an obligation of any Borrower or,
         subject to the limitation in the definition of Letter of Credit
         Subfacility, in support of an obligation of the Parent or any of its
         Subsidiaries which are not Borrowers (any such credit support or
         enhancement being herein referred to as a "Credit Support") from time
         to time during the term of this Agreement.

                  (2) Amounts; Outside Expiration Date. The Agent shall not have
         any obligation to issue or cause to be issued any Letter of Credit or
         Credit Support at any time if: (i) the maximum face amount of the
         requested Letter of Credit or Credit Support is greater than the Unused
         Letter of Credit Subfacility at such time; (ii) the maximum undrawn
         amount of the requested Letter of Credit or Credit Support and all
         commissions, fees, and charges due from such Borrower in connection
         with the opening thereof would exceed the Availability at such time; or
         (iii) such Letter of Credit or Credit Support has an expiration date
         later than thirty

CREDIT AGREEMENT - Page 5
<PAGE>
         (30) days prior to the Stated Termination Date or more than twelve (12)
         calendar months from the date of issuance for standby letters of credit
         and six (6) calendar months from the date of issuance for
         commercial/documentary letters of credit.

                  (3) Other Conditions. In addition to being subject to the
         satisfaction of the applicable conditions precedent contained in
         Article 8, the obligation of the Agent to cause to be issued any Letter
         of Credit or Credit Support is subject to the following conditions
         precedent having been satisfied in a manner reasonably satisfactory to
         the Agent:

                           (1) the Borrowers shall have delivered to the Letter
                  of Credit Issuer, at such times and in such manner as the
                  Letter of Credit Issuer may prescribe, an application in form
                  and substance satisfactory to the Letter of Credit Issuer and
                  reasonably satisfactory to the Agent for the issuance of the
                  Letter of Credit or Credit Support and such other documents as
                  may be required pursuant to the terms thereof, and the form,
                  terms, and purpose of the proposed Letter of Credit or Credit
                  Support shall be satisfactory to the Agent and the Letter of
                  Credit Issuer (provided that in the event any term of such
                  application or any other document is inconsistent with the
                  terms of this Agreement and the Letter of Credit Issuer is
                  either the same Person as the Agent or any Lender, then the
                  terms of this Agreement shall be controlling); and

                           (2) as of the date of issuance, no order of any
                  court, arbitrator, or Governmental Authority shall purport by
                  its terms to enjoin or restrain money center banks generally
                  from issuing letters of credit of the type and in the amount
                  of the proposed Letter of Credit or letter of credit for which
                  the proposed Credit Support has been requested, and no law,
                  rule, or regulation applicable to money center banks generally
                  and no request or directive (whether or not having the force
                  of law) from any Governmental Authority with jurisdiction over
                  money center banks generally shall prohibit, or request that
                  the proposed Letter of Credit Issuer refrain from, the
                  issuance of letters of credit generally or the issuance of
                  such proposed Letters of Credit or Credit Support.

                           (4) Issuance of Letters of Credit and Credit Support.

                                    (1) Request for Issuance. Any Borrower that
                           wishes to cause the issuance of a Letter of Credit or
                           any Credit Support must notify the Agent of such
                           request for issuance at least three (3) Business Days
                           prior to the proposed issuance date. Such notice
                           shall be irrevocable and must specify the original
                           face amount of the Letter of Credit or Credit Support
                           requested, the Business Day of issuance of such
                           requested Letter of Credit or Credit Support, whether
                           such Letter of Credit or Credit Support may be drawn
                           in a single or in partial draws, the Business Day on
                           which the requested Letter of Credit or Credit
                           Support is to expire, the purpose for which such
                           Letter of Credit or Credit Support is to be issued,
                           and the beneficiary of the requested Letter of Credit
                           or Credit Support. The applicable Borrower shall
                           attach to such notice the proposed form of the Letter
                           of Credit or letter of credit for which such Credit
                           Support is requested.

CREDIT AGREEMENT - Page 6
<PAGE>
                                    (2) Responsibilities of the Agent; Issuance.
                           The Agent shall determine, as of the Business Day
                           immediately preceding the requested issuance date of
                           the Letter of Credit or Credit Support set forth in
                           the notice from a Borrower pursuant to Section
                           1.3(d)(i), (A) the amount of the Unused Letter of
                           Credit Subfacility and (B) the Availability as of
                           such date. If the face amount of the requested Letter
                           of Credit or Credit Support is not greater than the
                           Unused Letter of Credit Subfacility and the amount of
                           such requested Letter of Credit or Credit Support and
                           all commissions, fees, and charges due from the
                           Borrower in connection with the opening thereof does
                           not exceed the Availability, the Agent shall cause
                           the Letter of Credit Issuer to issue the requested
                           Letter of Credit or Credit Support on the requested
                           issuance date so long as the other conditions hereof
                           are met.

                                    (3) Extensions and Amendments. The Agent
                           shall not be obligated to cause the Letter of Credit
                           Issuer to extend or amend any Letter of Credit or
                           Credit Support issued pursuant hereto unless the
                           requirements of this Section 1.3 are met as though a
                           new Letter of Credit or Credit Support were being
                           requested and issued. With respect to any Letter of
                           Credit or Credit Support which contains any
                           "evergreen" or automatic renewal provision, each
                           Lender shall be deemed to have consented to any such
                           extension or renewal unless such Lender shall have
                           provided to the Agent, written notice that it
                           declines to consent to any such extension or renewal
                           at least thirty (30) days prior to the date on which
                           the Letter of Credit Issuer is entitled to decline to
                           extend or renew the Letter of Credit or Credit
                           Support; provided that, notwithstanding the
                           foregoing, if all of the requirements of this Section
                           1.3 are met and no Default or Event of Default has
                           occurred and is continuing, no Lender may decline to
                           consent to any such extension or renewal.

                           (5) Payments Pursuant to Letters of Credit and Credit
                  Support. The Borrowers agree to reimburse the Letter of Credit
                  Issuer immediately for any draw under any Letter of Credit and
                  the Agent, for the account of the Lenders (as applicable) upon
                  any payment pursuant to any Credit Support, and to pay the
                  Letter of Credit Issuer the amount of all other charges and
                  fees payable to the Letter of Credit Issuer under or in
                  connection with any Letter of Credit immediately when due,
                  irrespective of any claim, setoff, defense, or other right
                  which any Borrower may have at any time against the Letter of
                  Credit Issuer or any other Person. Each drawing under any
                  Letter of Credit or Credit Support shall constitute a request
                  by the Borrower for whose account such Letter of Credit or
                  Credit Support was issued for a Borrowing of a Base Rate
                  Revolving Loan in the amount of such drawing. The Funding Date
                  with respect to such Borrowing shall be the date of such
                  drawing.

                           (6) Indemnification; Exoneration; Power of Attorney.

CREDIT AGREEMENT - Page 7
<PAGE>
                                    (1) Indemnification. In addition to amounts
                           payable as elsewhere provided in this Section 1.3,
                           each Borrower agrees to protect, indemnify, pay, and
                           save the Lenders, the Agent, and the Letter of Credit
                           Issuer harmless from and against any and all claims,
                           demands, liabilities, damages, losses, costs,
                           charges, and expenses (including attorneys' fees)
                           which any Lender, the Agent, or the Letter of Credit
                           Issuer may incur or be subject to as a consequence,
                           direct or indirect, of the issuance of any Letter of
                           Credit or the provision of any Credit Support or
                           enhancement in connection therewith. The Borrowers'
                           obligations under this Section 1.3(f) shall survive
                           payment of all other Obligations.

                                    (2) Assumption of Risk by the Borrowers. As
                           among the Borrowers, the Lenders, the Agent, and the
                           Letter of Credit Issuer, the Borrowers assume all
                           risks of the acts and omissions of, or misuse of any
                           of the Letters of Credit by, the respective
                           beneficiaries of such Letters of Credit. In
                           furtherance and not in limitation of the foregoing,
                           the Lenders, the Agent, and the Letter of Credit
                           Issuer shall not be responsible for: (A) the form,
                           validity, sufficiency, accuracy, genuineness, or
                           legal effect of any document submitted by any Person
                           in connection with the application for and issuance
                           of and presentation of drafts with respect to any of
                           the Letters of Credit, even if it should prove to be
                           in any or all respects invalid, insufficient,
                           inaccurate, fraudulent, or forged; (B) the validity
                           or sufficiency of any instrument transferring or
                           assigning or purporting to transfer or assign any
                           Letter of Credit or the rights or benefits thereunder
                           or proceeds thereof, in whole or in part, which may
                           prove to be invalid or ineffective for any reason;
                           (C) the failure of the beneficiary of any Letter of
                           Credit to comply duly with conditions required in
                           order to draw upon such Letter of Credit; (D) errors,
                           omissions, interruptions, or delays in transmission
                           or delivery of any messages, by mail, cable,
                           telegraph, telex, or otherwise, whether or not they
                           be in cipher; (E) errors in interpretation of
                           technical terms; (F) any loss or delay in the
                           transmission or otherwise of any document required in
                           order to make a drawing under any Letter of Credit or
                           of the proceeds thereof; (G) the misapplication by
                           the beneficiary of any Letter of Credit of the
                           proceeds of any drawing under such Letter of Credit;
                           (H) any consequences arising from causes beyond the
                           control of the Lenders or the Agent, including any
                           act or omission, whether rightful or wrongful, of any
                           present or future de jure or de facto Governmental
                           Authority; or (I) the Letter of Credit Issuer's honor
                           of a draw for which the draw or any certificate fails
                           to comply in any respect with the terms of the Letter
                           of Credit. None of the foregoing shall affect,
                           impair, or prevent the vesting of any rights or
                           powers of the Agent, any Lender, or the Letter of
                           Credit Issuer under this Section 1.3(f).

                                    (3) Exoneration. Without limiting the
                           foregoing, no action or omission whatsoever by the
                           Agent or any Lender (excluding any Lender in its
                           capacity as the Letter of Credit Issuer) under or in
                           connection with any of the Letters of Credit or
                           Credit Support or any related matters shall result in
                           any liability of the Agent or any Lender to any
                           Borrower, or relieve such Borrower of any of its
                           obligations hereunder to any such Person.

CREDIT AGREEMENT - Page 8
<PAGE>
                                    (4) Rights Against Letter of Credit Issuer.
                           Nothing contained in this Agreement is intended to
                           limit any Borrower's rights, if any, with respect to
                           the Letter of Credit Issuer which arise as a result
                           of the letter of credit application and related
                           documents executed by and between such Borrower and
                           the Letter of Credit Issuer.

                                    (5) Account Party. Each Borrower hereby
                           authorizes and directs the Letter of Credit Issuer to
                           name any Borrower as the "Account Party" in any
                           Letter of Credit and to deliver to the Agent all
                           instruments, documents, and other writings and
                           property received by the Letter of Credit Issuer
                           pursuant to each such Letter of Credit, and to accept
                           and rely upon the Agent's instructions and agreements
                           with respect to all matters arising in connection
                           with each such Letter of Credit or the application
                           therefor.

                                    (6) Power of Attorney. In connection with
                           all Inventory financed by any Letter of Credit, each
                           Borrower hereby appoints the Agent, or the Agent's
                           designee, as its attorney, with full power and
                           authority during the existence of a Default or an
                           Event of Default: (A) to sign and/or endorse such
                           Borrower's name upon any warehouse or other receipts;
                           (B) to sign such Borrower's name on bills of lading
                           and other negotiable and non-negotiable documents;
                           (C) to clear Inventory through customs in the Agent's
                           or such Borrower's name, and to sign and deliver to
                           customs officials powers of attorney in such
                           Borrower's name for such purpose; (D) to complete in
                           such Borrower's or the Agent's name, any order, sale,
                           or transaction, obtain the necessary documents in
                           connection therewith, and collect the proceeds
                           thereof; and (E) to do such other acts and things as
                           are necessary in order to enable the Agent to obtain
                           possession or control of such Inventory and to obtain
                           payment of the Obligations. Neither the Agent nor its
                           designee, as such Borrower's attorney, will be liable
                           for any acts or omissions, nor for any error of
                           judgment or mistakes of fact or law other than for
                           gross negligence or willful misconduct. This power,
                           being coupled with an interest, is irrevocable until
                           all Obligations have been paid and satisfied.

                                    (7) Control of Inventory. In connection with
                           all Inventory financed by Letters of Credit, during
                           the existence of a Default or an Event of Default the
                           Borrowers will, at the Agent's request, instruct all
                           suppliers, carriers, forwarders, customs brokers,
                           warehouses, or others receiving or holding cash,
                           checks, Inventory, documents, or instruments in which
                           the Agent holds a security interest to deliver them
                           to the Agent and/or subject to the Agent's order, and
                           if they shall come into any Borrower's possession, to
                           deliver them, upon request, to the Agent in their
                           original form. During the existence of a Default or
                           an Event of Default the Borrowers shall also, at the
                           Agent's request, designate the Agent as the consignee
                           on all bills of lading and other negotiable and
                           non-negotiable documents.

CREDIT AGREEMENT - Page 9
<PAGE>
               (7) Supporting Letter of Credit; Cash Collateral. If,
          notwithstanding the provisions of Section 1.3(b) and Section 10.1, any
          Letter of Credit or Credit Support is outstanding upon the termination
          of this Agreement, then upon such termination the Borrowers shall
          deposit with the Agent with respect to each such Letter of Credit or
          Credit Support then outstanding, as the Agent in its discretion shall
          specify, either (i) a standby letter of credit (a "Supporting Letter
          of Credit") in form and substance satisfactory to the Agent, issued by
          an issuer satisfactory to the Agent in an amount equal to the greatest
          amount for which such Letter of Credit or Credit Support may be drawn
          plus any fees and expenses associated with such Letter of Credit or
          Credit Support, under which Supporting Letter of Credit the Agent is
          entitled to draw amounts necessary to reimburse the Agent and the
          Lenders for payments to be made by the Agent and the Lenders under
          such Letter of Credit or Credit Support and any fees and expenses
          associated with such Letter of Credit or Credit Support or (ii) cash
          in an amount necessary to reimburse the Agent and the Lenders for
          payments to be made by the Agent and the Lenders under such Letter of
          Credit or Credit Support and any fees and expenses associated with
          such Letter of Credit or Credit Support. Such Supporting Letter of
          Credit or deposit of cash shall be held by the Agent, for the benefit
          of the Agent and the Lenders, as security for, and to provide for the
          payment of, the aggregate undrawn amount of such Letters of Credit or
          Credit Support remaining outstanding.

         Section 1.4 Bank Products. Any Borrower may request and the Agent may,
in its sole and absolute discretion, arrange for any Borrower to obtain Bank
Products from the Bank or the Bank's Affiliates although no Borrower is required
to do so. To the extent Bank Products are provided by an Affiliate of the Bank,
the Borrowers agree to indemnify and hold the Agent, the Bank, and the Lenders
harmless from any and all costs and obligations now or hereafter incurred by the
Agent, the Bank, or any of the Lenders which arise from any indemnity given by
the Agent to its Affiliates related to such Bank Products; provided, however,
nothing contained herein is intended to limit any Borrower's rights, with
respect to the Bank or its Affiliates, if any, which arise as a result of the
execution of documents by and between such Borrower and the Bank or its
Affiliates which relate to Bank Products. The agreement contained in this
Section shall survive termination of this Agreement. Each Borrower acknowledges
and agrees that the obtaining of Bank Products from the Bank or the Bank's
Affiliates (a) is in the sole and absolute discretion of the Bank or the Bank's
Affiliates, and (b) is subject to all rules and regulations of the Bank or the
Bank's Affiliates.

ARTICLE 2

                                INTEREST AND FEES

         Section 2.1 Interest.

                  (1) Interest Rates. All outstanding Obligations shall bear
         interest on the unpaid principal amount thereof (including, to the
         extent permitted by law, on accrued interest thereon not paid when due)
         from the date made or incurred until paid in full in cash at a rate
         determined by reference to the Base Rate or the LIBOR Rate, as
         applicable, plus the Applicable Margin as set forth below, but not to
         exceed the Maximum Rate. If at any time

CREDIT AGREEMENT - Page 10
<PAGE>
         Revolving Loans are outstanding with respect to which a Borrower has
         not delivered to the Agent a notice specifying the basis for
         determining the interest rate applicable thereto in accordance
         herewith, such Revolving Loans shall be Base Rate Revolving Loans and
         bear interest at a rate determined by reference to the Base Rate until
         notice to the contrary has been given to the Agent in accordance with
         this Agreement and such notice has become effective. Except as
         otherwise provided herein, the outstanding Obligations shall bear
         interest as follows:

                           (1) For all Base Rate Revolving Loans and other
                  Obligations (other than LIBOR Rate Revolving Loans) at a
                  fluctuating per annum rate equal to the lesser of (A) the Base
                  Rate, plus the Applicable Margin or (B) the Maximum Rate; and

                           (2) For all LIBOR Rate Revolving Loans at a per annum
                  rate equal to the lesser of (A) the LIBOR Rate, plus the
                  Applicable Margin or (B) the Maximum Rate.

         Each change in the Base Rate shall be reflected in the interest rate
         described in clause (i) preceding as of the effective date of such
         change. Subject to Section 2.3, all interest charges on the Obligations
         shall be computed on the basis of a year of 360 days and actual days
         elapsed (which results in more interest being paid than if computed on
         the basis of a 365 day year).

                  (2) Default Rate. During the existence of any Event of Default
         if the Agent or the Majority Lenders in their discretion so elect,
         then, while any such Event of Default exists, the Obligations shall
         bear interest at a rate per annum equal to the lesser of (i) the
         Default Rate applicable thereto or (ii) the Maximum Rate.

                  (3) Interest Periods. After giving effect to any Borrowing,
         conversion, or continuation of any LIBOR Rate Revolving Loan, there may
         not be more than ten (10) different Interest Periods in effect
         hereunder.

         Section 2.2 Continuation and Conversion Elections.

                  (1) A Borrower may upon irrevocable written notice to the
         Agent in accordance with Section 2.2(b):

                           (1) elect, as of any Business Day, in the case of
                  Base Rate Revolving Loans to convert any such Base Rate
                  Revolving Loans (or any part thereof in an amount not less
                  than $5,000,000, or that is in an integral multiple of
                  $1,000,000 in excess thereof) into LIBOR Rate Revolving Loans;

                           (2) elect, as of any Business Day subject to Section
                  4.4, in the case of LIBOR Rate Revolving Loans to convert any
                  such LIBOR Rate Revolving Loans into Base Rate Revolving
                  Loans; or

CREDIT AGREEMENT - Page 11
<PAGE>
                           (3) elect, as of the last day of the applicable
                  Interest Period, to continue any LIBOR Rate Revolving Loans
                  having Interest Periods expiring on such day (or any part
                  thereof in an amount not less than $5,000,000, or that is in
                  an integral multiple of $1,000,000, in excess thereof as LIBOR
                  Rate Revolving Loans);

         provided, that if at any time the aggregate amount of LIBOR Rate
         Revolving Loans in respect of any Borrowing is reduced, by payment,
         prepayment, or conversion of part thereof to be less than $5,000,000,
         such LIBOR Rate Revolving Loans shall, effective as of the expiration
         date of the applicable Interest Period, automatically convert into Base
         Rate Revolving Loans; provided, further, that if the notice shall fail
         to specify the duration of the Interest Period of any LIBOR Rate
         Revolving Loan, such Interest Period shall be one month.

                  (2) The Borrowers shall deliver a notice of
         continuation/conversion in the form of Exhibit E (a "Notice of
         Continuation/Conversion") to the Agent not later than 2:00 p.m.
         (Dallas, Texas time) at least three (3) Business Days in advance of the
         Continuation/Conversion Date, if the Revolving Loans are to be
         converted into or continued as LIBOR Rate Revolving Loans and
         specifying:

                           (1) the proposed Continuation/Conversion Date;

                           (2) the Revolving Loans and the aggregate amount of
                  such Revolving Loans to be converted or continued;

                           (3) the type of Revolving Loans resulting from the
                  proposed conversion or continuation; and

                           (4) the duration of the requested Interest Period,
                  provided, however, the Borrowers may not select an Interest
                  Period that ends after the Stated Termination Date.

         With respect to any request to convert or continue any Revolving Loans,
         the Borrowers may give the Agent telephonic notice of such request not
         later than the required time specified in this clause (b). The Agent at
         all times shall be entitled to rely on such telephonic notice in
         converting or continuing any such Revolving Loans, regardless of
         whether any written confirmation is received by the Agent, and the
         Agent may at any time refuse to accept any such telephonic notice and
         require that the Borrowers provide a written Notice of
         Continuation/Conversion.

                  (3) If upon the expiration of any Interest Period applicable
         to LIBOR Rate Revolving Loans, the Borrowers have failed to timely
         select a new Interest Period to be applicable to such LIBOR Rate
         Revolving Loans or if any Default or Event of Default then exists, the
         Borrowers shall be deemed to have elected to convert such LIBOR Rate
         Revolving Loans into Base Rate Revolving Loans effective as of the
         expiration date of such Interest Period.

CREDIT AGREEMENT - Page 12
<PAGE>
                  (4) The Agent will promptly notify each Lender of its receipt
         of a Notice of Continuation/Conversion. All conversions and
         continuations shall be made ratably according to the respective
         outstanding principal amounts of the Revolving Loans with respect to
         which such notice was given held by each Lender.

         Section 2.3 Maximum Interest Rate. If the Interest Rate, absent the
limitation set forth in this Section 2.3, would have exceeded the Maximum Rate,
then the Interest Rate shall be the Maximum Rate, and, if in the future, the
Interest Rate would otherwise be less than the Maximum Rate, then the Interest
Rate shall remain at the Maximum Rate until such time as the amount of interest
paid hereunder equals the amount of interest which would have been paid if the
same had not been limited by the Maximum Rate. In the event that, upon payment
in full of the Obligations, the total amount of interest paid or accrued under
the terms of this Agreement is less than the total amount of interest which
would, but for this Section 2.3, have been paid or accrued if the Interest Rate
otherwise set forth in this Agreement had at all times been in effect, then the
Borrowers shall, to the extent permitted by applicable law, pay the Agent, for
the account of the Lenders, an amount equal to the excess of (a) the lesser of
(i) the amount of interest which would have been paid or accrued if the Maximum
Rate had, at all times, been in effect or (ii) the amount of interest which
would have been paid or accrued had the interest rate otherwise set forth in
this Agreement, at all times, been in effect over (b) the amount of interest
actually paid or accrued under this Agreement. Each of the Agent, each Lender,
and each Borrower acknowledges, agrees, and declares that it is its intention to
expressly comply with all Requirements of Law in respect of limitations on the
amount or rate of interest that can legally be contracted for, charged, or
received under or in connection with the Loan Documents. Notwithstanding
anything to the contrary contained in any Loan Document (even if any such
provision expressly declares that it controls all other provisions of the Loan
Documents), in no contingency or event whatsoever shall the amount of interest
(including the aggregate of all charges, fees, benefits, or other compensation
which constitutes interest under any Requirement of Law) under the Loan
Documents paid by any Borrower, received by the Agent, the Letter of Credit
Issuer, or any Lender, agreed to be paid by any Borrower, or requested or
demanded to be paid by the Agent, the Letter of Credit Issuer, or any Lender,
exceed the Maximum Rate, and all provisions of the Loan Documents in respect of
the contracting for, charging, or receiving compensation for the use,
forbearance, or detention of money shall be limited as provided by this Section
2.3. In the event any such interest is paid to the Agent, the Letter of Credit
Issuer, or any Lender by the Borrowers, or any of them, in an amount or at a
rate which would exceed the Maximum Rate, the Agent, the Letter of Credit
Issuer, or such Lender, as the case may be, shall automatically apply such
excess to any unpaid amount of the Obligations other than interest, in the
inverse order of maturity, or if the amount of such excess exceeds said unpaid
amount, such excess shall be paid to the paying Borrowers or Borrower, as
applicable. All interest paid, or agreed to be paid, by any Borrower, or taken,
reserved, or received by the Agent, the Letter of Credit Issuer, or any Lender,
shall be amortized, prorated, spread, and allocated in respect of the
Obligations throughout the full term of this Agreement. Notwithstanding any
provision contained in any of the Loan Documents, or in any other related
documents executed pursuant hereto, neither the Agent, the Letter of Credit
Issuer, nor any Lender shall ever be entitled to charge, receive, take, reserve,
collect, or apply as interest any amount which, together with all other interest
under the Loan Documents would result in a rate of interest under the Loan
Documents in excess of the Maximum Rate and, in

CREDIT AGREEMENT - Page 13
<PAGE>
the event the Agent, the Letter of Credit Issuer, or any Lender ever charges,
receives, takes, reserves, collects, or applies any amount in respect of the
Borrowers, or any of them, that otherwise would, together with all other
interest under the Loan Documents, be in excess of the Maximum Rate, such amount
shall automatically be deemed to be applied in reduction of the unpaid principal
balance of the Obligations and, if such principal balance is paid in full, any
remaining excess shall forthwith be paid to the applicable Borrowers or
Borrower. The Borrowers, the Agent, the Letter of Credit Issuer, and the Lenders
shall, to the maximum extent permitted under any Requirement of Law, (A)
characterize any non-principal payment as a standby fee, commitment fee,
prepayment charge, delinquency charge, expense, or reimbursement for a
third-party expense rather than as interest and (B) exclude prepayments,
acceleration, and the effects thereof. Nothing in any Loan Document shall be
construed or so operate as to require or obligate the Borrowers, or any of them,
to pay any interest, fees, costs, or charges greater than is permitted by any
Requirement of Law. Subject to the foregoing, the Borrowers hereby agree that
the actual effective rate of interest from time to time existing under the Loan
Documents, including all amounts agreed to by the Borrowers or charged or
received by the Agent, the Letter of Credit Issuer, or the Lenders pursuant to
and in accordance with the Loan Documents, which may be deemed to be interest
under any Requirement of Law, shall be deemed to be a rate which is agreed to
and stipulated by the Borrowers and the Lenders in accordance with Requirements
of Law.

         Section 2.4 Unused Line Fee. Subject to Section 2.3, until the
Revolving Loans have been paid in full and this Agreement terminated, the
Borrowers agree to pay to the Agent, for the account of the Lenders, in
accordance with their respective Pro Rata Shares, on the first day of each
calendar month and on the Termination Date, an unused line fee (the "Unused Line
Fee") equal to three-eighths percent (0.375%) multiplied by the amount by which
the Maximum Revolver Amount exceeded the sum of the average daily outstanding
amount of the Revolving Loans and the average daily undrawn face amount of all
outstanding Letters of Credit and Credit Support during the immediately
preceding month or shorter period if calculated for the first month after the
Closing Date or on the Termination Date. Subject to Section 2.3, the Unused Line
Fee shall be computed on the basis of a 360 day year for the actual number of
days elapsed. For purposes of calculating the Unused Line Fee pursuant to this
Section 2.4, any payment received by the Agent (if received prior to 2:00 p.m.
(Dallas, Texas time)) shall be deemed to be credited to the Borrowers' Loan
Account on the Business Day following the date such payment is received by the
Agent.

         Section 2.5 Letter of Credit Fee. Subject to Section 2.3, the Borrowers
agree to pay to the Agent, for the account of the Lenders, in accordance with
their respective Pro Rata Shares, for each Letter of Credit or Credit Support, a
fee (the "Letter of Credit Fee") equal to the Letter of Credit Fee Percentage,
or during the existence of any Event of Default the Default Rate with respect to
Letters of Credit, multiplied by the undrawn face amount of each Letter of
Credit or Credit Support, plus all out-of-pocket costs, fees, and expenses
incurred by the Letter of Credit Issuer in connection with the application for,
processing of, issuance of, or amendment to any Letter of Credit or Credit
Support, which costs, fees, and expenses shall include a "fronting fee" in an
amount equal to one-quarter percent (0.25%) of the face amount of such Letter of
Credit or Credit Support, payable to the Letter of Credit Issuer on the date of
issuance of each Letter of Credit or Credit Support. The Letter of Credit Fee
shall be payable monthly in arrears on the first day of each month following any
month in which a Letter of Credit or Credit Support was issued and/or in which a
Letter of Credit or Credit

CREDIT AGREEMENT - Page 14
<PAGE>
Support remained outstanding and on the Termination Date. Subject to Section
2.3, the Letter of Credit Fee shall be computed on the basis of a 360 day year
for the actual number of days elapsed.

         Section 2.6 Collection Days Fee. Subject to Section 2.3, in order to
reimburse the Agent or the Bank, as applicable, for the cost of delays in the
collection and clearance of remittances applied to the Revolving Loans pursuant
to Section 2.11 of the Parent Security Agreement and Section 2.10 of the
Subsidiary Security Agreement, the Borrowers shall pay to the Agent or the Bank,
as applicable, for its own account, interest at the rate applicable to Base Rate
Revolving Loans for one (1) Business Day on the amount of all funds applied to
the Revolving Loans. Section 1.1

         Section 2.7 Other Fees. Subject to Section 2.3, the Borrowers agree to
pay the Agent all other fees and expenses as set forth in the Agent's Letter.

ARTICLE 3

                            PAYMENTS AND PREPAYMENTS

         Section 3.1 Revolving Loans. The Borrowers shall repay the outstanding
principal balance of the Revolving Loans, together with all other Obligations,
including all accrued and unpaid interest thereon, on the Termination Date. The
Borrowers may prepay the Revolving Loans at any time and reborrow subject to the
terms of this Agreement; provided that with respect to any LIBOR Rate Revolving
Loans prepaid prior to the expiration date of the Interest Period applicable
thereto, the Borrowers shall pay to the Agent, for the account of the Lenders,
the amounts described in Section 4.4. In addition, and without limiting the
generality of the foregoing, upon demand the Borrowers shall pay to the Agent,
for the account of the Lenders, the amount, if any and without duplication, by
which the Aggregate Revolver Outstandings exceeds the lesser of the Borrowing
Base or the Maximum Revolver Amount. Accrued interest on the Revolving Loans
shall be due and payable in arrears (a) in the case of Base Rate Revolving
Loans, on the first day of each calendar month and on the Termination Date and
(b) in the case of LIBOR Rate Revolving Loans and with respect to each such
Revolving Loan (i) on the first day of each calendar month, (ii) on the last day
of the Interest Period with respect thereto, and (iii) on the Termination Date.

         Section 3.2 Termination of Total Facility. The Borrowers may terminate
this Agreement upon at least sixty (60) Business Days prior written notice
thereof to the Agent and the Lenders, upon (a) the payment in full of all
outstanding Revolving Loans, together with accrued and unpaid interest thereon,
and the cancellation and return of all outstanding Letters of Credit and Credit
Support (or alternatively, with respect to each such Letter of Credit or Credit
Support, the furnishing to the Agent, in the Agent's discretion, of a Supporting
Letter of Credit or cash deposit, in each case in amounts and in the manner
required by Section 1.3(g)), (b) the payment in full of the early termination
fee set forth in the following sentence, (c) the payment in full of all
reimbursable expenses and other Obligations together with accrued and unpaid
interest thereon, and (d) the payment in full of any amount due under Section
3.4. Subject to Section 2.3, if this Agreement is terminated at any time prior
to the second Anniversary Date, whether pursuant to this Section or pursuant to
Section 9.2, the Borrowers shall pay to the Agent, for the account of the
Lenders, an early termination fee determined in accordance with the following
table:

CREDIT AGREEMENT - Page 15
<PAGE>
<TABLE>
<S>                                                                             <C>
                Period during which early termination occurs                    Early Termination Fee

                On or prior to the first Anniversary Date                       1.00% of the Maximum Revolver Amount

                After the first Anniversary Date but on or prior to the         0.50% of the Maximum Revolver Amount
                second Anniversary Date
</TABLE>

Notwithstanding the foregoing, no such early termination fee shall be payable in
the event this Agreement is terminated in connection with refinancing of the
Obligations in a transaction in which the Bank or any of its Affiliates provides
or arranges replacement financing or acts as an underwriter or arranger of any
public offering of debt or equity securities of the Borrowers or any of them.
The Maximum Revolver Amount shall not be reduced except in connection with
termination of the Total Facility and payment in full as provided by this
Section 3.2.

         Section 3.3 Prepayment of the Revolving Loans.

                  (1) The Borrowers may prepay the principal of the Revolving
         Loans, in whole or in part, at any time and from time to time.

                  (2) Immediately upon receipt by any Obligated Party of
         proceeds of any disposition (excluding proceeds of asset dispositions
         permitted by Section 7.9(a)) of any Collateral or of any Real Estate
         (whether or not such Real Estate constitutes Collateral at such time)
         or collection of Accounts outside the ordinary course of business, the
         Borrowers shall cause such Obligated Party to prepay the Revolving
         Loans in an amount equal to all such proceeds, net of (i) commissions
         and other reasonable and customary transaction costs, fees, and
         expenses properly attributable to such transaction and payable by such
         Obligated Party in connection therewith (in each case, paid to
         non-Affiliates), (ii) transfer taxes, (iii) amounts payable to holders
         of senior Liens (to the extent such Liens constitute Permitted Liens
         hereunder), if any, and (iv) an appropriate reserve for income taxes in
         accordance with GAAP in connection therewith ("Net Proceeds"). Any such
         prepayment shall be applied in accordance with Section 3.3(d).

                  (3) All cash payments or other cash proceeds (as defined in
         the UCC) received by any Obligated Party constituting proceeds of a
         Distribution, loan, or other advance (other than a loan or advance by
         an Obligated Party to an Obligated Party) to such Obligated Party,
         other than such proceeds which are proceeds of the Revolving Loans
         loaned from a Borrower to an Obligated Party, shall be paid to the
         Agent, promptly upon such receipt, for application to the Revolving
         Loans in accordance with Section 3.3(d).

                  (4) With respect to the amounts received pursuant to Section
         3.3(b) and Section 3.3(c):

CREDIT AGREEMENT - Page 16
<PAGE>
                           (1) the proceeds of sale of Accounts and Inventory
                  outside the ordinary course of business of the Obligated
                  Parties or collection of Accounts outside the ordinary course
                  of business of the Obligated Parties;

                           (2) in the case of a sale of a division or the sale
                  of Capital Stock of a Subsidiary, an amount equal to the
                  greater of (A) the total proceeds received from such sale or
                  (B) the book value of Eligible Accounts and Eligible Inventory
                  sold as part of any such sale of a division or which are owned
                  by any such Subsidiary; and

                           (3) the proceeds of all other asset dispositions and
                  amounts received pursuant to Section 3.3(c);

         the Net Proceeds of such amounts shall be applied, first, to accrued
         interest with respect to the Revolving Loans, second, to pay the
         principal of the Non-Ratable Loans, and the Agent Advances, third to
         pay the principal of the Revolving Loans other than the Non-Ratable
         Loans and the Agent Advances, fourth, to cash collateralize outstanding
         Letters of Credit and Credit Support, and fifth, to pay any other
         remaining Obligations.

                  (5) No provision contained in this Section 3.3 shall
         constitute a consent to an asset disposition that is otherwise not
         permitted by the terms of this Agreement.

                  (6) All cash proceeds arising from the sale of Inventory or
         collection of Accounts in the ordinary course of business of any
         Obligated Party shall be applied to repayment of the Obligations as
         provided by the Parent Security Agreement and the Subsidiary Security
         Agreement and in accordance with Section 3.7.

         Section 3.4 LIBOR Rate Revolving Loan Prepayments. In connection with
any prepayment, if any LIBOR Rate Revolving Loans are prepaid prior to the
expiration date of the Interest Period applicable thereto, the Borrowers shall
pay to the Agent, for the benefit of the Lenders, the amounts described in
Section 4.4.

         Section 3.5 Payments by the Borrowers.

                  (1) All payments to be made by the Borrowers shall be made
         without setoff, recoupment, or counterclaim. Without in any way
         limiting Section 2.11 of the Parent Security Agreement or Section 2.10
         of the Subsidiary Security Agreement, except as otherwise expressly
         provided herein, all payments by the Borrowers shall be made to the
         Agent, for the account of the Lenders, to the account designated by the
         Agent and shall be made in Dollars and in immediately available funds,
         no later than 2:00 p.m. (Dallas, Texas time) on the date specified
         herein. Any payment received by the Agent after such time shall be
         deemed to have been received on the following Business Day and any
         applicable interest or fee shall continue to accrue.

                  (2) Subject to the provisions set forth in the definition of
         Interest Period, whenever any payment is due on a day other than a
         Business Day, such payment shall be due

CREDIT AGREEMENT - Page 17
<PAGE>
         on the following Business Day, and such extension of time shall in such
         case be included in the computation of interest or fees, as the case
         may be.

         Section 3.6 Payments as Revolving Loans. At the election of the Agent,
all payments of principal, interest, reimbursement obligations in connection
with Letters of Credit and Credit Support, fees, premiums, reimbursable expenses
(including, without limitation, all reimbursement for expenses pursuant to
Section 13.7), and other sums payable under the Loan Documents, may be paid from
the proceeds of Revolving Loans made hereunder whether made following a request
by the Borrowers pursuant to Section 1.2 or a deemed request as provided in this
Section 3.6. The Borrowers hereby irrevocably authorize the Agent to charge the
Loan Account for the purpose of paying all amounts from time to time due under
the Loan Documents and agree that all such amounts charged shall constitute
Revolving Loans (including Non-Ratable Loans and Agent Advances) and that all
such Revolving Loans shall be deemed to have been requested pursuant to Section
1.2.

         Section 3.7 Apportionment, Application, and Reversal of Payments.
Principal and interest payments shall be apportioned ratably among the Lenders
(according to the unpaid principal balance of the Revolving Loans to which such
payments relate held by each Lender) and payments of the fees shall, as
applicable, be apportioned ratably among the Lenders, except for fees payable
solely to the Agent and the Letter of Credit Issuer and except as provided in
Section 11.1(e). All payments shall be remitted to the Agent and all such
payments not relating to principal or interest of specific Revolving Loans, or
not constituting payment of specific fees, and all proceeds of any Borrower's
Accounts or any other Collateral received by the Agent, shall be applied,
ratably, subject to the other provisions of this Agreement, first, to pay any
fees, indemnities, or expense reimbursements, then due to the Agent from the
Borrowers, second, to pay any fees or expense reimbursements then due to any of
the Lenders from the Borrowers, including any amounts relating to Bank Products,
third, to pay interest due in respect of the Revolving Loans, including
Non-Ratable Loans and Agent Advances, fourth, to pay or prepay principal of the
Non-Ratable Loans and the Agent Advances, fifth, to pay or prepay principal of
the Revolving Loans (other than the Non-Ratable Loans and the Agent Advances)
and unpaid reimbursement obligations in respect of Letters of Credit and Credit
Support, sixth, to pay an amount to the Agent equal to one hundred percent
(100%) of the aggregate undrawn face amount of all outstanding Letters of Credit
and Credit Support and the aggregate amount of any unpaid reimbursement
obligations in respect of Letters of Credit and Credit Support, to be held as
cash collateral for such Obligations, and seventh, to the payment of any other
Obligation due to the Agent or any Lender by the Borrowers. Notwithstanding
anything to the contrary contained in this Agreement, unless so directed by a
Borrower, or unless an Event of Default is in existence, neither the Agent nor
any Lender shall apply any payment which it receives to any LIBOR Rate Revolving
Loan, except (a) on the expiration date of the Interest Period applicable to any
such LIBOR Rate Revolving Loan, or (b) in the event, and only to the extent,
that there are no outstanding Base Rate Revolving Loans and, in any event, the
Borrowers shall pay the LIBOR breakage losses in accordance with Section 4.4.
The Agent and the Lenders shall have the continuing and exclusive right to apply
and reverse and reapply any and all such proceeds and payments to any portion of
the Obligations.

