Document:

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Exhibit 10.1

                                CREDIT AGREEMENT

Buffalo, New York                                                   May 17, 2005

BORROWER: THE PEOPLES PUBLISHING GROUP, INC., a corporation organized under the
laws of the State of Delaware having its chief executive office at 299 Market
Street, Saddle Brook, New Jersey 07663. Attention: Office of CFO.

BANK: MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking corporation
with its chief executive office at One M&T Plaza, Buffalo, NY 14240. Attention:
Office of General Counsel.

The Bank and the Borrower agree as follows:

1.    DEFINITIONS.

      (a)   "ADVANCE" means a Revolving Advance or the Term Advance.

      (b)   "AFFILIATE" means as to any Person, any other Person (i) which
            directly or indirectly controls, is controlled by, or is under
            common control with such Person, (ii) which beneficially owns or
            holds 5% or more of any class of the voting or other equity
            interests of such Person, or (iii) 5% or more of any class of voting
            interests or other equity interests of which is beneficially owned
            or held, directly or indirectly, by such Person. Control, as used in
            this definition, shall mean the possession, directly or indirectly,
            of the power to direct or cause the direction of the management or
            policies of a Person, whether through the ownership of voting
            securities, by contract or otherwise, including the power to elect a
            majority of the directors or trustees of a corporation or trust, as
            the case may be.

      (c)   "ANTI-TERRORISM LAWS" means any Laws relating to terrorism or money
            laundering, including Executive Order No. 13224, the USA Patriot
            Act, the Laws comprising or implementing the Bank Secrecy Act, and
            the Laws administered by the United States Treasury Department's
            Office of Foreign Asset Control (as any of the foregoing Laws may
            from time to time be amended, renewed, extended, or replaced).

      (d)   "CREDIT" OR "CREDIT FACILITY" means any and all credit facilities
            and any other financial accommodations made by the Bank in favor of
            the Borrower whether now or hereafter in existence.

      (e)   "COLLATERAL" means all of the Borrower's assets which the Bank has
            been granted a security interest pursuant to the Transaction
            Documents.

      (f)   "DEBT" means as to any Person as of a given date, all items of
            indebtedness or liability which in accordance with GAAP would be
            included in determining total liabilities as shown on the
            liabilities side of a balance sheet for such Person and shall also
            include the aggregate payments required to be made by such Person at
            any time under any lease that is considered a capitalized lease
            under GAAP.

      (g)   "DEBT SERVICE COVERAGE RATIO" means EBITDA divided by the sum of
            interest expense and scheduled principal reductions with respect to
            the outstanding Debt for the period being tested.

      (h)   "EBITDA" means for any period the sum of (i) Earnings Before
            Interest and Taxes for such period plus (ii) depreciation expenses
            for such period, plus (iii) amortization expenses for such period,
            excluding therefrom (a) non-operating gains (including, without
            limitation, extraordinary or unusual gains, gains from
            discontinuance of operations, gains arising from the sale of assets
            and other nonrecurring gains) of the Borrower during the period
            being tested and (b) similar non-operating losses (including,
            without limitation, losses arising from the sale of assets and other
            nonrecurring losses) of the Borrower during such period.

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      (i)   "ENVIRONMENTAL LAW" means any federal, state, local or other
            governmental statute, regulation, law or ordinance dealing with the
            protection of human health and the environment.

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

      (k)   "ERISA AFFILIATE means any trade or business (whether or not
            incorporated) that is a member of a group which includes the
            Borrower and which is treated as a single employer under Section 414
            of the IRC.

      (l)   "EXECUTIVE ORDER NO. 13224" means the Executive Order No. 13224 on
            Terrorist Financing, effective September 24, 2001, as the same has
            been, or shall hereafter be, renewed, extended, amended or replaced.

      (m)   "GAAP" means, with respect to any date of determination, generally
            accepted accounting principles as used by the Financial Accounting
            Standards Board and/or the American Institute of Certified Public
            Accountants consistently applied and maintained throughout the
            periods indicated.

      (n)   "GUARANTOR(S)" means PEH and any other Person, including all
            subsidiaries of Borrower, now or hereafter guarantying the
            Obligations.

      (o)   "GUARANTY" means each unconditional continuing guaranty or
            unconditional continuing guaranty by corporation executed by a
            Guarantor in favor of the Bank (collectively, the "Guaranties")

      (p)   "HAZARDOUS SUBSTANCES" means pollutants, contaminants, hazardous
            substances, hazardous wastes, petroleum and fractions thereof, and
            all other chemicals, wastes, substances and materials listed in,
            regulated by or identified in any Environmental Law.

      (q)   "INFRINGEMENT" OR "INFRINGING" when used with respect to
            Intellectual Property Rights means any infringement or other
            violation of Intellectual Property Rights.

      (r)   "INTELLECTUAL PROPERTY RIGHTS" means all actual or prospective
            rights arising in connection with any intellectual property or other
            proprietary rights, including all rights arising in connection with
            copyrights, patents, service marks, trade dress, trade secrets,
            trademarks, trade names or mask works.

      (s)   "IRC" means the Internal Revenue Code of 1986, as amended from time
            to time.

      (t)   "LAW" means any law (including common law), constitution, statute,
            treaty, regulation, rule, ordinance, opinion, release, ruling,
            order, injunction, writ, decree, bond, judgment, authorization or
            approval, lien or award by or settlement agreement with any official
            body.

      (u)   "LIEN" means any security interest, mortgage, deed of trust, pledge,
            lien, charge, encumbrance, title retention agreement or analogous
            instrument or device, including the interest of each lessor under
            any capitalized lease and the interest of any bondsman under any
            payment or performance bond, in, of or on any assets or properties
            of a Person, whether now owned or hereafter acquired and whether
            arising by agreement of operation of law.

      (v)   "MATURITY DATE" means with respect to the Term Note, May 16, 2012
            and with respect to the Revolving Note, May 16, 2010.

      (w)   "MAXIMUM LINE AMOUNT" means $7,000,000 unless said amount is reduced
            pursuant to the Revolving Note, in which event it means such lower
            amount.

      (x)   "MULTIEMPLOYER PLAN" means a multiemployer plan (as defined in
            Section 4001(a)(3) of ERISA) to which the Borrower or any ERISA
            Affiliate contributes or is obligated to contribute.

      (y)   "NET LOSS" means fiscal year-to-date after-tax net loss from
            continuing operations as determined in accordance with GAAP.

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      (z)   "OBLIGATIONS" means any and all indebtedness or other obligations of
            the Borrower to the Bank in any capacity, now existing or hereafter
            incurred, however created or evidenced, regardless of kind, class or
            form, whether direct, indirect, absolute or contingent (including
            obligations pursuant to any guaranty, endorsement, other assurance
            of payment or otherwise), whether arising by reason of an extension
            of credit, opening of a letter of credit, loan, equipment lease or
            guarantee, under any interest or currency swap, future, option or
            other similar agreement, or in any other manner, whether arising out
            of overdrafts or deposit or other accounts or electronic funds
            transfers (whether through automated clearing houses or otherwise),
            whether joint or several, whether from time to time reduced and
            thereafter increased, or entirely extinguished and thereafter
            reincurred, together with all extensions, renewals and replacements
            thereof, and all interest, fees, charges, costs or expenses which
            accrue on or in connection with the foregoing, including any
            indebtedness or obligations (i) not yet outstanding but contracted
            for, or with regard to which any other commitment by the Bank
            exists; (ii) arising prior to, during or after any pendency of any
            bankruptcy, insolvency, receivership or other similar proceeding,
            regardless of whether allowed or allowable in such proceeding; (iii)
            owed by the Borrower to others and which the Bank obtained, or may
            obtain, by assignment or otherwise; and (iv) payable under this
            Agreement.

      (aa)  "OFFICER" means with respect to the Borrower, an officer if the
            Borrower is a corporation, an manager if the Borrower is a limited
            liability company, or a partner if the Borrower is a partnership.

      (bb)  "PEH" means Peoples Educational Holdings, a corporation organized in
            the State of Delaware

      (cc)  "PENSION PLAN" means a pension plan (as defined in Section 3(2) of
            ERISA) maintained for employees of the Borrower or any ERISA
            Affiliate and covered by Title IV of ERISA.

      (dd)  "PERSON" means any individual, corporation, partnership, joint
            venture, limited liability company, association, joint-stock
            company, trust, unincorporated organization or government or any
            agency or political subdivision thereof.

      (ee)  "PLAN" means an employee benefit plan (as defined in Section 3(3) of
            ERISA) maintained for employees of the Borrower or any ERISA
            Affiliate.

      (ff)  "PREMISES" means all locations where the Borrower conducts its
            business or has any rights of possession, including the locations
            described in Schedule titled "Premises" attached hereto.

      (gg)  "REPORTABLE EVENT" means a reportable event (as defined in Section
            4043 of ERISA), other than an event for which the 30-day notice
            requirement under ERISA has been waived in regulations issued by the
            Pension Benefit Guaranty Corporation.

      (hh)  "REVOLVING NOTE" means the Borrower's revolving promissory note,
            payable to the order of the Bank, as same may be renewed and amended
            from time to time, and all replacements thereto.

      (ii)  "SENIOR FUNDED DEBT" means all long term Debt that is not
            subordinated to the Bank or the Obligations.

      (jj)  "SUBSIDIARY" means any corporation or other business entity of which
            at least fifty percent (50%) of the voting stock or other ownership
            interest is owned by the Borrower directly or indirectly through one
            or more Subsidiaries. If the Borrower has no Subsidiaries, the
            provisions of this Agreement relating to the Subsidiaries shall be
            disregarded, without affecting the applicability of such provisions
            to the Borrower alone.

      (kk)  "TERM NOTE" means the Borrower's promissory note, payable to the
            order of the Bank, as same may be renewed and amended from time to
            time, and all replacements thereto.

      (ll)  "TERMINATION DATE" means the earliest of (i) the Maturity Date, (ii)
            the date the Borrower terminates the Credit Facility, or (iii) the
            date the Bank demands payment of the Obligations following an Event
            of Default.

      (mm)  "TRANSACTION DOCUMENTS" means this Agreement and all documents,
            instruments or other agreements by the Borrower in favor of the Bank
            in connection (directly or indirectly) with the Obligations, whether
            now or hereafter in existence, including promissory notes, security
            agreements, guaranties and letter of credit reimbursement
            agreements.

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      (nn)  "UCC" means the Uniform Commercial Code as in effect in the State of
            New York as the state whose laws shall govern this Agreement, or in
            any other state whose laws are held to govern this Agreement or any
            portion hereof.

      1.1 "OTHER DEFINITIONAL TERMS; RULES OF INTERPRETATION". The words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. All accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with GAAP. All terms defined in
the UCC and not otherwise defined herein have the meanings assigned to them in
the UCC. References to Articles, Sections, subsections, Exhibits, Schedules and
the like, are to Sections and subsections of, or Exhibits or Schedules attached
to, this Agreement (as amended from time to time in accordance with this
Agreement) unless otherwise expressly provided. The words "include", "includes"
and "including" shall be deemed to be followed by the phrase "without
limitation". Unless the context in which used herein otherwise clearly requires,
"or" has the inclusive meaning represented by the phrase "and/or". Defined terms
include in the singular number the plural and in the plural number the singular.
Reference to any agreement (including the Transaction Documents), document or
instrument means such agreement, document or instrument as amended or modified
and in effect from time to time in accordance with the terms thereof (and, if
applicable, in accordance with the terms hereof and the other Transaction
Documents), except where otherwise explicitly provided, and reference to any
promissory note includes any promissory note which is an extension or renewal
thereof or a substitute or replacement therefor. Reference to any law, rule,
regulation, order, decree, requirement, policy, guideline, directive or
interpretation means as amended, modified, codified, replaced or reenacted, in
whole or in part, and in effect on the determination date, including rules and
regulations promulgated thereunder.

