Document:

Exhibit 10.1

                                                           No.____________
EQUIPMENT LEASE

Lessor:                 Malahat Energy Corporation

Lessee:                 __________________________

Billing Address:________________          Delivery Address:_______________
Street/Suite:___________________          Street/Suite:___________________
City:___________________________          City:___________________________
Province/State:_________________          Province/State:_________________
Postal/Zip Code:________________          Postal/Zip Code:________________
Attention:______________________          Attention:______________________
Telephone #:____________________          Telephone #:____________________
Facsimile #:____________________          Facsimile #:____________________

Equipment:
__________________________________________________________________________
Item            |         Equipment         |         Serial Number
 #              |                           |
________________|___________________________|_____________________________
 1              |                           |
________________|___________________________|_____________________________
 2              |                           |
________________|___________________________|_____________________________
 3              |                           |
________________|___________________________|_____________________________
 4              |                           |
________________|___________________________|_____________________________

Term:     The term of this lease will be __________ months commencing on the
Commencement Date and expiring on the Expiry Date, unless terminated earlier
pursuant to this lease.

Commencement Date:__________________    Expiry Date:_________________

Delivery and Installation Date:         __________________
Installation and Commissioning Cost:    $_________________

Supplements:                  Accepted
-----------                   --------
Genset Supplement             ________     Rent:            $__________/month
Maintenance Supplement        ________     Taxes on Rent:   $__________
Feedstock Supply Supplement   ________     Security Deposit:$__________

Lessee:                                    Lessor:
By:     Signature  ___________________     By:     Signature  _______________
        Print      ___________________             Print Name _______________

Title: ___________________                 Title: ___________________
Date:  ___________________                 Date:  ___________________

Lease Terms and Conditions

In consideration of their respective covenants set out below, Lessor and
Lessee agree as follows:

ARTICLE 1 - DEFINITIONS AND INTERPRETATION

1.1 Definitions.  Unless otherwise expressly provided, or unless the context
otherwise requires, all capitalized words and phrases used in this lease shall
have the following meanings and such meanings shall be equally applicable to
both the singular and the plural forms of the terms defined:

(a) "Alteration" has the meaning specified in section 7.1.

(b) "Business Day" means a day which is not a Saturday or Sunday or a
statutory holiday in the Province or State of the Delivery Address;

(c) "Commencement Date" has the meaning specified on the cover page;

(d) "Delivery Address" has the meaning specified on the cover page;

(e) "Delivery and Installation Date" has the meaning specified on the cover
page;

(f)  "Equipment" has the meaning specified on the cover page, including all
parts, components, attachments and accessories thereto and all other property
and assets from time to time subject to this lease, together with all
attachments, replacements, alterations, repair parts and components and all
intellectual property rights with respect to any of the foregoing;

(g) "Event of Default" has the meaning specified in Section 12.1;

(h) "Expiry Date" has the meaning specified on the cover page;

(i) "Force Majeure" means any event or occurrence not within the control of
the party claiming force majeure and which by the exercise of due diligence
such party is unable to prevent or overcome, including, without limitation the
generality of the foregoing, any act of God, strikes, lockouts or other
industrial disturbances, acts of the Queen's enemies, sabotage, wars,
blockades, insurrections, riots, epidemics, landslides, lightning,
earthquakes, floods, storms, fires, washouts, arrests, restraints of rulers
and peoples, civil disturbances, explosions, and orders of any court, board or
governmental authority having jurisdiction.  A lack of funds or other
financial cause specific to a party hereto shall not, in any circumstance be
force majeure;

(j) "Installation and Commissioning Cost" means the amount specified on the
cover page;

(k) "Lien" has the meaning specified in section 10.1;

(l) "Operating and Maintenance Manual" means Lessor's operating and
maintenance manual for the Equipment;

(m) "person" includes an individual, corporation, trust, partnership,
governmental authority and any other entity;

(n) "Prime Rate" means the rate of interest, expressed as a percentage per
annum, declared from time to time by the main branch in Vancouver of the Royal
Bank of Canada as its "prime rate", the intention being that the rate of
interest hereunder shall fluctuate as and when such declared prime rate
fluctuates;

(o) "Rent" means the amount specified on the cover page;

(p) "Security Deposit" has the meaning specified in section 3.8;

(q) "Stipulated Loss Value" for all or any part of the Equipment shall
represent the replacement cost of all or any part of the Equipment;

(r) "Supplements" means those of the Supplemental Agreements specified on the
cover page accepted by Lessee from time to time during the Term, which
Supplemental Agreements are each evidenced by a further agreement in writing
between the parties;

(s) "Taxes" means any and all taxes, rates, duties, assessments, levies,
license and registration fees and other public charges (excluding only federal
and provincial or state taxes on net income or capital of Lessor and
provincial, state or municipal place of business taxes and other similar taxes
in respect of Lessor or its property other than the Equipment) which may at
any time be charged or assessed directly or indirectly with respect to this
lease or the Equipment, or Lessor's or Lessee's interest therein, or with
respect to the use, leasing or operation of the Equipment, and all interest
and applicable penalties with respect thereto, whether assessed, levied or
charged by any municipal, provincial, state or federal government, and school
board or any other public body;

(t) "Term" has the meaning specified on the cover page;

(u) "this lease", "herein", "hereunder", hereof" and similar terms refer to
this lease as a whole and all Supplements accepted by the Lessee as indicated
on the cover page, and not to any particular article, section, schedule or
other subdivision of this lease.