         Section 3.8 Indemnity for Returned Payments. If after receipt of any
payment which is applied to the payment of all or any part of the Obligations,
the Agent, any Lender, the Bank, or any

CREDIT AGREEMENT - Page 18
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Affiliate of the Bank is for any reason compelled to surrender such payment or
proceeds to any Person because such payment or application of proceeds is
invalidated, declared fraudulent, set aside, determined to be void or voidable
as a preference, impermissible setoff, or a diversion of trust funds, or for any
other reason, then the Obligations or part thereof intended to be satisfied
shall be revived and continued and this Agreement shall continue in full force
as if such payment or proceeds had not been received by the Agent or such Lender
and the Borrowers shall be liable to pay to the Agent and the Lenders, and each
Borrower hereby indemnifies the Agent and the Lenders and holds the Agent and
the Lenders harmless for the amount of such payment or proceeds surrendered. The
provisions of this Section 3.8 shall be and remain effective notwithstanding any
contrary action which may have been taken by the Agent or any Lender in reliance
upon such payment or application of proceeds, and any such contrary action so
taken shall be without prejudice to the Agent's and the Lenders' rights under
this Agreement and shall be deemed to have been conditioned upon such payment or
application of proceeds having become final and irrevocable. The provisions of
this Section 3.8 shall survive the termination of this Agreement.

         Section 3.9 The Agent's and the Lenders' Books and Records; Monthly
Statements. The Agent shall record the principal amount of the Revolving Loans
owing to each Lender, the undrawn face amount of all outstanding Letters of
Credit and Credit Support and the aggregate amount of unpaid reimbursement
obligations outstanding with respect to the Letters of Credit and Credit Support
from time to time on its books. In addition, each Lender may note the date and
amount of each payment or prepayment of principal of such Lender's Revolving
Loans in its books and records. Failure by the Agent or any Lender to make any
such notation shall not affect the obligations of the Borrowers with respect to
the Revolving Loans, the Letters of Credit, or any Credit Support. The Borrowers
agree that the Agent's and each Lender's books and records showing the
Obligations and the transactions pursuant to this Agreement and the other Loan
Documents shall be admissible in any action or proceeding arising therefrom, and
shall constitute presumptive proof thereof, irrespective of whether any
Obligation is also evidenced by a promissory note or other instrument. The Agent
will provide to the Borrowers a monthly statement of Revolving Loans, payments,
and other transactions pursuant to this Agreement. Such statement shall be
deemed correct, accurate, and binding on the Borrowers and an account stated
(except for reversals and reapplications of payments made as provided in Section
3.7 and corrections of errors discovered by the Agent), unless a Borrower
notifies the Agent in writing to the contrary within thirty (30) days after such
statement is rendered. In the event a timely written notice of objections is
given by a Borrower, only the items to which exception is expressly made will be
considered to be disputed by the Borrowers.

ARTICLE 4

                     TAXES, YIELD PROTECTION, AND ILLEGALITY

         Section 4.1 Taxes.

                  (1) Any and all payments by the Borrowers, or any of them, to
         the Agent or any Lender under this Agreement and any other Loan
         Document shall be made free and clear of, and without deduction or
         withholding for, any Taxes. In addition, subject to Section 12.10(c),
         the Borrowers shall pay all Other Taxes.

CREDIT AGREEMENT - Page 19
<PAGE>
                  (2) The Borrowers agree to indemnify and hold harmless the
         Agent and each Lender for the full amount of Taxes or Other Taxes
         (including any Taxes or Other Taxes imposed by any jurisdiction on
         amounts payable under this Section 4.1) paid by the Agent or any Lender
         and any liability (including penalties, interest, additions to tax, and
         expenses) arising therefrom or with respect thereto, whether or not
         such Taxes or Other Taxes were correctly or legally asserted. Payment
         under this indemnification shall be made within thirty (30) days after
         the date the Agent or any Lender makes written demand therefor.

                  (3) If the Borrowers shall be required by law to deduct or
         withhold any Taxes or Other Taxes from or in respect of any sum payable
         hereunder to the Agent or any Lender, then:

                           (1) the sum payable shall be increased as necessary
                  so that after making all required deductions and withholdings
                  (including, without limitation, deductions and withholdings
                  applicable to additional sums payable under this Section 4.1)
                  the Agent or such Lender, as the case may be, receives an
                  amount equal to the sum it would have received had no such
                  deductions or withholdings been made;

                           (2) the Borrowers shall make such deductions and
                  withholdings;

                           (3) the Borrowers shall pay the full amount deducted
                  or withheld to the relevant taxing authority or other
                  authority in accordance with any applicable Requirement of
                  Law; and

                           (4) the Borrowers shall also pay to the Agent, for
                  the account of each Lender, or each Lender at the time
                  interest is paid, all additional amounts which the respective
                  Lender specifies as necessary to preserve the after-tax yield
                  such Lender would have received if such Taxes or Other Taxes
                  had not been imposed.

                  (4) Within thirty (30) days after the date of any payment by
         the Borrowers of Taxes or Other Taxes, the Borrowers shall furnish the
         Agent the original or a certified copy of a receipt evidencing payment
         thereof, or other evidence of payment satisfactory to the Agent.

                  (5) If the Borrowers are required to pay additional amounts to
         the Agent or any Lender pursuant to Section 4.1(c), then the applicable
         Lender shall use reasonable efforts (consistent with legal and
         regulatory restrictions) to change the jurisdiction of its lending
         office so as to eliminate any such additional payment by the Borrowers
         which may thereafter accrue, if such change in the judgment of such
         Lender is not otherwise disadvantageous to such Lender.

CREDIT AGREEMENT - Page 20
<PAGE>
         Section 4.2 Illegality.

                  (1) If any Lender determines that the introduction of any
         Requirement of Law, or any change in any Requirement of Law, or in the
         interpretation or administration of any Requirement of Law, has made it
         unlawful, or that any central bank or other Governmental Authority has
         asserted that it is unlawful, for such Lender or its applicable lending
         office to make LIBOR Rate Revolving Loans, then, on notice thereof by
         such Lender to the Borrowers through the Agent, any obligation of such
         Lender to make LIBOR Rate Revolving Loans shall be suspended until such
         Lender notifies the Agent and the Borrowers that the circumstances
         giving rise to such determination no longer exist.

                  (2) If a Lender determines that it is unlawful to maintain any
         LIBOR Rate Revolving Loan, the Borrowers shall, upon receipt of notice
         of such fact and demand from such Lender (with a copy to the Agent),
         prepay in full such LIBOR Rate Revolving Loans of such Lender then
         outstanding, together with accrued and unpaid interest thereon and
         amounts required under Section 4.4, either on the last day of the
         Interest Period thereof, if such Lender may lawfully continue to
         maintain such LIBOR Rate Revolving Loans to such day, or immediately,
         if such Lender may not lawfully continue to maintain such LIBOR Rate
         Revolving Loans. If the Borrowers are required to so prepay any LIBOR
         Rate Revolving Loans, then concurrently with such prepayment, the
         Borrowers shall borrow from the affected Lender, in the amount of such
         repayment, a Base Rate Revolving Loan.

         Section 4.3 Increased Costs and Reduction of Return.

                  (1) If any Lender determines that due to either (i) the
         introduction of or any change in the interpretation of any law or
         regulation or (ii) the compliance by such Lender with any guideline or
         request from any central bank or other Governmental Authority (whether
         or not having the force of law), there shall be any increase in the
         cost to such Lender of agreeing to make or making, funding, or
         maintaining any LIBOR Rate Revolving Loans, then the Borrowers shall be
         liable for, and shall from time to time, upon demand (with a copy of
         such demand to be sent to the Agent), pay to the Agent for the account
         of such Lender, additional amounts as are sufficient to compensate such
         Lender for such increased costs.

                  (2) If any Lender shall have determined that (i) the
         introduction of any Capital Adequacy Regulation, (ii) any change in any
         Capital Adequacy Regulation, (iii) any change in the interpretation or
         administration of any Capital Adequacy Regulation by any central bank
         or other Governmental Authority charged with the interpretation or
         administration thereof, or (iv) compliance by such Lender or any
         corporation or other entity controlling such Lender with any Capital
         Adequacy Regulation, affects or would affect the amount of capital
         required or expected to be maintained by such Lender or any corporation
         or other entity controlling such Lender and (taking into consideration
         such Lender's or such corporation's or other entity's policies with
         respect to capital adequacy and such Lender's desired return on
         capital) determines that the amount of such capital is increased as a
         consequence of its Commitment, loans, credits, or obligations under
         this Agreement, then, upon demand of such

CREDIT AGREEMENT - Page 21
<PAGE>
         Lender to the Borrowers through the Agent, the Borrowers shall pay to
         such Lender, from time to time as specified by such Lender, additional
         amounts sufficient to compensate such Lender for such increase.

         Section 4.4 Funding Losses. The Borrowers shall reimburse each Lender
and hold each Lender harmless from any loss or expense which such Lender may
sustain or incur as a consequence of:

                  (1) the failure of the Borrowers to make on a timely basis any
         payment of principal of any LIBOR Rate Revolving Loan;

                  (2) the failure of the Borrowers to (i) borrow any requested
         LIBOR Rate Revolving Loan, (ii) continue any LIBOR Rate Revolving Loan,
         or (iii) convert a Base Rate Revolving Loan to a LIBOR Rate Revolving
         Loan after any Borrower has given (or is deemed to have given) a Notice
         of Borrowing or a Notice of Continuation/Conversion with respect
         thereto (except as permitted by Section 4.5); or

                  (3) the prepayment or other payment (including after
         acceleration thereof) of any LIBOR Rate Revolving Loans on a day that
         is not the last day of the relevant Interest Period;

including any such loss of anticipated profit and any loss or expense arising
from the liquidation or reemployment of funds obtained by such Lender to
maintain its LIBOR Rate Revolving Loans or from fees payable to terminate the
deposits from which such funds were obtained. The Borrowers shall also pay any
customary administrative fees charged by any Lender in connection with the
foregoing.

         Section 4.5 Inability to Determine Rates. If the Agent determines that
for any reason adequate and reasonable means do not exist for determining the
LIBOR Rate for any requested Interest Period with respect to a proposed LIBOR
Rate Revolving Loan, or that the LIBOR Rate for any requested Interest Period
with respect to a proposed LIBOR Rate Revolving Loan does not adequately and
fairly reflect the cost to the Lenders of funding such Revolving Loan, the Agent
will promptly so notify the Borrowers and each Lender. Thereafter, the
obligation of the Lenders to make or maintain LIBOR Rate Revolving Loans
hereunder shall be suspended until the Agent revokes such notice in writing.
Upon receipt of a notice pursuant to the first sentence of this Section, the
Borrowers may revoke any Notice of Borrowing or Notice of
Continuation/Conversion then submitted by any of them. If the Borrowers do not
revoke any such Notice of Borrowing or Notice of Continuation/Conversion, the
Lenders shall make, convert, or continue the Revolving Loans, as proposed by the
Borrowers, in the amount specified in the applicable notice submitted by a
Borrower, but such Revolving Loans shall be made, converted, or continued as
Base Rate Revolving Loans instead of LIBOR Rate Revolving Loans.

         Section 4.6 Certificates of the Agent. If any Lender claims
reimbursement or compensation under this Article 4, the Agent shall determine
the amount thereof and shall deliver to the Borrowers (with a copy to the
affected Lender) a certificate setting forth in reasonable detail

CREDIT AGREEMENT - Page 22
<PAGE>
the amount payable to the affected Lender, and such certificate shall be
conclusive and binding on the Borrowers in the absence of manifest error.

         Section 4.7 Survival. The agreements and obligations of the Borrowers
in this Article 4 shall survive the payment of all other Obligations.

ARTICLE 5

                BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES

         Section 5.1 Books and Records. The Obligated Parties shall, and shall
cause each of their Subsidiaries to, maintain, at all times, correct and
complete books, records, and accounts in which complete, correct, and timely
entries are made of their transactions in accordance with GAAP. The Obligated
Parties shall, and shall cause each of their Subsidiaries to, by means of
appropriate entries, reflect in such accounts and in all Financial Statements
proper liabilities and reserves for all taxes and proper provision for
depreciation and amortization of property and bad debts, all in accordance with
GAAP. The Obligated Parties shall maintain at all times books and records
pertaining to the Collateral in such detail, form, and scope as the Agent or any
Lender shall reasonably require, including, but not limited to, records of (a)
all payments received and all credits and extensions granted with respect to the
Accounts, (b) the return, rejection, repossession, stoppage in transit, loss,
damage, or destruction of any Inventory, and (c) all other dealings affecting
the Collateral. Without limiting any other provision of this Agreement requiring
the Obligated Parties to prepare Financial Statements in accordance with GAAP,
as used in this Section 5.1 with respect to any Subsidiary not organized under
the laws of the U.S. or any state of the U.S., "GAAP" shall include such
accounting rules (if any) as may be comparable to GAAP in the jurisdiction of
organization of such foreign Subsidiary.

         Section 5.2 Financial Information. The Obligated Parties shall promptly
furnish to the Agent, all such information regarding the Obligated Parties' and
each of their Subsidiaries' financial and business affairs as the Agent or any
Lender (through the Agent) may reasonably request. Without limiting the
foregoing, the Obligated Parties will furnish, or cause to be furnished, to the
Agent the following, in sufficient copies for distribution by the Agent to each
Lender, in such detail as the Agent or the Lenders (through the Agent) shall
request:

                  (1) The Obligated Parties will furnish, or cause to be
         furnished, as soon as available, but in any event not later than ninety
         (90) days after the close of each Fiscal Year, consolidated audited and
         consolidating unaudited balance sheets and statements of income, cash
         flow, and stockholders' equity for the Parent and its Subsidiaries for
         such Fiscal Year, and the accompanying notes thereto, setting forth in
         each case in comparative form figures for the previous Fiscal Year, all
         in reasonable detail, fairly presenting the financial position and the
         results of operations of the Parent and its Subsidiaries as at the date
         thereof and for the Fiscal Year then ended, and prepared in accordance
         with GAAP. Such Financial Statements shall be examined in accordance
         with generally accepted auditing standards by and, in the case of such
         Financial Statements prepared on a consolidated basis, accompanied by a
         report thereon, unqualified in any respect, of independent certified
         public accountants

CREDIT AGREEMENT - Page 23
<PAGE>
         of national standing selected by the Parent. The Obligated Parties
         shall, simultaneously with retaining such independent public
         accountants to conduct such annual audit, send a letter to such
         accountants, with a copy to the Agent and the Lenders, notifying such
         accountants that one of the primary purposes for retaining such
         accountants' services and having audited financial statements prepared
         by such accountants is for use by the Agent and the Lenders. Each
         Obligated Party hereby authorizes the Agent to communicate directly
         with its certified public accountants (provided that the Obligated
         Parties are given prior notice of, and an opportunity to participate
         in, any such communication) and, by this provision, authorizes those
         accountants to disclose to the Agent any and all financial statements
         and other supporting financial documents and schedules relating to the
         Obligated Parties and their Subsidiaries and to discuss directly with
         the Agent the finances and affairs of the Obligated Parties and their
         Subsidiaries.

                  (2) The Obligated Parties will furnish or cause to be
         furnished,

                           (1) as soon as available, but in any event not later
                  than thirty (30) days after the end of each calendar month,
                  consolidated and consolidating unaudited balance sheets of the
                  Borrowers as at the end of such month, and consolidated and
                  consolidating unaudited statements of income and cash flow for
                  the Borrowers for such month and for the period from the
                  beginning of the Fiscal Year to the end of such month and

                           (2) as soon as available, but in any event not later
                  than forty-five (45) days after the end of such Fiscal
                  Quarter, consolidated and consolidating unaudited balance
                  sheets of the Parent and its Subsidiaries as at the end of
                  such Fiscal Quarter, and consolidated and consolidating
                  unaudited statements of income and cash flow for the Parent
                  and its Subsidiaries for such Fiscal Quarter and for the
                  period from the beginning of the Fiscal Year to the end of
                  such Fiscal Quarter, provided that delivery of such financial
                  statements shall be satisfied if the Parent delivers its
                  report on Form 10Q to the Agent,

         all in reasonable detail, fairly presenting the financial position and
         results of operations of the Borrowers or of the Parent and its
         Subsidiaries, as applicable, as at the date thereof and for such
         periods, and, in each case, in comparable form, figures for the
         corresponding period in the prior Fiscal Year and in the Obligated
         Parties' budget, and prepared in accordance with GAAP (other than for
         presentation of footnotes and subject to normal year-end audit
         adjustments) applied consistently with the audited Financial Statements
         required to be delivered pursuant to Section 5.2(a). The Parent shall
         certify by a certificate signed by its chief financial officer or chief
         accounting officer that all such Financial Statements have been
         prepared in accordance with GAAP and present fairly, subject to normal
         year-end adjustments, the financial position of the Borrowers or of the
         Parent and its Subsidiaries, as applicable, as at the dates thereof and
         its results of operations for the periods then ended.

                  (3) The Obligated Parties will cause to be furnished, with
         each of the audited Financial Statements delivered pursuant to Section
         5.2(a), a certificate of the independent

CREDIT AGREEMENT - Page 24
<PAGE>
         certified public accountants that audited such Financial Statements
         that, in auditing such Financial Statements, they did not become aware
         of any fact or condition which then constituted a Default or Event of
         Default with respect to a financial covenant, except for those, if any,
         described in reasonable detail in such certificate.

                  (4) The Obligated Parties will furnish or cause to be
         furnished, with each of the annual audited Financial Statements
         delivered pursuant to Section 5.2(a), and with each of the unaudited
         Financial Statements delivered pursuant to Section 5.2(b), a
         certificate of the chief financial officer or chief accounting officer
         of the Parent in the form of Exhibit C (a "Compliance Certificate") (i)
         setting forth in reasonable detail the calculations required to
         establish the Obligated Parties' compliance with the covenants set
         forth in Section 7.22 through Section 7.25 during the period covered by
         such Financial Statements and as at the end thereof and (ii) except as
         explained in reasonable detail in such certificate, (A) stating that
         all of the representations and warranties of the Obligated Parties
         contained in this Agreement and the other Loan Documents are correct
         and complete in all material respects as at the date of such
         certificate as if made at such time, except for those that speak as of
         a particular date, (B) stating that the Obligated Parties are, at the
         date of such certificate, in compliance in all material respects with
         all of their respective covenants and agreements in this Agreement and
         the other Loan Documents, (C) stating that no Default or Event of
         Default then exists or existed during the period covered by such
         Financial Statements, and (D) describing and analyzing in reasonable
         detail all material trends, changes, and developments in each and all
         such Financial Statements. If such certificate discloses that a
         representation or warranty is not correct or complete, or that a
         covenant has not been complied with, or that a Default or Event of
         Default existed or exists, such certificate shall set forth what action
         the Obligated Parties have taken or propose to take with respect
         thereto.

                  (5) The Obligated Parties will furnish, or cause to be
         furnished, not more than sixty (60) days after the end of each Fiscal
         Year, annual forecasts prepared by the Parent (to include forecasted
         consolidated and consolidating balance sheets and statements of income
         and cash flow) for the Obligated Parties as at the end of and for each
         calendar month of such Fiscal Year.

                  (6) The Obligated Parties will furnish, or cause to be
         furnished, promptly after filing with the PBGC and the IRS or any other
         Governmental Authority, a copy of each annual report or other filing
         filed with respect to each Plan or Foreign Plan of any Obligated Party.

                  (7) The Obligated Parties will furnish, or cause to be
         furnished, promptly upon the filing thereof, copies of all reports, if
         any, to or other documents filed by the Parent or any of its
         Subsidiaries with the Securities and Exchange Commission under the
         Exchange Act or any other similar Governmental Authority pursuant to
         any Requirement of Law, and all reports, notices, or statements sent or
         received by the Parent or any of its Subsidiaries to or from the
         holders of any equity interests of the Parent or any of its
         Subsidiaries (other than routine non-material correspondence sent by
         shareholders of the Parent or any of its Subsidiaries to the Parent or
         such Subsidiary) or of any Debt of the Parent or any of its

CREDIT AGREEMENT - Page 25
<PAGE>
         Subsidiaries registered under the Securities Act of 1933 or to or from
         the trustee under any indenture under which the same is issued.

                  (8) The Obligated Parties will furnish, or cause to be
         furnished, as soon as available, but in any event not later than
         fifteen (15) days after the Parent's or any of its Subsidiaries'
         receipt thereof, a copy of all management reports and management
         letters prepared by any independent certified public accountants of the
         Parent or any other Obligated Party.

                  (9) The Obligated Parties will furnish, or cause to be
         furnished, promptly after their preparation, copies of any and all
         proxy statements, financial statements, and reports which the Parent
         makes available to its shareholders or which are made available to any
         holder of any Debt of any Obligated Party.

                  (10) If requested by the Agent, the Obligated Parties will
         furnish, or cause to be furnished, promptly after filing with the IRS
         or any other Governmental Authority, a copy of each tax return filed by
         the Parent or any Subsidiary of the Parent.

                  (11) The Obligated Parties will furnish, or cause to be
         furnished, as soon as available, but in any event on the second
         Business Day of each week for the last Business Day of the preceding
         week and at such other times, from time to time, as may be requested by
         the Agent, a Borrowing Base Certificate and supporting information in
         connection therewith.

                  (12) The Obligated Parties shall provide, or cause to be
         provided, to the Agent the following documents, in form reasonably
         satisfactory to the Agent: (i) within fifteen (15) days of the end of
         each calendar month (except for clause (i)(A)(2) following which shall
         be delivered within twenty-five days (25) of the end of each calendar
         month), or more frequently if requested by the Agent, (A) a schedule of
         each Borrower's accounts receivable created since the last such
         schedule which (1) shall be as of the last day of the immediately
         preceding month, (2) shall be reconciled to the Borrowing Base
         Certificate and such Borrower's general ledger as of such last day of
         the immediately preceding month, and (3) shall set forth a detailed
         aged final balance of all then existing accounts receivable specifying
         the names, addresses (if requested by the Agent), and balances due for
         each Account Debtor obligated on an account receivable so listed, (B)
         an aging of each Borrower's accounts payable, and (C) a schedule
         identifying each location, if any, where any Collateral is located with
         a sales representative, agent, contractor, or other Person under any
         bailee, consignee, or warehouse arrangement, in each case setting
         forth, as of the last day of the immediately preceding month, (1) if
         requested by the Agent, the name and address of each such sales
         representative, agent, contractor, or other Person and a description of
         the nature of any such arrangement and (2) the cost of such Inventory
         and the net book value of Fixed Assets at each such location, and
         including a representation that all actions have been taken to comply
         with Section 2.3 of the Parent Security Agreement and Section 2.3 and
         Section 2.10(a) of the Subsidiary Security Agreement, as applicable,
         with respect to such Collateral; (ii) as soon as available, but in any
         event on the second Business Day of the succeeding week and at such
         other times,

CREDIT AGREEMENT - Page 26
<PAGE>
         as may be requested by the Agent, (A) a current summary report of aged
         balances for each Account Debtor of any Borrower and (B) a schedule of
         Inventory which shall be reconciled to the Borrowing Base Certificate
         and such Borrower's general ledger itemizing and describing the kind,
         type, and quantity of all Inventory, the cost thereof, and the location
         thereof; (iii) upon the Agent's request, copies of invoices in
         connection with each Borrower's Accounts, customer statements, credit
         memos, remittance advices and reports, deposit slips, and shipping and
         delivery documents in connection with each Borrower's Accounts and for
         Equipment acquired by each Borrower, purchase orders, and invoices;
         (iv) upon the Agent's request, a statement of the balance of each of
         the Intercompany Accounts; (v) such other reports as to the Collateral
         as the Agent may reasonably request from time to time; and (vi) with
         the delivery of each of the foregoing, a certificate of the Obligated
         Parties executed by a Responsible Officer of the Parent or Daisytek on
         behalf of all of the Obligated Parties certifying as to the accuracy
         and completeness of the foregoing. If any of the Obligated Parties'
         records or reports of the Collateral are prepared by an accounting
         service or other agent, each Obligated Party hereby authorizes, and
         shall cause each other Obligated Party to authorize, such service or
         agent to deliver such records, reports, and related documents to the
         Agent, for distribution to the Lenders.

                  (13) The Obligated Parties will furnish, or cause to be
         furnished, such additional information as the Agent and/or any Lender
         may from time to time reasonably request regarding the financial and
         business affairs of the Parent or any Subsidiary of the Parent.

         Section 5.3 Notices to the Lender. The Obligated Parties shall notify
the Agent and the Lenders in writing of the following matters at the following
times:

                  (1) immediately after becoming aware of any Default or Event
         of Default;

                  (2) immediately after becoming aware of the assertion by the
         holder of any Capital Stock of the Parent or any Subsidiary of the
         Parent or the holder of any Debt of the Parent or any Subsidiary of the
         Parent in excess of $5,000,000 that a default exists with respect
         thereto or that any such Person is not in compliance with the terms
         thereof, or the written threat or commencement by such holder of any
         enforcement action because of such asserted default or non-compliance;

                  (3) immediately after becoming aware of any event or
         circumstance which could have, or has resulted in, a Material Adverse
         Effect;

                  (4) immediately after becoming aware of any pending or
         threatened (in writing) action, suit, proceeding, or counterclaim by
         any Person, or any pending or threatened (in writing) investigation by
         a Governmental Authority, which could have, or has resulted in, a
         Material Adverse Effect;

                  (5) immediately after becoming aware of any pending or
         threatened (in writing) strike, work stoppage, unfair labor practice
         claim, or other labor dispute affecting any Obligated Party which could
         have, or has resulted in, a Material Adverse Effect;

CREDIT AGREEMENT - Page 27
<PAGE>
                  (6) immediately after becoming aware of any violation of any
         law, statute, regulation, or ordinance of a Governmental Authority
         affecting any Obligated Party which could have, or has resulted in, a
         Material Adverse Effect;

                  (7) immediately after receipt of any notice of any violation
         by any Obligated Party of any Environmental Law which could have, or
         has resulted in, a Material Adverse Effect or that any Governmental
         Authority has asserted in writing that any Obligated Party is not in
         compliance with any Environmental Law or is investigating any Obligated
         Party's compliance therewith;

                  (8) immediately after receipt of any written notice that any
         Obligated Party is or may be liable to any Person as a result of the
         Release or threatened Release of any Contaminant or that any Obligated
         Party is subject to investigation by any Governmental Authority
         evaluating whether any remedial action is needed to respond to the
         Release or threatened Release of any Contaminant which, in either case,
         is reasonably likely to give rise to liability in excess of $5,000,000;

                  (9) immediately after receipt of any written notice of the
         imposition of any Environmental Lien against any property of any
         Obligated Party;

                  (10) any change in any Obligated Party's name as it appears in
         the jurisdiction of its organization, type of entity, organizational
         identification number, locations of Collateral, or trade names under
         which such Obligated Party will sell Inventory or create Accounts, or
         to which instruments in payment of Accounts may be made payable, in
         each case at least thirty (30) days prior thereto;

                  (11) within ten (10) days after any Obligated Party or any
         ERISA Affiliate knows or has reason to know, that an ERISA Event or a
         prohibited transaction (as defined in Sections 406 of ERISA and 4975 of
         the Code) has occurred, and, when known, any action taken or threatened
         by the IRS, the DOL, or the PBGC with respect thereto;

                  (12) upon request, or, in the event that such filing reflects
         a significant change with respect to the matters covered thereby,
         within three (3) Business Days after the filing thereof with the PBGC,
         the DOL, or the IRS, as applicable, copies of the following: (i) each
         annual report (form 5500 series), including Schedule B thereto, filed
         with the PBGC, the DOL, or the IRS with respect to each Plan, (ii) a
         copy of each funding waiver request filed with the PBGC, the DOL, or
         the IRS with respect to any Plan and all communications received by any
         Obligated Party or any ERISA Affiliate from the PBGC, the DOL, or the
         IRS with respect to such request, and (iii) a copy of each other filing
         or notice filed with the PBGC, the DOL, or the IRS, with respect to
         each Plan by any Obligated Party or any ERISA Affiliate;

                  (13) upon request, copies of each actuarial report for any
         Plan or Multi-employer Plan and annual report for any Multi-employer
         Plan, and within three (3) Business Days after receipt thereof by any
         Obligated Party or any ERISA Affiliate, copies of the following:

CREDIT AGREEMENT - Page 28
<PAGE>
         (i) any notices of the PBGC's intention to terminate a Plan or to have
         a trustee appointed to administer such Plan; (ii) any favorable or
         unfavorable determination letter from the IRS regarding the
         qualification of a Plan under Section 401(a) of the Code; or (iii) any
         notice from a Multi-employer Plan regarding the imposition of
         withdrawal liability;

                  (14) within ten (10) days after the occurrence thereof: (i)
         any changes in the benefits of any existing Plan or Foreign Plan which
         increase any Obligated Party's annual costs with respect thereto by an
         amount in excess of $5,000,000, or the establishment of any new Plan or
         Foreign Plan or the commencement of contributions to any Plan or
         Foreign Plan to which any Obligated Party or any ERISA Affiliate was
         not previously contributing; or (ii) any failure by any Obligated Party
         or any ERISA Affiliate to make a required installment or any other
         required payment to any Plan or Foreign Plan in excess of $1,000,000
         under Section 412 of the Code on or before the due date for such
         installment or payment;

                  (15) within ten (10) days after any Obligated Party or any
         ERISA Affiliate knows or has reason to know that any of the following
         events has occurred or will occur: (i) a Multi-employer Plan has been
         or will be terminated; (ii) the administrator or plan sponsor of a
         Multi-employer Plan intends to terminate a Multi-employer Plan; or
         (iii) the PBGC has instituted or will institute proceedings under
         Section 4042 of ERISA to terminate a Multi-employer Plan;

                  (16) immediately upon becoming aware of an event which would
         require Parent to pay any amount on any of its guarantees of certain of
         PFSweb Inc.'s operating lease obligations;

                  (17) immediately upon commencement of any proceedings
         contesting any tax, fee, assessment, or other governmental charge in
         excess of $1,000,000; and

                  (18) immediately upon becoming aware that any material
         assumption on which the Obligated Parties prepared and presented the
         Latest Projections is no longer valid.

Each notice given under this Section shall describe the subject matter thereof
in reasonable detail, and shall set forth the action that any Obligated Party or
any ERISA Affiliate, as applicable, has taken or proposes to take with respect
thereto.

ARTICLE 6

                     GENERAL WARRANTIES AND REPRESENTATIONS

           Each Obligated Party warrants and represents to the Agent and the
Lenders that except as set forth in the Schedules to this Agreement:

         Section 6.1 Authorization, Validity, and Enforceability of this
Agreement and the other Loan Documents; No Conflicts. Each Obligated Party has
the power and authority to execute, deliver, and perform this Agreement and the
other Loan Documents to which it is a party, to incur

CREDIT AGREEMENT - Page 29
<PAGE>
the Obligations, and to grant to the Agent Liens upon the Collateral. Each
Obligated Party has taken all necessary action (including obtaining approval of
its stockholders, partners, general partner(s), members, or other applicable
equity owners, if necessary) to authorize its execution, delivery, and
performance of this Agreement and the other Loan Documents to which it is a
party. This Agreement and the other Loan Documents have been duly executed and
delivered by each Obligated Party, and constitute the legal, valid, and binding
obligations of each Obligated Party, enforceable against it in accordance with
their respective terms without defense, setoff, or counterclaim. Each Obligated
Party's execution, delivery, and performance of this Agreement and the other
Loan Documents to which it is a party do not and will not conflict with, or
constitute a violation or breach of, or constitute a default under, or result in
or require the creation or imposition of any Lien upon the property of the
Parent or any Subsidiary of the Parent by reason of the terms of (a) any
contract, mortgage, Lien, lease, agreement, indenture, document, or instrument
to which the Parent or any Subsidiary of the Parent is a party or which is
binding upon any of them, (b) any Requirement of Law applicable to the Parent or
any Subsidiary of the Parent, or (c) the certificate or articles of
incorporation, bylaws, limited liability company or partnership agreement, or
other organizational or constituent documents, as the case may be, of the Parent
or any Subsidiary of the Parent.

         Section 6.2 Validity and Priority of Security Interest. The provisions
of this Agreement and the other Loan Documents create legal and valid Liens on
all the Collateral in favor of the Agent, for the benefit of the Agent and the
Lenders, and such Liens constitute perfected and continuing Liens on the
Collateral, securing the Obligations, enforceable against the applicable
Obligated Party and all third parties, and having priority over all other Liens
on the Collateral (a) except in the case of Liens described in clause (c),
clause (e), and clause (f) of the definition of Permitted Liens to the extent
any such Liens would have priority over the Agent's Liens pursuant to any
Requirement of Law and (b) except for Liens in certificated vehicles, and Liens
perfected only by possession to the extent the Agent has not obtained or does
not maintain possession of such Collateral.

         Section 6.3 Corporate Name; Prior Transactions. Except as set forth on
Schedule 6.3, the Obligated Parties have not, during the past five (5) years,
been known by or used any other corporate or fictitious name, or been a party to
any merger or consolidation, or acquired all or substantially all of the assets
of any Person, or acquired any of its property outside of the ordinary course of
business.

         Section 6.4 Capitalization and Subsidiaries. Schedule 6.4 sets forth
(a) a correct and complete list of the name and relationship to the Parent of
each and all of the Parent's Subsidiaries, (b) the location of the chief
executive office of the Parent and each of its Subsidiaries, (c) a true and
complete listing of each class of each of the Parent's Subsidiaries' authorized
Capital Stock, of which all of such issued shares are validly issued,
outstanding, fully paid and non-assessable, and owned beneficially and of record
by the Persons identified on Schedule 6.4, and (d) the type of entity of the
Parent and each of its Subsidiaries. With respect to each Obligated Party,
Schedule 6.4 sets forth the employer or taxpayer identification number of each
Obligated Party and the organizational identification number issued by each
Obligated Party's jurisdiction of organization or a statement that no such
number has been issued. Each Obligated Party is (x) duly incorporated, formed,
or organized and validly existing in good standing under the laws of its
jurisdiction of incorporation, formation, or organization set forth on Schedule
6.4, (y) qualified to do business and in good standing (as applicable) in each
jurisdiction in which the failure to so qualify or be in good standing

CREDIT AGREEMENT - Page 30
<PAGE>
could reasonably be expected to have a Material Adverse Effect, and (z) has all
requisite power and authority to conduct its business and own its property.

         Section 6.5 Financial Statements and Projections.

                  (1) The Obligated Parties have delivered to the Agent and the
         Lenders the audited balance sheet and related statements of income,
         retained earnings, cash flow, and changes in stockholders' equity for
         the Parent and its Subsidiaries as of March 31, 2001, and for the
         Fiscal Year then ended, accompanied by the report thereon of the
         Parent's independent certified public accountants, Ernst & Young, LLP.
         The Obligated Parties have also delivered to the Agent and the Lenders
         the unaudited balance sheet and related statements of income and cash
         flow for the Parent and its Subsidiaries as of December 31, 2001. All
         such financial statements have been prepared in accordance with GAAP
         and fairly present the financial position of the Parent and its
         Subsidiaries as at the dates thereof and their results of operations
         for the periods then ended (except with respect to the financial
         statements dated December 31, 2001, for the absence of applicable
         footnotes and subject to normal year-end adjustments).

                  (2) The Latest Projections when submitted to the Agent and the
         Lenders as required herein represent the Obligated Parties' good faith
         estimate of the future financial performance of the Obligated Parties
         for the periods set forth therein. The Latest Projections have been
         prepared on the basis of the assumptions set forth therein, which the
         Obligated Parties believe are fair and reasonable in light of current
         and reasonably foreseeable business conditions at the time submitted to
         the Agent and the Lenders.

         Section 6.6 Solvency. Each Obligated Party is Solvent prior to and
after giving effect to the Borrowings to be made on the Closing Date and the
issuance of the Letters of Credit and Credit Support to be issued on the Closing
Date (if any).

         Section 6.7 Debt. After giving effect to the making of the Revolving
Loans to be made on the Closing Date and the issuance of the Letters of Credit
and Credit Support to be issued on the Closing Date (if any), the Obligated
Parties have no Debt, except (a) the Obligations, (b) Debt described on Schedule
6.7, and (c) other Debt entered into after the Closing Date as permitted by
Section 7.13 and reflected in the Financial Statements delivered pursuant to
Section 5.2.

         Section 6.8 Distributions. As of the Closing Date, since December 31,
2001, no Distribution has been declared, paid, or made upon or in respect of any
Capital Stock of the Parent.

         Section 6.9 Real Estate; Leases. As of the Closing Date, Schedule 6.9
sets forth a correct and complete list of all Real Estate owned by each
Obligated Party, all leases and subleases of real or personal property by each
Obligated Party as lessee or sublessee (other than leases of personal property
as to which it is lessee or sublessee for which the value of such personal
property in the aggregate is less than $1,000,000), and all leases and subleases
of real or personal property by each Obligated Party as lessor, or sublessor.
Each of such leases and subleases is valid and enforceable in accordance with
its terms and is in full force and effect, and no default by any party to any
such

CREDIT AGREEMENT - Page 31
<PAGE>
lease or sublease exists. Each Obligated Party has good and indefeasible title
in fee simple to the Real Estate identified on Schedule 6.9 as owned by such
Obligated Party, or valid leasehold interests in all Real Estate designated
therein as "leased" by such Obligated Party, and each Obligated Party has good,
indefeasible, and merchantable title to all of its other property reflected on
the December 31, 2001 Financial Statements of the Parent and its Subsidiaries
delivered to the Agent and the Lenders, except as disposed of in the ordinary
course of business since the date thereof, free of all Liens except Permitted
Liens.