2.   AMOUNT AND TERMS OF THE CREDIT FACILITY.

      (a)   REVOLVING ADVANCES. The Bank agrees, subject to the terms and
            conditions of this Agreement, to make advances ("Revolving
            Advances") to the Borrower from time to time from the date that all
            of the conditions set forth in 4.1 are satisfied (the "Funding
            Date") to and until (but not including) the Termination Date in an
            amount not in excess of the Maximum Line Amount. The Bank shall have
            no obligation to make a Revolving Advance to the extent that the
            amount of the requested Revolving Advance exceeds the Maximum Line
            Amount. The Borrower's obligation to pay the Revolving Advances
            shall be evidenced by the Revolving Note and shall be secured by the
            Collateral. Within the limits set forth in the Revolving Note, the
            Borrower may borrow, prepay pursuant to the Revolving Note, and
            reborrow.

      (b)   PROCEDURES FOR REQUESTING ADVANCES. The Borrower shall comply with
            the following procedures in requesting Revolving Advances set forth
            in the Revolving Note

      (c)   TERM ADVANCE. The Bank agrees, subject to the terms and conditions
            of this Agreement and the Term Note, to make a single advance to the
            Borrower on the Funding Date (the "Term Advance") in an amount of
            $5,000,000. The Borrower's obligation to pay the Term Advance shall
            be evidenced by the Term Note and shall be secured by the
            Collateral.

      (d)   PAYMENT OF TERM NOTE. The outstanding principal balance of the Term
            Note shall be due and payable as set forth in the Term Note.

      (e)   FEES.

            (i) ORIGINATION FEE. The Borrower shall pay the Bank a fully earned
            and non-refundable origination fee of $60,000, due and payable upon
            the execution of this Agreement.

            (ii) UNUSED LINE FEE. For the purposes of this Section 2(e), "Unused
            Amount" means the Maximum Line Amount reduced by outstanding
            Revolving Advances. The Borrower agrees to pay to the Bank an unused
            line fee at the rate of one-eighth of one percent per annum on the
            average daily Unused Amount from the date of this Agreement to and
            including the Termination Date, due and payable monthly in arrears
            on the first day of the month and on the Termination Date.

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      (f)   USE OF PROCEEDS. The Borrower shall use the proceeds of Advances (a)
            to pay in full any and all amounts owing by Borrower to Merrill
            Lynch, (b) to pay the fees and expenses of Borrower in connection
            with the transactions contemplated hereunder and (c) for ordinary
            working capital purposes including prepublication costs.

      (g)   LIABILITY RECORDS. The Bank may maintain from time to time, at its
            discretion, records as to the Obligations. All entries made on any
            such record shall be presumed correct until the Borrower establishes
            the contrary. Upon the Bank's demand, the Borrower will admit and
            certify in writing the exact principal balance of the Obligations
            that the Borrower then asserts to be outstanding. Any billing
            statement or accounting rendered by the Bank shall be conclusive and
            fully binding on the Borrower unless the Borrower gives the Bank
            specific written notice of exception within 30 days after receipt.

3.   CONDITIONS PRECEDENT.

      (a)   CONDITIONS PRECEDENT TO MAKING THE INITIAL ADVANCES AND ISSUING
            LETTERS OF CREDIT. The Bank's obligation to make the initial
            Advances or to cause any Letters of Credit to be issued shall be
            subject to the condition precedent that the Bank shall have received
            all of the following, each properly executed by the appropriate
            party and in form and substance satisfactory to the Bank:

            (i) This Agreement.

            (ii) The Revolving Note and the Term Note.

            (iii) The Security Agreement.

            (iv) The Security Agreement (Copyrights and Trademarks).

            (v) A true and correct copy of any and all agreements pursuant to
            which the Borrower's property is in the possession of any Person
            other than the Borrower, together with, in the case of any goods
            held by such Person for resale, (i) a consignee's acknowledgment and
            waiver of Liens, (ii) UCC financing statements sufficient to protect
            the Borrower's and the Bank's interests in such goods, and (iii) UCC
            searches showing that no other secured party has filed a financing
            statement against such Person and covering property similar to the
            Borrower's other than the Borrower, or if there exists any such
            secured party, evidence that each such secured party has received
            notice from the Borrower and the Bank sufficient to protect the
            Borrower's and the Bank's interests in the Borrower's goods from any
            claim by such secured party.

            (vi) An acknowledgment and waiver of Liens from each warehouse in
            which the Borrower is storing inventory

            (vii) Current searches of appropriate filing offices showing that
            (i) no Liens have been filed and remain in effect against the
            Borrower except Permitted Liens or Liens held by Persons who have
            agreed in writing that upon receipt of proceeds of the initial
            Advances, they will satisfy, release or terminate such Liens in a
            manner satisfactory to the Bank, and (ii) the Bank has duly filed
            all financing statements necessary to perfect the security interest,
            to the extent the security interest is capable of being perfected by
            filing.

            (viii) A certificate of the Borrower's Secretary or Assistant
            Secretary certifying that attached to such certificate are (i) the
            resolutions of the Borrower's Directors, authorizing the execution,
            delivery and performance of the Transaction Documents, (ii) true,
            correct and complete copies of the Borrower's Governing Documents,
            and (iii) examples of the signatures of the Borrower's Officers or
            agents authorized to execute and deliver the Transaction Documents
            and other instruments, agreements and certificates, including
            Advance requests, on the Borrower's behalf.

            (ix) A current certificate issued by the Secretary of State of
            Delaware, certifying that the Borrower is in good standing under the
            Law of the State of Delaware.

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            (x) Evidence that the Borrower is duly licensed or qualified to
            transact business in all jurisdictions where the character of the
            property owned or leased or the nature of the business transacted by
            it makes such licensing or qualification necessary.

            (xi) A certificate of an Officer of the Borrower confirming, in his
            personal capacity, the representations and warranties set forth in
            this Agreement.

            (xii) A certificate of two Officers of the Borrower confirming, in
            their personal capacity, that: (i) they have reviewed the balance
            sheet and cash flow projections of Borrower, (ii) Borrower is
            solvent after giving effect to the transactions and the Debt
            contemplated by the Transaction Documents, (iii) Borrower has the
            financial resources and anticipated ability to meet its obligations
            and liabilities as they become due and does not have unreasonably
            small capital base with which to engage in its anticipated business,
            and (iv) the Transaction Documents were executed and delivered in
            good faith and in exchange for reasonable equivalent value and fair
            consideration.

            (xiii) Certificates of the insurance required hereunder, with all
            hazard insurance containing a lender's loss payable endorsement in
            the Bank's favor and with all liability insurance naming the Bank as
            an additional insured.

            (xiv) Payment of the fees and commissions due under Section 2(e)
            through the date of the initial Advance and expenses incurred by the
            Bank through such date and required to be paid by the Borrower under
            Section 7, including all legal expenses incurred through the date of
            this Agreement.

            (xv) Borrower's audited financials statements for the fiscal year
            ending December 31, 2004, which financial statements shall include
            the Borrower's balance sheet as at the end of such fiscal year and
            the related statements of the Borrower's income, retained earnings
            and cash flows for the fiscal year then ended. There shall have
            occurred no material adverse change shall have occurred in the
            financial condition, business, affairs, operations, or control of
            Borrower, since the date of the delivery of such financial
            statements to Bank.

            (xvi) Such other documents as the Bank in its reasonable discretion
            may require.

      (b)   CONDITIONS PRECEDENT TO ALL ADVANCES AND LETTERS OF CREDIT. The
            Bank's obligation to make each Advance or to cause the issuance of a
            Letter of Credit shall be subject to the further conditions
            precedent that:

            (i) the representations and warranties contained in Section 4 are
            correct on and as of the date of such Advance as though made on and
            as of such date, except to the extent that such representations and
            warranties relate solely to an earlier date; and

            (ii) no event has occurred and is continuing, or would result from
            such Advance which constitutes a Default or an Event of Default.

4.    REPRESENTATIONS AND WARRANTIES. The Borrower makes the following
      representations and warranties and any "Additional Representations and
      Warranties" on the schedule attached hereto and made part hereof (the
      "Schedule"), all of which shall be deemed to be continuing representations
      and warranties as long as this Agreement is in effect:

      (a)   GOOD STANDING; AUTHORITY. The Borrower and each Subsidiary (if
            either is not an individual) is duly organized, validly existing and
            in good standing under the laws of the jurisdiction in which it was
            formed. The Borrower and each Subsidiary is duly authorized to do
            business in each jurisdiction in which failure to be so qualified
            might have a material adverse effect on its business or assets and
            has the power and authority to own each of its assets and to use
            them in the ordinary course of business now and in the future.

      (b)   COMPLIANCE. The Borrower and each Subsidiary conducts its business
            and operations and the ownership of its assets in compliance with
            each applicable statute, regulation and other law, including
            environmental laws. All approvals, including authorizations,
            permits, consents, franchises, licenses, registrations, filings,
            declarations, reports and notices (the "Approvals") necessary for
            the conduct of the Borrower's and each Subsidiary's business and for
            the Credit have been duly obtained and are in full force and effect.
            The Borrower and each Subsidiary is

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            in compliance with the Approvals. The Borrower and each Subsidiary
            (if either is not an individual) is in compliance with its
            certificate of incorporation, by-laws, partnership agreement,
            articles of organization, operating agreement or other applicable
            organizational or governing document as may be applicable to the
            Borrower or a Subsidiary depending on its organizational structure
            ("Governing Documents"). The Borrower and each Subsidiary is in
            compliance with each agreement to which it is a party or by which it
            or any of its assets is bound.

      (c)   LEGALITY. The execution, delivery and performance by the Borrower of
            this Agreement and all related documents, including the Transaction
            Documents, (i) are in furtherance of the Borrower's purposes and
            within its power and authority; (ii) do not (A) violate any statute,
            regulation or other law or any judgment, order or award of any
            court, agency or other governmental authority or of any arbitrator
            with respect to the Borrower or any Subsidiary or (B) violate the
            Borrower's or any Subsidiary's Governing Documents (if either is not
            an individual), constitute a default under any agreement binding on
            the Borrower or any Subsidiary or result in a lien or encumbrance on
            any assets of the Borrower or any Subsidiary; and (iii) if the
            Borrower or any Subsidiary is not an individual, have been duly
            authorized by all necessary organizational actions.

      (d)   FISCAL YEAR. The fiscal year of the Borrower is the calendar year
            unless the following blank states otherwise: year ending_________,
            20_____.

      (e)   TITLE TO ASSETS. The Borrower and each Subsidiary has good and
            marketable title to each of its assets free of security interests,
            mortgages or other liens or encumbrances, except as set forth on the
            Schedule titled "Permitted Liens" or pursuant to the Bank's prior
            written consent.

      (f)   JUDGMENTS AND LITIGATION. There is no pending or threatened claim,
            audit, investigation, action or other legal proceeding or judgment,
            order or award of any court, agency or other governmental authority
            or arbitrator (any, an "Action") which involves the Borrower, its
            Subsidiaries or their respective assets and might have a material
            adverse effect upon the Borrower or any Subsidiary or threaten the
            validity of the Credit, any Transaction Document or any related
            document or action.

      (g)   FULL DISCLOSURE. Neither this Agreement nor any certificate,
            financial statement or other writing provided to the Bank by or on
            behalf of the Borrower or any Subsidiary contains any statement of
            fact that is incorrect or misleading in any material respect or
            omits to state any fact necessary to make any such statement not
            incorrect or misleading. The Borrower has not failed to disclose to
            the Bank any fact that might have a material adverse effect on the
            Borrower or any Subsidiary.

      (h)   INTELLECTUAL PROPERTY RIGHTS.