(v) "Waste" means any exhaust, mineral salts, residual ash or other solids,
liquids or gases arising out of or in connection with, or resulting from the
Equipment excluding materials obtained from the scrubbers to be recycled
through the Equipment.

1.2 Interpretation

(a) In this lease, the singular includes the plural, the plural includes the
singular, and any gender includes the other genders.

(b) References in this lease to an article, section, schedule or other
subdivision are to the corresponding article, section, schedule or other
subdivision of this lease, unless otherwise indicated.

(c) The use of headings and the subdivision of this lease into articles,
sections, schedules and other subdivisions are for convenience of reference
only and shall not affect the interpretation of this lease.

(d) This lease shall be governed by and construed and interpreted in
accordance with the laws of the Province of British Columbia and the laws of
Canada applicable therein and each party hereby irrevocably agrees to the
exclusive jurisdiction of the courts of the Province of British Columbia in
respect of all matters which may arise in respect of this lease.

(e) Should any provisions of this lease be void or unenforceable it shall be
severed from this lease and the remainder of this lease shall remain in full
force and effect and shall be interpreted and construed as if the stricken
provision had never formed part of this lease.

(f) All dollar amounts referred to in this lease refer to  ______________
dollars.

(g) Except as contained in any Supplement accepted by the Lessee as indicated
on the cover page, this lease constitutes the entire agreement between the
parties with respect to the Equipment and its rental to and use by Lessee.
Any discrepancy between the terms of this lease and a Supplement shall be
resolved in favour of the Supplement.  There are no other terms, conditions,
obligations, representations or warranties on the part of either party,
whether oral, written, express, implied, statutory or otherwise, governing or
affecting the transaction contemplated in this lease or which may give rights
to Lessee or restrict the remedies and rights of Lessor.  Amendments to this
lease must be in writing and executed by the parties hereto.

(h) The representations, warranties and covenants survive the expiration or
sooner termination of the Term.

(i) The parties agree that the provisions of this lease have been negotiated
by the parties and therefore the contra proferentum rule will not apply as a
rule of construction of this lease.

ARTICLE 2  - LEASE

2.1 Lease and Term.  Lessor leases to Lessee, and Lessee leases from Lessor
the Equipment for the Term.  This lease cannot be cancelled except as
expressly provided herein.

2.2 Title.  Title to the Equipment is and shall at all times remain vested in
Lessor.  This agreement is one of lease only.  Lessee shall have no right,
title or interest in the Equipment except the right to use and possess the
same upon and subject to the terms and conditions contained in this lease.
Lessor may, and Lessee shall if and as directed by Lessor, affix plates, tags
or markings to the Equipment clearly indicating Lessor's ownership, and Lessee
shall not remove, alter or conceal any such plates, tags or markings.  Lessee
shall defend Lessor's title against any contrary claim asserted during the
Term or at any other time by any person claiming through or against Lessee or
arising out of or related in any way to this lease or Lessee's possession or
use of the Equipment.

2.3 Delivery.  The Lessor shall, at the Lessee's expense, deliver the
Equipment to the Delivery Address on the Delivery and Installation Date and
pick-up from the Delivery Address and deliver the Equipment to a location of
the Lessor's choice on the Expiry Date or sooner termination of the Term.
Without limiting the generality of the foregoing, the Lessee shall pay all
costs associated with the transportation of the Equipment to and from the
Delivery Address.

ARTICLE 3  - LESSEE'S PAYMENT OBLIGATIONS

3.1 Installation and Commissioning Cost.  The Lessee shall pay to the Lessor
the Installation and Commissioning Cost upon successful installation and
commissioning of the Equipment at the Delivery Address.

3.2 Rent.  Lessee shall pay to Lessor Rent during the Term and the Rent
together with applicable Taxes on Rent will be payable in advance on the first
day of each month.

3.3 Taxes.  Lessee shall promptly pay all Taxes, when due, to Lessor or to the
proper governmental authority.

3.4 Interest.  All Rent and other amounts from time to time owing under this
lease not paid when due shall bear interest, from the due date to the date of
payment at the Prime Rate plus 4% per annum, compounded monthly, both before
and after demand, default and judgment, which amounts shall be payable on
demand.

3.5 Net Lease.  This lease is a net lease and every cost and expense existing
or arising with respect to the Equipment, the delivery thereof or Lessee's
lease, possession or use thereof and all Taxes shall be borne by Lessee.  All
Rent and other amounts from time to time owing hereunder are payable without
abatement, withholding, set-off or reduction for any of the foregoing or for
any claim or claims whatsoever which Lessee may assert against Lessor or
against any other person for any reason, and whether arising under this lease
or otherwise.

3.6 Manner and Place of Payment.  All amounts to be paid by Lessee to Lessor
hereunder shall be direct-deposited to such bank as Lessor shall designate in
writing.  If any such amount is due to be paid on a day other than a Business
Day, such amount shall be payable on the next succeeding Business Day.  Lessee
acknowledges that any invoices for payments due under this lease sent to
Lessee by Lessor shall be for Lessee's convenience only. Lessee's non-receipt
of an invoice shall not relieve Lessee of its obligations to make any payment
hereunder on the due date thereof.