         Section 6.10 Proprietary Rights. As of the Closing Date, Schedule 6.10
sets forth a correct and complete list of all of each Obligated Party's
Proprietary Rights. None of the Proprietary Rights listed in Schedule 6.10 is
subject to any licensing agreement or similar arrangement except as set forth on
Schedule 6.10. The Proprietary Rights described on Schedule 6.10 constitute all
of the property of such type necessary to the current and anticipated future
conduct of the Obligated Parties' business. To the best of each Obligated
Party's knowledge, no slogan or other advertising device, product, process,
method, substance, part, or other material now employed, or now contemplated to
be employed, by any Obligated Party infringes in any material respect upon any
rights held by any other Person. No claim or litigation regarding any of the
foregoing is pending or threatened, and no patent, invention, device,
application, principle or any statute, law, rule, regulation, standard, or code
is pending or, to the knowledge of any Obligated Party, proposed, which, in
either case, could reasonably be expected to have a Material Adverse Effect.

         Section 6.11 Trade Names. All trade names or styles under which any
Obligated Party will sell Inventory or create Accounts, or to which instruments
in payment of Accounts may be made payable, are listed on Schedule 6.11.

         Section 6.12 Litigation. There is no pending, or to the best of any
Obligated Party's knowledge threatened, action, suit, proceeding, or
counterclaim by any Person, or investigation by any Governmental Authority, or
any basis for any of the foregoing, which could reasonably be expected to have a
Material Adverse Effect.

         Section 6.13 Labor Disputes. As of the Closing Date, (a) there is no
collective bargaining agreement or other labor contract covering employees of
any Obligated Party, (b) no such collective bargaining agreement or other labor
contract is scheduled to expire during the term of this Agreement, (c) no union
or other labor organization is seeking to organize, or to be recognized as, a
collective bargaining unit of employees of any Obligated Party or for any
similar purpose, and (d) there is no pending or (to the best of any Obligated
Party's knowledge) threatened, strike, work stoppage, material unfair labor
practice claim, or other material labor dispute against or affecting any
Obligated Party or its employees.

         Section 6.14 Environmental Laws. Except as otherwise set forth on
Schedule 6.14:

                  (1) Each Obligated Party and each of their respective
         Subsidiaries has complied in all material respects with all
         Environmental Laws and neither any Obligated Party, any of their
         respective Subsidiaries, nor any of their respective presently or
         previously owned Real Estate or presently conducted or prior
         operations, is subject to any enforcement order from

CREDIT AGREEMENT - Page 32
<PAGE>
         or liability agreement with any Governmental Authority or private
         Person respecting (i) compliance with any Environmental Law or (ii) any
         potential liabilities and costs or remedial action arising from the
         Release or threatened Release of a Contaminant.

                  (2) Each Obligated Party and each of their respective
         Subsidiaries has obtained all permits necessary for its current
         operations under Environmental Laws, and all such permits are in good
         standing, and each Obligated Party and each of their respective
         Subsidiaries is in compliance with all material terms and conditions of
         such permits.

                  (3) No Obligated Party or any of their respective
         Subsidiaries, nor to the best of any Obligated Party's knowledge any of
         their predecessors in interest, has in violation of any Environmental
         Law stored, treated, or disposed of any hazardous waste (as defined
         pursuant to 40 CFR Part 261 or any equivalent Environmental Law).

                  (4) No Obligated Party or any of their respective Subsidiaries
         has received any summons, complaint, order, or similar written notice
         indicating that it is not currently in compliance with, or that any
         Governmental Authority is investigating its compliance with, any
         Environmental Laws or that it is or may be liable to any other Person
         as a result of a Release or threatened Release of a Contaminant.

                  (5) None of the present or past operations of any Obligated
         Party or any of their respective Subsidiaries is the subject of any
         investigation by any Governmental Authority evaluating whether any
         remedial action is needed to respond to a Release or threatened Release
         of a Contaminant.

                  (6) There is not now, nor to the best of any Obligated Party's
         knowledge has there ever been, on or in the Real Estate of any
         Obligated Party or any of their respective Subsidiaries in violation of
         Environmental Laws:

                           (1) any underground storage tanks or surface
                  impoundments,

                           (2) any asbestos-containing material, or

                           (3) any polychlorinated biphenyls (PCBs) used in
                  hydraulic oils, electrical transformers, or other equipment.

                  (7) No Obligated Party or any Subsidiary of an Obligated Party
         has filed any notice under any requirement of Environmental Law
         reporting a spill or accidental and unpermitted Release or discharge of
         a Contaminant into the environment.

                  (8) No Obligated Party or any Subsidiary of any Obligated
         Party has entered into any negotiations or settlement agreements with
         any Person (including the prior owner of its property) imposing
         material obligations or liabilities on any Obligated Party or any
         Subsidiary of any Obligated Party with respect to any remedial action
         in response to the Release of a Contaminant or environmentally related
         claim.

CREDIT AGREEMENT - Page 33
<PAGE>
                  (9) None of the products manufactured, distributed, or sold by
         any Obligated Party or any Subsidiary of any Obligated Party contains
         asbestos containing material.

                  (10) No Environmental Lien has attached to the Real Estate of
         any Obligated Party or any Subsidiary of any Obligated Party.

         Section 6.15 No Violation of Law. No Obligated Party or any Subsidiary
of any Obligated Party is in violation of any law, statute, regulation,
ordinance, judgment, order, or decree applicable to it which violation could
reasonably be expected to have a Material Adverse Effect.

         Section 6.16 No Default. No Obligated Party or any Subsidiary of any
Obligated Party is in default with respect to any note, indenture, loan
agreement, mortgage, lease, deed, or other agreement to which such Obligated
Party or Subsidiary of an Obligated Party is a party or by which it is bound,
which default could reasonably be expected to have a Material Adverse Effect.

         Section 6.17 ERISA Compliance. Except as set forth on Schedule 6.17:

                  (1) Each Plan is in compliance in all material respects with
         the applicable provisions of ERISA, the Code, and other federal or
         state law. Each Plan which is intended to qualify under Section 401(a)
         of the Code has received a favorable determination letter from the IRS
         and to the best knowledge of each Obligated Party, nothing has occurred
         which would cause the loss of such qualification. Each Obligated Party
         and each ERISA Affiliate has made all required contributions to any
         Plan subject to Section 412 of the Code, and no application for a
         funding waiver or an extension of any amortization period pursuant to
         Section 412 of the Code has been made with respect to any Plan.

                  (2) There are no pending or, to the best knowledge of any
         Obligated Party, threatened claims, actions, or lawsuits, or action by
         any Governmental Authority, with respect to any Plan which has resulted
         or could reasonably be expected to result in a Material Adverse Effect.
         There has been no prohibited transaction or violation of the fiduciary
         responsibility rules with respect to any Plan which has resulted or
         could reasonably be expected to result in a Material Adverse Effect.

                  (3) (i) No ERISA Event has occurred or is reasonably expected
         to occur, (ii) no Pension Plan has any Unfunded Pension Liability,
         (iii) no Obligated Party nor any ERISA Affiliate has incurred, or
         reasonably expects to incur, any liability under Title IV of ERISA with
         respect to any Pension Plan (other than premiums due and not delinquent
         under Section 4007 of ERISA), (iv) no Obligated Party nor any ERISA
         Affiliate has incurred, or reasonably expects to incur, any liability
         (and no event has occurred which, with the giving of notice under
         Section 4219 of ERISA, would result in such liability) under Section
         4201 or 4243 of ERISA with respect to a Multi-employer Plan, and (v) no
         Obligated Party nor any ERISA Affiliate has engaged in a transaction
         that could be subject to Section 4069 or 4212(c) of ERISA.

CREDIT AGREEMENT - Page 34
<PAGE>
                  (4) Each Foreign Plan is in compliance in all material
         respects with the laws and regulations applicable to such Foreign Plan
         and each Obligated Party has satisfied all contribution obligations in
         all material respects with respect to such Foreign Plan (to the extent
         applicable). Each Foreign Plan and related funding arrangement that is
         intended to qualify for tax-favored status has been reviewed and
         approved for such status by the appropriate Governmental Authority (or
         has been submitted for such review and approval within the applicable
         time period), and nothing has occurred and no condition exists that is
         likely to cause the loss or denial of such tax-favored status. No
         Foreign Plan has any liabilities in any material respect in excess of
         the current value of such Foreign Plan's assets, determined in
         accordance with the assumptions used for funding such Foreign Plan
         pursuant to reasonable accounting standards in accordance with
         applicable law. No Obligated Party has incurred or reasonably expects
         to incur any material liability as a result of the termination or other
         insolvency of any Foreign Plan or any material liability which is not
         otherwise funded or satisfied with readily available assets set aside
         with respect to such Foreign Plan.

         Section 6.18 Taxes. Each Obligated Party has filed all federal, state,
and other tax returns and reports required to be filed (or appropriate
extensions have been timely filed), and has paid all federal, state, and other
taxes, assessments, fees, and other governmental charges levied or imposed upon
it or its properties, income, or assets otherwise due and payable unless such
unpaid taxes and assessments would constitute a Permitted Lien.

         Section 6.19 Regulated Entities. No Obligated Party nor any Person
controlling any Obligated Party is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940. No Obligated Party is a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding company" or a
"public utility" within the meaning of the Public Utility Holding Company Act of
1935, or a regulated entity under the Federal Power Act, the Interstate Commerce
Act, any state public utilities code or law, or any other federal or state
statute or regulation limiting its ability to incur indebtedness.

         Section 6.20 Use of Proceeds; Margin Regulations. The proceeds of the
Revolving Loans are to be used solely for the purposes specified in Section
7.26. No Obligated Party is engaged in the business of buying or selling Margin
Stock or extending credit for the purpose of buying or carrying Margin Stock.

         Section 6.21 No Material Adverse Change. No Material Adverse Effect has
occurred since the latest date of the Financial Statements delivered to the
Lenders referenced in Section 6.5.

         Section 6.22 Full Disclosure. None of the representations or warranties
made by any Obligated Party in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement, or certificate furnished
by or on behalf of any Obligated Party in connection with the Loan Documents
(including the offering and disclosure materials delivered by or on behalf of
any Obligated Party to the Lenders prior to the Closing Date), contains any
untrue statement of a material fact or omits any material fact

CREDIT AGREEMENT - Page 35
<PAGE>
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they are made, not misleading as of
the time when made or delivered.

         Section 6.23 Material Agreements. As of the Closing Date, Schedule 6.23
sets forth all material agreements and contracts (other than the Loan Documents)
of the Obligated Parties which are required to be publicly disclosed pursuant to
any Requirement of Law since the date of the Parent's quarterly report for the
Fiscal Quarter ended December 31, 2001.

         Section 6.24 Bank Accounts. As of the Closing Date, Schedule 6.24
contains a complete and accurate list of all bank accounts maintained by each
Obligated Party with any bank or other financial institution.

         Section 6.25 Governmental Authorization. No approval, consent,
exemption, authorization, or other action by, or notice to, or filing with, any
Governmental Authority or other Person is necessary or required in connection
with the execution, delivery, or performance by, or enforcement against, any
Obligated Party of this Agreement or any other Loan Document except for those
which have been duly obtained by the Obligated Parties, copies of which have
been provided to the Agent, and for filing of financing statements and the
Mortgages (if any).

         Section 6.26 Investment Property.

                  (a) Schedule 6.26 sets forth a correct and complete list of
         all Investment Property owned by each Obligated Party. Each Obligated
         Party is the legal and beneficial owner of such Investment Property, as
         so reflected, free and clear of any Lien (other than Permitted Liens),
         and has not sold, granted any option with respect to, assigned or
         transferred, or otherwise disposed of any of its rights or interest
         therein.

                  (b) To the extent any Obligated Party is the owner of or
         becomes the issuer of any Investment Property that is Collateral (each
         such Person which issues any such Investment Property being referred to
         herein as an "Issuer"): (i) the Issuer's shareholders that are
         Obligated Parties and the ownership interest of each such shareholder
         are as set forth on Schedule 6.4, and each such shareholder is the
         registered owner thereof on the books of the Issuer; (ii) the Issuer
         acknowledges the Agent's Liens; (iii) to the extent required to perfect
         the Agent's Liens, such security interest, collateral assignment, lien,
         and pledge in favor of the Agent has been registered on the books of
         the Issuer for such purpose as of the date hereof; and (iv) the Issuer
         is not aware of any liens, restrictions, or adverse claims which exist
         on any such Investment Property other than the Agent's Liens.

         Section 6.27 Common Enterprise. The successful operation and condition
of each of the Obligated Parties is dependent on the continued successful
performance of the functions of the group of the Obligated Parties as a whole
and the successful operation of each of the Obligated Parties is dependent on
the successful performance and operation of each other Obligated Party. Each
Obligated Party expects to derive benefit (and its board of directors or other
governing body has determined that it may reasonably be expected to derive
benefit), directly and indirectly, from successful operations of each of the
other Obligated Parties. Each Obligated Party expects to derive

CREDIT AGREEMENT - Page 36
<PAGE>
benefit (and the boards of directors or other governing body of each Obligated
Party has determined that it may reasonably be expected to derive benefit),
directly and indirectly, from the credit extended by the Lenders to the
Borrowers hereunder, both in their separate capacities and as members of the
group of companies. Each Obligated Party has determined that execution,
delivery, and performance of this Agreement and any other Loan Documents to be
executed by such Obligated Party is within its purpose, will be of direct and
indirect benefit to such Obligated Party, and is in its best interest.

         Section 6.28 Affiliate Transactions. Except as set forth on Schedule
6.28, there are no existing or proposed agreements, arrangements,
understandings, or transactions between any Obligated Party and any of the
officers, members, managers, directors, stockholders, parents, other interest
holders, employees, or Affiliates (other than Subsidiaries) of any Obligated
Party or any members of their respective immediate families, and none of the
foregoing Persons are directly or indirectly indebted to or have any direct or
indirect ownership, partnership, or voting interest in any Affiliate of any
Obligated Party or any Person with which any Obligated Party has a business
relationship or which competes with any Obligated Party (except that any such
Persons may own stock in (but not exceeding two percent (2.0%) of the
outstanding Capital Stock of) any publicly traded company that may compete with
an Obligated Party.

ARTICLE 7

                       AFFIRMATIVE AND NEGATIVE COVENANTS

         Each Obligated Party covenants to the Agent and each Lender that so
long as any of the Obligations remain outstanding or this Agreement is in effect
each Obligated Party will keep and perform each of the following covenants:

         Section 7.1 Taxes and Other Obligations. Except as otherwise permitted
by the terms of this Agreement and permitted statutory exemptions, each
Obligated Party shall (a) file when due all tax returns and other reports which
it is required to file, (b) pay, or provide for the payment, when due, of all
taxes, fees, assessments, and other governmental charges against it or upon its
property, income, and franchises, make all required withholding and other tax
deposits, and establish adequate reserves for the payment of all such items, and
provide to the Agent and the Lenders, upon request, satisfactory evidence of its
timely compliance with the foregoing, and (c) pay when due all Debt owed by it
and all claims of materialmen, mechanics, carriers, warehousemen, landlords,
processors, and other like Persons, and all other indebtedness owed by it and
perform and discharge in a timely manner all other obligations undertaken by it;
provided, however, such Obligated Party need not pay any tax, fee, assessment,
or governmental charge (w) which it is contesting in good faith by appropriate
proceedings diligently pursued, (x) for which it has established proper reserves
as required under GAAP, (y) for which no Lien (other than a Permitted Lien)
results from such non-payment, and (z) with respect to which any such tax, fee,
assessment, or governmental charge in excess of $5,000,000, such Obligated Party
has notified the Agent in writing of any contest described in clause (w)
preceding.

         Section 7.2 Legal Existence and Good Standing. Except as allowed by
Section 7.9, each Obligated Party shall maintain its legal existence and its
qualification and good standing in all

CREDIT AGREEMENT - Page 37
<PAGE>
jurisdictions in which the failure to maintain such existence and qualification
or good standing could reasonably be expected to have a Material Adverse Effect.

         Section 7.3 Compliance with Law and Agreements; Maintenance of
Licenses. Each Obligated Party shall comply, and shall cause each of its
Subsidiaries to comply, in all material respects with all Requirements of Law of
any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act and all Environmental Laws).
Each Obligated Party shall obtain and maintain, and shall cause each of its
Subsidiaries to obtain and maintain, all material licenses, permits, franchises,
and governmental authorizations necessary to own its property and to conduct its
business as conducted on the Closing Date or as permitted by Section 7.17. No
Obligated Party shall modify, amend, or alter its certificate or articles of
incorporation, bylaws, limited liability company operating agreement, limited
partnership agreement, or other similar constituent documents other than in a
manner which does not adversely affect the rights of the Lenders or the Agent.

         Section 7.4 Maintenance of Property; Inspection of Property.

                  (1) Each Obligated Party shall maintain all of its property
         necessary and useful in the conduct of its business, in good operating
         condition and repair, ordinary wear and tear excepted.

                  (2) Each Obligated Party shall permit representatives and
         independent contractors of the Agent (accompanied by any Lender which
         so elects with the consent of the Agent) to visit and inspect any of
         its properties, to examine its corporate, financial, and operating
         records, and make copies thereof or abstracts therefrom and to discuss
         its affairs, finances, and accounts with its directors, officers, and
         independent public accountants, at such reasonable times during normal
         business hours and as soon as may be reasonably desired, upon
         reasonable advance notice to such Obligated Party; provided, however,
         when an Event of Default exists, the Agent or any Lender may do any of
         the foregoing at the expense of the Borrowers (to be paid by the
         Borrowers as provided in Section 13.7) at any time during normal
         business hours and without advance notice.

         Section 7.5 Insurance.

                  (1) Each Obligated Party shall maintain with financially sound
         and reputable insurers having a rating of at least A+ or better by Best
         Rating Guide, insurance against: (i) loss or damage by fire with
         extended coverage; (ii) theft, burglary, pilferage, and loss in
         transit; (iii) public liability and third party property damage; (iv)
         larceny, embezzlement, or other criminal liability; (v) business
         interruption; and (vi) such other hazards or of such other types as is
         customary for Persons engaged in the same or similar business, as such
         Obligated Party, all such insurance as the Agent, in its discretion, or
         acting at the direction of the Majority Lenders, shall specify, in
         amounts, and under policies acceptable to the Agent and the Majority
         Lenders. Without limiting the foregoing, in the event that any improved
         Real Estate covered by a Mortgage is determined to be located within an
         area that has been identified by the Director of the Federal Emergency
         Management Agency as a Special Flood

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         Hazard Area ("SFHA"), the applicable Obligated Party shall purchase and
         maintain flood insurance on such Real Estate and any Equipment and
         Inventory located on such Real Estate. The amount of such flood
         insurance will be reasonably determined by the Agent, and shall, at a
         minimum, comply with applicable federal regulations as required by the
         Flood Disaster Protection Act of 1973, as amended. Each Obligated Party
         shall also maintain flood insurance for its Inventory and Equipment
         which is, at any time, located in a SFHA.

                  (2) For each of the insurance policies issued as required by
         this Section 7.5, each Obligated Party shall cause the Agent, for the
         benefit of the Agent and the Lenders, to be named as secured party or
         mortgagee and sole loss payee or additional insured, in a manner
         acceptable to the Agent. Each policy of insurance shall contain a
         clause or endorsement requiring the insurer to give not less than
         thirty (30) days prior written notice to the Agent in the event of
         cancellation of such policy for any reason whatsoever and a clause or
         endorsement stating that the interest of the Agent shall not be
         impaired or invalidated by any act or neglect of the insured Person or
         the owner of any premises for purposes more hazardous than are
         permitted by such policy. All premiums for such insurance shall be paid
         by the Obligated Parties when due, and certificates of insurance and,
         if requested by the Agent or any Lender, photocopies of the policies
         shall be delivered to the Agent, in each case, in sufficient quantity
         for distribution by the Agent to each of the Lenders. If any Obligated
         Party fails to procure (or cause to be procured) such insurance or to
         pay the premiums therefor when due, the Agent may, and at the direction
         of the Majority Lenders shall, do so from the proceeds of Revolving
         Loans.

         Section 7.6 Insurance and Condemnation Proceeds. Each Obligated Party
shall promptly notify the Agent and the Lenders of any loss, damage, or
destruction to the Collateral and Real Estate (whether or not any such Real
Estate is Collateral), whether or not covered by insurance. The Agent is hereby
authorized to directly collect all insurance and condemnation proceeds in
respect of Collateral and Real Estate (whether or not any such Real Estate is
Collateral) and to apply such proceeds to the reduction of the Obligations as
follows:

                  (1) With respect to insurance and condemnation proceeds
         relating to Collateral other than Fixed Assets, after deducting from
         such proceeds the reasonable expenses, if any, incurred by the Agent in
         the collection or handling thereof, the Agent shall apply such proceeds
         to the reduction of the Obligations in the manner provided for in
         Section 3.7.

                  (2) During the existence of a Default or an Event of Default
         or at any time if the applicable Obligated Party has not initiated
         collection of such proceeds on a timely basis, with respect to
         insurance and condemnation proceeds relating to Collateral consisting
         of Fixed Assets and any Real Estate which is not Collateral, after
         deducting from such proceeds the amount of any Debt secured by a
         Permitted Lien (excluding the Agent's Liens) and the reasonable
         expenses, if any, incurred by the Agent in the collection or handling
         thereof, the Agent shall permit or require the applicable Obligated
         Party to use such proceeds, or any part thereof, to replace, repair,
         restore, or rebuild the relevant Fixed Assets in a diligent and
         expeditious manner with materials and workmanship of substantially the
         same quality as existed before the loss, damage, or destruction so long
         as (i) no Default or Event of Default

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         exists, (ii) the aggregate proceeds do not exceed $1,000,000. In all
         other circumstances, the Agent shall apply such insurance and
         condemnation proceeds to the reduction of the Obligations in the order
         provided for in Section 3.7.

         Section 7.7 Environmental Laws.

                  (1) Each Obligated Party shall conduct, and shall cause each
         of its Subsidiaries to conduct, its business in compliance with all
         Environmental Laws applicable to it, including those relating to the
         generation, handling, use, storage, and disposal of any Contaminant.
         Each Obligated Party shall take, and shall cause each of its
         Subsidiaries to take, prompt and appropriate action to respond to any
         non-compliance with Environmental Laws and shall regularly report to
         the Agent on such response.

                  (2) Without limiting the generality of the foregoing, the
         Obligated Parties shall submit to the Agent and the Lenders annually,
         commencing on the first Anniversary Date, and on each Anniversary Date
         thereafter, an update of the status of each environmental compliance or
         liability issue concerning any Obligated Party or any Subsidiary of an
         Obligated Party or any of their respective properties or operations
         (whether past or present), if any. The Agent or any Lender may request,
         in which case the Borrowers will promptly furnish or cause to be
         promptly furnished to the Agent, copies of technical reports prepared
         by any Obligated Party or any Subsidiary of an Obligated Party and its
         communications with any Governmental Authority to determine whether
         such Obligated Party or Subsidiary of an Obligated Party is proceeding
         reasonably to correct, cure, or contest in good faith any alleged
         non-compliance or environmental liability. Each Obligated Party shall,
         at the Agent's or the Majority Lenders' request and at such Obligated
         Party's expense, (i) retain an independent environmental engineer
         acceptable to the Agent to evaluate any site, including tests if
         appropriate, where the non-compliance or alleged non-compliance with
         Environmental Laws has occurred and prepare and deliver to the Agent,
         in sufficient quantity for distribution by the Agent to the Lenders, a
         report setting forth the results of such evaluation, a proposed plan
         for responding to any environmental problems described therein, and an
         estimate of the costs thereof and (ii) provide to the Agent, in
         sufficient quantity for distribution by the Agent to the Lenders, a
         supplemental report of such engineer whenever the scope of the
         environmental problems (if any), or the response thereto or the
         estimated costs thereof, shall increase in any material respect.

                  (3) The Agent and its representatives shall have the right at
         any reasonable time to enter and visit the Real Estate and any other
         place where any property of any Obligated Party is located for the
         purposes of observing the Real Estate, taking and removing soil or
         groundwater samples, and conducting tests on any part of the Real
         Estate. The Agent is under no duty, however, to visit or observe the
         Real Estate or to conduct tests, and any such acts by the Agent will be
         solely for the purposes of protecting the Agent's Liens and preserving
         the Agent and the Lenders' rights under the Loan Documents. No site
         visit, observation, or testing by the Agent and the Lenders will result
         in a waiver of any Default or Event of Default of any Obligated Party
         or impose any liability on the Agent or the Lenders. In no event will
         any site visit, observation, or testing by the Agent be a

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         representation that hazardous substances are or are not present in, on
         or under the Real Estate, or that there has been or will be compliance
         with any Environmental Law. Neither any Obligated Party nor any other
         party is entitled to rely on any site visit, observation, or testing by
         the Agent. The Agent and the Lenders owe no duty of care to protect the
         Obligated Parties or any other party against, or to inform the
         Obligated Parties or any other party of, any hazardous substances or
         any other adverse condition affecting the Real Estate. The Agent may in
         its discretion disclose to the Obligated Parties or to any other party
         if so required by law any report or findings made as a result of, or in
         connection with, any site visit, observation, or testing by the Agent.
         The Obligated Parties understand and agree that the Agent makes no
         warranty or representation to the Obligated Parties or any other party
         regarding the truth, accuracy, or completeness of any such report or
         findings that may be disclosed. The Obligated Parties also understand
         that depending on the results of any site visit, observation, or
         testing by the Agent and disclosed to any Obligated Party, an Obligated
         Party may have a legal obligation to notify one or more environmental
         agencies of the results, that such reporting requirements are
         site-specific, and are to be evaluated by the Obligated Parties without
         advice or assistance from the Agent. In each instance, the Agent will
         give the Obligated Parties reasonable notice before entering the Real
         Estate or any other place the Agent is permitted to enter pursuant to
         this Section 7.7(c). The Agent will make reasonable efforts to avoid
         interfering with the Obligated Parties' use of the Real Estate or any
         other property in exercising any rights provided hereunder.

         Section 7.8 Compliance with ERISA and Similar Foreign Laws. Each
Obligated Party shall, and shall cause each of its ERISA Affiliates to: (a)
maintain each Plan in compliance in all material respects with the applicable
provisions of ERISA, the Code, and other federal or state law; (b) cause each
Plan which is qualified under Section 401(a) of the Code to maintain such
qualification; (c) make all required contributions to any Plan subject to
Section 412 of the Code; (d) not engage in a prohibited transaction or violation
of the fiduciary responsibility rules with respect to any Plan or Foreign Plan;
(e) not engage in a transaction that could be subject to Section 4069 or 4212(c)
of ERISA; (f) maintain each Foreign Plan in compliance in all material respects
with Requirements of Law applicable to such Foreign Plan; (g) satisfy all
contribution obligations in all material respects with respect to each Foreign
Plan; and (h) cause each Foreign Plan and related funding arrangements that are
intended to qualify for tax-favored status to maintain such tax-favored status.

         Section 7.9 Mergers, Consolidations, or Sales. No Obligated Party shall
enter into any transaction of merger, reorganization, or consolidation, or
transfer, sell, assign, lease, or otherwise dispose of all or any part of its
property, or wind up, liquidate or dissolve, or agree to do any of the
foregoing, except for (x) sales of Inventory in the ordinary course of its
business, (y) sales or other dispositions of Real Estate and Equipment in the
ordinary course of its business that is obsolete or no longer useable by such
Obligated Party in its business, and (z) transactions between or among Obligated
Parties (i) in the ordinary course of each Obligated Party's business consistent
with past practices, (ii) upon terms no less favorable to any Obligated Party
than would be obtained in a comparable arm's length transaction with a third
party who is not an Obligated Party, or (iii) to which the Agent has consented
in writing; provided that, notwithstanding the foregoing or any other

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provision of this Agreement, as long as no Default or Event of Default exists or
would result therefrom and provided the Parent gives the Agent and the Lenders
prior written notice:

                  (1) a Borrower, other than Daisytek, may wind-up, dissolve, or
         liquidate if (i) its property is transferred to Daisytek or another
         Borrower and (ii) the Person acquiring such property complies with its
         obligations under Section 7.29 and Section 7.31 hereof, Section 2.3 of
         the Parent Security Agreement, and Section 2.3 of the Subsidiary
         Security Agreement, as applicable, simultaneously with such
         acquisition;

                  (2) a Borrower, other than Daisytek, may merge or consolidate
         with Daisytek or another Borrower (provided Daisytek is the survivor of
         any such merger or consolidation to which it is a party); and

                  (3) subject to Section 3.3, an Obligated Party may enter into
         sales or other dispositions of its property consisting of:

                           (1) except as specified in clause (ii) following,
                  Equipment and Real Estate if (A) the Orderly Liquidation Value
                  of such Equipment and the appraised fair market value of such
                  Real Estate does not exceed $5,000,000 in the aggregate for
                  all of the Obligated Parties, collectively, during any period
                  of four (4) consecutive Fiscal Quarters (net of the related
                  sales costs, if any, of such Equipment and Real Estate), (B)
                  the Orderly Liquidation Value of such Equipment and the
                  appraised fair market value of such Real Estate does not
                  exceed $10,000,000 in the aggregate (net of the related sales
                  costs, if any, of such Equipment and Real Estate) for all of
                  the Obligated Parties, collectively, during any period of four
                  consecutive Fiscal Quarters, and (C) the cash consideration
                  received by the applicable Obligated Party at the time of any
                  such sale or other disposition shall be not less than ten
                  percent (10.0%) of the total consideration received; and

                           (2) sales allowed by Section 7.19.

         The inclusion of proceeds in the definition of Collateral shall not be
         deemed to constitute the Agent's or any Lender's consent to any sale or
         other disposition of the Collateral or any Real Estate except as
         expressly permitted herein.

         Section 7.10 Distributions; Capital Change; Restricted Investments. No
Obligated Party shall (a) directly or indirectly declare or make, or incur any
liability to make, any Distribution, except Distributions (i) by a Borrower to
another Borrower or by (ii) a Borrower to the Parent not in excess of $5,000,000
during any Fiscal Year, (b) make any change in its capital structure which could
have a Material Adverse Effect, or (c) make any Restricted Investment.

         Section 7.11 Transactions Resulting in a Material Adverse Effect. No
Obligated Party shall enter into any transaction which could be reasonably
expected to result in a Material Adverse Effect.

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         Section 7.12 Guaranties. No Obligated Party shall make, issue, or
become liable on any Guaranty, except (a) Guaranties of the Debt allowed under
Section 7.13, (b) Guaranties of Debt of Subsidiaries of the Parent, provided
that all such Guaranties are unsecured, and (c) Guaranties existing as of the
Closing Date of operating leases of PFSweb, Inc.

         Section 7.13 Debt. No Obligated Party shall incur or maintain any Debt,
other than: (a) the Obligations; (b) the Debt described on Schedule 6.7; (c)
Capital Leases of Equipment and purchase money secured Debt incurred to purchase
Equipment; provided that the Liens securing such Capital Leases and purchase
money secured Debt shall attach only to the Equipment acquired by the incurrence
of such Capital Leases and purchase money secured Debt; (d) Debt evidencing a
refunding, renewal, or extension of the Debt described in clause (b) and clause
(c) preceding; provided that (i) the principal amount thereof is not increased,
(ii) the Liens, if any, securing such refunded, renewed, or extended Debt do not
attach to any assets in addition to those assets, if any, securing the Debt to
be refunded, renewed, or extended, (iii) no Person that is not an obligor or
guarantor of such Debt as of the Closing Date shall become an obligor or
guarantor thereof, and (iv) the terms of such refunding, renewal, or extension
are, in the Agent's reasonable discretion, no less favorable to such Obligated
Party, the Agent, or the Lenders than the original Debt; (e) Debt owing by an
Obligated Party other than the Parent to another Obligated Party for
intercompany loans and advances made for working capital in the ordinary course
of business; (f) Guaranties of Debt which are permitted under Section 7.12; (g)
Debt assumed by an Obligated Party in connection with a Permitted Acquisition,
provided that the aggregate amount of such Debt under this clause (g) does not
exceed $5,000,000 at any time; (h) Permitted Subordinated Debt; and (i) other
unsecured Debt in an aggregate amount outstanding at any time not in excess of
$5,000,000.

         Section 7.14 Prepayment. No Obligated Party shall voluntarily prepay
any Debt except (a) the Obligations and (b) other Debt permitted under Section
7.13 if after such prepayment the Obligated Parties are current with respect to
payment of their other indebtedness, liabilities, and obligations and, after
giving effect to such prepayment, Availability is greater than $15,000,000.

         Section 7.15 Transactions with Affiliates. Except as set forth below,
no Obligated Party shall, sell, transfer, distribute, or pay any money or
property, including, but not limited to, any fees or expenses of any nature
(including, but not limited to, any fees or expenses for management services),
to any Affiliate that is not a Borrower, or lend or advance money or property to
any Affiliate that is not a Borrower, or invest in (by capital contribution or
otherwise) or purchase or repurchase any Capital Stock or indebtedness, or any
property, of any Affiliate that is not a Borrower, or become liable on any
Guaranty of the indebtedness, dividends, or other obligations of any Affiliate
that is not a Borrower. Notwithstanding the foregoing, if no Default or Event of
Default is in existence or would result therefrom, an Obligated Party may engage
in transactions with an Affiliate in the ordinary course of such Obligated
Party's business consistent with past practices and upon terms no less favorable
to such Obligated Party than would be obtained in a comparable arm's-length
transaction with a third party who is not an Affiliate.

         Section 7.16 Investment Banking and Finder's Fees. No Obligated Party
shall pay or agree to pay, or reimburse any other party with respect to, any
investment banking or similar or related fee, underwriter's fee, finder's fee,
or broker's fee to any Person in connection with this Agreement other

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than pursuant to the Agent's Letter. The Obligated Parties shall defend and
indemnify the Agent and the Lenders against and hold them harmless from (a) all
claims of any Person that any Obligated Party is obligated to pay any such fees
and (b) all costs and expenses (including attorneys' fees) incurred by the Agent
and/or any Lender in connection therewith.

         Section 7.17 Business Conducted. The Obligated Parties shall not
engage, directly or indirectly, in any line of business other than the
businesses in which the Obligated Parties are engaged on the Closing Date.

         Section 7.18 Liens. No Obligated Party shall create, incur, assume, or
permit to exist any Lien on any property now owned or hereafter acquired by it,
except Permitted Liens. Other than as set forth in this Agreement or in
connection with the creation or incurrence of any Debt under Section 7.13(c), no
Obligated Party will enter into or become subject to any Negative Pledge;
provided that any Negative Pledge entered into in connection with the creation
of Debt under Section 7.13(c) shall be limited to the purchase money Lien
securing such Debt.

         Section 7.19 Sale and Leaseback Transactions. No Obligated Party shall,
directly or indirectly, enter into any arrangement with any Person providing for
such Obligated Party to lease or rent property that such Obligated Party has
sold or will sell or otherwise transfer to such Person, other than Equipment
purchased by an Obligated Party and sold to such other Person in connection with
such a transaction within six (6) months of the original purchase date.

         Section 7.20 New Subsidiaries; Addition of Subsidiaries as Borrowers.

                  (1) No Obligated Party shall without the written consent of
         the Agent and the Majority Lenders, directly or indirectly, organize,
         create, acquire, or permit to exist any Subsidiary other than those
         listed on Schedule 6.4 and Subsidiaries created or acquired in
         connection with Permitted Acquisitions. Without limiting the foregoing,
         promptly upon creation or acquisition of any Subsidiary by an Obligated
         Party, other than any Subsidiary which is organized under Requirements
         of Law of a jurisdiction other than the U.S. or a state of the U.S.,
         the Obligated Parties shall propose to the Agent that such new
         Subsidiary become, and with the Agent's and the Majority Lenders'
         consent pursuant to Section 13.22 cause such Subsidiary to become
         either a Borrower and a Guarantor or a Guarantor (but not a Borrower)
         under the Loan Documents.

                  (2) In the event that any Obligated Party has any Subsidiary
         organized under the laws of the U.S. or any state of the U.S. which is
         not an Obligated Party and owns property with an aggregate book or fair
         market value in excess of $500,000 or that has revenue in any Fiscal
         Year in excess of $1,000,000, such Obligated Party shall notify the
         Agent in writing thereof and propose to the Agent that such Subsidiary
         become, and with the Agent's and the Majority Lenders' consent pursuant
         to Section 13.22 cause such Subsidiary to become, either a Borrower and
         a Guarantor or a Guarantor (but not a Borrower) subject to the terms of
         this Agreement. In the event that the Obligated Parties have
         Subsidiaries organized under the laws of the U.S. or any state of the
         U.S. which are not Obligated Parties and which collectively for all
         such Subsidiaries own property with an aggregate book or fair market

CREDIT AGREEMENT - Page 44
<PAGE>
         value in excess of $500,000 or which collectively for all such
         Subsidiaries have revenue in any Fiscal Year in excess of $1,000,000,
         the Obligated Parties shall propose to the Agent that one or more of
         such Subsidiaries become, and with the Agent's and the Majority
         Lenders' consent pursuant to Section 13.22 cause each such Subsidiary
         to become, either a Borrower or a Guarantor (but not a Borrower)
         subject to the terms of this Agreement to the extent required to cause
         the aggregate book or fair market value of all property owned by such
         Subsidiaries which are not Obligated Parties to be equal to or less
         than $500,000 and to cause the revenue of all such Subsidiaries which
         are not Obligated Parties, collectively, to be equal to or less than
         $1,000,000.

Any Subsidiary which must be added as either a Borrower or a Guarantor (but not
a Borrower) as provided in this Section 7.20, shall execute and deliver a
joinder agreement and other Loan Documents as the Agent may reasonably require
within thirty (30) days of the occurrence of the event which results in such
Subsidiary being required to become either a Borrower or a Guarantor (but not a
Borrower) hereunder.

         Section 7.21 Fiscal Year. Each Obligated Party (other than the Parent)
shall cause the last day of its Fiscal Year to be the same as the Parent's.

         Section 7.22 Capital Expenditures. No Obligated Party shall make or
incur any Capital Expenditure if, after giving effect thereto, the aggregate
amount of all Capital Expenditures by the Obligated Parties on a consolidated
basis during any Fiscal Year would exceed (a) for the Fiscal Year ending March
31, 2003, $20,000,000 and (b) for each Fiscal Year ending thereafter,
$20,000,000 plus the amount by which Capital Expenditures in the immediately
preceding Fiscal Year were less than $20,000,000.