            (i) OWNED INTELLECTUAL PROPERTY. Schedule titled "Owned Intellectual
            Property" is a complete list of all patents, applications for
            patents, trademarks, applications to register trademarks, service
            marks, applications to register service marks, mask works, trade
            dress and copyrights for which the Borrower is the owner of record
            (the "Owned Intellectual Property"). Except as disclosed on Schedule
            titled "Owned Intellectual Property", (i) the Borrower owns the
            Owned Intellectual Property free and clear of all restrictions
            (including covenants not to sue a third party), court orders,
            injunctions, decrees, writs or Liens, whether by written agreement
            or otherwise, (ii) no Person other than the Borrower owns or has
            been granted any right in the Owned Intellectual Property, (iii) all
            Owned Intellectual Property is valid, subsisting and enforceable and
            (iv) the Borrower has taken all commercially reasonable action
            necessary to maintain and protect the Owned Intellectual Property.

            (ii) INTELLECTUAL PROPERTY RIGHTS LICENSED FROM OTHERS. Schedule
            titled "Licensed Intellectual Property" is a complete list of all
            agreements under which the Borrower has licensed Intellectual
            Property Rights from another Person ("Licensed Intellectual
            Property") other than readily available, non-negotiated licenses of
            computer software and other intellectual property used solely for
            performing accounting, word processing and similar administrative
            tasks ("Off-the-shelf Software") and a summary of any ongoing
            payments the Borrower is obligated to make with respect thereto.
            Except as disclosed on Schedule titled "Licensed Intellectual
            Property" and in written agreements, copies of which have been given
            to the Bank, the Borrower's licenses to use the Licensed
            Intellectual Property are free and clear of all restrictions, Liens,
            court orders, injunctions, decrees, or writs, whether by written
            agreement or otherwise. Except as disclosed on Schedule titled
            "Licensed Intellectual

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            Property", the Borrower is not obligated or under any liability
            whatsoever to make any payments of a material nature by way of
            royalties, fees or otherwise to any owner of, licensor of, or other
            claimant to, any Intellectual Property Rights.

            (iii) OTHER INTELLECTUAL PROPERTY NEEDED FOR BUSINESS. Except for
            Off-the-shelf Software and as disclosed on Schedules titled Owned
            Intellectual Property and Licensed Intellectual Property, the Owned
            Intellectual Property and the Licensed Intellectual Property
            constitute all Intellectual Property Rights used or necessary to
            conduct the Borrower's business as it is presently conducted or as
            the Borrower reasonably foresees conducting it.

            (iv) INFRINGEMENT. Except as disclosed on Schedules titled "Owned
            Intellectual Property" and "Licensed Intellectual Property", the
            Borrower has no knowledge of, and has not received any written claim
            or notice alleging, any Infringement of another Person's
            Intellectual Property Rights (including any written claim that the
            Borrower must license or refrain from using the Intellectual
            Property Rights of any third party) nor, to the Borrower's
            knowledge, is there any threatened claim or any reasonable basis for
            any such claim.

      (i)   PLANS. Except as disclosed to the Bank in writing prior to the date
            hereof, neither the Borrower nor any ERISA Affiliate (i) maintains
            or has maintained any Pension Plan, (ii) contributes or has
            contributed to any Multiemployer Plan or (iii) provides or has
            provided post-retirement medical or insurance benefits with respect
            to employees or former employees (other than benefits required under
            Section 601 of ERISA, Section 4980B of the IRC or applicable state
            law). Neither the Borrower nor any ERISA Affiliate has received any
            notice or has any knowledge to the effect that it is not in full
            compliance with any of the requirements of ERISA, the IRC or
            applicable state law with respect to any Plan. No Reportable Event
            exists in connection with any Pension Plan. Each Plan which is
            intended to qualify under the IRC is so qualified, and no fact or
            circumstance exists which may have an adverse effect on the Plan's
            tax-qualified status. Neither the Borrower nor any ERISA Affiliate
            has (i) any accumulated funding deficiency (as defined in Section
            302 of ERISA and Section 412 of the IRC) under any Plan, whether or
            not waived, (ii) any liability under Section 4201 or 4243 of ERISA
            for any withdrawal, partial withdrawal, reorganization or other
            event under any Multiemployer Plan or (iii) any liability or
            knowledge of any facts or circumstances which could result in any
            liability to the Pension Benefit Guaranty Corporation, the Internal
            Revenue Service, the Department of Labor or any participant in
            connection with any Plan (other than routine claims for benefits
            under the Plan).

      (j)   ENVIRONMENTAL MATTERS

            (i) To Borrower's knowledge, there are not present in, on or under
            the Premises any Hazardous Substances in such form or quantity as to
            create any material liability or obligation for either the Borrower
            or the Bank under the common law of any jurisdiction or under any
            Environmental Law, and no Hazardous Substances have ever been
            stored, buried, spilled, leaked, discharged, emitted or released in,
            on or under the Premises in such a way as to create any such
            material liability.

            (ii) Except as disclosed on Schedule titled "Premises", the Borrower
            has not disposed of Hazardous Substances in such a manner as to
            create any material liability under any Environmental Law.

            (iii) To Borrower's knowledge with respect to the Premises and
            except as disclosed on Schedule titled "Premises" with respect to
            Borrower, there have not existed in the past, nor are there any
            threatened or impending requests, claims, notices, investigations,
            demands, administrative proceedings, hearings or litigation relating
            in any way to the Premises or the Borrower, alleging material
            liability under, violation of, or noncompliance with any
            Environmental Law or any license, permit or other authorization
            issued pursuant thereto.

            (iv) Except as disclosed on Schedule titled "Premises", the
            Borrower's businesses are and have in the past always been conducted
            in accordance with all Environmental Laws and all licenses, permits
            and other authorizations required pursuant to any Environmental Law
            and necessary for the lawful and efficient operation of such
            businesses are in the Borrower's possession and are in full force
            and effect, nor has the Borrower been denied insurance on grounds
            related to potential environmental liability. No permit required
            under any Environmental Law is scheduled to expire within 12 months
            and there is no threat that any such permit will be withdrawn,
            terminated, limited or materially changed.

<PAGE>

            (v) To Borrower's best knowledge, the Premises are not and never
            have been listed on the National Priorities List, the Comprehensive
            Environmental Response, Compensation and Liability Information
            System or any similar federal, state or local list, schedule, log,
            inventory or database.

      (k)   FINANCIAL SOLVENCY. Both before and after giving effect to all of
            the transactions contemplated in the Transaction Documents, none of
            the Borrower or its Affiliates:

            (i) Was or will be insolvent, as that term is used and defined in
            Section 101(32) of the United States Bankruptcy Code and Section 2
            of the Uniform Fraudulent Transfer Act;

            (ii) Has unreasonably small capital or is engaged or about to engage
            in a business or a transaction for which any remaining assets of the
            Borrower or such Affiliate are unreasonably small;

            (iii) By executing, delivering or performing its obligations under
            the Transaction Documents or other documents to which it is a party
            or by taking any action with respect thereto, intends to, nor
            believes that it will, incur debts beyond its ability to pay them as
            they mature;

            (iv) By executing, delivering or performing its obligations under
            the Transaction Documents or other documents to which it is a party
            or by taking any action with respect thereto, intends to hinder,
            delay or defraud either its present or future creditors; and

            (v) At this time contemplates filing a petition in bankruptcy or for
            an arrangement or reorganization or similar proceeding under any law
            of any jurisdiction, nor, to the best knowledge of the Borrower, is
            the subject of any actual, pending or threatened bankruptcy,
            insolvency or similar proceedings under any law of any jurisdiction.

      (l)   ANTI-TERRORISM LAWS.

            (i) General. Neither the Borrower nor any Affiliate of any Loan
            Party, is in violation of any Anti-Terrorism Law or engages in or
            conspires to engage in any transaction that evades or avoids, or has
            the purpose of evading or avoiding, or attempts to violate, any of
            the prohibitions set forth in any Anti-Terrorism Law.

            (ii) Executive Order No. 13224. Neither the Borrower nor any
            Affiliate, or their respective agents acting or benefiting in any
            capacity in connection with the Credit Facility, or other
            transactions hereunder, is any of the following (each a "Blocked
            Person"):

                  (1) a Person that is listed in the annex to, or is otherwise
            subject to the provisions of, the Executive Order No. 13224;

                  (2) a Person owned or controlled by, or acting for or on
            behalf of, any Person that is listed in the annex to, or is
            otherwise subject to the provisions of, the Executive Order No.
            13224;

                  (3) a Person or entity with which any Bank is prohibited from
            dealing or otherwise engaging in any transaction by any
            Anti-Terrorism Law;

                  (4) a Person or entity that commits, threatens or conspires to
            commit or supports "terrorism" as defined in the Executive Order No.
            13224;

                  (5) a Person or entity that is named as a "specially
            designated national" on the most current list published by the U.S.
            Treasury Department Office of Foreign Asset Control at its official
            website or any replacement website or other replacement official
            publication of such list, or

                  (6) a person or entity who is affiliated or associated with a
            person or entity listed above.

            (iii) Neither Borrower nor any Affiliate or to the knowledge of
            Borrower or any Affiliate, any of their respective agents acting in
            any capacity in connection with the Credit Facility or other
            transactions hereunder (i) conducts any business or engages in
            making or receiving any contribution of funds, goods or services to
            or for the benefit of any Blocked Person, or (ii) deals in, or
            otherwise engages in any transaction relating to, any property or
            interests in property blocked pursuant to the Executive Order No.
            13224.

<PAGE>

      (m)   UPDATE TO SCHEDULES.

         Should any of the information or disclosures provided on any of the
      Schedules attached hereto become outdated or incorrect in any material
      respect, the Borrower shall promptly provide the Bank in writing with such
      revisions or updates to such Schedule as may be necessary or appropriate
      to update or correct same; provided, however, that no Schedule shall be
      deemed to have been amended, modified or superseded by any such correction
      or update, nor shall any breach of warranty or representation resulting
      from the inaccuracy or incompleteness of any such Schedule be deemed to
      have been cured thereby, unless and until the Bank, in its reasonable
      discretion, shall have accepted in writing such revisions or updates to
      such Schedule.

      (n)   COMPLIANCE WITH LAWS.

            (i) The Borrower shall (i) comply, and cause each Subsidiary to
            comply, with the requirements of applicable laws and regulations,
            the non-compliance with which would materially and adversely affect
            its business or its financial condition and (ii) use and keep the
            Collateral, and require that others use and keep the Collateral,
            only for lawful purposes, without violation of any federal, state or
            local law, statute or ordinance.

            (ii) Without limiting the foregoing undertakings, the Borrower
            specifically agrees that it will comply, and cause each Subsidiary
            to comply, with all applicable Environmental Laws and obtain and
            comply with all permits, licenses and similar approvals required by
            any Environmental Laws, and will not generate, use, transport,
            treat, store or dispose of any Hazardous Substances in such a manner
            as to create any material liability or obligation under the common
            law of any jurisdiction or any Environmental Law.

            (iii) The Borrower shall (i) ensure, and cause each Subsidiary to
            ensure, that no Person shall be listed on the Specially Designated
            Nationals and Blocked Person List or other similar lists maintained
            by the Office of Foreign Assets Control ("OFAC"), the Department of
            the Treasury or included in any Executive Orders, (ii) not use or
            permit the use of the proceeds of the Credit Facility or any other
            financial accommodation from the Bank to violate any of the foreign
            asset control regulations of OFAC or other applicable law, (iii)
            comply, and cause each Subsidiary to comply, with all applicable
            Bank Secrecy Act laws and regulations, as amended from time to time,
            and (iv) otherwise comply with the USA Patriot Act as required by
            federal law and the Bank's policies and practices.