3.7 Security Deposit.  Lessee shall deposit with the Lessor the sum of two
months Rent as a security deposit upon signing this lease (the "Security
Deposit"), as security for the faithful performance by Lessee of all of its
covenants and obligations hereunder, provided that

(a) the Lessor shall not be liable to the Lessee for interest on the Security
Deposit;

(b) if any portion of the Rent is at any time overdue and unpaid, or if Lessee
fails to keep and perform any terms, covenants or conditions pursuant to this
lease, then Lessor may but shall not be obliged to, apply any portion of the
Security Deposit for loss or damage sustained or suffered by Lessor for
Lessee's breach.  If the entire Security Deposit, or any portion if it, is
appropriated and applied by Lessor, then Lessee will, upon demand, immediately
remit to Lessor a sufficient amount in cash to restore the Security Deposit to
the original sum deposited; and

(c) if Lessee complies with all of the terms, covenants and conditions and
promptly pays all of the Rent and other amounts owing, the security deposit
will be returned in full to Lessee within 60 days after the end of the Term.
Lessor shall not be obliged to account to Lessee for any interest earned on
the Security Deposit.

ARTICLE 4 - REPRESENTATIONS AND WARRANTIES

4.1 Lessor's Representations and Warranties.  Lessor represents and warrants
to Lessee that:

(a) Lessor is a corporation duly incorporated, organized, and validly existing
under the laws of Canada and is duly qualified to own the Equipment and to
lease it to Lessee as provided in this lease;

(b) Lessor has full power, authority and the legal right to enter into this
lease and perform its obligations hereunder, and the execution and delivery by
it of this lease and performance of its obligations hereunder have been duly
authorized by all necessary corporate action on the part of Lessor and will
not violate any provision of law or of the constating documents or by-laws of
Lessor or result in a breach of or constitute a default under any agreement,
indenture or other instrument to which Lessor is a party or by which Lessor or
any of its property may be bound or affected;

(c) This lease constitutes a legal, valid and binding obligation of Lessor;
and

(d) The Equipment shall have the capacity to convert approximately 6.0 tons
(metric) per day of biodegradable materials of the type as selected by the
Lessor into syngas to generate energy, yielding an average equivalent range of
250 kilowatt hours per hour of energy.

4.2     Exclusions.  Except as set forth in subsection 4.1, Lessor makes no
representations or warranties in favour of Lessee, whether oral or written,
express or implied, statutory or otherwise, with respect to Lessor, the
Equipment, this lease or any other matter relating to this lease transaction.
In that regard, and for greater certainty, Lessee acknowledges that (i) it has
selected the Equipment without placing any reliance on Lessor or on Lessor's
skill or judgment (ii) the Equipment is leased under this lease on an "as is"
basis, (iii) there are no warranties, conditions, terms, representations or
inducements, oral or written, express or implied, statutory or otherwise, made
by or on behalf of Lessor or operating in favour of Lessee as to any aspect of
the Equipment including, without limitation, as to its condition, operation,
fitness for any particular purpose, durability or merchantability, or as to
Lessor, this lease or any other matter related to this lease transaction, all
of which are waived and excluded from this lease to the fullest extent
permitted by applicable law, and Lessee agrees not to seek or claim the
benefit thereof; and (iv) the sole fundamental obligation of Lessor under this
lease is not to disturb the Lessee's quiet possession of the Equipment as long
as Lessee is not in default under this lease.

4.3     Lessee's Representations and Warranties.  Lessee represents and
warrants to Lessor that:

(a)     Lessee is a corporation duly incorporated, organized and validly
existing under the laws of its jurisdiction of incorporation and is duly
qualified and holds all necessary licences, approvals, certificates and
permits to enable it to lease the Equipment from Lessor and to operate the
same as contemplated in this lease;

(b)     Lessee has full power, authority and the legal right to enter into
this lease and perform its obligations hereunder, and the execution and
delivery by it of this lease and performance of its obligations hereunder have
been duly authorized by all necessary corporate action on the part of Lessee
and will not violate any provision of law or of the constating documents or
by-laws of Lessee or result in a breach of or constitute a default under any
agreement, indenture or other instrument to which Lessee is a party or by
which it or any of its property may be bound or affected, or permit any lender
to accelerate or demand repayment of any material amount of indebtedness of
Lessee;

(c)        this lease constitutes a legal, valid and binding obligation of
Lessee; and

(d)     all consents, authorizations and approvals of third persons, if any,
necessary with respect to this lease and to performance by Lessee of its
obligations hereunder have been obtained.

ARTICLE 5 - USE

5.1 Location.  Lessee shall keep the Equipment at the Delivery Address and
shall not remove the Equipment from such location during the Term without
Lessor's prior consent, which consent shall not be unreasonably or arbitrarily
withheld or delayed.

5.2 Compliance With Laws.  Lessee shall at all times and at its own expense
comply with all applicable statutes, laws, regulations, orders and rules,
including without limitation, regarding environmental matters, present or
future, and the requirements of any insurance policies and underwriters
relating to the ownership, lease, possession, use, operation, maintenance,
alteration, storage, repair, delivery, return or other disposition of all and
any part of the Equipment and Waste.

5.3 Maintenance, Use and Inspection.

(a) Lessee shall at all times and at its own expense, maintain the Equipment
in good mechanical and working order, repair, condition and appearance
(reasonable wear and tear from proper use only excepted).  Lessee shall
promptly make any and all necessary repairs and replacements, including
repairs and replacements, to the Equipment, and shall furnish or obtain and
install any and all parts, components, accessories and servicing required to
keep the Equipment in the state required by this lease.  Before undertaking
any maintenance, repairs or replacements to the Equipment, Lessee shall first
consult with Lessor, and to the extent authorized by Lessor, Lessee may
undertake such maintenance, repairs or replacements by competent and duly
qualified persons approved by Lessor.  If the Lessor so chooses, the Lessor
may at the Lessee's expense elect to undertake or engage others to undertake
the necessary maintenance, repairs or replacements, in each case provided the
Lessor ensures such maintenance, repairs or replacements are done promptly and
with the minimum amount of disruption to the Lessee's business.