         Section 7.23 Parent's Fixed Charge Coverage Ratio. The Obligated
Parties will not permit the Fixed Charge Coverage Ratio determined for the
Parent and its Subsidiaries on a consolidated basis for the preceding four (4)
Fiscal Quarters to be less than 1.00 to 1.00.

         Section 7.24 Borrowers' Fixed Charge Coverage Ratio. The Obligated
Parties will not permit the Fixed Charge Coverage Ratio determined for the
Borrowers on a consolidated basis for the preceding two (2) Fiscal Quarters to
be less than 1.00 to 1.00.

         Section 7.25 Adjusted Tangible Net Worth. The Obligated Parties shall
not permit the Adjusted Tangible Net Worth, determined for the Parent and its
Subsidiaries on a consolidated basis, as of the last day of each Fiscal Quarter
occurring after the Closing Date, to be less than the Adjusted Tangible Net
Worth Requirement.

         Section 7.26 Use of Proceeds. The Borrowers shall use the proceeds of
the Revolving Loans (a) to repay the outstanding indebtedness, liabilities, and
obligations under that certain Amended and Restated Credit Agreement, dated as
of April 30, 2001, among Daisytek, Incorporated, the lenders party thereto, Bank
One, Texas, NA, as administrative agent, Citizens Bank of Massachusetts, as
syndication agent, Bank of America, N.A., as documentation agent, and Bank One,
Texas, NA, and Bank One, NA, as letter of credit issuers, and (b) for general
working capital

CREDIT AGREEMENT - Page 45
<PAGE>
purposes (not otherwise prohibited by this Agreement) of the Borrowers in the
ordinary course of business (including, without limitation, for Permitted
Acquisitions and Capital Expenditures) and shall not use any portion of the
Revolving Loan proceeds, directly or indirectly, (w) to buy or carry any Margin
Stock, (x) to repay or otherwise refinance indebtedness of the Borrowers or
others incurred to buy or carry any Margin Stock, (y) to extend credit for the
purpose of buying or carrying any Margin Stock, or (z) to acquire any security
in any transaction that is subject to Section 13 or 14 of the Exchange Act.

         Section 7.27 Solvency. Each Obligated Party shall at all times during
the term of this Agreement remain Solvent.

         Section 7.28 Interest Rate Protection. On the Closing Date, and
continuing thereafter until all Obligations are indefeasibly paid and performed
in full in cash and the Lenders' Commitments are terminated, the Borrowers shall
maintain in full force and effect one or more Hedge Agreements, in form and
substance reasonably satisfactory to the Agent, with the Bank or another
financial institution reasonably acceptable to the Agent, that will have placed
a limit upon the rate of interest payable by the Borrowers under this Agreement
with respect to a principal amount not less than thirty percent (30.0%) of the
forecasted average daily outstanding amount of the Revolving Loans set forth in
the Latest Projections of the Borrowers.

         Section 7.29 Guaranties of the Obligations. Each Obligated Party,
including any Person which becomes a Borrower or a Guarantor after the Closing
Date pursuant to the terms of this Agreement, shall guarantee payment and
performance of the Obligations (other than Obligations owing by itself and
excluding Existing Obligations in the case of any such guarantee by a Newly
Obligated Party) pursuant to a Guaranty Agreement in form and substance
satisfactory to the Agent, duly executed by each such Obligated Party. Each
Borrower acknowledges and expressly agrees with the Agent and each Lender that
the Guaranty by such Borrower is required solely as a condition to, and is given
solely as inducement for and in consideration of, credit or accommodations
extended or to be extended under the Loan Documents to any or all of the other
Borrowers and is not required or given as a condition of extensions of credit to
such Borrower.

         Section 7.30 Landlord and Mortgagee Agreements. The Obligated Parties
will provide to the Agent upon the Agent's request, a landlord's or mortgagee's
waiver and consent agreement or subordination and consent agreement, in form and
substance reasonably acceptable to the Agent, duly executed on behalf of each
landlord or mortgagee, as the case may be, of Real Estate on which any
Collateral is located; provided that the Agent may, in its discretion, defer
delivery of any such waiver and consent agreement or subordination and consent
agreement and establish a Reserve with respect to any Collateral located on any
Real Estate for which the Agent has not received such acceptable waiver and
consent agreement or subordination and consent agreement.

CREDIT AGREEMENT - Page 46
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         Section 7.31 Additional Collateral; Further Assurances.

                  (1) Subject to Requirements of Law, each Obligated Party shall
         cause any Subsidiary of the Parent which is required to become an
         Obligated Party pursuant to the terms of this Agreement to, upon the
         request of the Agent, (i) grant Liens to the Agent, for the benefit of
         the Agent and the Lenders, pursuant to such documents as the Agent may
         reasonably deem necessary and deliver such property, documents, and
         instruments as the Agent may request to perfect the Liens of the Agent
         in the Collateral of such Subsidiary (ii) execute a Guaranty of the
         Obligations pursuant to Section 7.29, in form and substance
         satisfactory to the Agent, and (iii) in connection with the foregoing
         requirements, or either of them, deliver to the Agent all items of the
         type required by Section 8.1(a) (as applicable). Upon execution and
         delivery of such Loan Documents and other instruments, certificates,
         and agreements, such Subsidiary shall automatically become a Borrower
         and a Guarantor, or a Guarantor (but not a Borrower), as applicable,
         hereunder and thereupon shall have all of the rights, benefits, duties,
         and obligations in such capacity under the Loan Documents.

                  (2) Without limiting the foregoing, each Obligated Party
         shall, and shall cause each of the Parent's Subsidiaries which is
         required to become an Obligated Party pursuant to the terms of this
         Agreement to, execute and deliver, or cause to be executed and
         delivered, to the Agent such documents and agreements, and shall take
         or cause to be taken such actions as the Agent may, from time to time,
         reasonably request to carry out the terms and conditions of this
         Agreement and the other Loan Documents.

                  (3) Upon the Agent's request, each Obligated Party will
         deliver to the Agent the following with respect to each parcel of Real
         Estate owned by any Obligated Party:

                           (1) a Mortgage in proper form for recording in the
                  jurisdiction in which such Real Estate covered thereby is
                  located;

                           (2) ALTA or other mortgagee's title policies, in form
                  and substance satisfactory to the Agent, with respect to the
                  Real Estate subject to the Mortgages;

                           (3) an environmental site assessment, in compliance
                  with applicable Requirements of Law, prepared by a
                  credentialed environmental consultant acceptable to the Agent;

                           (4) a boundary survey prepared and certified to the
                  Agent by a credentialed surveyor acceptable to the Agent; and

                           (5) such other information, documentation, and
                  certifications, in form and substance satisfactory to the
                  Agent, as may be required by the Agent.

CREDIT AGREEMENT - Page 47
<PAGE>
ARTICLE 8

                              CONDITIONS OF LENDING

         Section 8.1 Conditions Precedent to Making of Revolving Loans on the
Closing Date. The obligation of the Lenders to make the initial Revolving Loans
on the Closing Date, and the obligation of the Agent to cause the Letter of
Credit Issuer to issue any Letter of Credit or Credit Support on the Closing
Date, are subject to the following conditions precedent having been satisfied in
a manner satisfactory to the Agent and each Lender:

                  (1) The Agent shall have received each of the following
         documents, all of which shall be satisfactory in form and substance to
         the Agent and the Lenders:

                           (1) certified copies of the certificate of
                  incorporation, certificate of limited partnership, or
                  comparable organizational document of each Obligated Party,
                  with all amendments, if any, certified by the appropriate
                  Governmental Authority of the jurisdiction of each Obligated
                  Party's organization or formation, and the bylaws,
                  regulations, operating agreement, limited partnership
                  agreement, or similar governing agreement or document of each
                  Obligated Party, in each case certified by the corporate
                  secretary, general partner, or comparable authorized
                  representative of such Obligated Party, as applicable as being
                  true and correct and in effect on the Closing Date;

                           (2) certificates of incumbency and specimen
                  signatures with respect to each individual authorized to
                  execute and deliver this Agreement and the other Loan
                  Documents on behalf of each Obligated Party, and any other
                  individual executing any document, certificate, or instrument
                  to be delivered in connection with this Agreement and the
                  other Loan Documents and, in the case of each Borrower, to
                  request Borrowings and the issuance of Letters of Credit or
                  Credit Support;

                           (3) a certificate evidencing the existence of each
                  Obligated Party, and certificates evidencing the good standing
                  of each Obligated Party in the jurisdiction of its
                  organization and in each other jurisdiction in which it is
                  required to be qualified as a foreign business entity to
                  transact its business as presently conducted;

                           (4) certified copies of all action taken by each
                  Obligated Party and each other Person executing any document,
                  certificate, or instrument to be delivered in connection with
                  this Agreement and the other Loan Documents to authorize the
                  execution, delivery, and performance of this Agreement, the
                  other Loan Documents, and, with respect to the Borrowers, the
                  Borrowings and the issuance of Letters of Credit and/or Credit
                  Support;

CREDIT AGREEMENT - Page 48
<PAGE>
                           (5) a certificate of each Obligated Party signed by a
                  Responsible Officer:

                                    (1) stating that all of the representations
                           and warranties made or deemed to be made under this
                           Agreement are true and correct as of the Closing
                           Date, after giving effect to the Revolving Loans to
                           be made at such time and the application of the
                           proceeds thereof and the issuance of any Letter(s) of
                           Credit and/or Credit Support at such time,

                                    (2) stating that no Default or Event of
                           Default exists,

                                    (3) specifying the account of the Borrowers
                           which is the Designated Account, and

                                    (4) certifying as to such other factual
                           matters as may be reasonably requested by the Agent;

                           (6) with respect to any Letter of Credit or Credit
                  Support to be issued, all documentation required by Section
                  1.3, duly executed;

                           (7) a Revolving Loan Note, payable to the order of
                  each Lender in the amount of its Commitment with respect
                  thereto, duly executed and delivered by each Borrower,
                  complying with the requirements of Section 1.2(b);

                           (8) UCC financing statements and/or amendments to
                  existing UCC financing statements with respect to the
                  Collateral as may be requested by the Agent, duly authorized
                  by the respective Obligated Parties, in all jurisdictions that
                  the Agent may deem necessary or desirable in order to perfect
                  the Agent's Liens therein and acknowledgment copies of proper
                  financing statements, duly filed on or before the Closing Date
                  under the UCC in each jurisdiction the Agent deems necessary
                  or desirable in order to perfect the Agent's Liens;

                           (9) duly executed UCC termination statements or
                  assignments and such other instruments, in form and substance
                  satisfactory to the Agent, as shall be necessary to terminate
                  and satisfy all Liens on the property of the Obligated Parties
                  except Permitted Liens;

                           (10) a Copyright Security Agreement, a Patent
                  Security Agreement, and a Trademark Security Agreement, as
                  applicable, with respect to all Proprietary Rights, if any,
                  owned by any Obligated Party which must be registered with any
                  Governmental Authority to perfect the Agent's Liens in such
                  Proprietary Rights, duly executed by each Obligated Party, as
                  applicable;

                           (11) (A) the Parent Guaranty Agreement, duly executed
                  and delivered by the Parent as required pursuant to Section
                  7.29 and (B) the Subsidiary Guaranty

CREDIT AGREEMENT - Page 49
<PAGE>
                  Agreement duly executed and delivered by each other Obligated
                  Party as required pursuant to Section 7.29;

                           (12) (A) the Parent Security Agreement, duly executed
                  and delivered by the Parent and (B) the Subsidiary Security
                  Agreement duly executed and delivered by each other Obligated
                  Party;

                           (13) (A) stock certificates and stock powers (duly
                  executed in blank) for one hundred percent (100%) of the
                  Capital Stock (to the extent certificated) of each Subsidiary
                  of the Parent which is organized under the laws of the U.S. or
                  any state thereof, together with acknowledgments executed by
                  the respective issuers thereof, in form and substance
                  satisfactory to the Agent and (B) "control" agreements
                  (pursuant to the UCC), each duly executed, as the Agent may
                  request with respect to any other Investment Property listed
                  in Schedule 6.26;

                           (14) stock certificates and stock powers (duly
                  executed in blank) for sixty-five percent (65.0%) of the
                  Capital Stock of Daisytek UK Limited (provided that the Agent
                  shall return such Capital Stock to the Obligated Parties and
                  release the Agent's Liens thereon (and each of the Lender's
                  authorizes the Agent to return such Capital Stock and release
                  such Liens) upon (A) the Obligated Parties issuing Capital
                  Stock and Permitted Subordinated Debt in an aggregate amount
                  in excess of the aggregate amount of intercompany loans made
                  by the Obligated Parties pursuant to clause (j) of the
                  definition of Restricted Investments, (B) the Obligated
                  Parties making a payment of the Revolving Loans equal to the
                  amount of intercompany loans referenced in clause (A)
                  preceding, and (C) the intercompany loans referenced in clause
                  (A) preceding shall have been fully and permanently paid in
                  full);

                           (15) a Borrowing Base Certificate effective as of
                  April 19, 2002;

                           (16) each landlord's or mortgagee's waiver and
                  consent agreement or subordination and consent agreement
                  required to be provided pursuant to Section 7.30;

                           (17) each Blocked Account Agreement duly executed as
                  requested by the Agent;

                           (18) signed opinions of counsel for the Obligated
                  Parties, opining as to such matters in connection with the
                  transactions contemplated by this Agreement as the Agent may
                  reasonably request, each such opinion to be in a form, scope,
                  and substance satisfactory to the Agent, the Lenders, and
                  their respective counsel;

                           (19) evidence, in form, scope, and substance,
                  reasonably satisfactory to the Agent, of all insurance
                  coverage as required by this Agreement together with loss
                  payable endorsements in form acceptable to the Agent;

CREDIT AGREEMENT - Page 50

<PAGE>

                  (20)  satisfactory evidence that all filings, consents, or
            approvals with or of the shareholders of any Obligated Party, any
            Governmental Authority, or any other third party have been made or
            obtained, as applicable; and

                  (21)  such other documents and instruments as the Agent or any
            Lender may reasonably request.

            (2)   After giving effect to the making of all Revolving Loans
      (including any Revolving Loans made to finance the fees and expenses set
      forth in the Agent's Letter or otherwise as reimbursement for fees, costs,
      and expenses then payable under this Agreement) and issuance of all
      Letters of Credit and Credit Support and with all of their obligations
      current, the Borrowers shall have remaining Availability in an amount not
      less than $10,000,000.

            (3)   All representations and warranties made hereunder and in the
      other Loan Documents shall be true and correct.

            (4)   No Default or Event of Default shall exist or would exist
      after giving effect to the Revolving Loans to be made and the Letters of
      Credit and Credit Support to be issued.

            (5)   The Borrowers shall have paid all fees and expenses of the
      Agent and the Attorney Costs incurred in connection with any of the Loan
      Documents and the transactions contemplated thereby to the extent
      invoiced.

            (6)   The Agent and the Lenders shall have had an opportunity to
      examine the books of account and other records and files of the Obligated
      Parties and to make copies thereof, and to conduct a pre-closing audit
      which shall include, without limitation, verification of Inventory,
      Accounts, and the Borrowing Base, and the results of such examination and
      audit shall have been satisfactory to the Agent and the Lenders in all
      respects.

            (7)   All proceedings taken by the Obligated Parties in connection
      with the execution of this Agreement, the other Loan Documents, and all
      documents and papers relating thereto shall be satisfactory in form,
      scope, and substance to the Agent and the Lenders.

            (8)   Without in any way limiting Section 2.3 of each of the Parent
      Security Agreement and the Subsidiary Security Agreement, the Agent shall
      have received any warehouse receipts, consent and control agreements,
      subordination agreements, or other documentation the Agent determines in
      its sole discretion are necessary to perfect the Agent's Liens in any
      Inventory or other Collateral in the possession of any warehouseman.

            (9)   Without limiting the generality of the items described above,
      each of the Obligated Parties and each other Person guaranteeing or
      securing payment of the Obligations shall have delivered or caused to be
      delivered to the Agent (in form and substance reasonably

CREDIT AGREEMENT-Page 51
<PAGE>
      satisfactory to the Agent), the financial statements, instruments,
      resolutions, documents, agreements, certificates, opinions and other items
      required by the Agent and the Lenders.

The acceptance by the Borrowers of any Revolving Loans made or Letters of Credit
or Credit Support issued on the Closing Date shall be deemed to be a
representation and warranty made by the Obligated Parties to the effect that all
of the conditions precedent to the making of such Loans or issuance of such
Letters of Credit or Credit Support have been satisfied, with the same effect as
delivery to the Agent and the Lenders of a certificate signed by a Responsible
Officer of the Obligated Parties, dated the Closing Date, to such effect.
Execution and delivery to the Agent by a Lender of a counterpart of this
Agreement shall be deemed confirmation by such Lender that (1) all conditions
precedent in this Section 8.1 have been fulfilled to the satisfaction of such
Lender, (2) the decision of such Lender to execute and deliver to the Agent an
executed counterpart of this Agreement was made by such Lender independently and
without reliance on the Agent or any other Lender as to the satisfaction of any
condition precedent set forth in this Section 8.1, and (3) all documents sent to
such Lender for approval, consent, or satisfaction were acceptable to such
Lender.

      Section 8.2 Conditions Precedent to Each Loan. The obligation of the
Lenders to make each Revolving Loan, including the initial Revolving Loans on
the Closing Date, and the obligation of the Agent to cause the Letter of Credit
Issuer to issue any Letter of Credit or Credit Support shall be subject to the
further conditions precedent that on and as of the date of any such extension of
credit the following statements shall be true, and the acceptance by the
Borrowers of any extension of credit shall be deemed to be a statement by each
of the Obligated Parties to the effect set forth in clause (a), clause (b), and
clause (c) following with the same effect as the delivery to the Agent and the
Lenders of a certificate signed by a Responsible Officer of each of the
Obligated Parties, dated the date of such extension of credit, stating that:
Section 1.1

            (1)   the representations and warranties contained in this Agreement
      and the other Loan Documents are correct in all material respects on and
      as of the date of such extension of credit as though made on and as of
      such date, other than any such representation or warranty which relates to
      a specified prior date and except to the extent the Agent and the Lenders
      have been notified in writing by the Obligated Parties that any
      representation or warranty is not correct and the Majority Lenders have
      explicitly waived in writing compliance with such representation or
      warranty;

            (2)   no event has occurred and is continuing, or would result from
      such extension of credit, which constitutes a Default or an Event of
      Default;

            (3)   no event has occurred and is continuing, or would result from
      such extension of credit, which has had or would have a Material Adverse
      Effect; and

            (4)   The Agent shall have received satisfactory evidence that the
      Agent has a valid, exclusive (other than Permitted Liens), and perfected
      first priority security interest, lien, collateral assignment, and pledge
      as of such date in all Collateral as security for the Obligations
      (excluding Existing Obligations in the case of property owned by a Newly
      Obligated Party), to the extent any such Liens may be perfected under the
      UCC (but

CREDIT AGREEMENT-Page 52
<PAGE>
      excluding any Liens on vehicles for which a certificate of title has been
      issued and Liens perfected solely by possession, but only to the extent
      the Agent has not requested perfection of its Liens in such vehicles or
      possession of such Collateral), in each case in form and substance
      satisfactory to the Agent; provided that upon the Agent's request, the
      Obligated Parties shall provide any additional agreement, document,
      instrument, certificate, or other item relating to any other Collateral as
      may be required for perfection under any Requirement of Law.

Except as provided by Section 11.1, no Borrowing or issuance of any Letter of
Credit or Credit Support shall exceed the Availability, provided, however, that
the foregoing conditions precedent are not conditions to the requirement for
each Lender participating in or reimbursing the Bank or the Agent for such
Lenders' Pro Rata Share of any Non-Ratable Loan or Agent Advance made in
accordance with the provisions of Section 1.2(i) or Section 1.2(j).

ARTICLE 9

                                DEFAULT; REMEDIES

      Section 9.1 Events of Default. It shall constitute an event of default
("Event of Default") if any one or more of the following shall occur for any
reason:

            (1)   any failure by the Borrowers to pay the principal of or
      interest or premium on any of the Obligations or any fee or other amount
      owing hereunder when due, whether upon demand or otherwise;

            (2)   any representation or warranty made or deemed made by any
      Obligated Party in this Agreement or in any other Loan Document, any
      Financial Statement, or any certificate furnished by any Obligated Party
      at any time to the Agent or any Lender shall prove to be untrue in any
      material respect as of the date on which made, deemed made, or furnished;

            (3)   any default shall occur in the (i) observance or performance
      of any of the covenants and agreements contained in Section 7.2 (insofar
      as it requires the preservation of the existence of the Obligated
      Parties), or Section 7.9 through Section 7.31, or Section 2.3 and Section
      2.11 of the Parent Security Agreement and Section 2.3 and Section 2.10 of
      the Subsidiary Security Agreement, (ii) observance or performance of any
      of the covenants and agreements contained in Section 5.2 or Section 5.3
      and such default shall continue for three (3) days or more, or (iii)
      observance or performance of any of the other covenants or agreements
      contained in this Agreement other than as referenced in Section 9.1(a),
      Section 9.1(b), and clause (i) and clause (ii) preceding, any other Loan
      Document, or any other agreement entered into at any time to which any
      Obligated Party and the Agent or any Lender are party (including in
      respect of any Bank Products) and such default shall continue for more
      than fifteen (15) days, or if any such agreement or document shall
      terminate (other than in accordance with its terms or the terms hereof or
      with the written consent of the Agent and the Majority Lenders) or become
      void or unenforceable without the written consent of the Agent and the
      Majority Lenders;

CREDIT AGREEMENT-Page 53
<PAGE>
            (4)   any default shall occur with respect to any Debt (other than
      the Obligations) of any Obligated Party in an outstanding principal amount
      which exceeds $5,000,000, or under any agreement or instrument under or
      pursuant to which any such Debt may have been issued, created, assumed, or
      guaranteed by any Obligated Party, and such default shall continue for
      more than the period of grace, if any, therein specified, if the effect
      thereof (with or without the giving of notice or further lapse of time or
      both) is to accelerate or to permit the holders of any such Debt to
      accelerate, the maturity of any such Debt, or any such Debt shall be
      declared due and payable or be required to be prepaid (other than by a
      regularly scheduled required prepayment) prior to the stated maturity
      thereof; provided that with respect to the Debt of the Parent and Daisytek
      under their respective Guaranties of the indebtedness, liabilities, and
      obligations of Daisytek Australia Pty Limited under that certain agreement
      dated December 18, 2000 between Daisytek Australia Pty Limited and Bank
      One, NA providing for loans by Bank One, NA to Daisytek Australia Pty
      Limited, no Event of Default shall have occurred hereunder until the
      earlier to occur of the lender under such credit facility shall have
      initiated proceedings to enforce such Guaranty and exercise its remedies
      thereunder or ninety (90) days shall have elapsed and the default under
      such credit facility shall remain uncured.

            (5)   any Obligated Party shall (i) file a voluntary petition in
      bankruptcy or file a voluntary petition or an answer or otherwise commence
      any action or proceeding seeking reorganization, arrangement, or
      readjustment of its debts or for any other relief under the Bankruptcy
      Code or under any other bankruptcy or insolvency act or law, state or
      federal, now or hereafter existing, or consent to, approve of, or
      acquiesce in, any such petition, action, or proceeding, (ii) apply for or
      acquiesce in the appointment of a receiver, assignee, liquidator,
      sequestrator, custodian, monitor, trustee, or similar officer for it or
      for all or any part of its property, (iii) make an assignment for the
      benefit of its creditors, or (iv) be unable generally to pay its debts as
      they become due;

            (6)   an involuntary petition or proposal shall be filed or an
      action or proceeding otherwise commenced seeking reorganization,
      arrangement, consolidation, or readjustment of the debts of any Obligated
      Party or for any other relief under the Bankruptcy Code or under any other
      bankruptcy or insolvency act or law, state or federal, now or hereafter
      existing and such petition or proceeding shall not be dismissed within
      sixty (60) days after the filing or commencement thereof or an order of
      relief (or comparable order under any other Requirement of Law) against
      any Obligated Party shall be entered with respect thereto;

            (7)   a receiver, assignee, liquidator, sequestrator, custodian,
      monitor, trustee, or similar officer for any Obligated Party or for all or
      any part of its property shall be appointed or a warrant of attachment,
      execution, or similar process shall be issued against any part of the
      property of any Obligated Party;

            (8)   any Obligated Party shall file a certificate of dissolution
      under any Requirement of Law or shall be liquidated, dissolved, or
      wound-up (except in a transaction allowed under Section 7.9) or shall
      commence or have commenced against it any action or

CREDIT AGREEMENT-Page 54
<PAGE>
      proceeding for dissolution, winding-up, or liquidation, or shall take any
      corporate action in furtherance thereof;

            (9)   all or any material part of the property of any Obligated
      Party shall be nationalized, expropriated, condemned, seized, or otherwise
      appropriated, or custody or control of such property or of any Obligated
      Party shall be assumed by any Governmental Authority or any court of
      competent jurisdiction at the instance of any Governmental Authority,
      except where contested in good faith by proper proceedings diligently
      pursued where a stay of enforcement is in effect;

            (10)  any Loan Document (other than UCC financing statements (if
      any) the effectiveness of which have lapsed as a result of the Agent's
      failure to file proper continuation statements as required by the UCC),
      including any Guaranty of the Obligations, shall be terminated, revoked,
      or declared void or invalid or unenforceable or challenged by any
      Obligated Party or any other obligor;

            (11)  one or more judgments, orders, decrees, or arbitration awards
      is entered against any Obligated Party involving liability in the
      aggregate for any or all of the Obligated Parties (to the extent not
      covered by independent third-party insurance as to which the insurer does
      not dispute coverage) as to any single or related or unrelated series of
      transactions, incidents, or conditions, of $1,000,000 or more, and the
      same shall remain unsatisfied, unvacated, and unstayed pending appeal for
      a period of thirty (30) days after the entry thereof;

            (12)  any loss, theft, damage, or destruction of any item or items
      of Collateral or other property of any Obligated Party occurs which could
      reasonably be expected to cause a Material Adverse Effect and is not
      adequately covered by insurance;

            (13)  there is filed against any Obligated Party any action, suit,
      or proceeding under any federal or state racketeering statute (including
      the Racketeer Influenced and Corrupt Organization Act of 1970), which
      action, suit, or proceeding (i) is not dismissed within one hundred twenty
      (120) days and (ii) could reasonably be expected to result in the
      confiscation or forfeiture of any material portion of the Collateral;

            (14)  for any reason other than the failure of the Agent to take any
      action available to it to maintain perfection of the Agent's Liens
      pursuant to the Loan Documents, any Loan Document ceases to be in full
      force and effect or any Lien with respect to any material portion of the
      Collateral intended to be secured thereby ceases to be, or is not, valid,
      perfected, and prior to all other Liens (other than Permitted Liens which
      are expressly permitted to have priority over the Agent's Liens) or is
      terminated, revoked, or declared void;

            (15)  (i) an ERISA Event shall occur with respect to a Pension Plan
      or Multi-employer Plan which has resulted in, or could reasonably be
      expected to result in, liability of any Obligated Party under Title IV of
      ERISA to the Pension Plan, Multi-employer Plan, or the PBGC in an
      aggregate amount in excess of $1,000,000; (ii) the aggregate amount of

CREDIT AGREEMENT-Page 55
<PAGE>
      Unfunded Pension Liability among all Pension Plans at any time exceeds
      $1,000,000; (iii) any Obligated Party or any ERISA Affiliate shall fail to
      pay when due, after the expiration of any applicable grace period, any
      installment payment with respect to its withdrawal liability under Section
      4201 of ERISA under a Multi-employer Plan in an aggregate amount in excess
      of $1,000,000; or (iv) the Foreign Plans in the aggregate have liabilities
      in excess of assets (determined in accordance with the assumptions under
      each such Foreign Plan and under Requirements of Law used for funding each
      Foreign Plan pursuant to reasonable accounting standards in accordance
      with Requirements of Law) in an amount in excess of $1,000,000;

            (16)  there occurs a Change of Control; or

            (17)  there occurs an event having a Material Adverse Effect.

Section 9.2       Remedies.

            (1)   If a Default or an Event of Default exists, the Agent may, in
      its discretion, and shall, at the direction of the Majority Lenders, do
      one or more of the following at any time or times and in any order,
      without notice to or demand on any Obligated Party: (i) reduce the Maximum
      Revolver Amount, or the advance rates against Eligible Accounts and/or
      Eligible Inventory used in computing the Borrowing Base, or reduce or
      increase one or more of the other elements used in computing the Borrowing
      Base; (ii) restrict the amount of or refuse to make Revolving Loans; and
      (iii) restrict or refuse to provide Letters of Credit or Credit Support.
      If an Event of Default exists, the Agent shall, at the direction of the
      Majority Lenders, do one or more of the following, in addition to the
      actions described in the preceding sentence, at any time or times and in
      any order, without notice to or demand on any Obligated Party: (A)
      terminate the Commitments and this Agreement; (B) declare any or all
      Obligations to be immediately due and payable; provided, however, that
      upon the occurrence of any Event of Default described in Section 9.1(e),
      Section 9.1(f), Section 9.1(g), or Section 9.1(h), the Commitments shall
      automatically and immediately expire and all Obligations shall
      automatically become immediately due and payable without notice or demand
      of any kind; (C) require the Obligated Parties to cash collateralize all
      outstanding Obligations outstanding with respect to Letters of Credit and
      Credit Support; and (D) pursue its other rights and remedies under the
      Loan Documents and applicable law.

            (2)   If an Event of Default has occurred and is continuing: (i) the
      Agent shall have, for the benefit of the Agent and the Lenders, in
      addition to all other rights of the Agent and the Lenders, the rights and
      remedies of a secured party under the Loan Documents and the UCC; (ii) the
      Agent may, at any time, take possession of the Collateral and keep it on
      any Obligated Party's premises, at no cost to the Agent or any Lender, or
      remove any part of it to such other place or places as the Agent may
      desire, or any Obligated Party shall, upon the Agent's demand, at such
      Obligated Party's cost, assemble the Collateral and make it available to
      the Agent at a place reasonably convenient to the Agent; and (iii) the
      Agent may sell and deliver any Collateral at public or private sales, for
      cash, upon credit, or otherwise, at such prices and upon such terms as the
      Agent deems advisable, in its sole discretion, and

CREDIT AGREEMENT-Page 56
<PAGE>
      may, if the Agent deems it reasonable, postpone or adjourn any sale of the
      Collateral by an announcement at the time and place of sale or of such
      postponed or adjourned sale without giving a new notice of sale. Without
      in any way requiring notice to be given in the following manner, each
      Obligated Party agrees that any notice by the Agent of sale, disposition,
      or other intended action hereunder or in connection herewith, whether
      required by the UCC or otherwise, shall constitute reasonable notice to
      the Obligated Parties if such notice is mailed by registered or certified
      mail, return receipt requested, postage prepaid, or is delivered
      personally against receipt, at least ten (10) days prior to such action to
      the Obligated Parties' address specified in or pursuant to Section 13.8.
      If any Collateral is sold on terms other than payment in full at the time
      of sale, no credit shall be given against the Obligations until the Agent
      or the Lenders receive payment, and if the buyer defaults in payment, the
      Agent may resell the Collateral without further notice to any Obligated
      Party. In the event the Agent seeks to take possession of all or any
      portion of the Collateral by judicial process, each Obligated Party
      irrevocably waives: (A) the posting of any bond, surety, or security with
      respect thereto which might otherwise be required; (B) any demand for
      possession prior to the commencement of any suit or action to recover the
      Collateral; and (C) any requirement that the Agent retain possession and
      not dispose of any Collateral until after trial or final judgment. Each
      Obligated Party agrees that the Agent has no obligation to preserve rights
      to the Collateral or marshal any Collateral for the benefit of any Person.
      The Agent is hereby granted a license or other right to use, without
      charge, each Obligated Party's labels, patents, copyrights, name, trade
      secrets, trade names, trademarks, and advertising matter, or any similar
      property, in completing production of, advertising, or selling any
      Collateral, and each Obligated Party's rights under all licenses and all
      franchise agreements shall inure to the Agent's benefit for such purpose.
      The proceeds of sale shall be applied first to all expenses of sale,
      including Attorney Costs, and then to the Obligations. The Agent will
      return any excess to the Obligated Parties and the Obligated Parties shall
      remain liable for any deficiency.

            (3)   If an Event of Default occurs and is continuing, each
      Obligated Party hereby waives all rights to notice and hearing prior to
      the exercise by the Agent of the Agent's rights to repossess the
      Collateral without judicial process or to replevy, attach, or levy upon
      the Collateral without notice or hearing.

CREDIT AGREEMENT-Page 57
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ARTICLE 10

                              TERM AND TERMINATION

      Section 10.1 Term and Termination. The term of this Agreement shall end on
the Stated Termination Date unless sooner terminated in accordance with the
terms hereof. The Agent upon direction from the Majority Lenders may terminate
this Agreement, without notice to the Obligated Parties, during the existence of
an Event of Default. Upon the effective date of termination of this Agreement
for any reason whatsoever, all Obligations (including all unpaid principal,
accrued and unpaid interest, and any early termination or prepayment fees or
penalties but excluding indemnification obligations to the extent no claim with
respect thereto has been asserted and remains unsatisfied) shall become
immediately due and payable and the Borrowers shall immediately arrange for the
cancellation and return of all Letters of Credit and Credit Support then
outstanding or, if permitted by the Agent in its discretion, presentation to the
Agent of a Supporting Letter of Credit or cash collateral as specified in
Section 1.3(g). Notwithstanding the termination of this Agreement, until all
Obligations are indefeasibly paid and performed in full in cash, the Obligated
Parties shall remain bound by the terms of this Agreement and the other Loan
Documents and shall not be relieved of any of their Obligations hereunder or
under any other Loan Document, and the Agent and the Lenders shall retain all
their rights and remedies hereunder and under the other Loan Documents
(including, without limitation, the Agent's Liens in and all rights and remedies
with respect to all then existing and after-arising Collateral).

ARTICLE 11

          AMENDMENTS; WAIVERS; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS

Section 11.1      Amendments and Waivers.

            (1)   No amendment or waiver of any provision of this Agreement or
      any other Loan Document, and no consent with respect to any departure by
      any Obligated Party therefrom, shall be effective unless the same shall be
      in writing and signed by the Majority Lenders (or by the Agent at the
      written request of the Majority Lenders) and the Borrowers (which may be
      evidenced by the signature of the Parent or Daisytek pursuant to Section
      13.21) and then any such waiver or consent shall be effective only in the
      specific instance and for the specific purpose for which given.

            (2)   No waiver, amendment, or consent shall, unless in writing and
      signed by all of the Lenders and the Obligated Parties and acknowledged by
      the Agent, do any of the following:

                  (1)   increase (other than pursuant to an assignment under
            Section 11.2) or extend the Commitment of any Lender or amend the
            second sentence of Section 1.2(a);

CREDIT AGREEMENT-Page 58
<PAGE>
                  (2)   postpone or delay any date fixed by this Agreement or
            any other Loan Document for any payment of principal, interest, fees
            (other than fees payable to the Agent solely for the Agent's
            benefit), or other amounts due to the Lenders (or any of them)
            hereunder or under any other Loan Document;

                  (3)   reduce the principal of, or the rate of interest
            specified herein on any Revolving Loan, or any fees or other amounts
            payable hereunder or under any other Loan Document;

                  (4)   change the percentage of the Commitments or of the
            aggregate unpaid principal amount of the Revolving Loans which is
            required for the Lenders or any of them to take any action
            hereunder;

                  (5)   increase any of the percentages set forth in the
            definition of the Borrowing Base;

                  (6)   amend this Section 11.1 or any provision of this
            Agreement providing for consent or other action by all of the
            Lenders;

                  (7)   release Collateral other than as permitted by Section
            12.11 and as provided in Section 8.1(a)(xiv);

                  (8)   change the definition of "Majority Lenders"; or

                  (9)   increase the Maximum Revolver Amount or the Letter of
            Credit Subfacility.

            (3)   No waiver, amendment, or consent shall, unless in writing and
      signed by the Required Lenders and the Obligated Parties (which signatures
      of the Obligated Parties may be evidenced by the signature of the Parent
      pursuant to Section 13.21) and acknowledged by the Agent do any of the
      following:

                  (1)   amend any provision of Section 1.2(j), other than an
            amendment to the percentage of Lenders required to revoke the
            Agent's authorization to make Agent Advances which revocation shall
            not require the signature of any of the Obligated Parties; and

                  (2)   change the definition of "Required Lenders".

            (4)   Notwithstanding the foregoing, (i) the Agent may, in its sole
      discretion and notwithstanding the limitations contained in Section
      11.1(b)(v) and Section 11.1(b)(ix) and any other terms of this Agreement,
      make Non-Ratable Loans in accordance with Section 1.2(i) and make Agent
      Advances in accordance with Section 1.2(j) and no amendment, waiver, or
      consent shall, unless in writing and signed by the Agent, affect the
      rights or duties of the Agent under this Agreement or any other Loan
      Document and

CREDIT AGREEMENT-Page 59
<PAGE>
      (ii) Schedule A-1 may be amended from time to time by the Agent alone to
      reflect assignments of Commitments in accordance herewith.

            (5)   If any fees are paid to the Lenders as consideration for
      amendments, waivers, or consents with respect to this Agreement, at the
      Agent's election, such fees may be paid only to those Lenders that agree
      to such amendments, waivers, or consents within the time specified for
      submission thereof.

            (6)   If, in connection with any proposed amendment, waiver, or
      consent (a "Proposed Change"):

                  (1)   requiring the consent of all of the Lenders, the consent
            of the Required Lenders is obtained but the consent of the other
            Lenders is not obtained (any such Lender whose consent is not
            obtained as described in this clause (f) being referred to as a
            "Non-Consenting Lender"), or

                  (2)   requiring the consent of the Required Lenders, the
            consent of the Majority Lenders is obtained but the consent of the
            other Lenders is not obtained,

      then, so long as the Agent is not a Non-Consenting Lender, at the
      Obligated Parties' request the Agent (in its individual capacity as a
      Lender) or an Eligible Assignee (with the Agent's approval) shall have the
      right (but not the obligation) to purchase from each Non-Consenting
      Lender, and each Non-Consenting Lender agrees that it shall sell, such
      Non-Consenting Lender's Commitments for an amount equal to the principal
      balances thereof and all accrued interest and fees with respect thereto
      through the date of sale pursuant to an Assignment and Acceptance, without
      premium or discount.