5.    AFFIRMATIVE COVENANTS. So long as this Agreement is in effect, the
      Borrower will comply with any "Additional Affirmative Covenants" contained
      in the Schedule and shall:

      (a)   FINANCIAL STATEMENTS AND OTHER INFORMATION. Promptly deliver to the
            Bank (i) within forty-five (45) days after the end of each of its
            first three fiscal quarters, an unaudited consolidating and
            consolidated financial statement of the Borrower and each Subsidiary
            as of the end of such quarter, which financial statement shall
            consist of income and cash flows for the quarter, for the
            corresponding quarter in the previous fiscal year and for the period
            from the end of the previous fiscal year, with a consolidating and
            consolidated balance sheet as of the quarter end all in such detail
            as the Bank may request and an accounts receivable aging summary and
            a list of newly acquired Owned Intellectual Property and Licensed
            Intellectual Property; (ii) within one hundred twenty (120) days
            after the end of each fiscal year, consolidating and consolidated
            statements of the Borrower's and each Subsidiary's income and cash
            flows and its consolidating and consolidated balance sheet as of the
            end of such fiscal year, setting forth comparative figures for the
            preceding fiscal year and to be audited by an independent certified
            public accountant acceptable to the Bank; all such statements shall
            be certified by the Borrower's chief financial officer to be correct
            and in accordance with the Borrower's and each Subsidiary's records
            and to present fairly the results of the Borrower's and each
            Subsidiary's operations and cash flows and its financial position at
            year end, together with the report to the audit committee and the
            management representation letter; and (iii) with each statement of
            income, a certificate executed by the Borrower's chief executive and
            chief financial officers or other such person responsible for the
            financial management of the Borrower (A) setting forth the
            computations required to establish the Borrower's compliance with
            each financial covenant, if any, during the statement period, (B)
            stating that the signers of the certificate have reviewed this
            Agreement and the operations and condition (financial or other) of
            the

<PAGE>

            Borrower and each of its Subsidiaries during the relevant period and
            (C) stating that no Event of Default occurred during the period, or
            if an Event of Default did occur, describing its nature, the date(s)
            of its occurrence or period of existence and what action the
            Borrower has taken with respect thereto. The Borrower shall also
            promptly provide the Bank with copies of all annual reports, proxy
            statements and similar information distributed to stockholders, and
            copies of all filings with the Securities and Exchange Commission
            and shall provide, in form satisfactory to the Bank, such additional
            information, reports or other information as the Bank may from time
            to time reasonably request regarding the financial and business
            affairs of the Borrower or any Subsidiary, including quarterly
            receipt of Form 10-QSB as submitted to the Securities and Exchange
            Commission. In conjunction with the submission of the annual
            financial statements, the Borrower shall submit detailed projections
            outlining expected operating results for the next twelve (12) month
            period.

      (b)   ACCOUNTING; TAX RETURNS AND PAYMENT OF CLAIMS. The Borrower and each
            Subsidiary will maintain a system of accounting and reserves in
            accordance with generally accepted accounting principles, has filed
            and will file each tax return required of it and, except as
            disclosed in the Schedule, has paid and will pay when due each tax,
            assessment, fee, charge, fine and penalty imposed by any taxing
            authority upon it or any of its assets, income or franchises, as
            well as all amounts owed to mechanics, materialmen, landlords,
            suppliers and the like in the normal course of business.

      (c)   INSPECTIONS. Promptly upon the Bank's request, the Borrower will
            permit, and cause its Subsidiaries to permit, the Bank's officers,
            attorneys or other agents to inspect its and its Subsidiary's
            premises, examine and copy its records and discuss its and its
            Subsidiary's business, operations and financial or other condition
            with its and its Subsidiary's responsible officers and independent
            accountants.

      (d)   OPERATING ACCOUNTS. Maintain, and cause its Subsidiaries to
            maintain, all operating accounts with the Bank including cash
            management relationship established at the Bank.

      (e)   NOTICE OF DEFAULTS AND MATERIAL ADVERSE CHANGES. Immediately upon
            acquiring reason to know of (i) any Event of Default, (ii) any event
            or condition that might have a material adverse effect upon the
            Borrower or any Subsidiary or (iii) any Action, the Borrower will
            provide to the Bank a certificate executed by the Borrower's senior
            individual authorized to transact business on behalf of the
            Borrower, specifying the date(s) and nature of the event or the
            Action and what action the Borrower or its Subsidiary has taken or
            proposes to take with respect to it.

      (f)   INSURANCE. Maintain its, and cause its Subsidiaries to maintain,
            property in good repair and will on request provide the Bank with
            evidence of insurance coverage satisfactory to the Bank, including
            fire and hazard, liability, workers' compensation and business
            interruption insurance and flood hazard insurance as required.

      (g)   FURTHER ASSURANCES. Promptly upon the request of the Bank, the
            Borrower will execute, and cause its Subsidiaries to execute, and
            deliver each writing and take each other action that the Bank deems
            necessary or desirable in connection with any transaction
            contemplated by this Agreement.

      (h)   INTELLECTUAL PROPERTY.

            (i) Promptly upon knowledge thereof, the Borrower will deliver to
            the Bank notice of (i) any Infringement of its Intellectual Property
            Rights by others, (ii) claims that the Borrower is Infringing
            another Person's Intellectual Property Rights and (iii) any
            threatened cancellation, termination or material limitation of its
            Intellectual Property Rights.

            (ii) Promptly upon receipt, the Borrower will give the Bank copies
            of all registrations and filings with respect to its Intellectual
            Property Rights.

      (i)   ANTI-TERRORISM LAWS. The Borrower and its Affiliates and agents
            shall not (i) conduct any business or engage in any transaction or
            dealing with any Blocked Person, including the making or receiving
            any contribution of funds, goods or services to or for the benefit
            of any Blocked Person, (ii) deal in, or otherwise engage in any
            transaction relating to, any property or interests in property
            blocked pursuant to the Executive Order No. 13224; or (iii) engage
            in or conspire to engage in any transaction that evades or avoids,
            or has the purpose of evading or

<PAGE>

            avoiding, or attempts to violate, any of the prohibitions set forth
            in the Executive Order No. 13224, the USA Patriot Act or any other
            Anti-Terrorism Law. The Borrower shall deliver to Bank any
            certification or other evidence requested from time to time by the
            Bank in its sole discretion, confirming Borrower's compliance with
            this Section i.

6.    NEGATIVE COVENANTS. As long as this Agreement is in effect, the Borrower
      shall not violate, and shall not suffer or permit any of its Subsidiaries
      to violate, any of the following covenants and any "Additional Negative
      Covenant" on the Schedule. The Borrower shall not:

      (a)   INDEBTEDNESS. Permit any indebtedness (including direct and
            contingent liabilities) not described on the Schedule titled
            "Permitted Indebtedness" except for trade indebtedness or current
            liabilities for salary and wages incurred in the ordinary course of
            business and not substantially overdue.

      (b)   GUARANTIES. Become a guarantor, a surety, or otherwise liable for
            the debts or other obligations of another, whether by guaranty or
            suretyship agreement, agreement to purchase indebtedness, agreement
            for furnishing funds through the purchase of goods, supplies or
            services (or by way of stock purchase, capital contribution, advance
            or loan) for the purpose of paying or discharging indebtedness, or
            otherwise, except as an endorser of instruments for the payment of
            money deposited to its bank account for collection in the ordinary
            course of business and except as may be specified in the Schedule
            titled "Permitted Guaranties".

      (c)   LIENS. Permit any of its assets to be subject to any security
            interest, mortgage or other lien or encumbrance, except as set forth
            on the Schedule titled "Permitted Liens" and except for liens for
            property taxes not yet due; pledges and deposits to secure
            obligations or performance for workers' compensation, bids, tenders,
            contracts other than notes, appeal bonds or public or statutory
            obligations; and materialmens', mechanics', carriers' and similar
            liens arising in the normal course of business.

      (d)   INVESTMENTS. Make any investment other than in FDIC insured deposits
            or United States Treasury obligations of less than one year, or in
            money market or mutual funds administering such investments, except
            as set forth on the Schedule titled "Permitted Investments".

      (e)   LOANS. Make any loan, advance or other extension of credit except as
            disclosed on the Schedule titled "Permitted Loans", except for
            endorsements of negotiable instruments deposited to the Borrower's
            deposit account for collection, trade credit in the normal course of
            business and intercompany loans approved in writing by the Bank.

      (f)   DISTRIBUTIONS. Declare or pay any distribution, except for (i)
            dividends payable solely in stock and (ii) except as set forth on
            the Schedule titled "Permitted Distributions".

      (g)   CHANGES IN FORM. (i) Transfer or dispose of substantially all of its
            assets, (ii) acquire substantially all of the assets of any other
            entity, (iii) do business under or otherwise use any name other than
            its true name or (iv) make any material change in its business,
            structure, purposes or operations that might have a material adverse
            effect on the Borrower or any of its Subsidiaries. If the Borrower
            or any Subsidiary is not an individual, (i) participate in any
            merger, consolidation or other absorption or (ii) make, terminate or
            permit to be revoked any election pursuant to Subchapter S of the
            Internal Revenue Code.

7.    FINANCIAL COVENANTS. During the term of this Agreement, the Borrower shall
      not violate, and shall not suffer or permit any of its Subsidiaries to
      violate, any of the following covenants (complete applicable financial
      covenant) or any Additional Financial Covenants on the Schedule. FOR
      PURPOSES OF THIS SECTION, IF THE BORROWER HAS ANY SUBSIDIARIES ALL
      REFERENCES TO THE BORROWER SHALL INCLUDE THE BORROWER AND ALL OF ITS
      SUBSIDIARIES ON A CONSOLIDATED BASIS.

      (a)   MAXIMUM SENIOR FUNDED DEBT TO EBITDA. Maintain at the end of each
            fiscal quarter, on a rolling four quarter basis, a consolidated
            maximum ratio of Senior Funded Debt to EBITDA of no greater than
            2.25 to 1.

      (b)   MINIMUM DEBT SERVICE COVERAGE RATIO. Maintain at the end of each
            fiscal quarter on a rolling four-quarter basis a consolidated
            minimum Debt Service Coverage of Ration of 1.35 to 1.00.

<PAGE>

      (c)   MINIMUM EBITDA. Borrower shall maintain a minimum EBITDA of
            sixty-five percent (65%) of management projections annually. Minimum
            EBITDA for Borrower means the following for such fiscal year ends:

<TABLE>
<CAPTION>
  EBITDA                           FISCAL YEAR END
-----------                        ---------------
<S>                                <C>
$ 5,596,000                             2005

  7,253,000                             2006

  9,792,000                             2007

 13,449,000                             2008
</TABLE>

            Any material changes to management's projected EBITDA shall require
            the Bank's review and approval, which approval shall not be
            unreasonably withheld.

      (d)   MINIMUM STOCKHOLDERS' EQUITY. Borrower shall maintain at December
            31, 2004 a minimum stockholders' equity of $ 8,551,211.00, to be
            increased by forty percent (40%) of all future annual net income
            beginning at December 31, 2005, to be tested annually.

      (e)   NET LOSSES. Borrower shall not permit a Net Loss, to be tested
            annually at year's end.