(b) Lessee shall ensure that the Equipment is not exposed to hazardous
materials which may impair the efficiency or destroy the functionality of the
Equipment.  Lessee shall cause the Equipment to be operated by competent and
duly qualified personnel only, and for proper business purposes, and in
compliance with all of Lessor's recommendations and instructions in the
Operating and Maintenance Manual and with all terms and provisions of this
lease.

(a) (c) Lessor, its employees and agents shall have and be permitted to have
access to the Equipment and the right to enter upon any lands or premises
where any part of the Equipment may be located at any time and from time to
time for the purpose of inspecting, maintaining, repairing or replacing the
Equipment.

(a) Lessor shall notify the lessee promptly of updates to the operating and
maintenance manual, if any, and lessee shall at all times maintain the
contents of the operating and maintenance manual in good order.(d)

5.4 Removal of Waste.  The Lessee shall own and be responsible for the removal
and disposal of all Waste in compliance with Section 5.2.

5.5 Excess Energy.  Lessee shall be responsible for obtaining all approvals
and permits and shall bear all risk with respect to any sale of excess energy
(including without limitation electricity, steam and synthesized gas) arising
out of or in connection with or resulting from the Equipment.

ARTICLE 6 - GREENHOUSE GASES

6.1 Definitions. Unless otherwise expressly provided, or unless the context
otherwise requires, all capitalized words and phrases used in this Article
shall have the following meanings and such meanings shall be equally
applicable to both the singular and the plural forms of the terms defined:

(a) "Convention" means the United Nations Framework Convention on Climate
Change.

(b) "ER" or "Emission Reduction" means a reduction, avoidance, sequestration
or mitigation of GHG emissions;

(c) "ERB" or "Emission Reduction Benefits" means all rights, benefits, title
and interest in and to, arising out of or in connection with, or resulting
from, an ER, whether such right, benefit, title or interest is in existence as
of the date of this lease or arises thereafter, including the period after the
Term;

(d) "GHG" means carbon dioxide, methane, nitrous oxide, hydrofluorocarbons,
perfluorocarbons, and any other gas substance that is the subject of the
Convention and related protocols, treaties, agreements and instruments;

6.2 Ownership of Greenhouse Gas Emission Reductions.  By signing this
Agreement, Lessee transfers, surrenders and quit claims to Lessor all of
Lessee's right, title and interest in any and all ERs and any and all ERBs
arising therefrom, if any, arising out of or in any way related to the
Equipment including without limitation, any and all ERs and ERBs arising from
sale of excess energy by Lessee.  Lessee agrees to take no action and to
receive no benefit, credit or interest contrary to this Agreement or that in
any way prejudices or impairs Lessor's ability to use or enjoy its right,
title ,interest and benefits in any and all such ERs and ERBs.

6.3 Measurement and Verification ERs.  Lessee shall, at Lessor's Cost, provide
Lessor with access to such of the Lessee's books, records and other
information both during and after the Term, as the Lessor may reasonably
require to document,evidence or measure any and all ERs which may arise out of
or are in any way related to the Equipment.

6.4 Further Assurances.

(a) At the request and cost of Lessor, Lessee shall from time to time, either
before, during or after the Term of the lease, do all such acts and things as
may be necessary to qualify all of the ERs which may arise out of or are in
any way related to the Equipment for any available ERBs and, subject to
subsection (b), to obtain and secure such ERBs forLessor.

(b) At the request and cost of Lessor, Lessee shall from time to time, both
during and after the Term, execute and deliver or cause to be executed and
delivered to Lessor all such further documents and instruments and do all such
further acts and things as may be necessary for more perfectly and absolutely
assigning, transferring and assuring to and vesting in Lessor good and
marketable title to any and all ERs which may arise out of are in any way
related to the Equipment and any and all ERBs arising therefrom.

ARTICLE 7  -ALTERATIONS, ADDITIONS AND IMPROVEMENTS

7.1 Alterations, Additions and Improvements.

(a) Lessor shall be entitled, at its expense, to make alterations, additions
or improvements (each individually referred to as an "Alteration") to the
Equipment provided the Lessor ensures such Alterations are done with the
minimum amount of disruption to the Lessee's business..

(b) Lessor shall give Lessee prior written notice of any Alterations to the
Equipment proposed to be made by it (repairs, replacements and maintenance of
the nature contemplated by section 5.3 excepted).  All Alterations shall upon
the earlier of installation or completion become the property of, and the same
are conveyed to, Lessor without requirement of any further act or formality,
and thereafter all such Alterations shall for all purposes be and be deemed to
be part of the Equipment.  Lessee shall not be entitled to modify or remove
any Alterations which become the property of Lessor.  Lessor, its employees
and agents shall have and be permitted to have access to the Equipment and the
right to enter upon any lands or premises where any part of the Equipment may
be located at any time and from time to time for the purpose of making
Alterations to the Equipment

7.2 Lessee shall, if so requested by Lessor, execute and deliver to Lessor
such bills of sale, assignments, deeds and other documents and instruments as
may be requested by Lessor to evidence the ownership of  Lessor of title in
and to any Alterations which become the property of Lessor as contemplated in
Section 7.1.