      Section 11.2      Assignments; Participations.

            (1)   Any Lender may, with the written consent of the Agent (which
      consent shall not be unreasonably withheld) and if no Default or Event of
      Default exists with the written consent of Daisytek (which consent shall
      not be unreasonably withheld), assign and delegate to one or more Eligible
      Assignees (provided that no consent of the Agent or Daisytek shall be
      required in connection with any assignment and delegation by a Lender to
      an Affiliate of such Lender or to another Lender) (each an "Assignee")
      all, or any ratable part of all, of the Revolving Loans, the Commitments,
      and the other rights and obligations of such Lender hereunder, in a
      minimum amount of $10,000,000 and integral amounts of $1,000,000 in excess
      thereof or all of such assigning Lender's Revolving Loans and Commitment
      (provided that, unless an assignor Lender has assigned and delegated all
      of its Revolving Loans and Commitment, no such assignment and/or
      delegation shall be permitted unless, after giving effect thereto, such
      assignor Lender retains a Commitment in a minimum amount of $10,000,000);
      provided, however, that the Obligated Parties and the Agent may continue
      to deal solely and directly with such Lender in connection with the
      interest so assigned to an Assignee until (i) written notice of such
      assignment, together with payment instructions, addresses, and related
      information with respect to the Assignee, shall have been given to the

CREDIT AGREEMENT-Page 60
<PAGE>
      Obligated Parties and the Agent by such Lender and the Assignee; (ii) such
      Lender and its Assignee shall have delivered to the Obligated Parties and
      the Agent an Assignment and Acceptance in the form of Exhibit F (an
      "Assignment and Acceptance") together with any Revolving Loan Note subject
      to such assignment, and (iii) the assignor Lender or Assignee has paid to
      the Agent a processing fee in the amount of $5,000 (provided that the
      Agent may, in its discretion, waive such fee in connection with the
      initial syndication of the Commitments). The Borrowers agree to promptly
      execute and deliver new or replacement Revolving Loan Notes as reasonably
      requested by the Agent to evidence assignments of the Revolving Loans and
      Commitments in accordance herewith.

            (2)   From and after the date that the Agent notifies the assignor
      Lender that it has received an executed Assignment and Acceptance and
      payment of the above-referenced processing fee, (i) the Assignee
      thereunder shall be a party hereto and, to the extent that rights and
      obligations, including, but not limited to, the obligation to participate
      in Letters of Credit and Credit Support have been assigned to it pursuant
      to such Assignment and Acceptance, shall have the rights and obligations
      of a Lender under the Loan Documents, and (ii) the assignor Lender shall,
      to the extent that rights and obligations hereunder and under the other
      Loan Documents have been assigned by it pursuant to such Assignment and
      Acceptance, relinquish its rights and be released from its obligations
      under this Agreement (and in the case of an Assignment and Acceptance
      covering all or the remaining portion of an assigning Lender's rights and
      obligations under this Agreement, such Lender shall cease to be a party
      hereto).

            (3)   By executing and delivering an Assignment and Acceptance, the
      assigning Lender thereunder and the Assignee thereunder confirm to and
      agree with each other and the other parties hereto as follows: (i) other
      than as provided in such Assignment and Acceptance, such assigning Lender
      makes no representation or warranty and assumes no responsibility with
      respect to any statements, warranties, or representations made in or in
      connection with this Agreement or the execution, legality, validity,
      enforceability, genuineness, sufficiency, or value of this Agreement or
      any other Loan Document furnished pursuant hereto or the attachment,
      perfection, or priority of any Lien granted by the Obligated Parties to
      the Agent or any Lender in the Collateral; (ii) such assigning Lender
      makes no representation or warranty and assumes no responsibility with
      respect to the financial condition of the Obligated Parties or the
      performance or observance by the Obligated Parties of any of their
      respective obligations under this Agreement or any other Loan Document
      furnished pursuant hereto; (iii) such Assignee confirms that it has
      received a copy of this Agreement, together with such other documents and
      information as it has deemed appropriate to make its own credit analysis
      and decision to enter into such Assignment and Acceptance; (iv) such
      Assignee will, independently and without reliance upon the Agent, such
      assigning Lender, or any other Lender, and based on such documents and
      information as it shall deem appropriate at the time, continue to make its
      own credit decisions in taking or not taking action under this Agreement;
      (v) such Assignee appoints and authorizes the Agent to take such action as
      agent on its behalf and to exercise such powers under this Agreement as
      are delegated to the Agent by the terms hereof, together with such powers,
      including the discretionary rights and incidental power, as are reasonably
      incidental thereto;

CREDIT AGREEMENT-Page 61
<PAGE>
      and (vi) such Assignee agrees that it will perform in accordance with
      their terms all of the obligations which by the terms of this Agreement
      are required to be performed by it as a Lender.

            (4)   Immediately upon satisfaction of the requirements of Section
      11.2(a), this Agreement shall be deemed to be amended to the extent, but
      only to the extent, necessary to reflect the addition of the Assignee and
      the resulting adjustment of the Commitments arising therefrom. The
      Commitment allocated to each Assignee shall reduce such Commitments of the
      assigning Lender pro tanto.

            (5)   Any Lender may at any time sell to one or more Participants
      participating interests in any Revolving Loans, the Commitment of that
      Lender, and the other interests of that Lender (the "originating Lender")
      hereunder and under the other Loan Documents; provided, however, that (i)
      the originating Lender's obligations under this Agreement shall remain
      unchanged, (ii) the originating Lender shall remain solely responsible for
      the performance of such obligations, (iii) the Obligated Parties and the
      Agent shall continue to deal solely and directly with the originating
      Lender in connection with the originating Lender's rights and obligations
      under this Agreement and the other Loan Documents, and (iv) no Lender
      shall transfer or grant any participating interest under which the
      Participant has rights to approve any amendment to, or any consent or
      waiver with respect to, this Agreement or any other Loan Document except
      the matters set forth in Section 11.1(b)(i), Section 11.1(b)(ii), and
      Section 11.1(b)(iii), and (v) all amounts payable by the Borrowers
      hereunder shall be determined as if such Lender had not sold such
      participation, except that, if amounts outstanding under this Agreement
      are due and unpaid, or shall have been declared or shall have become due
      and payable upon the occurrence of an Event of Default, each Participant
      shall be deemed to have the right of setoff in respect of its
      participating interest in amounts owing under this Agreement to the same
      extent and subject to the same limitation as if the amount of its
      participating interest were owing directly to it as a Lender under this
      Agreement.

            (6)   Notwithstanding any other provision in this Agreement, any
      Lender may at any time create a security interest in, or pledge, all or
      any portion of its rights under and interest in this Agreement in favor of
      any Federal Reserve Bank in accordance with Regulation A of the Federal
      Reserve Board or U.S. Treasury Regulation 31 CFR Section 203.14, and such
      Federal Reserve Bank may enforce such pledge or security interest in any
      manner permitted under applicable law.

CREDIT AGREEMENT-Page 62
<PAGE>
ARTICLE 12

                                    THE AGENT

      Section 12.1 Appointment and Authorization. Each Lender hereby designates
and appoints the Bank (acting in its capacity as the Agent) as its agent under
this Agreement and the other Loan Documents and each Lender hereby irrevocably
authorizes the Agent to take such action on its behalf under the provisions of
this Agreement and each other Loan Document and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. The Agent agrees to act as such on the express
conditions contained in this Article 12. The provisions of this Article 12 are
solely for the benefit of the Agent and the Lenders and the Obligated Parties
shall have no rights as a third party beneficiary of any of the provisions
contained herein other than as expressly provided in Section 12.10 and Section
12.11. Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the Agent
have or be deemed to have any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations, or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent. Without limiting the generality of the
foregoing sentence, the use of the term "agent" in this Agreement with reference
to the Agent is not intended to connote any fiduciary or other implied (or
express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties. Except as expressly otherwise provided in this Agreement,
the Agent shall have and may use its sole discretion with respect to exercising
or refraining from exercising any discretionary rights or taking or refraining
from taking any actions which the Agent is expressly entitled to take or assert
under this Agreement and the other Loan Documents, including (a) the
determination of the applicability of ineligibility criteria with respect to the
calculation of the Borrowing Base, (b) the making of Agent Advances pursuant to
Section 1.2(j), and (c) the exercise of remedies pursuant to Section 9.2, and
any action so taken or not taken shall be deemed consented to by the Lenders.

      Section 12.2 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees,
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects as
long as such selection was made without gross negligence or willful misconduct.

      Section 12.3 Liability of the Agent. None of the Agent-Related Persons
shall (a) be liable for any action taken or omitted to be taken by any of them
under or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct), or (b) be responsible in any manner to any of the Lenders for any
recital, statement, representation, or warranty made by any Obligated Party or
Affiliate of any Obligated Party, or any officer thereof, contained in this
Agreement or in any other Loan Document, or in any certificate, report,
statement, or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other Loan Document, or
the

CREDIT AGREEMENT-Page 63
<PAGE>
validity, effectiveness, genuineness, enforceability, or sufficiency of this
Agreement or any other Loan Document, or for any failure of any Obligated Party
or any other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of any Obligated Party
or any Obligated Party's Affiliates.

      Section 12.4 Reliance by the Agent. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex, or
telephone message, statement, or other document or conversation believed by it
to be genuine and correct and to have been signed, sent, or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including,
without limitation, counsel to any Obligated Party), independent accountants and
other experts selected by the Agent. The Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Majority Lenders as it deems appropriate and, if it so requests, it shall first
be indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. The Agent shall in all cases be fully protected in acting,
or in refraining from acting, under this Agreement or any other Loan Document in
accordance with a request or consent of the Majority Lenders (or such other
percentage of Lenders if so required by Section 11.1) and such request and any
action taken or failure to act pursuant thereto shall be binding upon all of the
Lenders.

      Section 12.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, unless
the Agent shall have received written notice from an Obligated Party referring
to this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default." The Agent will notify the Lenders of its
receipt of any such notice. The Agent shall take such action with respect to
such Default or Event of Default as may be requested by the Majority Lenders in
accordance with Article 9; provided, however, that unless and until the Agent
has received any such request, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable.

      Section 12.6 Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereinafter taken, including any review of the affairs of the
Obligated Parties and their Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon any Agent-Related Person and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition, and
creditworthiness of the Obligated Parties and their Affiliates, and all
applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to the Borrowers. Each Lender also represents that it will, independently
and without reliance upon any Agent-Related Person and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis,

CREDIT AGREEMENT-Page 64
<PAGE>
appraisals, and decisions in taking or not taking action under this Agreement
and the other Loan Documents, and to make such investigations as it deems
necessary to inform itself as to the business, prospects, operations, property,
financial and other condition, and creditworthiness of the Obligated Parties.
Except for notices, reports, and other documents expressly herein required to be
furnished to the Lenders by the Agent, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition, or creditworthiness of any Borrower which may come into the
possession of any of the Agent-Related Persons.

      Section 12.7 Indemnification. WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED
HEREBY ARE CONSUMMATED, THE LENDERS SHALL UPON DEMAND INDEMNIFY THE
AGENT-RELATED PERSONS (TO THE EXTENT NOT REIMBURSED BY OR ON BEHALF OF THE
OBLIGATED PARTIES AND WITHOUT LIMITING THE OBLIGATION OF THE OBLIGATED PARTIES
TO DO SO), IN ACCORDANCE WITH THEIR PRO RATA SHARES, FROM AND AGAINST ANY AND
ALL INDEMNIFIED LIABILITIES; PROVIDED, HOWEVER, THAT NO LENDER SHALL BE LIABLE
FOR THE PAYMENT TO THE AGENT-RELATED PERSONS OF ANY PORTION OF SUCH INDEMNIFIED
LIABILITIES (AS DEFINED HEREIN) RESULTING SOLELY FROM SUCH PERSON'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. Without limitation of the foregoing, each
Lender shall reimburse the Agent upon demand for its Pro Rata Share of any costs
or out-of-pocket expenses (including Attorney Costs) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment, or enforcement (whether through negotiations, legal
proceedings, or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or on behalf of the Borrowers. The undertaking
in this Section shall survive the payment of all Obligations hereunder and the
resignation or replacement of the Agent.

      Section 12.8 The Agent in Individual Capacity. The Bank and its Affiliates
may make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in, and generally engage in any kind of banking,
trust, financial advisory, underwriting, or other business with any Obligated
Party and its Affiliates as though the Bank were not the Agent hereunder and
without notice to or consent of the Lenders. The Bank or its Affiliates may
receive information regarding any Obligated Party or its Affiliates and Account
Debtors (including information that may be subject to confidentiality
obligations in favor of any such Obligated Party or Affiliate), and the Lenders
acknowledge that the Agent and the Bank shall be under no obligation to provide
such information to the Lenders. With respect to its Revolving Loans, the Bank
as a Lender shall have the same rights and powers under this Agreement as any
other Lender and may exercise the same as though it were not the Agent, and the
terms "Lender" and "Lenders" include the Bank in its individual capacity.

      Section 12.9 Successor Agent. The Agent may resign as Agent upon at least
thirty (30) days prior notice to the Lenders and the Obligated Parties, such
resignation to be effective upon the acceptance of a successor agent to its
appointment as the Agent. In the event the Bank sells all of its Commitments and
Revolving Loans as part of a sale, transfer, or other disposition by the Bank

CREDIT AGREEMENT-Page 65
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of substantially all of its loan portfolio, the Bank shall resign as the Agent
and such purchaser or transferee shall become the successor Agent hereunder.
Subject to the foregoing, if the Agent resigns (the "resigning Agent") under
this Agreement, the Majority Lenders shall appoint from among the Lenders a
successor agent for the Lenders (the "successor Agent"). If no successor Agent
is appointed prior to the effective date of the resignation of the resigning
Agent, the resigning Agent may appoint, after consulting with the Lenders and
the Obligated Parties, a successor Agent from among the Lenders. Upon the
acceptance of its appointment as the successor Agent, the successor Agent shall
succeed to all the rights, powers, and duties of the resigning Agent and the
term "Agent" shall mean the successor Agent and the resigning Agent's
appointment, powers, and duties as the Agent shall be terminated. After any
resigning Agent's resignation hereunder as the Agent, the provisions of this
Article 12 shall continue to inure to its benefit as to any actions taken or
omitted to be taken by it while it was the Agent under this Agreement.

      Section 12.10 Withholding Tax.

            (1)   If any Lender is a "foreign corporation, partnership, or
      trust" within the meaning of the Code and such Lender claims exemption
      from, or a reduction of, U.S. withholding tax under Sections 1441 or 1442
      of the Code, such Lender agrees with and in favor of the Agent, to deliver
      to the Agent and the Parent:

                  (1)   if such Lender claims an exemption from, or a reduction
            of, withholding tax under a U.S. tax treaty, two (2) properly
            completed and executed IRS Forms W-8BEN and W-8ECI before the
            payment of any interest in the first calendar year and before the
            payment of any interest in each third succeeding calendar year
            during which interest may be paid under this Agreement;

                  (2)   if such Lender claims that interest paid under this
            Agreement is exempt from U.S. withholding tax because it is
            effectively connected with a U.S. trade or business of such Lender,
            two (2) properly completed and executed copies of IRS Form W-8ECI
            before the payment of any interest is due in the first taxable year
            of such Lender and in each succeeding taxable year of such Lender
            during which interest may be paid under this Agreement, and IRS Form
            W-9; and

                  (3)   such other form or forms as may be required under the
            Code or other laws of the U.S. as a condition to exemption from, or
            reduction of, U.S. withholding tax.

      Such Lender agrees to promptly notify the Agent and the Parent of any
      change in circumstances which would modify or render invalid any claimed
      exemption or reduction.

            (2)   If any Lender claims exemption from, or reduction of,
      withholding tax under a U.S. tax treaty by providing IRS Form W-8BEN and
      such Lender sells, assigns, grants a participation in, or otherwise
      transfers all or part of the Obligations owing to such Lender, such Lender
      agrees to notify the Agent and the Parent of the percentage amount in
      which it is no longer the beneficial owner of Obligations owing to such
      Lender. To the extent of such

CREDIT AGREEMENT-Page 66
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      percentage amount, the Agent and the Parent will treat such Lender's IRS
      Form W-8BEN as no longer valid.

            (3)   If any Lender claiming exemption from U.S. withholding tax by
      filing IRS Form W-8ECI with the Agent sells, assigns, grants a
      participation in, or otherwise transfers all or part of the Obligations
      owing to such Lender, such Lender agrees to undertake sole responsibility
      for complying with the withholding tax requirements imposed by Sections
      1441 and 1442 of the Code.

            (4)   If any Lender is entitled to a reduction in the applicable
      withholding tax, the Agent or any Borrower may withhold from any interest
      payment to such Lender an amount equivalent to the applicable withholding
      tax after taking into account such reduction. If the forms or other
      documentation required by clause (a) preceding are not delivered to the
      Agent and the Parent, then the Agent or any Borrower may withhold from any
      interest payment to such Lender not providing such forms or other
      documentation an amount equivalent to the applicable withholding tax.

            (5)   If the IRS or any other Governmental Authority of the U.S. or
      other jurisdiction asserts a claim that the Agent or any Borrower did not
      properly withhold tax from amounts paid to or for the account of any
      Lender (because the appropriate form was not delivered, was not properly
      executed, or because such Lender failed to notify the Agent or any
      Borrower of a change in circumstances which rendered the exemption from,
      or reduction of, withholding tax ineffective, or for any other reason)
      such Lender shall indemnify the Agent or any Borrower fully for all
      amounts paid, directly or indirectly, by the Agent or any Borrower as tax
      or otherwise, including penalties and interest, and including any taxes
      imposed by any jurisdiction on the amounts payable to the Agent under this
      Section 12.10, together with all costs and expenses (including Attorney
      Costs). The obligation of the Lenders under this clause (e) shall survive
      the payment of all Obligations and the resignation or replacement of the
      Agent.

      Section 12.11 Collateral Matters.

            (1)   The Lenders hereby irrevocably authorize the Agent, at its
      option and in its sole discretion, to release any Agent's Liens upon any
      Collateral (i) upon the termination of the Commitments and payment and
      satisfaction in full of all Revolving Loans and reimbursement obligations
      in respect of Letters of Credit and Credit Support, and the termination or
      collateralization as provided in Section 1.3(g) of all outstanding Letters
      of Credit and Credit Support (whether or not any of such obligations are
      due) and all other Obligations; (ii) constituting property being sold or
      disposed of if the Obligated Party disposing of such property certifies to
      the Agent that the sale or disposition is made in compliance with Section
      7.9 (and the Agent may rely conclusively on any such certificate, without
      further inquiry); (iii) constituting property in which no Obligated Party
      owned any interest at the time the Lien was granted or at any time
      thereafter; (iv) constituting property leased to an Obligated Party under
      a lease which has expired or been terminated in a transaction permitted
      under this Agreement; or (v) as specified in Section 8.1(a)(xiv).

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<PAGE>
      Except as provided above, the Agent will not release any of the Agent's
      Liens without the prior written authorization of the Lenders; provided
      that the Agent may, in its discretion, release the Agent's Liens on
      Collateral valued in the aggregate not in excess of $1,000,000 during each
      Fiscal Year without the prior written authorization of the Lenders and the
      Agent may release the Agent's Liens on Collateral valued in the aggregate
      not in excess of $5,000,000 during each Fiscal Year with the prior written
      authorization of the Majority Lenders. Upon request by the Agent or the
      Obligated Parties at any time, the Lenders will confirm in writing the
      Agent's authority to release any Agent's Liens upon particular types or
      items of Collateral pursuant to this Section 12.11.

            (2)   Upon receipt by the Agent of any authorization required
      pursuant to Section 12.11(a) from the Lenders or the Majority Lenders, as
      applicable, of the Agent's authority to release any Agent's Liens upon
      particular types or items of Collateral, and upon at least five (5)
      Business Days prior written request by the Obligated Parties, the Agent
      shall (and is hereby irrevocably authorized by the Lenders to) execute
      such documents as may be necessary to evidence the release of the Agent's
      Liens upon such Collateral; provided, however, that (i) the Agent shall
      not be required to execute any such document on terms which, in the
      Agent's opinion, would expose the Agent to liability or create any
      obligation or entail any consequence other than the release of such Liens
      without recourse or warranty, and (ii) such release shall not in any
      manner discharge, affect, or impair the Obligations or any Liens (other
      than those expressly being released) upon (or obligations of the Obligated
      Parties in respect of) all interests retained by the Obligated Parties,
      including the proceeds of any sale, all of which shall continue to
      constitute part of the Collateral.

            (3)   The Agent shall have no obligation whatsoever to any of the
      Lenders to assure that the Collateral exists or is owned by the Obligated
      Parties or is cared for, protected, or insured or has been encumbered, or
      that the Agent's Liens have been properly or sufficiently or lawfully
      created, perfected, protected, or enforced or are entitled to any
      particular priority, or to exercise at all or in any particular manner or
      under any duty of care, disclosure, or fidelity, or to continue
      exercising, any of the rights, authorities, and powers granted or
      available to the Agent pursuant to any of the Loan Documents, it being
      understood and agreed that in respect of the Collateral, or any act,
      omission, or event related thereto, the Agent may act in any manner it may
      deem appropriate, in its sole discretion given the Agent's own interest in
      the Collateral in its capacity as one of the Lenders and that the Agent
      shall have no other duty or liability whatsoever to any Lender as to any
      of the foregoing.

      Section 12.12 Restrictions on Actions by the Lenders; Sharing of Payments.

            (1)   Each of the Lenders agrees that it shall not, without the
      express consent of all Lenders, and that it shall, to the extent it is
      lawfully entitled to do so, upon the request of all Lenders, setoff
      against the Obligations, any amounts owing by such Lender to any Obligated
      Party or any accounts of any Obligated Party now or hereafter maintained
      with such Lender. Each of the Lenders further agrees that it shall not,
      unless specifically requested to do so by the Agent, take or cause to be
      taken any action to enforce its rights under this Agreement or any other
      Loan Document or against any Obligated Party, including the commencement
      of

CREDIT AGREEMENT-Page 68
<PAGE>
      any legal or equitable proceedings, to foreclose any Lien on, or otherwise
      enforce any security interest in, any of the Collateral.

            (2)   If at any time or times any Lender shall receive (i) by
      payment, foreclosure, setoff, or otherwise, any proceeds of Collateral or
      any payments with respect to the Obligations owing to such Lender arising
      under, or relating to, this Agreement or the other Loan Documents, except
      for any such proceeds or payments received by such Lender from the Agent
      pursuant to the terms of this Agreement, or (ii) payments from the Agent
      in excess of such Lender's ratable portion of all such distributions by
      the Agent, such Lender shall promptly (1) turn the same over to the Agent,
      in kind, and with such endorsements as may be required to negotiate the
      same to the Agent, or in same day funds, as applicable, for the account of
      all of the Lenders and for application to the Obligations in accordance
      with the applicable provisions of this Agreement, or (2) purchase, without
      recourse or warranty, an undivided interest and participation in the
      Obligations owed to the other Lenders so that such excess payment received
      shall be applied ratably as among the Lenders in accordance with their Pro
      Rata Shares; provided, however, that if all or part of such excess payment
      received by the purchasing party is thereafter recovered from it, those
      purchases of participations shall be rescinded in whole or in part, as
      applicable, and the applicable portion of the purchase price paid therefor
      shall be returned to such purchasing party, but without interest except to
      the extent that such purchasing party is required to pay interest in
      connection with the recovery of the excess payment.

      Section 12.13 Agency for Perfection. Each Lender hereby appoints each
other Lender as agent for the purpose of perfecting Liens, for the benefit of
the Agent and the Lenders, in assets which, in accordance with Article 9 of the
UCC or any other Requirement of Law can be perfected only by possession. Should
any Lender (other than the Agent) obtain possession of any such Collateral, such
Lender shall notify the Agent thereof, and, promptly upon the Agent's request
therefor shall deliver such Collateral to the Agent or otherwise deal with such
Collateral in accordance with the Agent's instructions.

      Section 12.14 Payments by the Agent to the Lenders. All payments to be
made by the Agent to the Lenders shall be made by bank wire transfer or internal
transfer of immediately available funds to each Lender pursuant to wire transfer
instructions delivered in writing to the Agent on or prior to the Closing Date
(or if such Lender is an Assignee, delivered with or in the applicable
Assignment and Acceptance), or pursuant to such other wire transfer instructions
as each party may designate for itself by written notice to the Agent.
Concurrently with each such payment, the Agent shall identify whether such
payment (or any portion thereof) represents principal, premium, or interest on
the Revolving Loans or otherwise. Unless the Agent receives notice from the
Borrowers prior to the date on which any payment is due to the Lenders that the
Borrowers will not make such payment in full as and when required, the Agent may
assume that the Borrowers have made such payment in full to the Agent on such
date in immediately available funds and the Agent may (but shall not be so
required), in reliance upon such assumption, distribute to each Lender on such
due date an amount equal to the amount then due such Lender. If and to the
extent the Borrowers have not made such payment in full to the Agent, each
Lender shall repay to the Agent on demand such amount

CREDIT AGREEMENT-Page 69
<PAGE>
distributed to such Lender, together with interest thereon at the Federal Funds
Rate for each day from the date such amount is distributed to such Lender until
the date repaid.

      Section 12.15 Settlement.

            (1)   Each Lender's funded portion of the Revolving Loans is
      intended by the Lenders to be equal at all times to such Lender's Pro Rata
      Share of the outstanding Revolving Loans. Notwithstanding such agreement,
      the Agent, the Bank, and the Lenders agree (which agreement shall not be
      for the benefit of or enforceable by the Obligated Parties) that in order
      to facilitate the administration of this Agreement and the other Loan
      Documents, settlement among them as to the Revolving Loans, including the
      Non-Ratable Loans and the Agent Advances shall take place on a periodic
      basis in accordance with the following provisions:

                  (1)   The Agent shall request settlement (a "Settlement") with
            the Lenders on at least a weekly basis, or on a more frequent basis
            at the Agent's election, (A) on behalf of the Bank, with respect to
            each outstanding Non-Ratable Loan, (B) for itself, with respect to
            each Agent Advance, and (C) with respect to collections received, in
            each case, by notifying the Lenders of such requested Settlement by
            telecopy, telephone, e-mail, or other similar form of transmission,
            of such requested Settlement, no later than 12:00 noon (Dallas,
            Texas time) on the date of such requested Settlement (the
            "Settlement Date"). Each Lender (other than the Bank, in the case of
            the Non-Ratable Loans, and the Agent in the case of the Agent
            Advances) shall transfer the amount of such Lender's Pro Rata Share
            of the outstanding principal amount of the Non-Ratable Loans and the
            Agent Advances with respect to which Settlement is requested to the
            Agent, to such account of the Agent as the Agent may designate, not
            later than 1:00 p.m. (Dallas, Texas time), on the Settlement Date
            applicable thereto. Settlements may occur during the continuation of
            a Default or an Event of Default and whether or not the applicable
            conditions precedent set forth in Article 8 have then been
            satisfied. Such amounts transferred to the Agent shall be applied
            against the amounts of the applicable Non-Ratable Loan or Agent
            Advance and, together with the portion of such Non-Ratable Loan or
            Agent Advance representing the Bank's Pro Rata Share thereof, shall
            constitute Revolving Loans of such Lenders, respectively. If any
            such amount is not transferred to the Agent by any Lender on the
            Settlement Date applicable thereto, the Agent shall be entitled to
            recover such amount on demand from such Lender together with
            interest thereon at the Federal Funds Rate for the first three (3)
            days from and after the Settlement Date and thereafter at the
            Interest Rate then applicable to the Base Rate Revolving Loans (Y)
            on behalf of the Bank, with respect to each outstanding Non-Ratable
            Loan and (Z) for itself, with respect to each Agent Advance.

                  (2)   Notwithstanding the foregoing, not more than one (1)
            Business Day after demand is made by the Agent (whether before or
            after the occurrence of a Default or an Event of Default and
            regardless of whether the Agent has requested a Settlement with
            respect to a Non-Ratable Loan or Agent Advance), each other Lender

CREDIT AGREEMENT-Page 70
<PAGE>
            (A) shall irrevocably and unconditionally purchase and receive from
            the Bank or the Agent, as applicable, without recourse or warranty,
            an undivided interest and participation in such Non-Ratable Loan or
            Agent Advance equal to such Lender's Pro Rata Share of such
            Non-Ratable Loan or Agent Advance, and (B) if Settlement has not
            previously occurred with respect to such Non-Ratable Loans or Agent
            Advances, upon demand by the Bank or the Agent, as applicable, shall
            pay to the Bank or the Agent, as applicable, as the purchase price
            of such participation an amount equal to one-hundred percent (100%)
            of such Lender's Pro Rata Share of such Non-Ratable Loans or Agent
            Advances. If such amount is not in fact transferred to the Agent by
            any Lender, the Agent shall be entitled to recover such amount on
            demand from such Lender together with interest thereon at the
            Federal Funds Rate for the first three (3) days from and after such
            demand and thereafter at the Interest Rate then applicable to Base
            Rate Revolving Loans.

                  (3)   From and after the date, if any, on which any Lender
            purchases an undivided interest and participation in any Non-Ratable
            Loan or Agent Advance pursuant to clause (ii) preceding, the Agent
            shall promptly distribute to such Lender, such Lender's Pro Rata
            Share of all payments of principal and interest and all proceeds of
            Collateral received by the Agent in respect of such Non-Ratable Loan
            or Agent Advance.

                  (4)   Between Settlement Dates, to the extent no Agent
            Advances are outstanding, the Agent may pay over to the Bank any
            payments received by the Agent, which in accordance with the terms
            of this Agreement would be applied to the reduction of the Revolving
            Loans, for application to the Bank's Revolving Loans including
            Non-Ratable Loans. If, as of any Settlement Date, collections
            received since the then immediately preceding Settlement Date have
            been applied to the Bank's Revolving Loans (other than to
            Non-Ratable Loans or Agent Advances in which a Lender has not yet
            funded its purchase of a participation pursuant to clause (ii)
            preceding), as provided for in the previous sentence, the Bank shall
            pay to the Agent for the accounts of the Lenders, to be applied to
            the outstanding Revolving Loans of such Lenders, an amount such that
            each Lender shall, upon receipt of such amount, have, as of such
            Settlement Date, its Pro Rata Share of the Revolving Loans. During
            the period between Settlement Dates, the Bank with respect to
            Non-Ratable Loans, the Agent with respect to Agent Advances, and
            each Lender with respect to the Revolving Loans other than
            Non-Ratable Loans and Agent Advances, shall be entitled to interest
            at the applicable rate or rates payable under this Agreement on the
            actual average daily amount of funds employed by the Bank, the
            Agent, and the other Lenders.

                  (5)   Unless the Agent has received written notice from a
            Lender to the contrary, the Agent may assume that the applicable
            conditions precedent set forth in Article 8 have been satisfied and
            the requested Borrowing will not exceed the Availability on any
            Funding Date for a Revolving Loan or Non-Ratable Loan.

CREDIT AGREEMENT-Page 71
<PAGE>
            (b)   The Lenders' Failure to Perform. All Revolving Loans (other
      than Non-Ratable Loans and Agent Advances) shall be made by the Lenders
      simultaneously and in accordance with their Pro Rata Shares. It is
      understood that (i) no Lender shall be responsible for any failure by any
      other Lender to perform its obligation to make any Revolving Loans
      hereunder, nor shall any Commitment of any Lender be increased or
      decreased as a result of any failure by any other Lender to perform its
      obligation to make any Revolving Loans hereunder, (ii) no failure by any
      Lender to perform its obligation to make any Revolving Loans hereunder
      shall excuse any other Lender from its obligation to make any Revolving
      Loans hereunder, and (iii) the obligations of each Lender hereunder shall
      be several, not joint and several.

            (c)   Defaulting Lenders. Unless the Agent receives notice from a
      Lender on or prior to the Closing Date or, with respect to any Borrowing
      after the Closing Date, at least one (1) Business Day prior to the date of
      such Borrowing, that such Lender will not make available as and when
      required hereunder to the Agent such Lender's Pro Rata Share of such
      Borrowing, the Agent may assume that each Lender has made such amount
      available to the Agent in immediately available funds on the Funding Date.
      Furthermore, the Agent may, in reliance upon such assumption, make
      available to the Borrowers on such date a corresponding amount. If any
      Lender has not transferred its full Pro Rata Share to the Agent in
      immediately available funds and if the Agent has transferred a
      corresponding amount to the Borrowers on the Business Day following such
      Funding Date the applicable Lender shall make such amount available to the
      Agent, together with interest at the Federal Funds Rate for that day. A
      notice by the Agent submitted to any Lender with respect to amounts owing
      shall be conclusive, absent manifest error. If each Lender's full Pro Rata
      Share is transferred to the Agent as required, the amount transferred to
      the Agent shall constitute such Lender's Revolving Loan for all purposes
      of this Agreement. If any such amount is not transferred to the Agent on
      the Business Day following the Funding Date, the Agent will notify the
      Borrowers of such failure to fund and, upon demand by the Agent, the
      Borrowers shall pay such amount to the Agent for the Agent's account,
      together with interest thereon for each day elapsed since the date of such
      Borrowing, at a rate per annum equal to the Interest Rate applicable at
      the time to the Revolving Loans comprising that particular Borrowing. The
      failure of any Lender to make any Revolving Loan on any Funding Date (any
      such Lender, prior to the cure of such failure, being hereinafter referred
      to as a "Defaulting Lender") shall not relieve any other Lender of its
      obligation hereunder to make a Revolving Loan on such Funding Date. No
      Lender shall be responsible for any other Lender's failure to advance such
      other Lenders' Pro Rata Share of any Borrowing.

            (d)   Retention of Defaulting Lender's Payments. The Agent shall not
      be obligated to transfer to a Defaulting Lender any payments made by any
      Borrower to the Agent for the Defaulting Lender's benefit, nor shall a
      Defaulting Lender be entitled to the sharing of any payments hereunder.
      Amounts payable to a Defaulting Lender shall instead be paid to or
      retained by the Agent. In its discretion, the Agent may loan the Borrowers
      the amount of all such payments received or retained by it for the account
      of such Defaulting Lender. Any amounts so loaned to the Borrowers shall
      bear interest at the rate applicable to Base Rate Revolving Loans and for
      all other purposes of this Agreement shall be treated as if they were

CREDIT AGREEMENT-Page 72
<PAGE>
      Revolving Loans, provided, however, that for purposes of voting or
      consenting to matters with respect to the Loan Documents and determining
      Pro Rata Shares, such Defaulting Lender shall be deemed not to be a
      "Lender." Until a Defaulting Lender cures its failure to fund its Pro Rata
      Share of any Borrowing (i) such Defaulting Lender shall not be entitled to
      any portion of the Unused Line Fee and (ii) the Unused Line Fee shall
      accrue in favor of the Lenders which have funded their respective Pro Rata
      Shares of such requested Borrowing and shall be allocated among such
      performing Lenders ratably based upon their relative Commitments. This
      Section shall remain effective with respect to such Lender until such time
      as the Defaulting Lender shall no longer be in default of any of its
      obligations under this Agreement. The terms of this Section shall not be
      construed to increase or otherwise affect the Commitment of any Lender, or
      relieve or excuse the performance by any Borrower of its duties and
      obligations hereunder.

            (e)   Removal of Defaulting Lender. At the Borrowers' request, the
      Agent or an Eligible Assignee reasonably acceptable to the Agent and the
      Borrowers shall have the right (but not the obligation) to purchase from
      any Defaulting Lender, and each Defaulting Lender shall, upon such
      request, sell and assign to the Agent or such Eligible Assignee, all of
      the Defaulting Lender's outstanding Commitments hereunder. Such sale shall
      be consummated promptly after the Agent has arranged for a purchase by the
      Agent or an Eligible Assignee pursuant to an Assignment and Acceptance,
      and at a price equal to the outstanding principal balance of the
      Defaulting Lender's Revolving Loans, plus accrued interest and fees,
      without premium or discount.

      Section 12.16 Letters of Credit; Intra-Lender Issues.

            (1)   Notice of Letter of Credit Balance. On each Settlement Date,
      the Agent shall notify each Lender of the issuance of all Letters of
      Credit and Credit Support since the prior Settlement Date.

            (2)   Participations in Letters of Credit.

                  (1)   Purchase of Participations. Immediately upon issuance of
            any Letter of Credit or Credit Support in accordance with Section
            1.3(d), each Lender shall be deemed to have irrevocably and
            unconditionally purchased and received without recourse or warranty,
            an undivided interest and participation equal to such Lender's Pro
            Rata Share of the face amount of such Letter of Credit or Credit
            Support in connection with the issuance of such Letter of Credit or
            Credit Support (including all obligations of the Borrower for whose
            account such Letter of Credit or Credit Support was issued, and any
            security therefor or guaranty pertaining thereto).

                  (2)   Sharing of Reimbursement Obligation Payments. Whenever
            the Agent receives a payment from a Borrower on account of
            reimbursement obligations in respect of a Letter of Credit or Credit
            Support as to which the Agent has previously received for the
            account of the Agent or the Letter of Credit Issuer payment from a
            Lender, the Agent shall promptly pay to such Lender such Lender's
            Pro Rata Share

CREDIT AGREEMENT-Page 73
<PAGE>
            of such payment from such Borrower. Each such payment shall be made
            by the Agent on the next Settlement Date.

                  (3)   Documentation. Upon the request of any Lender, the Agent
            shall furnish to such Lender copies of any Letter of Credit, Credit
            Support, reimbursement agreements executed in connection therewith,
            applications for any Letter of Credit or Credit Support, and such
            other documentation as may reasonably be requested by such Lender.