8.    DEFAULT.

      (a)   EVENTS OF DEFAULT. Any of the following events or conditions shall
            constitute an "Event of Default": (i) failure by the Borrower to pay
            when due (whether at the stated maturity, by acceleration, upon
            demand or otherwise) the Obligations, or any part thereof, or there
            occurs any event or condition which after notice, lapse of time or
            after both notice and lapse of time will permit acceleration of any
            Obligation; (ii) default by the Borrower in the performance of any
            obligation, term or condition of this Agreement, the other
            Transaction Documents or any other agreement with the Bank or any of
            its Affiliates; (iii) failure by the Borrower to pay when due
            (whether at the stated maturity, by acceleration, upon demand or
            otherwise) any indebtedness or obligation owing to any third party
            or any Affiliate, the occurrence of any event which could result in
            acceleration of payment of any such indebtedness or obligation or
            the failure to perform any agreement with any third party or any
            Affiliate; (iv) the Borrower is dissolved, becomes insolvent,
            generally fails to pay or admits in writing its inability generally
            to pay its debts as they become due; (v) the Borrower makes a
            general assignment, arrangement or composition agreement with or for
            the benefit of its creditors or makes, or sends notice of any
            intended, bulk sale; the sale, assignment, transfer or delivery of
            all or substantially all of the assets of the Borrower to a third
            party; or the cessation by the Borrower as a going business concern;
            (vi) the Borrower files a petition in bankruptcy or institutes any
            action under federal or state law for the relief of debtors or seeks
            or consents to the appointment of an administrator, receiver,
            custodian or similar official for the wind up of its business (or
            has such a petition or action filed against it and such petition
            action or appointment is not dismissed or stayed within forty-five
            (45) days); (vii) the reorganization, merger, consolidation or
            dissolution of the Borrower (or the making of any agreement
            therefor); (viii) the death or judicial declaration of incompetency
            of the Borrower, if an individual; (ix) the entry of any judgment or
            order of any court, other governmental authority or arbitrator
            against the Borrower; (x) falsity, omission or inaccuracy of facts
            submitted to the Bank or any Affiliate (whether in a financial
            statement or otherwise); (xi) an adverse change in the Borrower, its
            business, assets, operations, affairs or condition (financial or
            otherwise) from the status shown on any financial statement or other
            document submitted to the Bank or any Affiliate, and which change
            the Bank determines will have a material adverse affect on (a) the
            Borrower, its business, assets, operations or condition (financial
            or otherwise), or (b) the ability of the Borrower to pay or perform
            the Obligations; (xii) any Plan of the Borrower fails to comply with
            applicable law or has vested unfunded liabilities that, in the
            opinion of the Bank, might have a material adverse effect on the
            Borrower's ability to repay its debts; (xiii) any indication or
            evidence received by the Bank that the Borrower may have directly or
            indirectly been engaged in any type of activity which, in the Bank's
            discretion, might result in the forfeiture or any property of the
            Borrower to any governmental authority; (xiv) the occurrence of any
            event described in Section 6(a)(i) through and including 6(a)(xiii)
            with respect to any Subsidiary or to any endorser, guarantor or any
            other party liable for, or whose assets or any interest therein
            secures, payment of any of the Obligations; or (xiv)(a) any

<PAGE>

            direct or indirect sale, conveyance, assignment or other transfer of
            or grant of a security interest in any ownership interest of
            Borrower which results, or if any rights related thereto were
            exercised would result, in PEH no longer controlling and owning,
            directly or indirectly, 100% if the ownership interests of Borrower;
            or (b) any direct or indirect sale, conveyance, assignment or other
            transfer of or grant of a security interest in and any ownership
            interest of PEH which would result in a change of 51% or more of the
            controlling interest of PEH; or (c) if two or more Persons (or a
            replacement who is reasonably satisfactory to the Bank) who are
            Senior Managers as of the date hereof shall for any reason cease to
            be Senior Managers of Borrower and/or PEH. For the purposes hereof,
            the "Senior Managers" shall mean the chairman of the board, the
            chief financial officer, the executive vice president and the senior
            vice president.

      (b)   RIGHTS AND REMEDIES UPON DEFAULT. Upon the occurrence of any Event
            of Default, the Bank without demand of performance or other demand,
            presentment, protest, advertisement or notice of any kind (except
            any notice required by law) to or upon the Borrower, any Subsidiary
            or any other person (all and each of which demands, presentments,
            protests, advertisements and notices are hereby waived), may
            exercise all rights and remedies under the Borrower's or its
            Subsidiaries' agreements with the Bank or its Affiliates, applicable
            law, in equity or otherwise and may declare all or any part of any
            Obligations not payable on demand to be immediately due and payable
            without demand or notice of any kind and terminate any obligation it
            may have to grant any additional loan, credit or other financial
            accommodation to the Borrower or any Subsidiary. All or any part of
            any Obligations whether or not payable on demand, shall be
            immediately due and payable automatically upon the occurrence of an
            Event of Default in Section 6(a)(vi) above. The provisions hereof
            are not intended in any way to affect any rights of the Bank with
            respect to any Obligations which may now or hereafter be payable on
            demand.

9.    EXPENSES. The Borrower shall pay to the Bank on demand all costs and
      expenses (including all fees and disbursements of counsel retained for
      advice, suit, appeal or other proceedings or purpose and of any experts or
      agents it may retain), which the Bank may incur in connection with (i) the
      administration of the Obligations, including any administrative fees the
      Bank may impose for the preparation of discharges, releases or assignments
      to third-parties; (ii) the enforcement and collection of any Obligations
      or any guaranty thereof; (iv) the exercise, performance ,enforcement or
      protection of any of the rights of the Bank hereunder; or (v) the failure
      of the Borrower or any Subsidiary to perform or observe any provisions
      hereof. After such demand for payment of any cost, expense or fee under
      this Section or elsewhere under this Agreement, the Borrower shall pay
      interest at the highest default rate specified in any instrument
      evidencing any of the Obligations from the date payment is demanded by the
      Bank to the date reimbursed by the Borrower. All such costs, expenses or
      fees under this Agreement shall be added to the Obligations.

10.   TERMINATION. This Agreement shall remain in full force and effect until
      (i) all Obligations outstanding, or contracted or committed for (whether
      or not outstanding), shall be finally and irrevocably paid in full and
      (ii) all Transaction Documents have been terminated by the Bank.

11.   RIGHT OF SETOFF. If an Event of Default occurs, the Bank shall have the
      right to set off against the amounts owing under this Agreement and the
      other Transaction Documents any property held in a deposit or other
      account or otherwise with the Bank or its Affiliates or otherwise owing by
      the Bank or its Affiliates in any capacity to the Borrower, its Subsidiary
      or any guarantor of, or endorser of any of the Transaction Documents
      evidencing, the Obligations. Such setoff shall be deemed to have been
      exercised immediately at the time the Bank or such Affiliate elect to do
      so.

12.   MISCELLANEOUS.

      (a)   NOTICES. Any demand or notice hereunder or under any applicable law
            pertaining hereto shall be in writing and duly given if delivered to
            Borrower (at its address on the Bank's records) or to the Bank (at
            the address on page one and separately to the Bank officer
            responsible for Borrower's relationship with the Bank). Such notice
            or demand shall be deemed sufficiently given for all purposes when
            delivered (i) by personal delivery and shall be deemed effective
            when delivered, or (ii) by mail or courier and shall be deemed
            effective three (3) business days after deposit in an official
            depository maintained by the United States Post Office for the
            collection of mail or one (1) business day after delivery to a
            nationally recognized overnight courier service (e.g., Federal
            Express). Notice by e-mail is not valid notice under this or any
            other agreement between Borrower and the Bank.

<PAGE>

      (b)   GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Any financial calculation
            to be made, all financial statements and other financial information
            to be provided, and all books and records, system of accounting and
            reserves to be kept in connection with the provisions of this
            Agreement, shall be in accordance with generally accepted accounting
            principles consistently applied during each interval and from
            interval to interval; provided, however, that in the event changes
            in generally accepted accounting principles shall be mandated by the
            Financial Accounting Standards Board or any similar accounting body
            of comparable standing, or should be recommended by Borrower's
            certified public accountants, to the extent such changes would
            affect any financial calculations to be made in connection herewith,
            such changes shall be implemented in making such calculations only
            from and after such date as Borrower and the Bank shall have amended
            this Agreement to the extent necessary to reflect such changes in
            the financial and other covenants to which such calculations relate.

      (c)   INDEMNIFICATION. If after receipt of any payment of all, or any part
            of, the Obligations, the Bank is, for any reason, compelled to
            surrender such payment to any person or entity because such payment
            is determined to be void or voidable as a preference, an
            impermissible setoff, or a diversion of trust funds, or for any
            other reason, the Transaction Documents shall continue in full force
            and the Borrower shall be liable, and shall indemnify and hold the
            Bank harmless for, the amount of such payment surrendered. The
            provisions of this Section shall be and remain effective
            notwithstanding any contrary action which may have been taken by the
            Bank in reliance upon such payment, and any such contrary action so
            taken shall be without prejudice to the Bank's rights under the
            Transaction Documents and shall be deemed to have been conditioned
            upon such payment having become final and irrevocable. The
            provisions of this Section shall survive the termination of this
            Agreement and the Transaction Documents.

      (d)   FURTHER ASSURANCES. From time to time, the Borrower shall take, and
            cause its Subsidiaries to take, such action and execute and deliver
            to the Bank such additional documents, instruments, certificates,
            and agreements as the Bank may reasonably request to effectuate the
            purposes of the Transaction Documents.

      (e)   CUMULATIVE NATURE AND NON-EXCLUSIVE EXERCISE OF RIGHTS AND REMEDIES.
            All rights and remedies of the Bank pursuant to this Agreement and
            the Transaction Documents shall be cumulative, and no such right or
            remedy shall be exclusive of any other such right or remedy. In the
            event of any unreconcilable inconsistencies, this Agreement shall
            control. No single or partial exercise by the Bank of any right or
            remedy pursuant to this Agreement or otherwise shall preclude any
            other or further exercise thereof, or any exercise of any other such
            right or remedy, by the Bank.

      (f)   GOVERNING LAW; JURISDICTION. This Agreement has been delivered to
            and accepted by the Bank and will be deemed to be made in the State
            of New York. Except as otherwise provided under federal law, this
            Agreement will be interpreted in accordance with the laws of the
            State of New York excluding its conflict of laws rules. BORROWER
            HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY
            STATE OR FEDERAL COURT IN THE STATE OF NEW YORK IN A COUNTY OR
            JUDICIAL DISTRICT WHERE THE BANK MAINTAINS A BRANCH AND CONSENTS
            THAT THE BANK MAY EFFECT ANY SERVICE OF PROCESS IN THE MANNER AND AT
            BORROWER'S ADDRESS SET FORTH ABOVE FOR PROVIDING NOTICE OR DEMAND;
            PROVIDED THAT NOTHING CONTAINED IN THIS AGREEMENT WILL PREVENT THE
            BANK FROM BRINGING ANY ACTION, ENFORCING ANY AWARD OR JUDGMENT OR
            EXERCISING ANY RIGHTS AGAINST BORROWER INDIVIDUALLY, AGAINST ANY
            SECURITY OR AGAINST ANY PROPERTY OF BORROWER WITHIN ANY OTHER
            COUNTY, STATE OR OTHER FOREIGN OR DOMESTIC JURISDICTION. Borrower
            acknowledges and agrees that the venue provided above is the most
            convenient forum for both the Bank and Borrower. Borrower waives any
            objection to venue and any objection based on a more convenient
            forum in any action instituted under this Agreement.

      (g)   JOINT AND SEVERAL; SUCCESSORS AND ASSIGNS. If there is more than one
            Borrower, each of them shall be jointly and severally liable for all
            amounts, which become due, and the performance of all obligations
            under this Agreement, and the term "the Borrower" shall include each
            as well as all of them. This Agreement shall be binding upon the
            Borrower and upon its heirs and legal representatives, its
            successors and assignees, and shall inure to the benefit of, and be
            enforceable by, the Bank, its successors and assignees and each
            direct or indirect assignee or other transferee of any of the
            Obligations; provided, however, that this Agreement may not be
            assigned by the Borrower without the prior written consent of the
            Bank.