ARTICLE 8 - LOSS, DAMAGE AND INSURANCE

8.1 Loss or Damage, Restoration and Rebuilding, Expropriation.

(a) Lessee assumes the entire risk of loss (including loss or interruption of
use) of or damage to the Equipment from any cause whatsoever.  No loss or
damage (with the exception of loss or damage caused by the gross negligence or
wilful misconduct of Lessor), shall affect or impair the obligations of Lessee
under this lease including but not limited to the obligation to pay Rent
unabated and without interruption, all of which shall continue in full force
and effect subject to subsection 8.1(c).

(b) If the Equipment is destroyed, expropriated or confiscated, or is damaged
so that it cannot reasonably be repaired (as determined by Lessor), Lessee
shall promptly notify Lessor and Lessee shall pay to Lessor all amounts
required by Lessor to replace the Equipment or the part so destroyed, or, at
the Lessor's option, on the next Rent payment date pay to Lessor, including
the Rent payment due on such date, the applicable Stipulated Loss Value for
the Equipment or such part.

(c) Upon payment of the Stipulated Loss Value pursuant to subsection 8.1(b) in
respect of the Equipment, and provided Lessee is not then in default
hereunder, this Lease shall terminate.  In the event that Lessee is required
to pay Stipulated Loss Value in respect only of part of the Equipment, then
following payment thereof Rent shall be adjusted to a lower amount as
determined by Lessor.

8.2 Insurance.  Lessee shall obtain and maintain, at its expense and for the
duration of the Term, insurance against loss, damage or destruction of the
Equipment and against such other risks as Lessor may reasonably require on
such terms and against such risks in accordance with prudent business
practices prevailing in the energy industry and having regard to the
locations, age and character of the Equipment and with insurers acceptable to
Lessor.  Such insurance shall be in an amount not less than the Stipulated
Loss Value from time to time of the Equipment as determined by the Lessor in
its absolute discretion.  Lessor shall have no obligation to insure against
any loss, damage or liability whatsoever.  All policies and all renewals
thereof shall name Lessor and Lessee jointly as loss payees.  Insurance
proceeds for damage to or destruction of the Equipment shall be paid to Lessor
to reimburse it for the costs of repair or replacement under Section 8.1, as
the case may be, or applied towards satisfaction of Lessee's obligation to pay
the Stipulated Loss Value of the Equipment.

8.3 Third Party Liability.  Lessee shall insure at its expense both Lessor and
Lessee against liability for all loss, damage, injury or death to persons or
property arising directly or indirectly out of the possession, operation,
delivery, return, storage or use of the Equipment during the Term or
thereafter and prior to its return to Lessor, by whomsoever caused and whether
or not caused by negligence under comprehensive general liability policies in
such amounts and with such insurers as are acceptable to Lessor.  Each
liability policy maintained in accordance with this section 8.3 shall provide
that all provisions thereof (except limits of liability) shall operate as if
they were a separate policy covering each insured.

8.4 Proof of Insurance; Notice of Change.  Certificates confirming existence
of the insurance coverage required to be maintained by Lessee under sections
8.2 and 8.3 and all insurance policies shall be deposited with Lessor at all
times and shall be provided to Lessor on before the Delivery and Installation
Date, but Lessor shall not be deemed to have reviewed the same or the
sufficiency thereof except where it has so confirmed in writing.  Lessee shall
give Lessor immediate notice of any reduction in the limits of liability or
property insurance maintained by Lessee and of any notice of cancellation or
termination, or of intent to cancel or terminate, in respect of any such
policy.  Each policy shall also require the insurer to give Lessor not less
than 30 prior days notice of cancellation or termination.  In the event of
issuance of notice of cancellation or termination, Lessee shall immediately
provide Lessor with satisfactory evidence of replacement insurance complying
with this lease.

8.5 Failure to Perform Covenants.  If Lessee fails to insure, to pay Taxes or
to keep the Equipment and the respective interests of Lessor and Lessee
therein free and clear of all claims, proceedings and Liens as required by
this lease, or to perform or observe any other covenant or condition of this
lease, then in addition to its other remedies, Lessor may, but shall not be
obligated to pay to insure, pay Taxes, pay to discharge, release or vacate any
adverse claim or Lien against all or any part of the Equipment or to release
the Equipment from proceedings, or pay any other sum or otherwise take such
steps and proceedings as may in its opinion be required to cure or partially
cure any default by Lessee hereunder.  The cost of such actions and all
amounts so paid and incurred by or on behalf of Lessor shall be payable to
Lessor on demand together with interest at the rate stated in section 3.4 from
the date the same is paid by Lessor to the date of payment by Lessee.

ARTICLE 9 -INDEMNIFICATION AND EXCLUSION OF LIABILITY

9.1 Lessee's Indemnification.  Lessee shall indemnify and hold harmless
Lessor, its directors, officers, employees, shareholders, representatives,
consultants and agents from any liability described in section 8.3 and any and
all losses, claims, actions, suits, proceedings, costs, expenses, damages and
liabilities, including legal fees on a solicitor and his own client basis,
arising out of, connected with, or resulting from the Equipment including
those relating to the possession, use, lease, operation, maintenance,
alteration, repair, delivery, storage, return or other disposition of all or
any part of the Equipment, arising out of, connected with or resulting from
harm or injury suffered by Lessee or its directors, officers, employees,
shareholders, representatives and consultants, or from property damage or
destruction and any breaches by Lessee of any of the representations,
warranties, terms, covenants or conditions under this lease.  This indemnity
shall not be affected or terminated by virtue of the expiry of the Term or
sooner termination of this Lease but shall remain in full force and effect
until all obligations of Lessee to Lessor have been satisfied.