                  (4)   Obligations Irrevocable. The obligation of each Lender
            to make payments to the Agent with respect to any Letter of Credit
            or Credit Support or with respect to their participation therein or
            with respect to the Revolving Loans made as a result of a drawing
            under a Letter of Credit or Credit Support and the obligation of the
            Borrowers to make payments to the Agent, for the account of the
            Lenders, with respect to any Letter of Credit or Credit Support
            shall be irrevocable and shall not be subject to any qualification
            or exception whatsoever, including any of the following
            circumstances:

                        (1)   any lack of validity or enforceability of this
                  Agreement or any of the other Loan Documents;

                        (2)   the existence of any claim, setoff, defense, or
                  other right which any Borrower may have at any time against a
                  beneficiary named in a Letter of Credit or any transferee of
                  any Letter of Credit (or any Person for whom any such
                  transferee may be acting), any Lender, the Agent, the Letter
                  of Credit Issuer, or any other Person, whether in connection
                  with this Agreement, any Letter of Credit or Credit Support,
                  the transactions contemplated herein or any unrelated
                  transactions (including any underlying transactions between
                  such Borrower or any other Person and the beneficiary named in
                  any Letter of Credit);

                        (3)   any draft, certificate, or any other document
                  presented under any Letter of Credit proving to be forged,
                  fraudulent, invalid, or insufficient in any respect or any
                  statement therein being untrue or inaccurate in any respect;

                        (4)   the surrender or impairment of any security for
                  the performance or observance of any of the terms of any of
                  the Loan Documents;

                        (5)   the occurrence of any Default or Event of Default;
                  or

                        (6)   the failure of the Borrowers to satisfy the
                  applicable conditions precedent set forth in Article 8.

CREDIT AGREEMENT-Page 74
<PAGE>
            (3)   Recovery or Avoidance of Payments; Refund of Payments in
      Error. In the event any payment by or on behalf of any Borrower received
      by the Agent with respect to any Letter of Credit or Credit Support and
      distributed by the Agent to the Lenders on account of their respective
      participations therein is thereafter set aside, avoided, or recovered from
      the Agent in connection with any receivership, liquidation, or bankruptcy
      proceeding, the Lenders shall, upon demand by the Agent, pay to the Agent
      their respective Pro Rata Shares of such amount set aside, avoided, or
      recovered, together with interest at the rate required to be paid by the
      Agent upon the amount required to be repaid by it. Unless the Agent
      receives notice from the Borrowers prior to the date on which any payment
      is due to the Lenders that the Borrowers will not make such payment in
      full as and when required, the Agent may assume that the Borrowers have
      made such payment in full to the Agent on such date in immediately
      available funds and the Agent may (but shall not be so required), in
      reliance upon such assumption, distribute to each Lender on such due date
      an amount equal to the amount then due such Lender. If and to the extent
      the Borrowers have not made such payment in full to the Agent, each Lender
      shall repay to the Agent on demand such amount distributed to such Lender,
      together with interest thereon at the Federal Funds Rate for each day from
      the date such amount is distributed to such Lender until the date repaid.

            (4)   Indemnification by the Lenders. To the extent not reimbursed
      by the Borrowers and without limiting the obligations of the Borrowers
      hereunder, the Lenders agree to indemnify the Letter of Credit Issuer
      ratably in accordance with their respective Pro Rata Shares, for any and
      all liabilities, obligations, losses, damages, penalties, actions,
      judgments, suits, costs, expenses (including attorneys' fees) or
      disbursements of any kind and nature whatsoever that may be imposed on,
      incurred by or asserted against the Letter of Credit Issuer in any way
      relating to or arising out of any Letter of Credit or Credit Support or
      the transactions contemplated thereby or any action taken or omitted by
      the Letter of Credit Issuer under any Letter of Credit or Credit Support
      or any Loan Document in connection therewith; provided that no Lender
      shall be liable for any of the foregoing to the extent it arises from the
      gross negligence or willful misconduct of the Person to be indemnified.
      Without limitation of the foregoing, each Lender agrees to reimburse the
      Letter of Credit Issuer promptly upon demand for its Pro Rata Share of any
      costs or expenses payable by any Borrower to the Letter of Credit Issuer,
      to the extent that the Letter of Credit Issuer is not promptly reimbursed
      for such costs and expenses by a Borrower. The agreement contained in this
      Section shall survive payment in full of all other Obligations.

      Section 12.17 Concerning the Collateral and the Related Loan Documents.
Each Lender authorizes and directs the Agent to enter into the other Loan
Documents, for the ratable benefit and obligation of the Agent and the Lenders.
Each Lender agrees that any action taken by the Agent or the Majority Lenders in
accordance with the terms of this Agreement or the other Loan Documents, and the
exercise by the Agent or the Majority Lenders of their respective powers set
forth therein or herein, together with such other powers that are reasonably
incidental thereto, shall be binding upon all of the Lenders. The Lenders
acknowledge that the Revolving Loans (including the Agent Advances and the
Non-Ratable Loans), Bank Products (including Hedge Agreements), and all
interest, fees, and expenses hereunder constitute one Debt, secured pari passu
by all of the Collateral.

CREDIT AGREEMENT-Page 75
<PAGE>
      Section 12.18 Field Audit and Examination Reports; Disclaimer by the
Lenders. By signing this Agreement, each Lender:

            (1)   is deemed to have requested that the Agent furnish such
      Lender, promptly after it becomes available, a copy of each field audit or
      examination report (each a "Report" and collectively, the "Reports")
      prepared by or on behalf of the Agent;

            (2)   expressly agrees and acknowledges that neither the Bank nor
      the Agent (i) makes any representation or warranty as to the accuracy of
      any Report, or (ii) shall be liable for any information contained in any
      Report;

            (3)   expressly agrees and acknowledges that the Reports are not
      comprehensive audits or examinations, that the Agent, the Bank, or any
      other party performing any audit or examination will inspect only specific
      information regarding the Obligated Parties and will rely significantly
      upon the Obligated Parties' books and records, as well as on
      representations of the Obligated Parties' personnel;

            (4)   agrees to keep all Reports confidential and strictly for its
      internal use, and not to distribute except to its Participants, or use any
      Report in any other manner; and

            (5)   without limiting the generality of any other indemnification
      provision contained in this Agreement, agrees: (i) to hold the Agent and
      any such other Lender preparing a Report harmless from any action the
      indemnifying Lender may take or conclusion the indemnifying Lender may
      reach or draw from any Report in connection with any loans or other credit
      accommodations that the indemnifying Lender has made or may make to the
      Obligated Parties, or the indemnifying Lender's participation in, or the
      indemnifying Lender's purchase of, a loan or loans of the Obligated
      Parties; and (ii) to pay and protect, and indemnify, defend, and hold the
      Agent and any such other Lender preparing a Report harmless from and
      against, the claims, actions, proceedings, damages, costs, expenses, and
      other amounts (including Attorney Costs) incurred by the Agent and any
      such other Lender preparing a Report as the direct or indirect result of
      any third parties who might obtain all or part of any Report through the
      indemnifying Lender.

      Section 12.19 Relation Among the Lenders. The Lenders are not partners or
co-venturers, and no Lender shall be liable for the acts or omissions of, or
(except as otherwise set forth herein in case of the Agent) authorized to act
for, any other Lender.

ARTICLE 13

                                  MISCELLANEOUS

      Section 13.1 No Waivers; Cumulative Remedies. No failure by the Agent or
any Lender to exercise any right, remedy, or option under this Agreement or any
present or future supplement hereto, or in any other agreement between or among
any Borrower and the Agent and/or any Lender, or delay by the Agent or any
Lender in exercising the same, will operate as a waiver thereof. Subject

CREDIT AGREEMENT-Page 76
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to Section 11.1, no waiver by the Agent or any Lender will be effective unless
it is in writing, and then only to the extent specifically stated. No waiver by
the Agent or the Lenders on any occasion shall affect or diminish the Agent's
and each Lender's rights thereafter to require strict performance by the
Obligated Parties of any provision of this Agreement. The Agent and the Lenders
may proceed directly to collect the Obligations without any prior recourse to
the Collateral. The Agent's and each Lender's rights under this Agreement will
be cumulative and not exclusive of any other right or remedy which the Agent or
any Lender may have.

      Section 13.2 Severability. The illegality or unenforceability of any
provision of this Agreement, any other Loan Document, or any instrument or
agreement required hereunder shall not in any way affect or impair the legality
or enforceability of the remaining provisions of this Agreement, any other Loan
Document, or any instrument or agreement required hereunder.

      Section 13.3 Governing Law; Choice of Forum; Service of Process.

            (1)   THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND
      LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE
      INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS, PROVIDED
      THAT PERFECTION ISSUES WITH RESPECT TO ARTICLE 9 OF THE UCC MAY GIVE
      EFFECT TO APPLICABLE CHOICE OR CONFLICT OF LAW RULES SET FORTH IN ARTICLE
      9 OF THE UCC) OF THE STATE OF TEXAS; PROVIDED THAT THE AGENT AND THE
      LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

            (2)   ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
      OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF
      TEXAS OR OF THE U.S. LOCATED IN DALLAS COUNTY, TEXAS, AND BY EXECUTION AND
      DELIVERY OF THIS AGREEMENT, EACH OF THE OBLIGATED PARTIES, THE AGENT, AND
      THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
      NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE OBLIGATED PARTIES,
      THE AGENT, AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY
      OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
      CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
      ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT,
      ANY OTHER LOAN DOCUMENT, OR ANY OTHER AGREEMENT, DOCUMENT, OR INSTRUMENT
      RELATED HERETO OR THERETO. NOTWITHSTANDING THE FOREGOING (i) THE AGENT AND
      THE LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST
      ANY OBLIGATED PARTY OR ITS PROPERTY IN THE COURTS OF ANY OTHER
      JURISDICTION THE AGENT OR THE LENDERS DEEM NECESSARY OR APPROPRIATE IN
      ORDER TO REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS
      AND (ii) EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THE

CREDIT AGREEMENT-Page 77
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      COURTS DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE
      HEARD BY A COURT LOCATED OUTSIDE THOSE JURISDICTIONS.

            (3)   EACH OBLIGATED PARTY HEREBY WAIVES PERSONAL SERVICE OF ANY AND
      ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE
      MADE BY REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO SUCH
      OBLIGATED PARTY AT ITS ADDRESS SET FORTH IN SECTION 13.8 AND SERVICE SO
      MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL
      HAVE BEEN SO DEPOSITED IN THE U.S. MAILS POSTAGE PREPAID. NOTHING
      CONTAINED HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR THE LENDERS TO
      SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.

      Section 13.4 Waiver of Jury Trial. EACH OF THE OBLIGATED PARTIES, THE
LENDERS, AND THE AGENT IRREVOCABLY WAIVES ITS RESPECTIVE RIGHTS TO A TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO
THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING, OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED
PERSON, PARTICIPANT, OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. EACH OF THE OBLIGATED PARTIES, THE LENDERS, AND THE AGENT
AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES FURTHER
AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS SECTION AS TO ANY ACTION, COUNTERCLAIM, OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT,
THE OTHER LOAN DOCUMENTS, OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS, OR MODIFICATIONS TO
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

      Section 13.5 Survival of Representations and Warranties. All
representations and warranties of the Obligated Parties contained in this
Agreement shall survive the execution, delivery, and acceptance thereof by the
parties, notwithstanding any investigation by the Agent or the Lenders or their
respective agents.

      Section 13.6 Other Security and Guaranties. The Agent may, without notice
or demand and without affecting the Obligated Parties' obligations hereunder,
from time to time: (a) take from any Person and hold collateral (other than the
Collateral) for the payment of all or any part of the Obligations and exchange,
enforce, or release such collateral or any part thereof; and (b) accept and hold
any endorsement or guaranty of payment of all or any part of the Obligations and
release or substitute any such endorser or guarantor, or any Person who has
given any Lien in any other collateral as security for the payment of all or any
part of the Obligations, or any other Person in any way obligated to pay all or
any part of the Obligations.

CREDIT AGREEMENT-Page 78
<PAGE>
      Section 13.7 Fees and Expenses. Each Borrower agrees to pay to the Agent,
for its benefit, on demand, all costs and expenses that the Agent pays or incurs
in connection with the negotiation, preparation, syndication, consummation,
administration, enforcement, and termination of this Agreement or any of the
other Loan Documents, including: (a) Attorney Costs; (b) costs and expenses
(including Attorney Costs) for any amendment, supplement, waiver, consent, or
subsequent closing in connection with the Loan Documents and the transactions
contemplated thereby; (c) reasonable costs and expenses of lien and title
searches, title insurance, and environmental audits; (d) taxes, fees, and other
charges for recording the Mortgages, filing financing statements and
continuations, and other actions to perfect, protect, and continue the Agent's
Liens (including costs and expenses paid or incurred by the Agent in connection
with the consummation of this Agreement); (e) sums paid or incurred to pay any
amount or take any action required of any Obligated Party under the Loan
Documents that such Obligated Party fails to pay or take; (f) costs of
appraisals, inspections, and verifications of the Collateral, including travel,
lodging, and meals for field examinations and inspections of the Collateral and
the Obligated Parties' operations by the Agent, plus the Agent's then customary
charge for field examinations and audits and the preparation of reports thereof
(such charge is currently $800 per day (or portion thereof) for each Person
retained or employed by the Agent with respect to each field examination or
audit); and (g) costs and expenses of forwarding loan proceeds, collecting
checks and other items of payment, and establishing and maintaining Payment
Accounts and lockboxes, and costs and expenses of preserving and protecting the
Collateral. In addition, the Borrowers agree to pay costs and expenses incurred
by the Agent (including Attorney Costs) to the Agent, for its benefit, on
demand, and to the other Lenders for their benefit, on demand, and all
reasonable fees, expenses, and disbursements incurred by such other Lenders for
one law firm retained by such other Lenders, in each case, paid or incurred to
obtain payment of the Obligations, enforce the Agent's Liens, sell or otherwise
realize upon the Collateral, and otherwise enforce the provisions of the Loan
Documents, or to defend any claims made or threatened against the Agent or any
Lender arising out of the transactions contemplated hereby (including
preparations for and consultations concerning any such matters). The foregoing
shall not be construed to limit any other provisions of the Loan Documents
regarding costs and expenses to be paid by the Borrowers. All of the foregoing
costs and expenses shall be charged to the Loan Account as Revolving Loans as
described in Section 3.6.

      Section 13.8 Notices. Except as otherwise provided herein, all notices,
demands, and requests that any party is required or elects to give to any other
party shall be in writing, or by a telecommunications device capable of creating
a written record, and any such notice shall become effective (a) upon personal
delivery thereof, including, but not limited to, delivery by overnight mail or
courier service, (b) four (4) days after it shall have been mailed by U.S. mail,
first class, certified or registered, with postage prepaid, or (c) in the case
of notice by such a telecommunications device, when properly transmitted, in
each case addressed to the party to be notified as follows:

CREDIT AGREEMENT-Page 79
<PAGE>
         If to the Agent or to the Bank:

                  Bank of America, National Association
                  55 South Lake Avenue, Suite 900
                  Pasadena, California 91101
                  Attention:  Business Credit: URGENT
                  Telecopy No.:  (626) 578-6143

         If to any Obligated Party:

                  c/o Daisytek, Incorporated
                  1025 Central Expressway South, Suite 200
                  Allen, Texas 75013
                  Attention: Ralph Mitchell
                  Telecopy No.: (972) 999-4081

or to such other address as each party may designate for itself by like notice.
For purposes of providing any notice to a Lender, such notice shall be delivered
to such Lender at the address for notice of such Lender set forth on the
signature pages of this Agreement or on the most recent Assignment and
Acceptance to which such Lender is a party. Failure or delay in delivering
copies of any notice, demand, request, consent, approval, declaration, or other
communication to the persons designated above to receive copies shall not
adversely affect the effectiveness of such notice, demand, request, consent,
approval, declaration, or other communication.

      Section 13.9 Waiver of Notices. Unless otherwise expressly provided
herein, each Obligated Party waives presentment, notice of demand or dishonor,
protest as to any instrument, notice of intent to accelerate the Obligations,
and notice of acceleration of the Obligations, as well as any and all other
notices to which it might otherwise be entitled. No notice to or demand on any
Obligated Party which the Agent or any Lender may elect to give shall entitle
any Obligated Party to any or further notice or demand in the same, similar, or
other circumstances.

      Section 13.10 Binding Effect. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective representatives,
successors, and assigns of the parties hereto; provided, however, that no
interest herein may be assigned by any Obligated Party without the prior written
consent of the Agent and each Lender. The rights and benefits of the Agent and
the Lenders hereunder shall, if such Persons so agree, inure to any party
acquiring any interest in the Obligations or any part thereof.

      Section 13.11 Indemnity of the Agent and the Lenders by the Borrower.

            (1)   EACH OBLIGATED PARTY AGREES TO DEFEND, INDEMNIFY, AND HOLD THE
      AGENT-RELATED PERSONS, AND EACH LENDER AND EACH OF THEIR RESPECTIVE
      OFFICERS, DIRECTORS, EMPLOYEES, COUNSEL, REPRESENTATIVES, AGENTS, AND
      ATTORNEYS-IN-FACT (EACH, AN

CREDIT AGREEMENT-Page 80
<PAGE>
      "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES,
      OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
      CHARGES, EXPENSES, AND DISBURSEMENTS (INCLUDING ATTORNEY FEES AND
      EXPENSES) OF ANY KIND OR NATURE WHATSOEVER WHICH MAY AT ANY TIME
      (INCLUDING AT ANY TIME FOLLOWING REPAYMENT OF THE REVOLVING LOANS AND THE
      TERMINATION, RESIGNATION, OR REPLACEMENT OF THE AGENT OR REPLACEMENT OF
      ANY LENDER) BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST ANY SUCH
      PERSON IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT, ANY OTHER
      LOAN DOCUMENT, OR ANY OTHER AGREEMENT, DOCUMENT, OR INSTRUMENT
      CONTEMPLATED BY OR REFERRED TO HEREIN OR THEREIN, OR THE TRANSACTIONS
      CONTEMPLATED HEREBY OR THEREBY, OR ANY ACTION TAKEN OR OMITTED BY ANY SUCH
      PERSON UNDER OR IN CONNECTION WITH ANY OF THE FOREGOING, INCLUDING WITH
      RESPECT TO ANY INVESTIGATION, LITIGATION, OR PROCEEDING (INCLUDING ANY
      INSOLVENCY PROCEEDING OR APPELLATE PROCEEDING) RELATED TO OR ARISING OUT
      OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR THE REVOLVING LOANS OR THE
      USE OF THE PROCEEDS THEREOF, WHETHER OR NOT ANY INDEMNIFIED PERSON IS A
      PARTY THERETO (ALL THE FOREGOING, COLLECTIVELY, THE "INDEMNIFIED
      LIABILITIES"); PROVIDED THAT THE OBLIGATED PARTIES SHALL HAVE NO
      OBLIGATION HEREUNDER TO ANY INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED
      LIABILITIES RESULTING SOLELY FROM THE GROSS NEGLIGENCE OR WILLFUL
      MISCONDUCT OF SUCH INDEMNIFIED PERSON. THE AGREEMENTS IN THIS SECTION
      13.11 SHALL SURVIVE PAYMENT OF ALL OTHER OBLIGATIONS.

            (2)   EACH OBLIGATED PARTY AGREES TO INDEMNIFY, DEFEND, AND HOLD
      HARMLESS THE AGENT AND THE LENDERS FROM ANY LOSS OR LIABILITY DIRECTLY OR
      INDIRECTLY ARISING OUT OF THE USE, GENERATION, MANUFACTURE, PRODUCTION,
      STORAGE, RELEASE, THREATENED RELEASE, DISCHARGE, DISPOSAL, OR PRESENCE OF
      A HAZARDOUS SUBSTANCE RELATING TO ANY OBLIGATED PARTY'S OPERATIONS,
      BUSINESS, OR PROPERTY. THIS INDEMNITY WILL APPLY WHETHER THE HAZARDOUS
      SUBSTANCE IS ON, UNDER, OR ABOUT ANY OBLIGATED PARTY'S PROPERTY OR
      OPERATIONS OR PROPERTY LEASED TO ANY OBLIGATED PARTY. THE INDEMNITY
      INCLUDES BUT IS NOT LIMITED TO ATTORNEY FEES AND EXPENSES. THE INDEMNITY
      EXTENDS TO THE AGENT AND THE LENDERS, THEIR AFFILIATES, SUBSIDIARIES, AND
      ALL OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, SUCCESSORS,
      ATTORNEYS, AND ASSIGNS. AS USED IN THIS CLAUSE (b), "HAZARDOUS SUBSTANCES"
      MEANS ANY SUBSTANCE, MATERIAL, OR WASTE THAT IS OR BECOMES DESIGNATED OR
      REGULATED AS "TOXIC," "HAZARDOUS," "POLLUTANT," OR "CONTAMINANT" OR A
      SIMILAR DESIGNATION OR REGULATION UNDER ANY FEDERAL, STATE, OR LOCAL LAW
      (WHETHER UNDER COMMON LAW, STATUTE, REGULATION, OR

CREDIT AGREEMENT-Page 81
<PAGE>
      OTHERWISE) OR JUDICIAL OR ADMINISTRATIVE INTERPRETATION OF SUCH, INCLUDING
      PETROLEUM OR NATURAL GAS. THIS INDEMNITY WILL SURVIVE REPAYMENT OF ALL
      OTHER OBLIGATIONS.

      Section 13.12 Limitation of Liability. NO CLAIM MAY BE MADE BY ANY
OBLIGATED PARTY, ANY LENDER, OR OTHER PERSON AGAINST ANY OBLIGATED PARTY, THE
AGENT, ANY LENDER, OR THE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, COUNSEL,
REPRESENTATIVES, AGENTS, OR ATTORNEYS-IN-FACT OF ANY OF THEM FOR ANY SPECIAL,
INDIRECT, CONSEQUENTIAL, OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM FOR BREACH
OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATED TO THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY
ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION THEREWITH, AND EACH OBLIGATED
PARTY AND EACH LENDER HEREBY WAIVES, RELEASES, AND AGREES NOT TO SUE UPON ANY
CLAIM FOR SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR
SUSPECTED TO EXIST IN ITS FAVOR.

      Section 13.13 Final Agreement. This Agreement and the other Loan Documents
are intended by the Obligated Parties, the Agent, and the Lenders to be the
final, complete, and exclusive expression of the agreement between them. This
Agreement and the other Loan Documents supersede any and all prior oral or
written agreements relating to the subject matter hereof and thereof. No
modification, rescission, waiver, release, or amendment of any provision of this
Agreement or any other Loan Document shall be made, except by a written
agreement signed by the Obligated Parties and a duly authorized officer of each
of the Agent and the Majority Lenders, the Required Lenders, or all of the
Lenders, as applicable.

      THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
      AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
      SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
      AGREEMENTS BETWEEN THE PARTIES.

      Section 13.14 Counterparts. This Agreement and the other Loan Documents
may be executed in any number of counterparts, and by the Agent, each Lender,
and the Obligated Parties in separate counterparts, each of which shall be an
original, but all of which shall together constitute one and the same agreement.
Signature pages to this Agreement and the other Loan Documents may be detached
from multiple separate counterparts and attached to a single counterpart so that
all signature pages are physically attached to the same document and a telecopy
of any such executed signature page shall be valid as an original.

      Section 13.15 Captions. The captions contained in this Agreement and the
other Loan Documents are for convenience of reference only, are without
substantive meaning and should not be construed to modify, enlarge, or restrict
any provision.

CREDIT AGREEMENT-Page 82
<PAGE>
      Section 13.16 Right of Setoff. In addition to any rights and remedies of
the Lenders provided by law, if an Event of Default exists or the Revolving
Loans have been accelerated, each Lender is authorized at any time and from time
to time, without prior notice to the Obligated Parties, any such notice being
waived by the Obligated Parties to the fullest extent permitted by law, to
setoff and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held by, and other indebtedness at any time
owing by, such Lender or any Affiliate of such Lender to or for the credit or
the account of the Obligated Parties against any and all Obligations owing to
such Lender, now or hereafter existing, irrespective of whether or not the Agent
or such Lender shall have made demand under this Agreement or any other Loan
Document and although such Obligations may be contingent or unmatured. Each
Lender agrees promptly to notify the Obligated Parties and the Agent after any
such setoff and application made by such Lender; provided, however, the failure
to give such notice shall not affect the validity of such setoff and
application. NOTWITHSTANDING THE FOREGOING, NO LENDER SHALL EXERCISE ANY RIGHT
OF SETOFF, BANKER'S LIEN, OR THE LIKE AGAINST ANY DEPOSIT ACCOUNT OR PROPERTY OF
ANY OBLIGATED PARTY HELD OR MAINTAINED BY SUCH LENDER WITHOUT THE PRIOR WRITTEN
UNANIMOUS CONSENT OF THE LENDERS.

      Section 13.17 Confidentiality.

            (1)   Each Obligated Party hereby consents that the Agent and each
      Lender may issue and disseminate to the public general information
      describing the credit accommodation entered into pursuant to this
      Agreement, including the name and address of the Obligated Parties and a
      general description of the Obligated Parties' business and may use each
      Obligated Party's name in advertising and other promotional material.

            (2)   Each Lender severally agrees to take normal and reasonable
      precautions and exercise due care to maintain the confidentiality of all
      information identified as "confidential" or "secret" by any Obligated
      Party and provided to the Agent or such Lender by or on behalf of any
      Obligated Party, under this Agreement or any other Loan Document, except
      to the extent that such information (i) was or becomes generally available
      to the public other than as a result of disclosure by the Agent or such
      Lender, or (ii) was or becomes available on a nonconfidential basis from a
      source other than an Obligated Party, provided that such source is not
      bound by a confidentiality agreement with an Obligated Party known to the
      Agent or such Lender; provided, however, that the Agent and any Lender may
      disclose such information (A) at the request or pursuant to any
      requirement of any Governmental Authority to which the Agent or such
      Lender is subject or in connection with an examination of the Agent or
      such Lender by any such Governmental Authority; (B) pursuant to subpoena
      or other court process; (C) when required to do so in accordance with the
      provisions of any applicable Requirement of Law; (d) to the extent
      reasonably required in connection with any litigation or proceeding
      (including, but not limited to, any bankruptcy proceeding) to which the
      Agent, any Lender or their respective Affiliates may be party; (e) to the
      extent reasonably required in connection with the exercise of any remedy
      hereunder or under any other Loan Document; (f) to the Agent's or such
      Lender's independent auditors, accountants, attorneys, and other
      professional advisors; (g) to any prospective Participant or Assignee,
      actual or potential, provided that such prospective Participant or
      Assignee agrees to keep such

CREDIT AGREEMENT-Page 83
<PAGE>
      information confidential to the same extent required of the Agent and the
      Lenders hereunder; (h) as expressly permitted under the terms of any other
      document or agreement regarding confidentiality to which any Obligated
      Party is party or is deemed party with the Agent or such Lender; and (i)
      to its Affiliates.

      Section 13.18 Conflicts with other Loan Documents. Unless otherwise
expressly provided in this Agreement (or in another Loan Document by specific
reference to the applicable provision contained in this Agreement), if any
provision contained in this Agreement conflicts with any provision of any other
Loan Document, the provision contained in this Agreement shall govern and
control.

      Section 13.19 Joint and Several Liability. All Revolving Loans, upon
funding, shall be deemed to be jointly funded to and received by the Borrowers.
Each Borrower jointly and severally agrees to pay, and shall be jointly and
severally liable under this Agreement for, all Obligations (excluding Existing
Obligations in the case of a Newly Obligated Party), regardless of the manner or
amount in which proceeds of Revolving Loans are used, allocated, shared, or
disbursed by or among the Borrowers themselves, or the manner in which the Agent
and/or any Lender accounts for such Revolving Loans or other extensions of
credit on its books and records. Each Borrower shall be liable for all amounts
due to the Agent and/or any Lender under this Agreement, regardless of which
Borrower actually receives Revolving Loans or other extensions of credit
hereunder or the amount of such Revolving Loans and extensions of credit
received or the manner in which the Agent and/or such Lender accounts for such
Revolving Loans or other extensions of credit on its books and records. Each
Borrower's Obligations with respect to Revolving Loans and other extensions of
credit made to it, and such Borrower's Obligations arising as a result of the
joint and several liability of such Borrower hereunder, with respect to
Revolving Loans made to the other Borrowers hereunder, shall be separate and
distinct obligations, but all such Obligations shall be primary obligations of
such Borrower. The Borrowers acknowledge and expressly agree with the Agent and
each Lender that the joint and several liability of each Borrower is required
solely as a condition to, and is given solely as inducement for and in
consideration of, credit or accommodations extended or to be extended under the
Loan Documents to any or all of the other Borrowers and is not required or given
as a condition of extensions of credit to such Borrower. Each Borrower's
obligations under this Agreement and as an obligor under a Guaranty Agreement
shall be separate and distinct obligations. Each Borrower's obligations under
this Agreement shall, to the fullest extent permitted by law, be unconditional
irrespective of (i) the validity or enforceability, avoidance, or subordination
of the Obligations of any other Borrower or of any promissory note or other
document evidencing all or any part of the Obligations of any other Borrower,
(ii) the absence of any attempt to collect the Obligations from any other
Borrower, any Guarantor, or any other security therefor, or the absence of any
other action to enforce the same, (iii) the waiver, consent, extension,
forbearance, or granting of any indulgence by the Agent and/or any Lender with
respect to any provision of any instrument evidencing the Obligations of any
other Borrower or Guarantor, or any part thereof, or any other agreement now or
hereafter executed by any other Borrower or Guarantor and delivered to the Agent
and/or any Lender, (iv) the failure by the Agent and/or any Lender to take any
steps to perfect and maintain its security interest in, or to preserve its
rights to, any security or collateral for the Obligations of any other Borrower
or Guarantor, (v) the Agent's and/or any Lender's election, in any proceeding
instituted under the Bankruptcy Code, of the application of Section 1111(b)(2)
of the

CREDIT AGREEMENT-Page 84
<PAGE>
Bankruptcy Code, (vi) any borrowing or grant of a security interest by any other
Borrower, as debtor-in-possession under Section 364 of the Bankruptcy Code,
(vii) the disallowance of all or any portion of the Agent's and/or any Lender's
claim(s) for the repayment of the Obligations of any other Borrower under
Section 502 of the Bankruptcy Code, or (viii) any other circumstances which
might constitute a legal or equitable discharge or defense of a guarantor or of
any other Borrower. With respect to any Borrower's Obligations arising as a
result of the joint and several liability of the Borrowers hereunder with
respect to Revolving Loans or other extensions of credit made to any of the
other Borrowers hereunder, such Borrower waives, until the Obligations shall
have been paid in full and this Agreement shall have been terminated, any right
to enforce any right of subrogation or any remedy which the Agent and/or any
Lender now has or may hereafter have against any other Borrower, any endorser or
any Guarantor of all or any part of the Obligations, and any benefit of, and any
right to participate in, any security or collateral given to the Agent and/or
any Lender to secure payment of the Obligations or any other liability of any
Borrower to the Agent and/or any Lender. Upon any Event of Default, the Agent
may proceed directly and at once, without notice, against any Borrower to
collect and recover the full amount, or any portion of the Obligations, without
first proceeding against any other Borrower or any other Person, or against any
security or collateral for the Obligations. Each Borrower consents and agrees
that the Agent shall be under no obligation to marshal any assets in favor of
any Borrower or against or in payment of any or all of the Obligations.

      Section 13.20 Contribution and Indemnification among the Borrowers. Each
Borrower is obligated to repay the Obligations as joint and several obligors
under this Agreement. To the extent that any Borrower shall, under this
Agreement as a joint and several obligor, repay any of the Obligations
constituting Revolving Loans made to another Borrower hereunder or other
Obligations incurred directly and primarily by any other Borrower (an
"Accommodation Payment"), then the Borrower making such Accommodation Payment
shall be entitled to contribution and indemnification from, and be reimbursed
by, each of the other Borrowers in an amount, for each of such other Borrowers,
equal to a fraction of such Accommodation Payment, the numerator of which
fraction is such other Borrower's Allocable Amount and the denominator of which
is the sum of the Allocable Amounts of all of the Borrowers. As of any date of
determination, the "Allocable Amount" of each Borrower shall be equal to the
maximum amount of liability for Accommodation Payments which could be asserted
against such Borrower hereunder without (a) rendering such Borrower "insolvent"
within the meaning of Section 101 (31) of the Bankruptcy Code, Section 2 of the
Uniform Fraudulent Transfer Act ("UFTA") or Section 2 of the Uniform Fraudulent
Conveyance Act ("UFCA"), (b) leaving such Borrower with unreasonably small
capital or assets, within the meaning of Section 548 of the Bankruptcy Code,
Section 4 of the UFTA, or Section 5 of the UFCA, or (c) leaving such Borrower
unable to pay its debts as they become due within the meaning of Section 548 of
the Bankruptcy Code or Section 4 of the UFTA, or Section 5 of the UFCA. All
rights and claims of contribution, indemnification, and reimbursement under this
Section shall be subordinate in right of payment to the prior payment in full of
the Obligations. The provisions of this Section shall, to the extent expressly
inconsistent with any provision in any Loan Document, supersede such
inconsistent provision.

      Section 13.21 Agency of the Parent and Daisytek for each Other Obligated
Party. Each of the other Obligated Parties irrevocably appoints each of the
Parent and Daisytek as its agent for all purposes relevant to this Agreement,
including the giving and receipt of notices and execution and

CREDIT AGREEMENT-Page 85
<PAGE>
delivery of all documents, instruments, and certificates contemplated herein
(including, without limitation, execution and delivery to the Agent of Borrowing
Base Certificates, Notices of Borrowing, and Notices of Continuation/Conversion)
and all modifications hereto. Any acknowledgment, consent, direction,
certification, or other action which might otherwise be valid or effective only
if given or taken by all or any of the Obligated Parties or acting singly, shall
be valid and effective if given or taken only by the Parent or Daisytek, whether
or not any of the other Obligated Parties joins therein, and the Agent and the
Lenders shall have no duty or obligation to make further inquiry with respect to
the authority of the Parent or Daisytek under this Section 13.21, provided that
nothing in this Section 13.21 shall limit the effectiveness of, or the right of
the Agent and the Lenders to rely upon, any notice (including without limitation
a Notice of Borrowing or a Notice of Continuation/Conversion), document,
instrument, certificate, acknowledgment, consent, direction, certification, or
other action delivered by any Obligated Party pursuant to this Agreement.

      Section 13.22 Additional Borrowers and Guarantors. Addition of any Person
as a Borrower or a Guarantor to this Agreement is subject to approval of the
Agent and the Majority Lenders, and may be conditioned upon such requirements as
they may determine in their discretion, including, without limitation, (a) the
furnishing of such financial and other information as the Agent or any such
Lender may request; (b) approval by all appropriate approval authorities of the
Agent and each such Lender; (c) execution and delivery by the Obligated Parties,
such Person, the Agent, and the Majority Lenders of such agreements and other
documentation (including, without limitation, an amendment to this Agreement or
any other Loan Document), and the furnishing by such Person or any of the
Obligated Parties of such certificates, opinions, and other documentation, as
the Agent and any such Lender may request. Neither the Agent nor any Lender
shall have any obligation to approve any such Person for addition as a party to
this Agreement.

      Section 13.23 Express Waivers By the Obligated Parties In Respect of Cross
Guaranties and Cross Collateralization. Each Obligated Party agrees as follows:

            (1)   Each Obligated Party hereby waives: (i) notice of acceptance
      of this Agreement; (ii) notice of the making of any Revolving Loans, the
      issuance of any Letter of Credit or Credit Support, or any other financial
      accommodations made or extended under the Loan Documents or the creation
      or existence of any Obligations; (iii) notice of the amount of the
      Obligations, subject, however, to such Obligated Party's right to make
      inquiry of the Agent to ascertain the amount of the Obligations at any
      reasonable time; (iv) notice of any adverse change in the financial
      condition of any other Obligated Party or of any other fact that might
      increase such Obligated Party's risk with respect to such other Obligated
      Party under the Loan Documents; (v) notice of presentment for payment,
      demand, protest, and notice thereof as to any promissory notes or other
      instruments among the Loan Documents; and (vii) all other notices (except
      if such notice is specifically required to be given to such Obligated
      Party hereunder or under any of the other Loan Documents to which such
      Obligated Party is a party) and demands to which such Obligated Party
      might otherwise be entitled;

            (2)   Each Obligated Party hereby waives the right by statute or
      otherwise to require the Agent or any Lender to institute suit against any
      other Obligated Party or to

CREDIT AGREEMENT-Page 86
<PAGE>
      exhaust any rights and remedies which the Agent or any Lender has or may
      have against any other Obligated Party. Each Obligated Party further
      waives any defense arising by reason of any disability or other defense of
      any other Obligated Party (other than the defense that the Obligations
      shall have been fully and finally performed and indefeasibly paid) or by
      reason of the cessation from any cause whatsoever of the liability of any
      such Obligated Party in respect thereof.

            (3)   Each Obligated Party hereby waives and agrees not to assert
      against the Agent, any Lender, or the Letter of Credit Issuer: (i) any
      defense (legal or equitable), setoff, counterclaim, or claim which such
      Obligated Party may now or at any time hereafter have against any other
      Obligated Party or any other party liable under the Loan Documents; (ii)
      any defense, setoff, counterclaim, or claim of any kind or nature
      available to any other Obligated Party against the Agent, any Lender, the
      Bank, or the Letter of Credit Issuer, arising directly or indirectly from
      the present or future lack of perfection, sufficiency, validity, or
      enforceability of the Obligations or any security therefor; (iii) any
      right or defense arising by reason of any claim or defense based upon an
      election of remedies by the Agent, any Lender, the Bank, or the Letter of
      Credit Issuer under any applicable law; (iv) the benefit of any statute of
      limitations affecting any other Obligated Party's liability hereunder;

            (4)   Each Obligated Party consents and agrees that, without notice
      to or by such Obligated Party and without affecting or impairing the
      obligations of such Obligated Party hereunder, the Agent may (subject to
      any requirement for consent of any of the Lenders to the extent required
      by this Agreement), by action or inaction: (i) compromise, settle, extend
      the duration or the time for the payment of, or discharge the performance
      of, or may refuse to or otherwise not enforce the Loan Documents; (ii)
      release all or any one or more parties to any one or more of the Loan
      Documents or grant other indulgences to any other Obligated Party in
      respect thereof; (iii) amend or modify in any manner and at any time (or
      from time to time) any of the Loan Documents; or (iv) release or
      substitute any Person liable for payment of the Obligations, or enforce,
      exchange, release, or waive any security for the Obligations or any
      Guaranty of the Obligations;

Each Obligated Party represents and warrants to the Agent and the Lenders that
such Obligated Party is currently informed of the financial condition of all
other Obligated Parties and all other circumstances which a diligent inquiry
would reveal and which bear upon the risk of nonpayment of the Obligations. Each
Obligated Party further represents and warrants that such Obligated Party has
read and understands the terms and conditions of the Loan Documents. Each
Obligated Party agrees that neither the Agent, any Lender, the Bank, nor the
Letter of Credit Issuer has any responsibility to inform any Obligated Party of
the financial condition of any other Obligated Party or of any other
circumstances which bear upon the risk of nonpayment or nonperformance of the
Obligations.