<PAGE>

      (h)   WAIVERS; CHANGES IN WRITING. No failure or delay of the Bank in
            exercising any power or right hereunder shall operate as a waiver
            thereof, nor shall any single or partial exercise of any such right
            or power, or any abandonment or discontinuance of steps to enforce
            such a right or power, preclude any other or further exercise
            thereof or the exercise of any other right or power. The Borrower
            expressly disclaims any reliance on any course of dealing or usage
            of trade or oral representation of the Bank (including
            representations to make loans to the Borrower) and agrees that none
            of the foregoing shall operate as a waiver of any right or remedy of
            the Bank. No notice to or demand on the Borrower in any case shall
            entitle the Borrower to any other or further notice or demand in
            similar or other circumstances. No waiver of any provision of this
            Agreement or consent to any departure by the Borrower therefrom
            shall in any event be effective unless made specifically in writing
            by the Bank and then such waiver or consent shall be effective only
            in the specific instance and for the purpose for which given. No
            modification to any provision of this Agreement shall be effective
            unless made in writing in an agreement signed by the Borrower and
            the Bank.

      (i)   INTERPRETATION. Unless the context otherwise clearly requires,
            references to plural includes the singular and references to the
            singular include the plural; references to "individual" shall mean a
            natural person and shall include a natural person doing business
            under an assumed name (e.g., a "DBA"); the word "or" has the
            inclusive meaning represented by the phrase "and/or"; the word
            "including", "includes" and "include" shall be deemed to be followed
            by the words "without limitation"; and captions or section headings
            are solely for convenience and not part of the substance of this
            Agreement. Any representation, warranty, covenant or agreement
            herein shall survive execution and delivery of this Agreement and
            shall be deemed continuous. Each provision of this Agreement shall
            be interpreted as consistent with existing law and shall be deemed
            amended to the extent necessary to comply with any conflicting law.
            If any provision nevertheless is held invalid, the other provisions
            shall remain in effect. The Borrower agrees that in any legal
            proceeding, a photocopy of this Agreement kept in the Bank's course
            of business may be admitted into evidence as an original.

      (j)   WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK HEREBY KNOWINGLY,
            VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY THE
            BORROWER AND THE BANK MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW
            OR IN EQUITY, IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTIONS
            RELATED HERETO. THE BORROWER REPRESENTS AND WARRANTS THAT NO
            REPRESENTATIVE OR AGENT OF THE BANK HAS REPRESENTED, EXPRESSLY OR
            OTHERWISE, THAT THE BANK WILL NOT, IN THE EVENT OF LITIGATION, SEEK
            TO ENFORCE THIS JURY TRIAL WAIVER. THE BORROWER ACKNOWLEDGES THAT
            THE BANK HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
            OTHER THINGS, THE PROVISIONS OF THIS SECTION.

ACKNOWLEDGMENT. Borrower acknowledges that it has read and understands all the
provisions of this Agreement, including the GOVERNING LAW, JURISDICTION and
WAIVER OF JURY TRIAL, and has been advised by counsel as necessary or
appropriate.

                                    MANUFACTURERS AND TRADERS TRUST COMPANY

                                        /s/ Ira A. Brown
                                        ----------------
                                        Name: Ira A. Brown
                                        Title:   Vice President

                                    THE PEOPLES PUBLISHING GROUP, INC.

                                        /s/ Michael L. DeMarco
                                        ----------------------
                                        Name:  Michael L. DeMarco
                                        Title: Chief Financial Officer

<PAGE>

                                    SCHEDULE

Additional Representations and Warranties (Section 4)

      NONE

Additional Affirmative Covenants (Section 5)

      NONE

Permitted Indebtedness (Section 6(a))

      Existing and Future Capitalized Lease Obligations

Permitted Guaranties (Section 6(b))

      NONE

Permitted Liens (Section 6(c))

      Existing and Future Capitalized Lease Obligations

Permitted Investments (Section 6(d))

      Indebtedness entitled to the full faith and credit of the United States.

      Indebtedness which has at least the second highest rating of nationally
recognized rating agency.

      Investments disclosed to Lender in writing existing on the date of this
Agreement.

      Certificates of deposit or banker's acceptances issued by any commercial
bank organized under the law of the United States or any State thereof which has
(i) combined capital and surplus of at least $100,000,000, and (ii) a credit
rating with respect to its unsecured indebtedness from a nationally recognized
rating service that is satisfactory to the Lender.

      Other readily marketable Investments in debt securities, certificates of
deposit, commercial paper or repurchase agreements (including any such
Investments issued or guaranteed by non-United States governments or stated in
non-United States currencies).

      Purchases or redemption of shares of common stock of Peoples Educational
Holdings, Inc. so long as both before and after giving effect thereto, no Event
of Default will have occurred or be continuing.

<PAGE>

Permitted Loans (Section 6(e))

      Loans to executive officers as provided in existing employment agreements
and disclosed in Form 10-KSB filed March 25, 2005 with the SEC by Peoples
Educational Holdings, Inc.

Permitted Distributions (Section 6(f))

      Cash dividends so long as both before and after giving effect thereto, no
Event of Default will have occurred or be continuing.

Owned Intellectual Property (Section  5(a))

Licensed Intellectual Property (Section 5(a))

      NONE

Additional Financial Covenants (Section 7)

      NONE<PAGE>

Exhibit 10.2

                                 REVOLVING NOTE
                                    NEW YORK

Buffalo, New York     May 17, 2005                                 $7,000,000.00

BORROWER: THE PEOPLES PUBLISHING GROUP, INC., a corporation organized under the
laws of the State of Delaware

Address of chief executive office: 299 Market Street, Saddle Brook, New Jersey
07663, Attention: Office of Chief Financial Officer

BANK: MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking corporation
      with its principal banking office at One M&T Plaza, Buffalo, NY 14240.
      Attention: Office of General Counsel

1. DEFINITIONS. Each capitalized term shall have the meaning specified herein
and the following terms shall have the indicated meanings:

      a. "AUTHORIZED PERSON" shall mean, each individually, Michael L. DeMarco,
CFO and Brian Beckwith, President.

      Mention of the Authorized Person's name is for reference purposes only and
      the Bank may rely on a person's title to ascertain whether someone is an
      Authorized Person.

      b. "AUTOMATIC ADJUSTMENT DATE", when applicable, shall mean:

            (i)   If the Interest Period duration selected for such LIBOR Rate
                  Loan is "one day": the first day of the applicable Interest
                  Period (or, if such date is not a Business Day, the
                  immediately preceding Business Day).

            (ii)  If the Interest Period duration selected for such LIBOR Rate
                  Loan is other than "one day": two (2) Business Days before the
                  first day of the applicable Interest Period for a LIBOR Rate
                  Loan for which the Automatic Continuation Option is in effect.

      c. "AUTOMATIC CONTINUATION OPTION" shall, with respect to any LIBOR Rate
Loan, mean the option to have the then-current Interest Period duration, as
previously selected by Borrower, remain the same for the succeeding Interest
Period.

      d. "BASE RATE" shall mean the rate of interest announced by the Bank as
its prime rate of interest ("Prime").

      e. "BASE RATE LOAN" shall mean a Loan which bears interest at the Base
Rate. Base Rate or "Prime" shall be available only at such time as LIBOR is not
available.

      f. "BUSINESS DAY" shall mean any day of the year on which banking
institutions in New York, New York are not authorized or required by law or
other governmental action to close and, to the extent the LIBOR Rate is
applicable, on which dealings are carried on in the London Interbank market.

      g. "CONTINUATION DATE" shall mean the date on which Borrower's election to
continue a LIBOR Rate Loan for another Interest Period becomes effective in
accordance with this Note.

      h. "CREDIT AGREEMENT" shall mean the Credit Agreement dated even date
herewith by and between the Borrower and the Bank.

      i. "CONVERSION DATE" shall mean the date on which Borrower's election to
convert a Base Rate Loan to a LIBOR Rate Loan, or a LIBOR Rate Loan to a Base
Rate Loan, becomes effective in accordance with this Note.

<PAGE>

      j. "INTEREST PERIOD" shall mean, as to any LIBOR Rate Loan, the period
commencing on the Draw Date, the Conversion Date or Continuation Date for such
LIBOR Rate Loan and ending on the date that shall be:

            (i)   If the Interest Period duration selected for such LIBOR Rate
                  Loan is "one day": the following day; provided, however, that
                  if an Interest Period would end on a day that is not a
                  Business Day, such Interest Period shall be extended to the
                  next succeeding Business Day.

            (ii)  If the Interest Period duration selected for such LIBOR Rate
                  Loan is other than "one day": the numerically corresponding
                  day (or, if there is no numerically corresponding day, on the
                  last day) of the calendar month that is one (1), two (2),
                  three (3), or six (6) months thereafter, in each case as
                  Borrower may elect; provided, however, that if an Interest
                  Period would end on a day that is not a Business Day, such
                  Interest Period shall be extended to the next succeeding
                  Business Day unless such next succeeding Business Day would
                  fall in the next calendar month, in which case such Interest
                  Period shall end on the immediately preceding Business Day.

      k. "DRAW DATE" shall mean, in relation to any Loan, the Business Day on
which such Loan is made, or to be made, to Borrower pursuant to the Note.

      l. "LIBOR RATE LOAN" shall mean a Loan which bears interest at a LIBOR
Rate.

      m. "LIBOR" shall mean the rate obtained by dividing (i) the one-day,
one-month, two-month, three-month or six-month interest period London Interbank
Offered Rate (as selected by Borrower) as fixed by the British Bankers
Association for United States dollar deposits in the London Interbank Eurodollar
Market at approximately 11:00 a.m. London, England time (or as soon thereafter
as practicable) as determined by the Bank from any broker, quoting service or
commonly available source utilized by the Bank by (ii) a percentage equal to
100% minus the stated maximum rate of all reserves required to be maintained
against "Eurocurrency Liabilities" as specified in Regulation D (or against any
other category of liabilities which includes deposits by reference to which the
interest rate on LIBOR Rate Loan or Loans is determined or any category of
extensions of credit or other assets which includes loans by a non-United
States' office of a bank to United States' residents) on such date to any member
bank of the Federal Reserve System.

      n. "LIBOR RATE" shall mean the interest rate determined on the pricing
grid as follows with an Interest Period duration of one day, one month, two
months, three months or six months:

<TABLE>
<CAPTION>
            Total Funded Debt
              To EBITDA (as
             defined in the        LIBOR
 Level      Credit Agreement       Margin
<S>         <C>                    <C>
 I                <1.00             1.75%
 II             1.0>2.0             2.00%
 III               >2.0             2.25%
</TABLE>

      o. "LOAN" means a loan made to Borrower by the Bank pursuant to this Note.

      p. "MAXIMUM PRINCIPAL AMOUNT" shall mean Seven Million Dollars
($7,000,000.00).

      q. "MINIMUM BORROWING AMOUNT" shall mean (i) for Base Rate Loans and any
LIBOR Rate Loan with an Interest Period of one day, any whole dollar increment,
and (ii) for all other LIBOR Rate Loans, $50,000, with minimum increments
thereafter of $50,000, provided, however, in no event shall the Minimum
Borrowing Amount for such LIBOR Rate Loan be less than $100,000.00 with minimum
increments thereafter of $100,000.00.

      r. "OUTSTANDING PRINCIPAL AMOUNT" shall mean the actual outstanding
principal amount under this Note at any time.