9.2 Lessor's Indemnification.  Lessor shall indemnify and hold harmless
Lessee, its directors, officers, employees, shareholders, representatives,
consultants and agents from any and all losses, claims, actions, suits,
proceedings, costs, expenses, damages and liabilities, including legal fees on
a solicitor and his own client basis, arising out of, connected with, or
resulting from any breaches by Lessor of any of the representations,
warranties, terms, covenants or conditions under this lease.

9.3 Exclusion of Liability.  Neither party shall be liable to the other party
for indirect or consequential loss or for loss of profit, regardless of how
the liability arises, including without limitation via negligence, gross
negligence or breach of contract.

ARTICLE 10  - LIENS AND ENCUMBRANCES; RECORDATION AND FILING

10.1 Liens and Encumbrances.  Lessee shall not at any time during the Term
permit any builder's, laborer's, material supplier's or other similar lien or
charge to stand against the whole or any part of the Equipment.  In addition,
at all times during the Term and so long as any amount owing hereunder shall
remain unpaid, Lessee shall keep the Equipment free and clear of all other
liens, charges, encumbrances, security interests, seizures and rights or
claims of third parties of any kind or nature (any such lien, charge,
encumbrance, security interest, seizure and third party right and claim of any
kind or nature being referred to as a "Lien"), except for any Lien arising out
of claims against the Lessor unrelated to this transaction and to the
Equipment.  Notwithstanding the foregoing Lessee may, upon written notice to
Lessor, refrain from paying and discharging any Lien if:

(a) the amount, applicability or validity thereof is being contested by Lessee
in good faith; and

(b) Lessee shall have deposited with Lessor or with a court having
jurisdiction or with the appropriate governmental authority such amount by way
of cash, certificates of deposit or other security, if any, as may be required
by such court or governmental authority or by applicable law in order to
permit Lessee to contest the same, and shall have provided to Lessor, if and
whenever requested by Lessor, with evidence satisfactory to Lessor that the
effect of such proceedings is to postpone or avoid the enforcement of the Lien
and forfeiture of any part of the Equipment.

However, upon final determination of such proceedings Lessee shall immediately
pay and satisfy all costs, penalties, interest or charges payable by it in
connection with the Lien and such proceedings.

10.2 Recordation and Filing.  Lessee shall at its own expense, do, execute,
acknowledge or deliver all such further things, agreements, documents and
conveyances as may from time to time be requested by Lessor to give effect to
or better protect the rights of Lessor hereunder, including but not limited to
completion of such public registrations of or with respect to this lease and
Lessor's rights hereunder as Lessor may require.  Lessor shall be permitted to
file and re-file Personal Property Security financing statements or notices of
similar effect with respect to the Equipment in all applicable jurisdictions.

ARTICLE 11  - RETURN OF EQUIPMENT

11.1 Time and Place of Return.  At the end of the Term or sooner termination,
and at Lessee's expense, Lessor shall pick up and return the Equipment to the
Lessor's nearest manufacturing facility.

11.2 Equipment Return Condition.  The Equipment shall be returned to Lessor at
the end of the Term in the same condition it was in on the Commencement Date.
If at the termination of this lease the Equipment is not in the condition
required by this lease, Lessor may repair or replace the same or any part
thereof as may in Lessor's judgement be necessary to place the Equipment in
the required condition.  Lessee shall pay the costs of all such repairs and
replacements on demand with interest at the rate stated in section 3.4.

11.3 Quiet Enjoyment.  So long as Lessee is not in default, Lessor shall not
disturb Lessee's quiet enjoyment and possession of the Equipment during the
Term except as may be permitted by this lease.

ARTICLE 12  - EVENTS OF DEFAULT AND REMEDIES

12.1 Events of Default.  Each of the following shall constitute an event of
default (an "Event of Default") under this lease:

(a) if any amount owing under this lease is past due;

(b) if Lessee assigns this lease or sublets, transfers, surrenders or loses
possession (except by theft) of any of the Equipment, whether by seizure,
expropriation, abandonment or otherwise;

(c) if Lessee makes an assignment for the benefit of creditors;

(d) if Lessee states in writing its inability to pay its debts as they fall
due or demonstrates an intention to cease carrying on business;

(e) if a receiver, receiver-manager, trustee or similar official is appointed
for Lessee or any of its property which appointment is not contested by Lessee
or which, if contested, is not vacated within 30 days of the appointment;

(f) if a petition in bankruptcy or other proceeding or application for
reorganization or liquidation of Lessee under any federal or provincial law is
filed or commenced by or against Lessee which is not contested by Lessee or
which, if contested, is not discharged within 30 days of filing;

(g) if Lessee suspends business, or transfers to one or more other entities
all or a substantial part of Lessee's property, or seeks any proposal,
arrangement or compromise with its creditors under the Bankruptcy Act
applicable within its federal, state or provincial jurisidiction or any other
statute or otherwise;

(h) if Lessee commits an act of bankruptcy;

(i) if Lessee fails to comply with or to perform any other term of this lease
provided:

(i) Lessee has been given notice of such failure by or on behalf of Lessor and
a period of 7 days has elapsed from the date of such notice without Lessee
having cured the same, or

(ii) where by its nature such failure is capable of being cured but is not
capable of cure within 7 days, Lessee has not proceeded diligently to cure
such failure or, in any event, if such failure has not been cured within 14
days of such notice.