                  [Remainder of page intentionally left blank]

CREDIT AGREEMENT-Page 87
<PAGE>
      IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.

                                      THE PARENT:

                                      DAISYTEK INTERNATIONAL
                                      CORPORATION

                                      By:
                                          --------------------------------------
                                               Ralph Mitchell
                                               Executive Vice President, Chief
                                               Financial Officer, and Treasurer

                                      BORROWERS:

                                      DAISYTEK, INCORPORATED
                                      ARLINGTON INDUSTRIES, INC.
                                      DAISYTEK LATIN AMERICA, INC.
                                      DIGITAL STORAGE, INC.
                                      B.A. PARGH COMPANY
                                      THE TAPE COMPANY
                                      TAPEBARGAINS.COM, INC.
                                      VIRTUAL DEMAND, INC.

                                      By:
                                          --------------------------------------
                                               Ralph Mitchell
                                               Executive Vice President,
                                               Chief Financial Officer, and
                                               Treasurer

CREDIT AGREEMENT-Page 88
<PAGE>
                                                  AGENT:

                                                  BANK OF AMERICA, NATIONAL
                                                  ASSOCIATION, as Agent

                                                  By:
                                                      --------------------------
                                                           Rosemary Davis
                                                           Senior Vice President

CREDIT AGREEMENT-Page 89
<PAGE>
                                           LENDERS:

                                           BANK OF AMERICA, NATIONAL
                                           ASSOCIATION

                                           By:
                                               ---------------------------------
                                                    Rosemary Davis
                                                    Senior Vice President

                                           Address for Notices:

                                           Bank of America, National Association
                                           55 South Lake Avenue, Suite 900
                                           Pasadena, California 91101
                                           Attn: Business Credit: URGENT
                                           Telecopy: (626) 578-6143

CREDIT AGREEMENT-Page 90
<PAGE>
                                     ANNEX A
                                       to
                                Credit Agreement

           Definitions, Accounting Terms, and Interpretive Provisions

DEFINITIONS:

      Capitalized terms wherever used in the Loan Documents shall have the
following respective meanings (unless otherwise defined therein):

      "Account" and "Accounts" have the meaning specified in the Parent Security
Agreement and the Subsidiary Security Agreement.

      "Accommodation Payment" has the meaning specified in Section 13.20.

      "Account Debtor" means each Person obligated in any way on or in
connection with an Account, Chattel Paper, or General Intangibles (including a
payment intangible).

      "ACH Transactions" means any cash management or related services
including, without limitation, the automated clearinghouse transfer of funds by
the Bank for the account of any Borrower pursuant to agreement or overdrafts.

      "Adjusted Tangible Net Worth" means, as applied to any Person, at any date
and determined in accordance with GAAP, (a) total assets, minus (b) total
liabilities, plus (c) Subordinated Debt, minus (d) intangible assets, excluding
up to $20,000,000 of goodwill resulting from the ISA Acquisition.

      "Adjusted Tangible Net Worth Requirement" means, as of the end of each
Fiscal Quarter ending after the Closing Date, an amount equal to the amount
specified corresponding to the applicable Fiscal Quarter end in the table below,
respectively:

<TABLE>
<S>                                                     <C>
    Fiscal Quarter End                                  Adjusted Tangible Net Worth
                                                        Requirement

    Each Fiscal Quarter ending after the                $125,000,000
    Closing Date through and including
    December 31, 2002

    Fiscal Quarter ending March 31, 2003                $125,000,000, plus the
    and each Fiscal Quarter ending thereafter           cumulative amount of all
                                                        Adjusted Tangible Net Worth
                                                        Requirement Increases
</TABLE>

ANNEX A TO CREDIT AGREEMENT- Page 1
<PAGE>
      "Adjusted Tangible Net Worth Requirement Increase" means an amount,
determined for the Parent and its Subsidiaries on a consolidated basis as of the
end of any Fiscal Quarter, commencing with the Fiscal Quarter ending March 31,
2003, equal to the sum of (a) fifty percent (50.0%) of the amount (not less than
zero) of Net Income for each Fiscal Year ending after the Closing Date,
excluding the effect of (i) any non-recurring non-cash loss attributable to the
sale of assets outside the ordinary course of business, including any sale of an
operating division or a Subsidiary, (ii) any other non-recurring, non-cash loss,
including any loss attributable to the write-down of long-lived assets or the
impairment of intangible assets (excluding any write-down of Inventory), stock
based compensation, and amortization of financing costs, (iii) any non-cash loss
or non-cash gain or any reduction or increase in shareholders' equity during
such Fiscal Year related to foreign exchange fluctuations or the valuation of
derivatives in accordance with SFAS 133 (as amended by SFAS 137 and SFAS 138),
plus (b) fifty percent (50.0%) of the net amount of all equity proceeds received
by the Parent after the Closing Date. As used in this definition, a "non-cash
loss" is a loss which involves no cash expenditure by the subject Person in the
current Fiscal Year, and a "non-cash gain" is any gain which involves no cash
receipt by the subject Person in the current Fiscal Year.

      "Affiliate" means, as to any Person (the "subject Person"), any other
Person which, directly or indirectly, is in control of, is controlled by, or is
under common control with, the subject Person or which owns, directly or
indirectly, five percent (5.0%) or more of the outstanding Capital Stock of the
subject Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, by contract, or otherwise.

      "Agent" means the Bank, solely in its capacity as administrative agent for
the Lenders, and any successor administrative agent.

      "Agent Advances" has the meaning specified in Section 1.2(j).

      "Agent-Related Persons" means the Agent, together with its Affiliates, and
the officers, directors, employees, counsel, representatives, agents, and
attorneys-in-fact of the Agent and its Affiliates.

      "Agent's Letter" means that certain letter agreement, dated as of the
Closing Date, among the Borrowers and the Agent as such letter agreement may be
amended, restated, or otherwise modified from time to time.

      "Agent's Liens" means the Liens in the Collateral granted to the Agent,
for the benefit of the Lenders, the Bank, and the Agent pursuant to this
Agreement and the other Loan Documents.

      "Aggregate Revolver Outstandings" means, at any time, the sum of (a) the
unpaid balance of the Revolving Loans, (b) the aggregate undrawn face amount of
all outstanding Letters of Credit and Credit Support, and (c) the aggregate
amount of any unpaid reimbursement obligations in respect of Letters of Credit
and Credit Support.

ANNEX A TO CREDIT AGREEMENT- Page 2
<PAGE>
      "Agreement" means the Credit Agreement to which this Annex A is attached,
as amended, restated, or otherwise modified from time to time.

      "Allocable Amount" has the meaning specified in Section 13.20.

      "Anniversary Date" means an anniversary of the Closing Date.

      "Applicable Margin" means, as of the Closing Date,

            (a)   with respect to Base Rate Revolving Loans and all other
      Obligations (other than LIBOR Rate Revolving Loans), 0.50%; and

            (b)   with respect to LIBOR Rate Revolving Loans, 2.50%;

in each case subject to adjustment from time to time thereafter to the
applicable percentage specified corresponding to the Fixed Charge Coverage Ratio
of the Obligated Parties on a consolidated basis, as set forth below,
respectively:

<TABLE>
<CAPTION>
      Fixed Charge Coverage Ratio           Base Rate      LIBOR Rate
                                            Revolving      Revolving
                                            Loans          Loans
<S>                                         <C>            <C>
      Less than or equal to 1.10 to           0.75%          2.75%
      1.00

      Greater than 1.10 to 1.00 but           0.50%          2.50%
      less than or equal to 1.30 to
      1.00

      Greater than 1.30 to 1.00 but           0.25%          2.25%
      less than or equal to 1.50 to
      1.00

      Greater than 1.50 to 1.00               0.00%          2.00%
</TABLE>

For the purpose of determining any such adjustments to the Applicable Margin,
the Fixed Charge Coverage Ratio of the Obligated Parties shall be determined for
the immediately preceding four (4) Fiscal Quarters based upon the Financial
Statements of the Obligated Parties, beginning with the Fiscal Quarter ending
December 31, 2002, delivered to the Agent and the Lenders as required by Section
5.2(a) (with respect to the Financial Statements for the end of each Fiscal Year
of the Parent) or Section 5.2(b) (with respect to the Financial Statements for
each Fiscal Quarter end other than the Parent's Fiscal Year end), and any such
adjustment, if any, shall become effective prospectively on and after the first
day of the calendar month following the calendar month which begins at least
five (5) days after the date of delivery of such Financial Statements to the
Agent and the Lenders. Concurrently with the delivery of such Financial
Statements, the Borrowers shall deliver to the Agent and the Lenders a
certificate, signed by a Responsible Officer of the Borrowers, setting forth in
reasonable detail the basis for the continuance of, or any change in, the
Applicable Margin. In the event the Obligated Parties fail to timely deliver any
such Financial Statements, in addition to any other remedy provided for in this
Agreement, the Applicable Margin shall be deemed to be equal to

ANNEX A TO CREDIT AGREEMENT- Page 3
<PAGE>
the highest level set forth in the preceding table, until the first day of the
first calendar month following the delivery of such Financial Statements at
which time the Applicable Margin shall be determined, prospectively, in
accordance with the terms hereof. If a Default or Event of Default exists at the
time any reduction in the Applicable Margin is to be implemented, such reduction
shall not occur until the first day of the first calendar month following the
date on which such Default or Event of Default is waived or cured.

         "Arlington Industries" means Arlington Industries, Inc., a Delaware
corporation, and its successors and assigns.

         "Assignee" has the meaning specified in Section 11.2(a).

         "Assignment and Acceptance" has the meaning specified in Section
11.2(a).

         "Attorney Costs" means and includes all reasonable fees, expenses, and
disbursements of any law firm or other counsel engaged by the Agent and the
reasonably allocated costs and expenses of internal legal services of the Agent.

         "Availability" means, at any time, (a) the lesser of (i) the Maximum
Revolver Amount or (ii) the Borrowing Base, minus (b) the Aggregate Revolver
Outstandings.

         "Bank" means Bank of America, National Association, a national banking
association, or any successor entity thereto.

         "Bank Products" means any one or more of the following types of
services or facilities extended to any Obligated Party by the Bank or any
Affiliate of the Bank in reliance on the Bank's agreement to indemnify such
Affiliate: (a) credit cards; (b) ACH Transactions; (c) cash management,
including, without limitation, controlled disbursement services; and (d) Hedge
Agreements.

         "Bank Product Reserves" means all reserves which the Agent from time to
time establishes in its sole discretion for the Bank Products then provided or
outstanding.

         "Bankruptcy Code" means Title 11 of the United States Code (11
U.S.C. Section 101 et seq.).

         "Base Rate" means, for any day, the rate of interest in effect for such
day as publicly announced from time to time by the Bank in Charlotte, North
Carolina as its "prime rate" (the "prime rate" being a rate set by the Bank
based upon various factors including the Bank's costs and desired return,
general economic conditions, and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above, or below such announced
rate). Any change in the prime rate announced by the Bank shall take effect at
the opening of business on the day specified in the public announcement of such
change. Each Interest Rate based upon the Base Rate shall be adjusted
simultaneously with any change in the Base Rate.

         "Base Rate Revolving Loan" means a Revolving Loan during any period in
which it bears interest based on the Base Rate.

ANNEX A TO CREDIT AGREEMENT-Page 4
<PAGE>
         "Blocked Account Agreement" means an agreement among one or more of the
Obligated Parties, the Agent, and a Clearing Bank, in form and substance
reasonably satisfactory to the Agent, concerning the collection of payments
which represent the proceeds of Accounts or of any other Collateral.

         "Borrower" means, separately and individually, any of Daisytek,
Arlington Industries, Daisytek Latin America, TapeBargains, VirtualDemand,
Pargh, Tape Company, and Digital Storage, and any other Person who becomes a
party to this Agreement as a "Borrower" pursuant to the terms hereof, jointly,
severally, and collectively, and "Borrowers" means more than one or all of the
foregoing Persons, jointly, severally, and collectively, as the context
requires.

         "Borrowing" means a borrowing hereunder consisting of Revolving Loans
made on the same day by the Lenders to the Borrowers, or any of them, or by the
Bank (in the case of a Borrowing funded by Non-Ratable Loans) or by the Agent
(in the case of a Borrowing consisting of an Agent Advance), or the issuance of
a Letter of Credit or Credit Support hereunder.

         "Borrowing Base" means, at any time, an amount equal to the lesser of
(a) the Maximum Revolver Amount or (b) the sum of, without duplication, (i)
eighty-five percent (85.0%) of the Net Amount of Eligible Accounts, plus (ii)
the lesser of (A) the Inventory Advance Rate multiplied by Eligible Inventory or
(B) the Maximum Inventory Loan Amount, minus (iii) Reserves.

         "Borrowing Base Certificate" means a certificate by a Responsible
Officer of the Borrowers, or Daisytek on behalf of all of the Borrowers,
substantially in the form of Exhibit B (or another form acceptable to the Agent)
setting forth the calculation of the Borrowing Base, including a calculation of
each component thereof (including to the extent a Borrower has received notice
of any Reserve from the Agent, any of the Reserves included in such calculation
pursuant to clause (b) of the definition of Borrowing Base), all in such detail
as shall be reasonably satisfactory to the Agent. All calculations of the
Borrowing Base in connection with the preparation of any Borrowing Base
Certificate shall originally be made by the Borrowers, or the Parent on behalf
of the Borrowers, and certified to the Agent; provided that the Agent shall have
the right to review and adjust, in the exercise of its reasonable credit
judgment, any such calculation (a) to reflect its reasonable estimate of
declines in value of any of the Collateral described therein, and (b) to the
extent that such calculation is not in accordance with this Agreement.

         "Business Day" means (a) any day that is not a Saturday, Sunday, or a
day on which banks in Pasadena, California, or Charlotte, North Carolina are
required or permitted to be closed, and (b) with respect to all notices,
determinations, fundings, and payments in connection with the LIBOR Rate or
LIBOR Rate Revolving Loans, any day that is a Business Day pursuant to clause
(a) preceding and that is also a day on which trading in Dollars is carried on
by and between banks in the London interbank market.

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

ANNEX A TO CREDIT AGREEMENT-Page 5
<PAGE>
         "Capital Expenditures" means all payments due (whether or not paid
during any fiscal period) in respect of the cost of any fixed asset or
improvement, or replacement, substitution, or addition thereto, which has a
useful life of more than one year, including, without limitation, those costs
arising in connection with the direct or indirect acquisition of such asset by
way of increased product or service charges or in connection with a Capital
Lease, but excluding any asset acquired in connection with a Permitted
Acquisition and any asset acquired with the proceeds of any insurance or
condemnation award.

         "Capital Lease" means any lease of property by an Obligated Party
which, in accordance with GAAP, should be reflected as a capital lease on the
balance sheet of such Obligated Party.

         "Capital Stock" means any and all corporate stock, units, shares,
partnership interests, membership interests, equity interests, rights,
securities, or other equivalent evidences of ownership (howsoever designated)
issued by any Person.

         "Change of Control" means the occurrence of any of the following: (a)
except as allowed by Section 7.9, the adoption of a plan relating to the
liquidation or dissolution of any Obligated Party; (b) the acquisition by any
Person or group (as such term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended) of a direct or indirect majority in interest
(more than fifty percent (50.0%)) of the voting power of the voting stock of the
Parent by way of merger or consolidation or otherwise; (c) during any period of
twelve (12) consecutive calendar months, individuals (i) who were members of the
Management Group of the Parent on the first day of such period, or (ii) whose
election or nomination for election to the Management Group of the Parent was
recommended or approved by at least a majority of the Management Group then
still in office who were members of the Management Group of the Parent on the
first day of such period, or whose election or nomination for election was so
approved, shall cease to constitute a majority of the Management Group of the
Parent; or (d) except as allowed by Section 7.9, any Borrower shall cease to be
a Wholly-Owned Subsidiary of the Parent.

         "Chattel Paper" has the meaning specified in the Parent Security
Agreement and the Subsidiary Security Agreement.

         "Clearing Bank" means the Bank or any other banking institution with
whom a Payment Account has been established pursuant to a Blocked Account
Agreement.

         "Closing Date" means the date of this Agreement as specified in the
introductory paragraph.

         "Code" means the Internal Revenue Code of 1986, as amended from time to
time and any successor statute and the regulations promulgated thereunder.

         "Collateral" means (a) all of the "Collateral", as such term is defined
in the Parent Security Agreement and the Subsidiary Security Agreement, (b) all
owned Real Estate of any Obligated Party; (c) all other personal property at any
time subject to the Agent's Liens; and (d) all accessions to, substitutions for
and replacements, products and proceeds of any of the foregoing, including, but
not

ANNEX A TO CREDIT AGREEMENT-Page 6
<PAGE>
limited to, proceeds of any insurance policies, claims against third parties,
and condemnation or requisition payments with respect to all or any of the
foregoing.

         "Commitment" means, at any time with respect to a Lender, the principal
amount set forth beside such Lender's name under the heading "Commitment" on
Schedule A-1 or in the most recent Assignment and Acceptance to which such
Lender is a party, as such Commitment may be adjusted from time to time in
accordance with the provisions of Section 11.1 and Section 11.2, and
"Commitments" means, collectively, the aggregate amount of the Commitments of
all of the Lenders.

         "Compliance Certificate' has the meaning specified in Section 5.2(d).

         "Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos in any form or condition, polychlorinated biphenyls
("PCBs"), or any constituent of any such substance or waste.

         "Continuation/Conversion Date" means the effective date of (a) any
conversion of LIBOR Rate Revolving Loans to Base Rate Revolving Loans or of Base
Rate Revolving Loans to LIBOR Rate Revolving Loans or (b) any continuation of
LIBOR Rate Revolving Loans as LIBOR Rate Revolving Loans.

         "Copyright Security Agreement" means any Copyright Security Agreement
executed and delivered by an Obligated Party to the Agent, for the benefit of
the Agent and the Lenders, to evidence and perfect the Agent's Liens in such
Obligated Party's present and future copyrights and related licenses and rights,
as such agreement may be amended, restated, or otherwise modified from time to
time.

         "Credit Support" has the meaning specified in Section 1.3(a).

         "Daisytek" means Daisytek, Incorporated, a Delaware corporation, and
its successors and assigns.

         "Daisytek Latin America" means Daisytek Latin America, Inc., a Florida
corporation, and its successors and assigns.

         "Debt" means, without duplication, with respect to any Person (the
"subject Person") all liabilities, obligations, and indebtedness of the subject
Person to any other Person, of any kind or nature, now or hereafter owing,
arising, due, or payable, howsoever evidenced, created, incurred, acquired, or
owing, whether primary, secondary, direct, contingent, fixed, or otherwise,
consisting of indebtedness for borrowed money or the deferred purchase price of
property, excluding trade payables, but including, without in any way limiting
the generality of the foregoing: (a) in the case of the Obligated Parties, the
Obligations; (b) all indebtedness, liabilities, and obligations of any Person
secured by any Lien on the subject Person's property, even if the subject Person
shall not have assumed or become liable for the payment thereof; provided,
however, that all such indebtedness, liabilities, and obligations which are
limited in recourse to such property shall be

ANNEX A TO CREDIT AGREEMENT-Page 7
<PAGE>
included in Debt only to the extent of the book value of such property as would
be shown on a balance sheet of the subject Person prepared in accordance with
GAAP; (c) all indebtedness, liabilities, and obligations created or arising
under any Capital Lease or conditional sale or other title retention agreement
with respect to property used or acquired by the subject Person, even if the
rights and remedies of the lessor, seller, or lender thereunder are limited to
repossession of such property; provided, however, that all such indebtedness,
liabilities, and obligations which are limited in recourse to such property
shall be included in Debt only to the extent of the book value of such property
as would be shown on a balance sheet of the subject Person prepared in
accordance with GAAP; (d) all indebtedness, liabilities, and obligations under
Guaranties of Debt; and (e) the present value (discounted at the Base Rate) of
lease payments due under synthetic leases.

         "Default" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured, waived, or otherwise
remedied during such time) constitute an Event of Default.

         "Default Rate" means a fluctuating per annum interest rate at all times
equal to the sum of (a) the otherwise applicable Interest Rate, plus (b) two
percent (2.00%) per annum. Each Default Rate shall be adjusted simultaneously
with any change in the applicable Interest Rate. In addition, with respect to
Letters of Credit and Credit Support, the Default Rate shall mean the Letter of
Credit Fee Percentage, plus two percent (2.00%) per annum.

         "Defaulting Lender" has the meaning specified in Section 12.15(c).

         "Designated Account" has the meaning specified in Section 1.2(d).

         "Digital Storage" Digital Storage, Inc., a Delaware corporation, and
its successors and assigns.

         "Distribution" means, with respect to any Person (other than a natural
person): (a) the payment or making of any dividend or other distribution of
property in respect of such Person's Capital Stock (or any options or warrants
for, or other rights with respect to, such Capital Stock) of such Person, other
than distributions solely in such Person's Capital Stock (or any options or
warrants for, or other rights with respect to, such Capital Stock) of the same
class; or (b) the redemption or other acquisition by such Person of any Capital
Stock (or any options or warrants for, or other rights with respect to, such
Capital Stock) of such Person.

         "DOL" means the United States Department of Labor or any successor
department or agency.

         "Dollar" and "$" means dollars in the lawful currency of the U.S.
Unless otherwise specified, all payments under this Agreement shall be made in
Dollars.

         "EBITDA" means, with respect to any fiscal period, Net Income, (a)
plus, without duplication and to the extent deducted in the determination of Net
Income, (i) Interest Expense, (ii) the provision for (or minus any benefit from)
income taxes, (iii) depreciation and amortization expense, (iv) any
non-recurring, non-cash losses attributable to the sale of operating divisions
or

ANNEX A TO CREDIT AGREEMENT-Page 8
<PAGE>
Subsidiaries, (v) any non-recurring, non-cash losses, including any losses
attributable to the write-down of long-lived assets or impairment of intangibles
(excluding any write-down of Inventory), stock based compensation, and
amortization of financing costs, (vi) any non-cash loss attributable to foreign
exchange fluctuations, (vii) any non-cash loss related to the valuation of
derivatives in accordance with SFAS 133 (as amended by SFAS 137 and SFAS 138),
and (viii) the amount of restructuring charges actually incurred by the
Obligated Parties during such fiscal period, to the extent such charges were
disclosed to the Agent and the Lenders on March 26, 2002, but not in excess of
the amount included in such disclosure (b) minus, without duplication and to the
extent included in the determination of Net Income (i) any gains attributable to
the sale of assets outside the ordinary course of business or any operating
divisions or Subsidiaries, (ii) any non-cash gain attributable to foreign
exchange fluctuations, (iii) any non-cash gain related to the valuation of
derivatives in accordance with SFAS 133 (as amended by SFAS 137 and SFAS 138),
and (iv) any other non-cash gains. For the purpose of this definition, a
"non-cash loss" is a loss which involves no cash expenditure by the subject
Person in the current Fiscal Year and a "non-cash gain" is a gain which involves
no cash receipt by the subject Person in the current Fiscal Year.

         "Eligible Accounts" means the Accounts of a Borrower which the Agent in
the exercise of its reasonable commercial discretion determines to be Eligible
Accounts. Without limiting the discretion of the Agent to establish other
criteria of ineligibility, Eligible Accounts shall not, unless the Agent in its
sole discretion elects, include any Account:

                  (a) with respect to which more than ninety (90) days have
         elapsed since the date of the original invoice therefor or which is
         more than sixty (60) days past due;

                  (b) with respect to which any of the representations,
         warranties, covenants, and agreements contained in the Parent Security
         Agreement or the Subsidiary Security Agreement, as applicable, are
         incorrect or have been breached;

                  (c) with respect to which Account (or any other Account due
         from the applicable Account Debtor), in whole or in part, a check,
         promissory note, draft, trade acceptance, or other instrument for the
         payment of money has been received, presented for payment, and returned
         uncollected for any reason;

                  (d) which represents a progress billing (as hereinafter
         defined) or as to which the applicable Borrower has extended the time
         for payment without the consent of the Agent (for the purposes hereof,
         "progress billing" means any invoice for goods sold or leased or
         services rendered under a contract or agreement pursuant to which the
         Account Debtor's obligation to pay such invoice is conditioned upon
         such Borrower's completion of any further performance under such
         contract or agreement);

                  (e) with respect to which any one or more of the following
         events has occurred to the Account Debtor on such Account: (i) death or
         judicial declaration of incompetency of such Account Debtor who is a
         natural person; (ii) the filing by or against such Account Debtor of a
         request or petition for liquidation, reorganization, arrangement,
         adjustment of debts, adjudication as a bankrupt, winding-up, or other
         relief under the Bankruptcy Code or

ANNEX A TO CREDIT AGREEMENT-Page 9
<PAGE>
         any other bankruptcy, insolvency, or similar laws of the U.S., any
         state or territory thereof, or any foreign jurisdiction, now or
         hereafter in effect; (iii) the making of any general assignment by such
         Account Debtor for the benefit of creditors; (iv) the appointment of a
         receiver or trustee for such Account Debtor or for any of the assets of
         the Account Debtor, including, without limitation, the appointment of
         or taking possession by a "custodian," as defined in the Bankruptcy
         Code; (v) the institution by or against such Account Debtor of any
         other type of insolvency proceeding (under the Bankruptcy Code or
         otherwise) or of any formal or informal proceeding for the dissolution
         or liquidation of, settlement of claims against, or winding up of
         affairs of, such Account Debtor; (vi) the sale, assignment, or transfer
         of all or any material part of the assets of such Account Debtor; (vii)
         the nonpayment generally by such Account Debtor of its debts as they
         become due; or (viii) the cessation of the business of such Account
         Debtor as a going concern;

                  (f) if fifty percent (50.0%) or more of the aggregate Dollar
         amount of outstanding Accounts owed at such time by the Account Debtor
         thereon is classified as ineligible pursuant to the other provisions of
         this definition;

                  (g) owed by an Account Debtor which (i) does not maintain its
         chief executive office in the U.S., (ii) is not organized under the
         laws of the U.S. or any political subdivision or state thereof, or
         (iii) is the government of any foreign country or sovereign state, or
         of any state, province, municipality, or other political subdivision
         thereof, or of any department, agency, public corporation, or other
         instrumentality thereof, except to the extent that such Account is
         secured or payable by a letter of credit satisfactory to the Agent in
         its discretion; provided that the Agent may, in its discretion, include
         as Eligible Accounts up to $3,000,000 of Accounts which are otherwise
         not eligible due solely to the fact that the Account Debtor thereon
         does not maintain its chief executive office in the U.S. or is not
         organized under the laws of the U.S. or any political subdivision or
         state thereof;

                  (h) owed by an Account Debtor which is an Affiliate or
         employee of such Borrower;

                  (i) except as provided in clause (k) following, with respect
         to which either the perfection, enforceability, or validity of the
         Agent's Liens in such Account, or the Agent's right or ability to
         obtain direct payment to the Agent of the proceeds of such Account, is
         governed by any federal, state, or local statutory requirements other
         than those of the UCC;

                  (j) owed by an Account Debtor to which an Obligated Party or
         any of its Affiliates, is indebted in any way, or which is subject to
         any right of setoff or recoupment by the Account Debtor, unless the
         Account Debtor has entered into an agreement acceptable to the Agent to
         waive setoff rights, or if the Account Debtor thereon has disputed
         liability or made any claim with respect to any other Account due from
         such Account Debtor, but in each such case only to the extent of such
         indebtedness, setoff, recoupment, dispute, or claim;

                  (k) owed by the government of the U.S., or any department,
         agency, public corporation, or other instrumentality thereof, unless
         the Federal Assignment of Claims Act

ANNEX A TO CREDIT AGREEMENT-Page 10
<PAGE>
         of 1940, as amended (31 U.S.C. Section 3727 et seq.), and any other
         steps necessary to perfect the Agent's Liens therein, have been
         complied with to the Agent's satisfaction with respect to such Account;

                  (l) owed by any state, municipality, or other political
         subdivision of the U.S., or any department, agency, public corporation,
         or other instrumentality thereof and as to which the Agent determines
         that its Lien therein is not or cannot be perfected;

                  (m) which represents a sale on a bill-and-hold, guaranteed
         sale, sale and return, sale on approval, consignment, or other
         repurchase or return basis;

                  (n) which is evidenced by a promissory note or other
         Instrument or by Chattel Paper;

                  (o) with respect to which the Agent believes, in the exercise
         of its reasonable judgment, that the prospect of collection of such
         Account is impaired or that such Account may not be paid by reason of
         the Account Debtor's financial inability to pay;

                  (p) with respect to which the Account Debtor is located in any
         state requiring the filing of a Notice of Business Activities Report or
         similar report in order to permit such Borrower to seek judicial
         enforcement in such state of payment of such Account, unless such
         Borrower has qualified to do business in such state or has filed a
         Notice of Business Activities Report or equivalent report for the then
         current year;

                  (q) which arises out of a sale not made in the ordinary course
         of such Borrower's business or which represents a rebate due from a
         vendor;

                  (r) with respect to which the goods giving rise to such
         Account have not been shipped and delivered to and accepted by, or have
         been rejected or objected to by, the Account Debtor or the services
         giving rise to such Account have not been performed by such Borrower,
         and, if applicable, accepted by the Account Debtor, or the Account
         Debtor revokes its acceptance of such goods or services;

                  (s) owed by an Account Debtor, or group of affiliated Account
         Debtors, which is obligated to the Obligated Parties respecting
         Accounts the aggregate unpaid balance of which exceeds fifteen percent
         (15.0%) of the aggregate unpaid balance of all Accounts owed to the
         Borrowers at such time by all of the Borrowers' Account Debtors, but
         only to the extent of such excess;

                  (t) which is not subject to a first priority and perfected
         security interest in favor of the Agent, for the benefit of the Agent
         and the Lenders;

                  (u) with respect to which such Borrower or the Agent has
         deemed such Account as uncollectible or has any reason to believe that
         such Account is uncollectible;

ANNEX A TO CREDIT AGREEMENT-Page 11
<PAGE>
                  (v) which is acquired in connection with any acquisition,
         including a Permitted Acquisition, to the extent the Agent has not
         completed an audit of the Accounts acquired in connection with such
         acquisition with results satisfactory to the Agent;

                  (w) which is an Eligible Foreign Account; and

                  (x) which the Agent determines in its reasonable discretion is
         ineligible for any other reason.

If any Account at any time ceases to be an Eligible Account, then such Account
shall promptly be excluded from the calculation of the Borrowing Base.

         "Eligible Assignee" means (a) a commercial bank, commercial finance
company, or other asset based lender having total assets in excess of
$1,000,000,000, (b) any Lender listed on the signature pages of this Agreement,
(c) any Affiliate of any Lender, and (d) if an Event of Default has occurred and
is continuing, any Person reasonably acceptable to the Agent.

         "Eligible Inventory" means Inventory, valued at the lower of the
weighted average cost or market value, which the Agent, in its reasonable
discretion, determines to be Eligible Inventory. Without limiting the discretion
of the Agent to establish other criteria of ineligibility, Eligible Inventory
shall not, unless the Agent in its sole discretion elects, include any
Inventory:

                  (a) that is not owned by a Borrower, including Inventory held
         by a Borrower on consignment;

                  (b) that is not subject to the Agent's Liens, which are
         perfected as to such Inventory, or that is subject to any other Lien
         whatsoever (other than the Liens described in clause (e) of the
         definition of Permitted Liens; provided that such Permitted Liens (i)
         are junior in priority to the Agent's Liens or subject to Reserves and
         (ii) do not impair directly or indirectly the ability of the Agent to
         realize on or obtain the full benefit of the Collateral);

                  (c) that is not finished goods;

                  (d) that is raw materials, work-in-process, chemicals,
         samples, prototypes, supplies, or packing and shipping materials;

                  (e) that is not in good condition, is unmerchantable, or does
         not meet all standards imposed by any Governmental Authority having
         regulatory authority over such goods or their use or sale;

                  (f) that is not currently either usable or salable, at prices
         approximating at least cost, in the normal course of such Borrower's
         business, or that is slow moving or stale;

                  (g) that is obsolete, defective, returned, repossessed, or
         used goods taken in trade;

ANNEX A TO CREDIT AGREEMENT-Page 12
<PAGE>
                  (h) that is located outside the U.S. or that is in transit
         from vendors or suppliers;

                  (i) that is located in a public warehouse or in possession of
         a bailee or in a facility leased by such Borrower, if the applicable
         warehouseman, bailee, or lessor has not delivered to the Agent, if
         requested by the Agent, a subordination agreement in form and substance
         satisfactory to the Agent or if a Reserve for rents or storage charges
         has not been established for Inventory at that location;

                  (j) that contains or bears any Proprietary Rights licensed to
         a Borrower by any Person, if the Agent is not satisfied that it may
         sell or otherwise dispose of such Inventory in accordance with the
         terms of the Subsidiary Security Agreement and Section 9.2 without
         infringing the rights of the licensor of such Proprietary Rights or
         violating any contract with such licensor (and without payment of any
         royalties other than any royalties due with respect to the sale or
         disposition of such Inventory pursuant to the existing license
         agreement), and, if the Agent deems it necessary, as to which such
         Borrower has not delivered to the Agent a consent or sublicense
         agreement from such licensor in form and substance acceptable to the
         Agent;

                  (k) that is acquired in connection with any acquisition,
         including a Permitted Acquisition, to the extent the Agent has not
         completed an audit of such Inventory with results satisfactory to the
         Agent; or

                  (l) that is not reflected in the details of a current
         perpetual inventory report.

If any Inventory at any time ceases to be Eligible Inventory, such Inventory
shall promptly be excluded from the calculation of the Borrowing Base.

         "Environmental Compliance Reserve" means any reserve which the Agent
establishes from time to time in its reasonable discretion after prior written
notice to the Borrowers for amounts that are reasonably likely to be expended by
an Obligated Party in order for such Obligated Party and its operations and
property (a) to comply with any notice from a Governmental Authority asserting
material non-compliance with Environmental Laws or (b) to correct any such
material non-compliance identified in a report delivered to the Agent and the
Lenders pursuant to Section 7.7.

         "Environmental Laws" means all federal, state, or local laws, statutes,
common law duties, rules, regulations, ordinances, and codes, together with all
administrative orders, directed duties, licenses, authorizations, and permits
of, and agreements with, any Governmental Authority, in each case relating to
environmental, health, safety, and land use matters.

         "Environmental Lien" means a Lien in favor of any Governmental
Authority or any other Person for (a) any liability under Environmental Laws or
(b) damages arising from, or costs incurred by such Governmental Authority in
response to, a Release or threatened Release of a Contaminant into the
environment.

ANNEX A TO CREDIT AGREEMENT-Page 13
<PAGE>
         "Equipment" has the meaning specified in the Parent Security Agreement
and the Subsidiary Security Agreement.

         "ERISA" means the Employee Retirement Income Security Act of 1974, and
regulations promulgated thereunder.

         "ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with an Obligated Party within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for
purposes of provisions relating to Section 412 of the Code).

         "ERISA Event" means (a) a Reportable Event with respect to a Pension
Plan, (b) a withdrawal by an Obligated Party or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which it was
a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations which is treated as such a withdrawal under Section
4062(e) of ERISA, (c) a complete or partial withdrawal by an Obligated Party or
any ERISA Affiliate from a Multi-employer Plan or notification that a
Multi-employer Plan is in reorganization or insolvent, (d) the filing of a
notice of intent to terminate, the treatment of a Plan amendment as a
termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or the termination,
insolvency, or reorganization of a Multi-employer Plan, (e) the occurrence of an
event or condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan or Multi-employer Plan, or (f) the
imposition of any liability under Title IV of ERISA, other than for PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon an Obligated
Party or any ERISA Affiliate.

         "Event of Default" has the meaning specified in Section 9.1.

         "Exchange Act" means the Securities Exchange Act of 1934, and
regulations promulgated thereunder.

         "Existing Obligations" means, with respect to a Newly Obligated Party,
any Obligations which are outstanding and unpaid as of the time such Newly
Obligated Party becomes a Borrower.

         "Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of 1.00%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day; provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day
and (b) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate charged to the
Bank on such day on such transactions as determined by the Agent.

         "Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any successor thereto.

ANNEX A TO CREDIT AGREEMENT-Page 14
<PAGE>
         "Financial Statements" means, according to the context in which used,
the financial statements referred to in Section 5.2 and Section 6.5 or any other
financial statements required to be given to the Agent or the Lenders pursuant
to this Agreement.

         "Fiscal Quarter" means one of the four three (3) calendar month
measurement periods in a Fiscal Year, with the first of such measurement periods
beginning on the first day of a Fiscal Year and the last of such measurement
periods ending on March 31, of such Fiscal Year.

         "Fiscal Year" means, with respect to any Obligated Party, such
Obligated Party's fiscal year for financial accounting purposes. The current
Fiscal Year of the Parent will end on March 31, 2003.

         "Fixed Assets" means, with respect to each Obligated Party, the
Equipment and Real Estate of such Obligated Party.

         "Fixed Charge Coverage Ratio" means, as of the end of any Fiscal
Quarter, the ratio of EBITDA to Fixed Charges.

         "Fixed Charges" means, with respect to any fiscal period, without
duplication, the sum of (a) Interest (b) federal, state, local, and foreign
income taxes paid in cash net of refunds and reimbursements, (c) Capital
Expenditures made in cash, net of any cash received upon the disposal of any
capital asset (where such disposal is for the specific purpose of replacing old
capital assets with new capital assets) which is not applied to the repayment of
any Debt other than the Revolving Loans, (d) scheduled principal payments of
Debt, and (e) any Distributions other than Distributions made in Capital Stock
of the Person making such Distribution.

         "Foreign Plan" means any benefit plan established or maintained outside
of the U.S. which an Obligated Party maintains, sponsors, or to which such
Person has any obligation or liability and which provides or otherwise makes
available retirement or deferred benefits of any kind whatsoever to employees.

         "Funding Date" means the date on which a Borrowing occurs.

         "GAAP" means generally accepted accounting principles and practices set
forth from time to time in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the
date of determination.

         "General Intangibles" has the meaning specified in the Parent Security
Agreement and the Subsidiary Security Agreement.

         "Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or pertaining to

ANNEX A TO CREDIT AGREEMENT-Page 15
<PAGE>
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing, and any
department, agency, board, commission, tribunal, committee, or instrumentality
of any of the foregoing.

         "Guarantor" means each Obligated Party and each other Person who
becomes a party to any Guaranty Agreement pursuant to the terms of this
Agreement, and "Guarantors" means two (2) or more of such Persons, collectively.