<PAGE>

2. PAYMENT OF PRINCIPAL, INTEREST AND EXPENSES

      a. PROMISE TO PAY. For value received, and intending to be legally bound,
Borrower promises to pay to the order of the Bank on demand, the Maximum
Principal Amount or the Outstanding Principal Amount, if less; plus interest as
set forth below and all fees and costs (including without limitation attorneys'
fees and disbursements, whether for internal or outside counsel) the Bank incurs
in order to collect any amount due under this Note, to negotiate or document a
workout or restructuring, or to preserve its rights or realize upon any guaranty
or other security for the payment of this Note ("Expenses").

      b. INTEREST. Each Loan shall earn interest on the Outstanding Principal
Amount thereof calculated on the basis of a 360-day year for the actual number
of days of each year (365 or 366) that on each day shall be:

            (i)   LIBOR RATE LOANS. Interest shall accrue on a LIBOR Rate Loan
                  from and including the first day of the Interest Period
                  applicable thereto until, but not including, the last day of
                  such Interest Period or the day the LIBOR Rate Loan is paid in
                  full (if sooner) at a rate per annum equal to the LIBOR Rate
                  determined and in effect on (depending on the circumstance):
                  (i) for new LIBOR Rate Loans, the Business Day the Bank
                  receives (or is deemed to receive) a Request for a LIBOR Rate
                  Loan; (ii) for conversions and continuations of LIBOR Rate
                  Loans pursuant to Section 4, the Business Day the Bank
                  receives (or is deemed to receive) the Notice of Conversion or
                  Notice of Continuation, as the case may be, in accordance with
                  Section 4(b); (iii) for LIBOR Rate Loans where the Automatic
                  Continuation Option is selected, the applicable Automatic
                  Adjustment Date for such LIBOR Rate Loan.

            (ii)  BASE RATE LOANS. Interest shall accrue on a Base Rate Loan
                  from and including the first date the Base Rate Loan was made
                  (i.e., the Draw Date or the Conversion Date, as the case may
                  be) to, but not including, the day such Base Rate Loan is paid
                  in full or converted, at the rate per annum equal to the Base
                  Rate. Any change in the Base Rate resulting from a change in
                  the Bank's prime rate shall be effective on the date of such
                  change.

      c. MAXIMUM LEGAL RATE. It is the intent of the Bank and of Borrower that
in no event shall interest be payable at a rate in excess of the maximum rate
permitted by applicable law (the "Maximum Legal Rate"). Solely to the extent
necessary to prevent interest under this Note from exceeding the Maximum Legal
Rate, any amount that would be treated as excessive under a final judicial
interpretation of applicable law shall be deemed to have been a mistake and
automatically canceled, and, if received by the Bank, shall be refunded to
Borrower.

      d. PAYMENTS; LATE CHARGE; DEFAULT RATE. Payments shall be made in
immediately available United States funds at any banking office of the Bank.
Absent demand for payment in full, interest shall be due and payable as follows:
unless demanded sooner, (i) in respect to each Base Rate Loan, monthly when
invoiced and (ii) in respect to each LIBOR Rate Loan, on the last day of each
Interest Period applicable thereto (except, however, if the Interest Period
duration selected by Borrower is "one day", in which case such payment shall be
made on the Payment Due Date for each month, or as otherwise invoiced by the
Bank). If payment is not received within five days of its due date, Borrower
shall pay a late charge equal to the greatest of (a) 5% of the delinquent
amount, (b) the Bank's then current late charge as announced by the Bank from
time to time, or (c) $50.00. In addition, if the Bank has not actually received
any payment under this Note within thirty days after its due date, from and
after such thirtieth day the interest rate for all amounts outstanding under
this Note shall automatically increase to 3 percentage points above the higher
of the Base Rate or the highest LIBOR Rate (the "Default Rate"), and any
judgment entered hereon or otherwise in connection with any suit to collect
amounts due hereunder shall bear interest at such Default Rate. Payments may be
applied in any order in the sole discretion of the Bank but, prior to demand,
shall be applied first to past due interest, Expenses, late charges, and
principal payments, if any, which are past due, then to current interest and
Expenses and late charges, and last to remaining principal.

      e. PREPAYMENT OF LIBOR RATE LOANS. If (i) Borrower pays, in whole or in
part, any LIBOR Rate Loan, before the expiration of its respective Interest
Period, (ii) fails to draw down, in whole or in part, a LIBOR Rate Loan after
giving a Request therefor, (iii) otherwise tries to revoke any LIBOR Rate Loan,
in whole or in part, or (iv) there occurs a Bankruptcy Event or the applicable
rate is converted from the LIBOR Rate to the Base Rate pursuant to Section 4(d),
then Borrower shall be liable for and shall pay the Bank, on demand, the higher
of $250.00 or the actual amount of

<PAGE>

the liabilities, expenses, costs or funding losses that are a direct or indirect
result of such prepayment, failure to draw, early termination of an Interest
Period, revocation, bankruptcy or otherwise, whether such liability, expense,
cost or loss is by reason of (a) any reduction in yield, by reason of the
liquidation or reemployment of any deposit or other funds acquired by the Bank,
(b) the fixing of the interest rate payable on any LIBOR Rate Loans or (c)
otherwise. The determination by the Bank of the amount of foregoing amount
shall, in the absence of manifest error, be conclusive and binding upon
Borrower. The provisions of this paragraph shall not be applicable to any LIBOR
Rate Loan if the applicable Interest Period duration for such LIBOR Rate Loan is
"one day".

3. LOANS.

      a. GENERAL. Any Loan hereunder shall either be in the form of a Base Rate
Loan or a LIBOR Rate Loan. The Bank may make any Loan in reliance upon any oral,
telephonic, written, teletransmitted or other request (the "Request(s)") that
the Bank in good faith believes to be valid and to have been made by Borrower or
on behalf of Borrower by an Authorized Person. The Bank may act on the Request
of any Authorized Person until the Bank shall have received from Borrower, and
had a reasonable time to act on, written notice revoking the authority of such
Authorized Person. The Bank shall incur no liability to Borrower or to any other
person as a direct or indirect result of making any Loan pursuant to this
paragraph.

      b. REQUEST FOR LIBOR RATE LOANS. Borrower shall give the Bank its
irrevocable Request for a LIBOR Rate Loan specifying:

            (i)   the Draw Date for the LIBOR Rate Loan, which shall be a two
                  (2) Business Days from the date of the Request (except in the
                  case of a LIBOR Rate Loan with an Interest Period of one day,
                  for which the Draw Date may be the same as the date of the
                  Request); provided, however, if a Request is received by the
                  Bank after 2:00 p.m. (Eastern Standard Time), the Request for
                  such LIBOR Rate Loan shall be deemed to have been received on
                  the next Business Day;

            (ii)  the aggregate amount of such LIBOR Rate Loan, which amount
                  shall not be less than the Minimum Borrowing Amount;

            (iii) the applicable Interest Period (i.e., a one-day, one-month,
                  two-month, three-month, or six-month Interest Period); and

            (iv)  whether Borrower is electing to have the Automatic
                  Continuation Option for such LIBOR Rate Loan.

      c. REQUESTS FOR BASE RATE LOANS. Borrower may request any Base Rate Loan
not later than 2:00 p.m. (Eastern Standard Time) on any proposed Draw Date
specifying the aggregate amount of such Base Rate Loan.

      d. DELIVERY OF REQUESTS Delivery of a Notice or Request for a LIBOR Rate
Loan or a Base Rate Loan shall be made to the Bank at the following address, or
such other address designated by the Bank from time to time:

      Manufacturers and Traders Trust Company

      Attn: Chris Tesla

      Fax No.  (914) 366-8523
      Telephone No.  (914) 366-8515

4. CONTINUATION AND CONVERSION ELECTIONS.

      a. ELECTION. An Authorized Person of Borrower may, upon irrevocable
Request to the Bank,

            (i)   elect to convert on any Business Day any Base Rate Loan into a
                  LIBOR Rate Loan provided the amount converted is not less than
                  the Minimum Borrowing Amount; or

<PAGE>

            (ii)  elect to convert any or a part of LIBOR Rate Loan as of the
                  last day of the applicable Interest Period into a Base Rate
                  Loan provided no partial conversion of a LIBOR Rate Loan shall
                  reduce the outstanding principal amount of such LIBOR Rate
                  Loan to less than the Minimum Borrowing Amount; or

            (iii) elect to continue all or a part (subject to the Minimum
                  Borrowing Amount limitation) of any LIBOR Rate Loan as of the
                  last day of the Interest Period applicable to such LIBOR Rate
                  Loan with the same or different Interest Period provided no
                  partial continuation of a LIBOR Rate Loan with a different
                  Interest Period shall reduce the outstanding principal amount
                  of the LIBOR Rate Loan with the same Interest Period to less
                  than the Minimum Borrowing Amount.

      b. NOTICE OF CONVERSION/CONTINUATION.

            (i)   For an election under Section 4(a)(i) or 4(a)(iii), an
                  Authorized Person must deliver to the Bank by 2:00 p.m.
                  (Eastern Standard Time) on a Business Day a Notice of
                  Conversion ("Notice of Conversion") for an election under
                  Section 4(a)(i) or a Notice of Continuation ("Notice of
                  Continuation") for an election under Section 4(a)(iii)
                  specifying:

                  (a)   the aggregate amount of the Loans to be converted or
                        continued;

                  (b)   the duration of the requested Interest Period (i.e., a
                        one-day, one-month, two-month, three-month or six-month
                        Interest Period); and

                  (c)   whether the Automatic Continuation Option will be
                        activated for such LIBOR Rate Loan.

            (ii)  The Continuation Date or Conversion Date (as the case may be)
                  shall be the later of (A) two (2) Business Days from the
                  Business Day the Bank receives the Notice of Conversion or
                  Notice of Continuation (either, a "Notice") in accordance with
                  the foregoing Section or (B) the last day of the relevant
                  Interest Period if a Notice is received by the Bank more than
                  two (2) Business Days before the last day of an Interest
                  Period. If a Notice is received after 2:00 p.m. (Eastern
                  Standard Time), the Notice will be deemed to have been
                  received on the next Business Day. Notice of Continuation
                  received more than two (2) Business Days before the end of an
                  Interest Period shall be deemed to have been received two (2)
                  Business Days before the end of such Interest Period for
                  purposes of determining the LIBOR Rate for the next Interest
                  Period per Section 2(b)(i). Accordingly, if, for example,
                  Borrower has a LIBOR Rate Loan with a one month Interest
                  Period ending on June 15 and wants to continue the LIBOR Rate
                  Loan with a two month Interest Period, Borrower must deliver
                  its Notice of Continuation identifying the new two month
                  Interest Period to the Bank by 2:00 p.m. (Eastern Standard
                  Time) on June 13 (provided that June 13 and June 14 are
                  Business Days).

            (iii) For LIBOR Rate Loans where Borrower has elected to activate
                  the Automatic Continuation Option, the Bank shall
                  automatically continue such LIBOR Rate Loan with the same
                  Interest Period initially selected by the Borrower. Once the
                  Automatic Continuation Option has been activated for a LIBOR
                  Rate Loan, the submission of a Notice of Conversion or a
                  Notice of Continuation with a different Interest Period shall
                  result in the cancellation of the Automatic Continuation
                  Option for such LIBOR Rate Loan.

            (iv)  For an election under Section 4(a)(ii), an Authorized Person
                  may deliver to the Bank a Notice of Conversion at any time
                  during an Interest Period up to the last day of such Interest
                  Period or may have the LIBOR Rate Loan automatically convert
                  to a Base Rate Loan pursuant to Section 4(c). Any such Notice
                  of Conversion delivered during an Interest Period shall be
                  effective on the last day of the Interest Period.