12.2 Consequences of Default; Remedies.  Upon the occurrence of any Event of
Default, Lessor may, subject to any provision of applicable law which cannot
be waived:

(a) take any proceedings and pursue any remedies available to it under this
lease, at law, equity or by statute to compel performance by Lessee of its
obligations under this lease or to cure any default by Lessee and, or in the
alternative, to recover damages;

(b) with or without terminating this lease, enter personally, or by agents or
attorneys, upon any premises where the Equipment or any part thereof may be
located and repossess all or any part of the Equipment without any prior or
further demand, notice, court order or other process of law, and may use such
force as may be lawful and as circumstances may require, and Lessee releases
Lessor from all liability for damage occasioned by such repossession and
agrees to indemnify and save Lessor harmless against all claims for such
damage;

(c) as agent for Lessee, without terminating this lease and without in any way
releasing Lessee from any of its obligations hereunder, re-lease the Equipment
for such period and upon such terms as Lessor deems fit and apply the net
proceeds of such re-leasing against amounts payable hereunder (including
amounts payable under paragraph 12.2(f));

(d) elect to terminate this lease, in which event Lessor may dispose of the
Equipment in whole or in part, whether by public sale, private sale, lease or
otherwise, and at such time and place and upon such terms and conditions
(including sale for deferred payments) as are commercially reasonable in the
circumstances;

(e) recover from Lessee, and Lessee shall immediately pay to Lessor on demand,
the difference between the total of rentals to be received by Lessor from any
third party lessee of the Equipment for the balance of the Term, or the
purchase price at a sale, lease or other disposition, as the case may be
pursuant to paragraphs (c) or (d) above, and the total unpaid Rent which would
have otherwise been payable hereunder for the balance of the Term, discounted
at 5% to present value;

(f) recover from Lessee, and Lessee shall immediately pay to Lessor on demand,
all costs incurred by Lessor in connection with the enforcement of its rights
and remedies under this lease, including but not limited to costs incurred in
selling, re-leasing or otherwise disposing of repossessed Equipment; and

(g) recover from Lessee, and Lessee shall immediately pay to Lessor on demand,
interest on all sums referred to in paragraphs (a) through (f) at the rate
stated in section 3.4 from the date of the Event of Default (or in the case of
costs referred to in paragraph (f), from the date the same are incurred) until
payment in full by Lessee.

12.3 Exercise of Remedies.  The remedies specified in this lease are in
addition to any other rights Lessor may have at law, equity or under this
lease, and Lessor may exercise any one or more of such rights successively or
concurrently, provided that Lessor may not be compensated twice for the same
damages suffered by it.

ARTICLE 13 - FORCE MAJEURE

13.1 Force Majeure.

(a) If either party is prevented from or delayed in performing any of its
obligations under this lease, in whole or in part, by reason of Force Majeure,
such party shall be excused from performance for so long as and to the extent
that Force Majeure shall so prevent such performance, provided that such party
uses reasonable efforts to restore its ability to perform its obligations
hereunder.  Any party claiming Force Majeure will, with reasonable promptness,
give to the other party notice of the cause of the Force Majeure and its
expected duration.

(b) If the Lessee is wholly unable to operate the Equipment as a result of an
event of Force Majeure, then for so long as the Equipment is inoperable and
cannot be repaired or replaced as the Lessee may be obligated to do in
accordance with the provisions of this lease, and only during such period, the
Lessee's obligation to pay Rent and Taxes applicable to Rent shall be
suspended.

(c) With the exception of 13.1(a) and (b), this lease shall not terminate and
the obligations of Lessee shall not be affected by reason of any defect in or
damage to all or any part of the Equipment, loss of possession or use of the
Equipment in whole or in part from any cause whatsoever, the prohibition or
other restriction against use of all or any part of the Equipment by Lessee or
any other person, interference with such use by any person, the invalidity or
unenforceability or lack of due authorization of this lease by Lessee or
Lessor.  It is the intention of the parties that Rent and all other amounts
for which payment is provided or required in this lease shall continue to be
payable as herein provided unless the Lessee's obligation to pay the same is
terminated pursuant to an express provision of this lease.

ARTICLE 14 - MISCELLANEOUS

14.1 Notices.  Any direction, notice or invoice that any party may be required
or may desire to give to the other shall be in writing and shall be delivered
or sent by facsimile or courier to the other party addressed as follows:

If to Lessor, then to:

Malahat Energy Corporation

                6473 - 64th Street
                Delta, British Columbia
                Canada V4K 4E2

Fax No.:        1-604-946-3098

Attention:      Ben Dulley

If to the Lessee, then to the Billing Address specified on the cover page.

Either of the parties may by notice to the other change its address. Any
notice or invoice delivered or sent by facsimile or courier shall be deemed to
have been received by the addressee on the Business Day after it was so
delivered or sent by facsimile or courier.  Notwithstanding the foregoing,
invoices for Rent and other costs and expenses to be charged to Lessee may be
sent by mail in which event such will be deemed received on the fourth day of
such mailing.