         "Guaranty" means, with respect to any Person, all obligations of such
Person which in any manner directly or indirectly guarantee or assure, or in
effect guarantee or assure, the payment or performance of any indebtedness,
dividend, or other obligations of any other Person (the "guaranteed
obligations"), or assure or in effect assure the holder of the guaranteed
obligations against loss in respect thereof, including any such obligations
incurred through an agreement, contingent or otherwise: (a) to purchase the
guaranteed obligations or any property constituting security therefor; (b) to
advance or supply funds for the purchase or payment of the guaranteed
obligations or to maintain a working capital or other balance sheet condition;
or (c) to lease property or to purchase any debt or equity securities or other
property or services.

         "Guaranty Agreement" means, collectively and individually (as
applicable), the Parent Guaranty and the Subsidiary Guaranty.

         "Hedge Agreement" means any and all transactions, agreements, or
documents now existing or hereafter entered into, which provide for an interest
rate, credit, commodity, or equity swap, cap, floor, collar, forward foreign
exchange transaction, currency swap, cross currency rate swap, currency option,
or any combination of, or option with respect to, these or similar transactions,
for the purpose of hedging a Person's exposure to fluctuations in interest or
exchange rates, loan, credit exchange, security, or currency valuations, or
commodity prices.

         "Indemnified Liabilities" has the meaning specified in Section
13.11(a).

         "Indemnified Person" has the meaning specified in Section 13.11(a).

         "Instruments" has the meaning specified in the Parent Security
Agreement and the Subsidiary Security Agreement.

         "Intercompany Accounts" means all assets and liabilities, however
arising, which are due to the Parent or a Subsidiary of the Parent from, which
are due from the Parent or a Subsidiary of the Parent to, or which otherwise
arise from any transaction by the Parent or a Subsidiary of the Parent with, any
Affiliate of the Parent or a Subsidiary of the Parent.

         "Interest Expense" means, with respect to any Person for any period,
the interest expense of such Person for such period, determined in accordance
with GAAP.

         "Interest Period" means, with respect to any LIBOR Rate Revolving Loan,
the period commencing on the Funding Date of such Revolving Loan or on the
Continuation/Conversion Date

ANNEX A TO CREDIT AGREEMENT-Page 16
<PAGE>
on which such Revolving Loan is continued as or converted into a LIBOR Rate
Revolving Loan, and ending on the date one, two, or three months thereafter as
selected by a Borrower in its Notice of Borrowing or Notice of
Continuation/Conversion, provided that:

                  (a) if any Interest Period would otherwise end on a day that
         is not a Business Day, such Interest Period shall be extended to the
         following Business Day unless the result of such extension would be to
         carry such Interest Period into another calendar month, in which event
         such Interest Period shall end on the preceding Business Day;

                  (b) any Interest Period pertaining to a LIBOR Rate Revolving
         Loan that begins on the last Business 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
         Business Day of the calendar month at the end of such Interest Period;
         and

                  (c) no Interest Period shall extend beyond the Stated
         Termination Date.

         "Interest Rate" means each or any of the interest rates, including the
Default Rate, set forth in Section 2.1.

         "Inventory" has the meaning specified in the Parent Security Agreement
and the Subsidiary Security Agreement.

         "Inventory Advance Rate" means, with respect to Eligible Inventory, the
lesser of (a) sixty-five percent (65.0%) of the lesser of average cost or market
value therefor or (b) eighty-five percent (85.0%) of the Orderly Liquidation
Value thereof.

         "Investment Property" has the meaning specified in the Parent Security
Agreement and the Subsidiary Security Agreement.

         "IRS" means the Internal Revenue Service and any Governmental Authority
succeeding to any of its principal functions under the Code.

         "ISA Acquisition" means the acquisition by Daisytek UK Limited of not
less than seventy-five percent (75.0%) of the outstanding Capital Stock of ISA
International plc pursuant to conversion of existing Capital Stock and a
proposed tender offer for the remaining outstanding Capital Stock of ISA
International plc.

         "Issuer" has the meaning prescribed for such term in Section 6.26(b).

         "Latest Projections" means: (a) on the Closing Date and thereafter
until the Agent receives new projections pursuant to Section 5.2(e), the
projections of the Obligated Parties' financial condition, results of
operations, and cash flows, in each case for the period commencing on March 31,
2002 and ending on March 31, 2005 and delivered to the Agent prior to the
Closing Date; and (b) thereafter, the projections most recently received by the
Agent pursuant to Section 5.2(e).

ANNEX A TO CREDIT AGREEMENT-Page 17
<PAGE>
         "Lender" and "Lenders" have the meanings specified in the introductory
paragraph hereof and shall include the Agent to the extent of any Agent Advance
outstanding and the Bank to the extent of any Non-Ratable Loan outstanding;
provided that no such Agent Advance or Non-Ratable Loan shall be taken into
account in determining any Lender's Pro Rata Share.

         "Letter of Credit" has the meaning specified in Section 1.3(a).

         "Letter of Credit Fee" has the meaning specified in Section 2.5.

         "Letter of Credit Fee Percentage" means with respect to any Letter of
Credit or any Credit Support issued hereunder, on any date of determination, a
per annum percentage equal to the Applicable Margin for LIBOR Rate Revolving
Loans as of such date of determination.

         "Letter of Credit Issuer" means the Bank, any Affiliate of the Bank, or
any other financial institution that issues any Letter of Credit or Credit
Support pursuant to this Agreement.

         "Letter of Credit Subfacility" means $10,000,000; provided that Letters
of Credit issued in support of obligations of the Parent or any of its
Subsidiaries which are not Borrowers shall not exceed $1,000,000 at any time.

         "LIBOR Rate" means, for any Interest Period, with respect to LIBOR Rate
Revolving Loans, the rate of interest per annum determined pursuant to the
following formula:

                  LIBOR Rate  =            Offshore Base Rate
                                -------------------------------------------
                                    1.00 - Eurodollar Reserve Percentage

                  Where,

                  "Eurodollar Reserve Percentage" means, for any day during any
                  Interest Period, the reserve percentage (expressed as a
                  decimal, rounded upward to the next 1/100th of 1.00%) in
                  effect on such day applicable to member banks under
                  regulations issued from time to time by the Federal Reserve
                  Board for determining the maximum reserve requirement
                  (including any emergency, supplemental, or other marginal
                  reserve requirement) with respect to Eurocurrency funding
                  (currently referred to as "Eurocurrency liabilities"). The
                  LIBOR Rate for each outstanding LIBOR Rate Revolving Loan
                  shall be adjusted automatically as of the effective date of
                  any change in the Eurodollar Reserve Percentage.

                  "Offshore Base Rate" means the rate per annum appearing on
                  Telerate Page 3750 (or any successor page) as the London
                  interbank offered rate for deposits in Dollars at
                  approximately 11:00 a.m. (London time) two

ANNEX A TO CREDIT AGREEMENT-Page 18
<PAGE>
                  Business Days prior to the first day of such Interest Period
                  for a term comparable to such Interest Period. If for any
                  reason such rate is not available, the Offshore Base Rate
                  shall be, for any Interest Period, the rate per annum
                  appearing on Reuters Screen LIBO Page as the London interbank
                  offered rate for deposits in Dollars at approximately 11:00
                  a.m. (London time) two Business Days prior to the first day of
                  such Interest Period for a term comparable to such Interest
                  Period; provided, however, if more than one rate is specified
                  on Reuters Screen LIBO Page, the applicable rate shall be the
                  arithmetic mean of all such rates. If for any reason none of
                  the foregoing rates is available, the Offshore Base Rate shall
                  be, for any Interest Period, the rate per annum determined by
                  the Agent as the rate of interest at which Dollar deposits in
                  the approximate amount of the LIBOR Rate Revolving Loan
                  comprising part of such Borrowing would be offered by the
                  Bank's London Branch to major banks in the offshore Dollar
                  market at their request at or about 11:00 a.m. (London time)
                  two Business Days prior to the first day of such Interest
                  Period for a term comparable to such Interest Period.

         "LIBOR Rate Revolving Loan" means a Revolving Loan during any period in
which it bears interest based on the LIBOR Rate.

         "Lien" means (a) any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute, or contract, and including a
security interest, charge, claim, or lien arising from a mortgage, deed of
trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement,
agreement, security agreement, conditional sale or trust receipt or a lease,
consignment, or bailment for security purposes, (b) to the extent not included
under clause (a) preceding, any reservation, exception, encroachment, easement,
right-of-way, covenant, condition, restriction, lease, or other title exception
or encumbrance affecting property, and (c) any contingent or other agreement to
provide any of the foregoing.

         "Loan Account" means the loan account of the Borrowers, which account
shall be maintained by the Agent.

         "Loan Documents" means, collectively, this Agreement, the Revolving
Loan Notes, the Parent Security Agreement, the Subsidiary Security Agreement,
the Mortgages, the Copyright Security Agreement, the Patent Security Agreement,
the Trademark Security Agreement, the Parent Guaranty, the Subsidiary Guaranty,
and any other agreements, instruments, and documents heretofore, now or
hereafter evidencing, securing, guaranteeing, or otherwise relating to the
Obligations, the Collateral, or any other aspect of the transactions
contemplated by this Agreement.

         "Majority Lenders" means, at any time, Lenders whose Pro Rata Shares
aggregate more than fifty percent (50.0%) of the Commitments.

         "Management Group" means, as of any date of determination, the board of
directors, board of managers, or similar constituency having management
authority in respect of an entity under any Requirement of Law.

         "Margin Stock" means "margin stock" as such term is defined in
Regulation T, U, or X of the Federal Reserve Board.

ANNEX A TO CREDIT AGREEMENT-Page 19
<PAGE>
         "Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon the value, condition, use, or availability of the
Collateral or upon the operations, business, properties, condition (financial or
otherwise), or prospects of any Obligated Party, the Collateral, or any
guarantor of the Obligations, (b) a material impairment of the ability of any
Obligated Party to perform under any Loan Document to which it is a party, or
(c) a material adverse effect upon the legality, validity, binding effect, or
enforceability against any Obligated Party of any Loan Document to which it is a
party.

         "Maximum Rate" means, at any time, the maximum rate of interest the
Lenders may lawfully contract for, charge, or receive in respect of the
Obligations as allowed by any Requirement of Law. For purposes of determining
the Maximum Rate under the Requirements of Law of the State of Texas, the
applicable rate ceiling shall be (a) the "weekly ceiling" described in and
computed in accordance with the provisions of Section 303.003 of the Texas
Finance Code, as amended or (b) if the parties subsequently contract as allowed
by any Requirement of Law, the "quarterly ceiling" or the "annualized ceiling"
computed pursuant to Section 303.008 of the Texas Finance Code, as amended;
provided, however, that at any time the "weekly ceiling", the "quarterly
ceiling", or the "annualized ceiling" shall be less than eighteen percent
(18.0%) per annum or more than twenty-four percent (24.0%) per annum, the
provisions of Section 303.009(a) and Section 303.009(b) of the Texas Finance
Code, as amended, shall control for purposes of such determination, as
applicable.

         "Maximum Inventory Loan Amount" means $85,000,000.

         "Maximum Revolver Amount" means $200,000,000.

         "Mortgage" means and includes any mortgage, deed of trust, deed to
secure debt, assignment, or other instrument executed and delivered by any
Obligated Party to or for the benefit of the Agent by which the Agent, for the
benefit of the Agent and the Lenders, acquires a Lien on any Real Estate or a
collateral assignment of such Obligated Party's interest under a lease of Real
Estate, and any amendment, modification, or supplement thereto.

         "Multi-employer Plan" means a "multi-employer plan" as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current
calendar year or the immediately preceding six (6) calendar years contributed to
by an Obligated Party or any ERISA Affiliate.

         "Negative Pledge" means any agreement, contract, or other arrangement
whereby any Obligated Party is prohibited from, or would otherwise be in default
as a result of, creating, assuming, incurring, or suffering to exist, directly
or indirectly, any Lien on any of its assets in favor of the Agent under the
Loan Documents.

         "Net Amount of Eligible Accounts" means, at any time, the gross amount
of Eligible Accounts less sales, excise, or similar taxes, and less returns,
discounts, claims, credits, allowances, accrued rebates, offsets, deductions,
counterclaims, disputes, and other defenses of any nature at any time issued,
owing, granted, outstanding, available, or claimed.

ANNEX A TO CREDIT AGREEMENT-Page 20
<PAGE>
         "Net Income" means, as applied to any Person (the "subject Person"),
the net income (or net loss) of the subject Person for the period in question
after giving effect to deduction of or provision for all operating expenses, all
taxes and reserves (including, without limitation, reserves for deferred taxes),
and all other proper deductions, all determined in accordance with GAAP.

         "Net Proceeds" has the meaning specified in Section 3.3(b).

         "Newly Obligated Party" means each Person, if any, who becomes party to
this Agreement as a Borrower effective as of any date after the Closing Date.

         "Non-Ratable Loan" and "Non-Ratable Loans" have the respective meanings
specified in Section 1.2(i).

         "Notice of Borrowing" has the meaning specified in Section 1.2(c).

         "Notice of Continuation/Conversion" has the meaning specified in
Section 2.2(b).

         "Obligated Party" means each of the Parent and the Borrowers,
individually, and "Obligated Parties" means two or more of such Persons,
collectively.

         "Obligations" means all present and future loans, advances,
liabilities, obligations, covenants, duties, and debts owing by the Obligated
Parties, or any of them, to the Agent and/or any Lender, arising under or
pursuant to this Agreement or any of the other Loan Documents, whether or not
evidenced by any note, or other instrument or document, whether arising from an
extension of credit, opening of a letter of credit, acceptance, loan, guaranty,
indemnification, or otherwise, whether direct or indirect, absolute or
contingent, due or to become due, primary or secondary, as principal or
guarantor, and including all principal, interest, charges, expenses, fees,
attorneys' fees, filing fees, and any other sums chargeable to any Obligated
Party hereunder or under any of the other Loan Documents. "Obligations"
includes, without limitation, (a) all debts, liabilities, and obligations now or
hereafter arising from or in connection with the Letters of Credit and Credit
Support and (b) all debts, liabilities, and obligations now or hereafter arising
from or in connection with Bank Products; provided, however, that
notwithstanding the foregoing, in the case of and with regard to or in
connection with any Newly Obligated Party, the term "Obligations," wherever in
any manner used in the Loan Documents, excludes Existing Obligations.

         "Orderly Liquidation Value" means, with respect to Inventory of any
Person, the orderly liquidation value thereof as determined in a manner
acceptable to the Agent by an experienced and reputable independent appraiser
acceptable to the Agent, net of all costs of liquidation thereof.

         "Other Taxes" means any present or future stamp or documentary taxes or
any other excise or property taxes, charges, or similar levies (excluding, in
the case of each Lender and the Agent, such taxes (including income taxes or
franchise taxes) as are imposed on or measured by each Lender's or the Agent's
net income) which arise from any payment made hereunder or from the execution,
delivery, or registration of, or otherwise with respect to, this Agreement or
any other Loan Documents.

ANNEX A TO CREDIT AGREEMENT-Page 21
<PAGE>
         "Parent" means Daisytek International Corporation, a Delaware
corporation.

         "Parent Guaranty" means an agreement of Guaranty executed by the Parent
pursuant to which the Parent guarantees the Obligations, as such agreement may
be amended, restated, or otherwise modified from time to time.

         "Parent Security Agreement" means the Security Agreement, dated
concurrently herewith, between the Parent and the Agent, for the benefit of the
Agent and the Lenders, as such agreement may be amended, restated, or otherwise
modified from time to time.

         "Pargh" means B.A. Pargh Company, a Delaware corporation, and its
successors and assigns.

         "Participant" means any commercial bank, financial institution, or
other Person not an Affiliate of the Obligated Parties who shall have been
granted the right by any Lender to participate in the financing provided by such
Lender under this Agreement, and who shall have entered into a participation
agreement in form and substance satisfactory to such Lender.

         "Patent Security Agreement" means any Patent Security Agreement
executed and delivered by an Obligated Party to the Agent, for the benefit of
the Agent and the Lenders, to evidence and perfect the Agent's Liens in such
Obligated Party's present and future patents and related licenses and rights, as
such agreement may be amended, restated, or otherwise modified from time to
time.

         "Payment Account" means each bank account established pursuant to the
Parent Security Agreement and the Subsidiary Security Agreement, to which the
funds of an Obligated Party, as applicable, (including proceeds of Accounts and
other Collateral) are deposited or credited, and which is maintained in the name
of the Agent, an Obligated Party, or any of them, as the Agent may determine, on
terms acceptable to the Agent.

         "PBGC" means the Pension Benefit Guaranty Corporation or any
Governmental Authority succeeding to the functions thereof.

         "Pension Plan" means a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA which any Obligated Party or any ERISA
Affiliate sponsors, maintains, or to which it makes, is making, or is obligated
to make contributions, or in the case of a Multi-employer Plan has made
contributions at any time during the immediately preceding five (5) plan years.

         "Permitted Acquisition" means (I) the ISA Acquisition; provided that
such acquisition is consummated on or before July 31, 2002, the aggregate cash
consideration paid in connection with such acquisition is not in excess of
L6,000,000, and Availability after giving effect to such acquisition and any
additional investment in ISA International plc required or made in connection
therewith is not less than $10,000,000, (II) any acquisition of a Person or
substantially all of the assets of a Person which is funded wholly from the
proceeds of Permitted Subordinated Debt or equity proceeds received by the
Parent after the Closing Date, and (III) any other acquisition occurring after
August 1, 2002 of the Capital Stock of a Person or any acquisition of property
which

ANNEX A TO CREDIT AGREEMENT-Page 22
<PAGE>
constitutes a significant or material portion of an existing business of a
Person by a Borrower, in each case, in a transaction that satisfies each of the
following requirements:

                  (a) such acquisition is not a hostile or contested
         acquisition;

                  (b) the business acquired in connection with such acquisition
         is (i) located in the U.S., (ii) organized under Requirements of Law of
         the U.S., and (iii) not engaged, directly or indirectly, in any line of
         business other than the businesses in which the Borrowers are engaged
         on the Closing Date and any business activities that are substantially
         similar, related, or incidental thereto;

                  (c) both before and after giving effect to such acquisition
         and the Revolving Loans (if any) requested to be made in connection
         therewith, each of the representations and warranties in the Loan
         Documents is true and correct (except (i) any such representation or
         warranty which relates to a specified prior date, and (ii) to the
         extent the Agent and the Lenders have been notified in writing by the
         Obligated Parties that any representation or warranty is not correct
         and the Majority Lenders have explicitly waived in writing compliance
         with such representation or warranty) and no Default or Event of
         Default exists or will exist or would result therefrom;

                  (d) (i) as soon as available, but not less than thirty (30)
         days prior to such acquisition, the Borrower has given the Agent (A)
         notice of such acquisition (B) a copy of all business and financial
         information reasonably requested by the Agent including pro forma
         financial statements, statements of cash flow, and projections of
         Availability and, if the Accounts and Inventory acquired in connection
         with such acquisition are proposed to be included in the determination
         of the Borrowing Base, such financial information is reasonably
         satisfactory to the Agent, and (c) a certificate of the Parent's chief
         financial officer certifying (and showing the calculations therefor in
         reasonable detail) that the Obligated Parties will be in compliance
         with each of the covenants set forth in Section 7.23 through Section
         7.25 on a pro forma basis before and after giving effect to such
         acquisition and (ii) as soon as available, the information provided to
         the board of directors of the Parent with respect to such acquisition;

                  (e) the aggregate cash consideration paid in connection with
         any such acquisition does not exceed $20,000,000 and the aggregate cash
         consideration paid in connection with all such acquisitions does not
         exceed $50,000,000;

                  (f) if such acquisition is an acquisition of the Capital Stock
         of a Person, the acquisition is structured so that the acquired Person
         shall become a wholly-owned Subsidiary of a Borrower and, (if
         applicable) subject to Section 13.22, an Obligated Party pursuant to
         the terms of this Agreement;

                  (g) no Obligated Party shall, as a result of or in connection
         with any such acquisition, assume or incur any direct or contingent
         liabilities (whether relating to

ANNEX A TO CREDIT AGREEMENT-Page 23
<PAGE>
         environmental, tax, litigation, or other matters) that could reasonably
         be expected, as of the date of such acquisition, to result in the
         existence or occurrence of a Material Adverse Effect;

                  (h) in connection with an acquisition of the Capital Stock of
         any Person, all Liens on property of such Person shall be terminated
         unless the Agent in its sole discretion consents otherwise, and in
         connection with an acquisition of the assets of any Person, all Liens
         on such assets shall be terminated;

                  (i) the Parent shall certify (and provide the Agent and the
         Lenders with a pro forma calculation in form and substance reasonably
         satisfactory to the Agent) to the Agent and the Lenders that, before
         and after giving effect to completion of such acquisition, the
         Availability is not less than $25,000,000; and

                  (j) no Default or Event of Default exists or would result
         therefrom.

         "Permitted Liens" means:

                  (a) the Agent's Liens;

                  (b) Liens, if any, which are described on Schedule A-2 on the
         Closing Date and Liens resulting from the refinancing of the related
         Debt, provided that such refinancing is on the same or substantially
         similar terms, the Debt secured thereby shall not be increased, and the
         Liens shall not cover any additional property;

                  (c) Liens for taxes, fees, assessments, or other charges of a
         Governmental Authority which are not delinquent or statutory Liens for
         taxes, fees, assessments, or other charges of a Governmental Authority
         in an amount not to exceed $2,000,000; provided that the payment of
         such taxes which are due and payable is being contested in good faith
         and by appropriate proceedings diligently pursued and as to which
         adequate financial reserves have been established in accordance with
         GAAP on the applicable Obligated Party's books and records and a stay
         of enforcement of any such Lien is in effect;

                  (d) Liens consisting of deposits made in the ordinary course
         of business in connection with, or to secure payment of, obligations
         under worker's compensation, unemployment insurance, social security,
         and other similar laws, or to secure the performance of bids, tenders,
         or contracts (other than for the repayment of Debt) or to secure
         indemnity, performance, or other similar bonds for the performance of
         bids, tenders, or contracts (other than for the repayment of Debt) or
         to secure statutory obligations (other than liens arising under ERISA
         or Environmental Liens) or surety or appeal bonds, or to secure
         indemnity, performance, or other similar bonds;

                  (e) Liens securing the claims or demands of materialmen,
         mechanics, carriers, warehousemen, landlords, and other similar
         Persons, provided that if any such Lien arises from the nonpayment of
         such claims or demands when due, such claims or demands do not exceed
         $1,000,000 in the aggregate;

ANNEX A TO CREDIT AGREEMENT-Page 24
<PAGE>
                  (f) Liens constituting encumbrances in the nature of
         reservations, exceptions, encroachments, easements, rights of way,
         covenants running with the land, and other similar title exceptions or
         encumbrances affecting any Real Estate, provided that any such Liens do
         not in the aggregate materially detract from the value of such Real
         Estate or materially interfere with its use in the ordinary conduct of
         an Obligated Party's business;

                  (g) Liens which constitute purchase money Liens and secure
         Debt permitted under clause (c) of Section 7.13;

                  (h) Liens arising from judgments and attachments in connection
         with court proceedings, provided that the attachment or enforcement of
         such Liens would not result in an Event of Default hereunder and such
         Liens are being contested in good faith by appropriate proceedings,
         adequate financial reserves have been established on the applicable
         Obligated Party's books and records in accordance with GAAP, no
         material property is subject to a material risk of loss or forfeiture,
         the claims in respect of such Liens are fully covered by insurance
         (subject to ordinary and customary deductibles), and a stay of
         execution pending appeal or proceeding for review is in effect; and

                  (i) Liens on cash deposits, not in excess of $30,000, in favor
         of Bank One, NA as security for letters of credit issued by Bank One,
         NA which are outstanding as of the Closing Date;

provided that (i) none of such Liens listed in clause (b) through clause (h)
preceding may attach to any Accounts, (ii) none of such Liens listed in clause
(b) through clause (h) preceding, other than such Liens of a type and to the
extent provided by clause (e) preceding, may attach to any Inventory owned by a
Borrower, and (iii) none of such Liens listed in clause (e) preceding shall be a
"Permitted Lien" to the extent that any such Lien attaches to any Inventory
owned by an Obligated Party and the aggregate amount of claims or demands under
clause (e) against all Obligated Parties exceeds $1,000,000.

         "Permitted Other Investments" means investments by the Obligated
Parties in Subsidiaries which are not Obligated Parties (the "subject Persons"),
not in excess of $5,000,000 in the aggregate during the term of this Agreement,
consisting of (a) payments by an Obligated Party under Letters of Credit issued
under this Agreement in support of obligations of the subject Persons, (b)
loans, advances, and equity contributions, and (c) amounts paid under Guaranties
of Debt and other obligations of the subject Persons.

         "Permitted Subordinated Debt" means Debt of an Obligated Party entered
into at any time when no Default or Event of Default exists and which has
maturities and terms, and which is subordinated to payment of the Obligations in
a manner approved in writing by the Agent, and any renewals, modifications, or
amendments thereto which are approved by the Agent in writing.

         "Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, Governmental Authority, or any other entity.

ANNEX A TO CREDIT AGREEMENT-Page 25
<PAGE>
         "Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which any Obligated Party sponsors or maintains or to which any Obligated
Party makes, is making, or is obligated to make contributions and includes any
Pension Plan.

         "Proprietary Rights" has the meaning specified in the Parent Security
Agreement and the Subsidiary Security Agreement.

         "Pro Rata Share" means, with respect to a Lender, a fraction (expressed
as a percentage), the numerator of which is the amount of such Lender's
Commitment and the denominator of which is the sum of the amounts of all of the
Lenders' Commitments, or if no Commitments are outstanding, a fraction
(expressed as a percentage), the numerator of which is the amount of Obligations
owed to such Lender and the denominator of which is the aggregate amount of the
Obligations owed to the Lenders, in each case giving effect to a Lender's
participation in Non-Ratable Loans and Agent Advances.

         "Real Estate" means, with respect to any Person, all of such Person's
now or hereafter owned or leased estates in real property, including, without
limitation, all fees, leaseholds, and future interests, together with all of
such Person's now or hereafter owned or leased interests in the improvements
thereon, the fixtures attached thereto, and the easements appurtenant thereto.

         "Release" means a release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching, or migration of a
Contaminant into the indoor or outdoor environment or into or out of any Real
Estate or other property, including the movement of Contaminants through or in
the air, soil, surface water, groundwater, or Real Estate or other property.

         "Report" has the meaning specified in Section 12.18(a).

         "Reportable Event" means, any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, other than any such event for
which the 30-day notice requirement under ERISA has been waived in regulations
issued by the PBGC.

         "Required Lenders" means at any time Lenders whose Pro Rata Shares
aggregate more than 66-2/3% of the Commitments.

         "Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule, or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.

         "Reserves" means reserves that limit the availability of credit
hereunder, consisting of reserves against Availability, Eligible Accounts, or
Eligible Inventory, established by the Agent from time to time in the Agent's
reasonable credit judgment. Without limiting the generality of the foregoing,
the following reserves shall be deemed to be a reasonable exercise of the
Agent's credit judgment: (a) Bank Product Reserves; (b) reserves for accrued,
unpaid interest on the Obligations; (c) reserves for rent at leased locations
subject to statutory or contractual landlord liens; (d) reserves

ANNEX A TO CREDIT AGREEMENT-Page 26
<PAGE>
for Inventory shrinkage; (e) Environmental Compliance Reserves; (f) reserves for
customs charges; (g) reserves for dilution of Accounts; (h) reserves for
warehousemen's or bailees' charges; and (i) reserves for taxes, fees,
assessments, and other governmental charges which are due and unpaid.

         "Responsible Officer" means, with respect to any Obligated Party, the
chief executive officer or the president, or any other officer having
substantially the same authority and responsibility, or, with respect to
compliance with financial covenants, the preparation of Borrowing Base
Certificates, and certificates with respect to determination of the Applicable
Margin the chief financial officer or the treasurer of such Obligated Party, or
any other officer having substantially the same authority and responsibility.

         "Restricted Investment" means, with respect to any Obligated Party, any
acquisition of property by such Obligated Party in exchange for cash or other
property, whether in the form of an acquisition of Capital Stock, debt, or other
indebtedness or obligation, or the purchase or acquisition of any other assets
or property, or a loan, advance, capital contribution, or subscription (each of
the foregoing an "Investment"), except the following if made at a time when no
Default or Event of Default exists or would result therefrom: (a) acquisitions
of Equipment to be used in the business of such Obligated Party so long as the
acquisition costs thereof constitute Capital Expenditures permitted hereunder;
(b) acquisitions of Inventory in the ordinary course of business of such
Obligated Party; (c) acquisitions of other current assets acquired in the
ordinary course of business of such Obligated Party; (d) Investments in direct
obligations of the U.S., or any agency thereof, or obligations guaranteed by the
U.S., provided that such obligations mature within one year from the date of
acquisition thereof; (e) Investments in certificates of deposit maturing within
one year from the date of investment, bankers' acceptances, Eurodollar bank
deposits, or overnight bank deposits, in each case issued by, created by, or
with a bank or trust company organized under the laws of the U.S. or any state
thereof having capital and surplus aggregating at least $100,000,000; (f)
Investments in commercial paper given a rating of "A2" or better by Standard &
Poor's Corporation or "P2" or better by Moody's Investors Service, Inc. and
maturing not more than ninety (90) days from the date of creation thereof; and
(g) Investments in Hedge Agreements entered into for the purpose of limiting the
amount of interest payable under this Agreement; (h) Investments in mutual funds
substantially all of the assets of which are comprised of securities of the
types described in clauses (d), (e), and (f) preceding; (i) Investments
consisting of intercompany loans between any Borrower and another Borrower; (j)
Investments not in excess of L9,000,000 in the aggregate, consisting of
intercompany loans by the Obligated Parties to Daisytek UK Limited and ISA
International plc, collectively, which intercompany loans shall be used to (i)
fund intercompany loans to ISA International plc (such intercompany loans not to
exceed L3,000,000) and (ii) by Daisytek UK Limited as payment of the cash
consideration required to be paid in connection with the ISA Acquisition (such
cash consideration not to exceed L6,000,000); (k) loans to executive officers
and non-employee directors of the Obligated Parties; provided that (i) at the
time of such loan no Default or Event of Default shall exist or result
therefrom, and (ii) the aggregate amount of such loans made by the Obligated
Parties and outstanding at any one time shall not exceed $5,000,000, calculated
net of any bad debt reserves; (l) existing Investments listed on Schedule A-3);
(m) Investments consisting of payments made by the Parent under its Guarantees
allowed under Section 7.12(c); (n) Permitted Other Investments; and (n)
Permitted Acquisitions; and (o) other Investments not included in clauses (a)
through (n) preceding in an aggregate amount at any time not

ANNEX A TO CREDIT AGREEMENT-Page 27
<PAGE>
in excess of the net amount of proceeds from offerings of equity securities of
the Parent and Permitted Subordinated Debt funded after the Closing Date, to the
extent such net proceeds exceed an amount equal to the sum of intercompany loans
and other Investments made by the Obligated Parties pursuant to clause (j)
preceding.

         "Revolving Loan Note" and "Revolving Loan Notes" have the meanings
specified in Section 1.2(b).

         "Revolving Loans" has the meaning specified in Section 1.2 and includes
each Agent Advance and Non-Ratable Loan.

         "Settlement" and "Settlement Date" have the meanings specified in
Section 12.15(a)(ii).

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

                  (a) the assets of such Person, at a fair valuation, are in
         excess of the total amount of its debts (including contingent
         liabilities);

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

                  (c) it is then able and expects to be able to pay its debts
         (including contingent debts and other commitments) as they mature; and

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

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

         "Stated Termination Date" means April 24, 2005.

         "Subsidiary" means, with respect to any Person (the "subject Person"),
any corporation, association, partnership, limited liability company, joint
venture, or other business entity of which more than fifty percent (50.0%) of
the voting Capital Stock or other Capital Stock, is owned or controlled directly
or indirectly by the subject Person, or one or more of the Subsidiaries of the
subject Person, or a combination thereof. Unless the context otherwise clearly
requires, references herein to a "Subsidiary" refer to a Subsidiary of an
Obligated Party.

         "Subsidiary Guaranty" means an agreement of Guaranty executed by any
Subsidiary of the Parent pursuant to which such Subsidiary guarantees the
Obligations, or any portion thereof, as such agreement may be amended, restated,
or otherwise modified from time to time.

ANNEX A TO CREDIT AGREEMENT-Page 28
<PAGE>
         "Subsidiary Security Agreement" means the Security Agreement, dated
concurrently herewith, between the Borrowers and the Agent, for the benefit of
the Agent and the Lenders, as such agreement may be amended, restated, or
otherwise modified from time to time.

         "Supporting Letter of Credit" has the meaning specified in Section
1.3(g).

         "TapeBargains" means TapeBargains.com, Inc., a Delaware corporation,
and its successors and assigns.

         "Tape Company" means The Tape Company, Inc., a Delaware corporation,
and its successors and assigns.

         "Taxes" means any and all present or future taxes, levies, imposts,
deductions, charges, or withholdings, and all liabilities with respect thereto,
excluding, in the case of the Agent and each Lender, such taxes (including
income taxes or franchise taxes) as are imposed on or measured by the Agent's or
such Lender's net income in the jurisdiction (whether federal, state, or local
and including any political subdivision thereof) under the laws of which the
Agent or such Lender, as the case may be, is organized or maintains a lending
office.

         "Termination Date" means the earliest to occur of (a) the Stated
Termination Date, (b) the date the Total Facility is terminated (i) by the
Borrowers pursuant to Section 3.2 or (ii) pursuant to Section 9.2, and (c) the
date this Agreement is otherwise terminated for any reason whatsoever pursuant
to the terms of this Agreement.

         "Total Facility" has the meaning specified in Section 1.1.

         "Trademark Security Agreement" means any Trademark Security Agreement
executed and delivered by an Obligated Party to the Agent, for the benefit of
the Agent and the Lenders, to evidence and perfect the Agent's Liens in such
Obligated Party's present and future trademarks and related licenses and rights,
as such agreement may be amended, restated, or otherwise modified from time to
time.

         "UCC" means the Uniform Commercial Code (or any successor statute), as
in effect from time to time, of the State of Texas or of any other state the
laws of which are required as a result thereof to be applied in connection with
the issue of perfection of security interests; provided that to the extent that
the UCC is used to define any term herein or in any other documents and such
term is defined differently in different Articles or Divisions of the UCC, the
definition of such term contained in Article or Division 9 shall govern.

         "Unfunded Pension Liability" means the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Plan's assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable plan
year.

ANNEX A TO CREDIT AGREEMENT-Page 29
<PAGE>
         "Unused Letter of Credit Subfacility" means an amount equal to the
Letter of Credit Subfacility minus the sum of (a) the aggregate undrawn amount
of all outstanding Letters of Credit and Credit Support, plus, without
duplication, (b) the aggregate unpaid reimbursement obligations with respect to
all Letters of Credit and Credit Support.

         "Unused Line Fee" has the meaning specified in Section 2.4.

         "U.S." means the United States of America.

         "VirtualDemand" means VirtualDemand.com, Inc., a Delaware corporation,
and its successors and assigns.

         "Wholly-Owned Subsidiary" when used to determine the relationship of a
Subsidiary to a Person, means a Subsidiary all of the issued and outstanding
Capital Stock (other than directors' qualifying shares) of which shall at the
time be owned by such Person or one or more of such Person's Wholly-Owned
Subsidiaries or by such Person and one or more of such Person's Wholly-Owned
Subsidiaries.

ACCOUNTING TERMS:

         Any accounting term used in this Agreement shall have, unless otherwise
specifically provided herein, the meaning customarily given to such term in
accordance with GAAP, and all financial computations in this Agreement shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
as consistently applied and using the same method for inventory valuation as
used in the preparation of the Financial Statements.

INTERPRETIVE PROVISIONS:

         Wherever used in this Agreement,

                  (a) The meanings of defined terms are equally applicable to
         the singular and plural forms of the defined terms. Terms used herein
         that are defined in the UCC and are not otherwise defined herein shall
         have the meanings specified therefor in the UCC.

                  (b) The words "hereof," "herein," "hereunder," and similar
         words refer to this Agreement as a whole and not to any particular
         provision of this Agreement. Section, Schedule, and Exhibit references
         are to this Agreement unless otherwise specified. The term "documents"
         includes any and all instruments, documents, agreements, certificates,
         indentures, notices, and other writings, however evidenced. The term
         "including" is not limiting and means "including, without limitation."
         In the computation of periods of time from a specified date to a later
         specified date, the word "from" means "from and including," the words
         "to" and "until" each mean "to but excluding" and the word "through"
         means "to and including." The word "or" is not exclusive. The words
         "hereof," "herein," "hereunder"

ANNEX A TO CREDIT AGREEMENT-Page 30
<PAGE>
         and similar words refer to the Agreement as a whole and not to any
         particular provision of the Agreement; and Subsection, Section,
         Schedule and Exhibit references are to the Agreement unless otherwise
         specified.

                  (c) Unless otherwise expressly provided herein, (i) references
         to agreements (including this Agreement) and other contractual
         instruments shall be deemed to include all subsequent amendments,
         restatements, and other modifications thereto, but only to the extent
         such amendments, restatements, and other modifications are not
         prohibited by the terms of any Loan Document, and (ii) references to
         any statute or regulation are to be construed as including all
         statutory and regulatory provisions consolidating, amending, replacing,
         supplementing, or interpreting the statute or regulation.

                  (d) The captions and headings of this Agreement are for
         convenience of reference only and shall not affect the interpretation
         of this Agreement.

                  (e) This Agreement and the other Loan Documents may use
         several different limitations, tests, or measurements to regulate the
         same or similar matters. All such limitations, tests, and measurements
         are cumulative and shall each be performed in accordance with their
         terms.

                  (f) For purposes of Section 9.1, a breach of a financial
         covenant contained in Section 7.22 through Section 7.25 shall be deemed
         to have occurred as of any date of determination thereof by the Agent
         or as of the last day of any specified measuring period, regardless of
         when the Financial Statements reflecting such breach are delivered to
         the Agent and the Lenders.

                  (g) This Agreement and the other Loan Documents are the result
         of negotiations among and have been reviewed by counsel to the Agent,
         each Lender, and the Obligated Parties and are the products of all
         parties. Accordingly, this Agreement and the other Loan Documents shall
         not be construed against the Agent, the Lender, or the Obligated
         Parties merely because of their respective involvement in their
         preparation.

ANNEX A TO CREDIT AGREEMENT-Page 31

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