<PAGE>

            (v)   The Bank may take action on any Notice in reliance upon any
                  oral, telephonic, written or teletransmitted Notice that the
                  Bank in good faith believes to be valid and to have been made
                  by Borrower or on behalf of Borrower by an Authorized Person.
                  No Notice may be delivered by e-mail. The Bank may act on the
                  Notice from any Authorized Person until the Bank shall have
                  received from Borrower, and had a reasonable time to act on,
                  written notice revoking the authority of such Authorized
                  Person. The Bank shall incur no liability to Borrower or to
                  any other person as a direct or indirect result of acting on
                  any Notice under this Note. The Bank, in its sole discretion,
                  may reject any Notice that is incomplete.

      c. EXPIRATION OF INTEREST PERIOD. With respect to any LIBOR Rate Loan for
which an Automatic Continuation Option is not in effect, if Borrower does not
submit a Notice of Continuation in accordance with Section 4(b)(i) and 4(b)(ii)
so that the Bank receives the Notice of Continuation at least two (2) Business
Days before the end of an Interest Period, the LIBOR Rate Loan shall
automatically be converted into a Base Rate Loan and such Loan shall accrue
interest at the Base Rate until two (2) Business Days after the Bank receives a
Notice of Conversion pursuant to Section 4(b)(i) and 4(b)(ii) electing to
convert the Loan from a Base Rate Loan to a LIBOR Rate Loan pursuant to Section
4(a)(i). A Notice of Continuation received one (1) Business Day before the end
of an Interest Period will not effect a continuation of such Loan as a LIBOR
Rate Loan. Rather, such LIBOR Rate Loan shall automatically convert to a Base
Rate Loan on the last day of the Interest Period. The late Notice of
Continuation, however, will be deemed to be a Notice of Conversion that will be
effective two (2) Business Days from the date received by the Bank.

      d. CONVERSION UPON DEFAULT. Unless the Bank shall otherwise consent in
writing, if (i) Borrower has failed to pay when due, in whole or in part, the
indebtedness under the Note (whether by demand or otherwise), or (ii) there
exists a condition or event which with the passage of time, the giving of notice
or both shall constitute an event of default under any of Borrower's agreement
with the Bank, if any, Borrower may not elect to have a Loan converted or
continued as a LIBOR Rate Loan or have any Loan made as a LIBOR Rate Loan.
Further, the Bank, in its sole discretion, may (i) permit any outstanding LIBOR
Rate Loans to continue until the last day of the applicable Interest Period at
which time such Loan shall automatically be converted into a Base Rate Loan or
(ii) convert any outstanding LIBOR Rate Loans into a Base Rate Loan before the
end of the applicable Interest Period applicable to such LIBOR Rate Loan.
Notwithstanding the foregoing, if Borrower commences, or has commenced against
it, any proceeding or request for relief under any bankruptcy, insolvency or
similar laws now or hereafter in effect in the United States of America or any
state or territory thereof or any foreign jurisdiction or any formal or informal
proceeding for the dissolution or liquidation of, settlement of claims against
or winding up of affairs of Borrower (a "Bankruptcy Event"), any outstanding
LIBOR Rate Loans shall be automatically converted to Base Rate Loans without
further action by the Bank and Borrower's rights to have Base Rate Loans
converted under Section 4 shall be automatically terminated. Nothing herein
shall be construed to be a waiver by the Bank to have any Loan accrue interest
at the Default Rate or the right of the Bank to the amounts set forth in Section
2(e) of this Note.

5. SETOFF. The Bank shall have the right to set off against the amounts owing
under this Note any property held in a deposit or other account with the Bank or
any of its affiliates or otherwise owing by the Bank or any of its affiliates in
any capacity to Borrower or any guarantor or endorser of this Note. Such set-off
shall be deemed to have been exercised immediately at the time the Bank or such
affiliate elects to do so.

6. BANK RECORDS CONCLUSIVE. The Bank shall set forth on a schedule attached to
this Note or maintained on computer, the date and original principal amount of
each Loan and the date and amount of each payment to be applied to the
Outstanding Principal Amount of this Note. The Outstanding Principal Amount set
forth on any such schedule shall be presumptive evidence of the Outstanding
Principal Amount of this Note and of all Loans. No failure by the Bank to make,
and no error by the Bank in making, any annotation on any such schedule shall
affect the Borrower's obligation to pay the principal and interest of each Loan
or any other obligation of Borrower to the Bank pursuant to this Note.

7. PURPOSE. Borrower certifies (a) that no Loan will be used to purchase margin
stock except with the Bank's express prior written consent for each such
purchase and (b) that all Loans shall be used for a business purpose, and not
for any personal, family or household purpose.

<PAGE>

8. AUTHORIZATION. Borrower, if a corporation, partnership, limited liability
company, trust or other entity, represents that it is duly organized and in good
standing or duly constituted in the state of its organization and is duly
authorized to do business in all jurisdictions material to the conduct of its
business; that the execution, delivery and performance of this Note have been
duly authorized by all necessary regulatory and corporate or partnership action
or by its governing instrument; that this Note has been duly executed by an
authorized officer, partner or trustee and constitutes a binding obligation
enforceable against Borrower and not in violation of any law, court order or
agreement by which Borrower is bound; and that Borrower's performance is not
threatened by any pending or threatened litigation.

9. INABILITY TO DETERMINE LIBOR RATES, INCREASED COSTS, ILLEGALITY.

      a. INCREASED COSTS. If the Bank shall determine that, due to either (a)
the introduction of any change (other than any change by way of imposition of or
increase in reserve requirements included in the calculation of the LIBOR) in or
in the interpretation of any requirement of law or (b) the compliance 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 the Bank of agreeing to make or making, funding or maintaining any LIBOR
Rate Loans, then Borrower shall be liable for, and shall from time to time, upon
demand therefor by the Bank and pay to the Bank such additional amounts as are
sufficient to compensate the Bank for such increased costs.

      b. INABILITY TO DETERMINE RATES. If the Bank shall determine that for any
reason adequate and reasonable means do not exist for ascertaining LIBOR for any
requested Interest Period with respect to a proposed LIBOR Rate Loan, the Bank
will give notice of such determination to Borrower. Thereafter, the Bank may not
make or maintain LIBOR Rate Loans, as the case may be, hereunder until the Bank
revokes such notice in writing. Upon receipt of such notice, Borrower may revoke
any request for a LIBOR Rate Loan or Notice then submitted by it. If Borrower
does not revoke such notice the Bank may make, or continue the Loans, as
proposed by Borrower, in the amount specified in the applicable request
submitted by Borrower, but such Loans shall be made or continued as Base Rate
Loans instead of LIBOR Rate Loans, as the case may be.

      c. ILLEGALITY. If the Bank shall determine that the introduction of any
law (statutory or common), treaty, rule, regulation, guideline or determination
of an arbitrator or of a governmental authority or in the interpretation or
administration thereof, has made it unlawful, or that any central bank or other
governmental authority has asserted that it is unlawful for the Bank to make
LIBOR Rate Loans, then, on notice thereof by the Bank to Borrower, the Bank may
suspend the making of LIBOR Rate Loans until the Bank shall have notified
Borrower that the circumstances giving rise to such determination shall no
longer exist. If the Bank shall determine that it is unlawful to maintain any
LIBOR Rate Loans, Borrower shall prepay in full all LIBOR Rate Loans then
outstanding, together with accrued interest, either on the last date of the
Interest Period thereof if the Bank may lawfully continue to maintain such LIBOR
Rate Loans to such day, or immediately, if the Bank may not lawfully continue to
maintain such LIBOR Rate Loans. If Borrower is required to prepay any LIBOR Rate
Loan immediately as set forth in this subsection, then concurrently with such
prepayment, Borrower may borrow from the Bank, in the amount of such repayment,
a Base Rate Loan.

10. MISCELLANEOUS. This Note, together with any related loan and security
agreements and guaranties, contains the entire agreement between the Bank and
Borrower with respect to the Note, and supersedes every course of dealing, other
conduct, oral agreement and representation previously made by the Bank. All
rights and remedies of the Bank under applicable law and this Note or amendment
of any provision of this Note are cumulative and not exclusive. No single,
partial or delayed exercise by the Bank of any right or remedy shall preclude
the subsequent exercise by the Bank at any time of any right or remedy of the
Bank without notice. No waiver or amendment of any provision of this Note shall
be effective unless made specifically in writing by the Bank. No course of
dealing or other conduct, no oral agreement or representation made by the Bank,
and no usage of trade, shall operate as a waiver of any right or remedy of the
Bank. No waiver of any right or remedy of the Bank shall be effective unless
made specifically in writing by the Bank. Borrower agrees that in any legal
proceeding, a copy of this Note kept in the Bank's course of business may be
admitted into evidence as an original. This Note is a binding obligation
enforceable against Borrower and its successors and assigns and shall inure to
the benefit of the Bank and its successors and assigns. If a court deems any
provision of this Note invalid, the remainder of the Note shall remain in
effect. Section headings are for convenience only. Singular number includes
plural and neuter gender includes masculine and feminine as appropriate.

<PAGE>

11. NOTICES. Any demand or notice hereunder or under any applicable law
pertaining hereto shall be in writing and duly given if delivered to Borrower
(at its address on the Bank's records) or to the Bank (at the address on page
one and separately to the Bank officer responsible for Borrower's relationship
with the Bank). Such notice or demand shall be deemed sufficiently given for all
purposes when delivered (i) by personal delivery and shall be deemed effective
when delivered, or (ii) by mail or courier and shall be deemed effective three
(3) business days after deposit in an official depository maintained by the
United States Post Office for the collection of mail or one (1) business day
after delivery to a nationally recognized overnight courier service (e.g.,
Federal Express). Notice by e-mail is not valid notice under this or any other
agreement between Borrower and the Bank.

12. JOINT AND SEVERAL. If there is more than one Borrower, each of them shall be
jointly and severally liable for all amounts which become due under this Note
and the term "Borrower" shall include each as well as all of them.

13. GOVERNING LAW; JURISDICTION. This Note has been delivered to and accepted by
the Bank and will be deemed to be made in the State of New York. This Note will
be interpreted in accordance with the laws of the State of New York excluding
its conflict of laws rules. BORROWER HEREBY IRREVOCABLY CONSENTS TO THE
EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT IN THE STATE OF NEW YORK IN
A COUNTY OR JUDICIAL DISTRICT WHERE THE BANK MAINTAINS A BRANCH, AND CONSENTS
THAT THE BANK MAY EFFECT ANY SERVICE OF PROCESS IN THE MANNER AND AT BORROWER'S
ADDRESS SET FORTH ABOVE FOR PROVIDING NOTICE OR DEMAND; PROVIDED THAT NOTHING
CONTAINED IN THIS NOTE WILL PREVENT THE BANK FROM BRINGING ANY ACTION, ENFORCING
ANY AWARD OR JUDGMENT OR EXERCISING ANY RIGHTS AGAINST BORROWER INDIVIDUALLY,
AGAINST ANY SECURITY OR AGAINST ANY PROPERTY OF BORROWER WITHIN ANY OTHER
COUNTY, STATE OR OTHER FOREIGN OR DOMESTIC JURISDICTION. Borrower acknowledges
and agrees that the venue provided above is the most convenient forum for both
the Bank and Borrower. Borrower waives any objection to venue and any objection
based on a more convenient forum in any action instituted under this Note.

14. WAIVER OF JURY TRIAL. Borrower and the Bank hereby knowingly, voluntarily,
and intentionally waive any right to trial by jury Borrower and the Bank may
have in any action or proceeding, in law or in equity, in connection with this
note or the transactions related hereto. Borrower represents and warrants that
no representative or agent of the Bank has represented, expressly or otherwise,
that the Bank will not, in the event of litigation, seek to enforce this jury
trial waiver. Borrower Acknowledges that the Bank has been induced to enter into
this note by, among other things, the provisions of this Section.

PREAUTHORIZED TRANSFERS FROM DEPOSIT ACCOUNT. If a deposit account number is
provided in the following blank Borrower hereby authorizes the Bank to debit
available funds in Borrower's deposit account #9836813304 with the Bank
automatically for any amount which becomes due under this Note or as directed by
an Authorized Person, by telephone.

ACKNOWLEDGMENT. Borrower acknowledges that it has read and understands all the
provisions of this Note, including the GOVERNING LAW, JURISDICTION and WAIVER OF
JURY TRIAL, and has been advised by counsel as necessary or appropriate.

TAX ID/SS # 2199108                    THE PEOPLES PUBLISHING GROUP, INC.

                                       /s/ Michael L. DeMarco
____________________                   -----------------------
Signature of Witness                   Name: Michael L. DeMarco
                                       Title:  Chief Financial Officer

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