14.2 Assignment.

(a) Lessee shall not assign any of its rights hereunder nor sublet, transfer,
attach as a fixture to real property, nor deliver possession of (except for
purposes of repair) the Equipment. No purported assignment, sub-letting,
transfer, attachment nor delivery by Lessee in contravention of this
subsection shall be of any effect as against Lessor.  Lessee agrees that any
change of control of Lessee shall be deemed to be an assignment by the Lessee,
requiring the prior written consent of the Lessor.  For the purposes of this
paragraph, "change of control" means a change, directly or indirectly, of the
control of the Lessee or of legal or beneficial ownership of more than 50% of
the aggregate voting securities of the Lessee and "control" includes the right
to exercise, directly or indirectly, a majority of the votes which may be cast
at a general meeting of the Lessee or the right to elect or appoint, directly
or indirectly, a majority of the directors of the Lessee.

(b) Lessor may assign its rights or transfer any of its obligations under this
lease, or both, in whole or in part without notice to Lessee, provided that
Lessee shall be bound by any such assignment according to its terms only upon
receipt of notice thereof.  Lessee shall in no event raise against any
assignee of Lessor any claims Lessee may have against Lessor.  Lessee accepts
any assignment made by Lessor in favour of a third party and agrees to execute
and deliver to any such assignee an acknowledgment or such other documentation
including any hypothecation, financing or leasing documentation with respect
to this lease as Lessor or its assignee may reasonable request.

14.3 Confidentiality.  Lessee shall keep all workings of the Equipment, the
Operating and Maintenance Manual, and all other documents and information
provided by Lessor relating to the Equipment confidential.

14.4 No Waiver Operates to Waive Future Defaults.  No covenant or condition of
this lease to be performed or observed by Lessee can be waived except by
written consent of Lessor.  Forbearance by Lessor in any regard shall not
constitute a waiver.  Until complete performance or observance by Lessee of
each covenant or condition, Lessor shall be entitled to invoke any remedy
available to Lessor under this lease and at law or equity, despite any prior
forbearance.  No waiver of a single default shall be deemed a waiver of any
other, nor shall any single or partial exercise of any remedy preclude any
further exercise thereof or of any other remedy of Lessor.

14.5 Lessee's Waiver.  Except as may be prohibited by law, and to the extent
the same extends to and relates to this lease as amended, modified or
supplemented or any security collateral hereto, Lessee waives the benefit of
all provisions of any applicable statutes and regulations which would in any
manner affect, restrict or limit the rights of Lessor hereunder including,
without limitation, as the same may be amended, supplemented, re-enacted,
substituted or replaced from time to time.  Lessee also waives the right of
any statutory exemption from execution or seizure, and the right to demand
security for costs in the event of litigation.

14.6 Further Assurances.  The parties shall execute and deliver such
additional documents in form and substance mutually satisfactory to both
parties, and shall cause such additional action to be taken as, in the
reasonable opinion of the other party, may be necessary or desirable to fully
effect, evidence or carry out the provisions of this lease and the
transactions contemplated.

14.7 Enurement.  This Agreement shall be binding upon and enure to the benefit
of the parties hereto and their respective successors and permitted assigns.

14.8 Counterparts and Facsimiles.  This Agreement may be executed in one or
more counterparts, in original form or by electronic facsimile, each of which
shall be deemed to be an original and all of which taken together shall be
deemed to constitute one and the same instrument, with the same effect as if
the signatures thereto were upon the same instrument.

14.9 Time of Essence.  Time is of the essence of this lease and of the terms
and conditions hereof.EXECUTION COPY

                           LOAN AND SECURITY AGREEMENT

                         DATED AS OF SEPTEMBER 24, 2001

                                      AMONG

                          LASALLE BUSINESS CREDIT, INC.

                                   AS LENDER,

                                       AND

                    PROTECTIVE APPAREL CORPORATION OF AMERICA
                          POINT BLANK BODY ARMOR, INC.
                             AND NDL PRODUCTS, INC.,

                                  AS BORROWERS

                                       AND

                       DHB INDUSTRIES, INC., AS GUARANTOR

<PAGE>

<TABLE>
<CAPTION>

                                TABLE OF CONTENTS
                                                                                                               PAGE

<S>      <C>                                                                                                     <C>
1.       DEFINITIONS..............................................................................................1

2.       LOANS...................................................................................................11
         (a)      Revolving Loans................................................................................11
         (b)      Term Loan......................................................................................14
         (c)      Capital Expenditure Loans......................................................................14
         (d)      Repayments.....................................................................................14
         (e)      Notes..........................................................................................16

3.       LETTERS OF CREDIT.......................................................................................16
         (a)      General Terms..................................................................................16
         (b)      Requests for Letters of Credit.................................................................17
         (c)      Obligations Absolute...........................................................................17
         (d)      Expiration Dates of Letters of Credit..........................................................17

4.       INTEREST, FEES AND CHARGES..............................................................................18
         (a)      Interest Rate..................................................................................18
         (b)      Other Libor Provisions.........................................................................19
         (c)      Fees And Charges...............................................................................21
         (d)      Maximum Interest...............................................................................22

5.       COLLATERAL..............................................................................................22
         (a)      Grant of Security Interest to Lender...........................................................22
         (b)      Other Security.................................................................................22
         (c)      Possessory Collateral..........................................................................23
         (d)      Electronic Chattel Paper.......................................................................23

6.       PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN.................................23

7.       POSSESSION OF COLLATERAL AND RELATED MATTERS............................................................24

8.       COLLECTIONS.............................................................................................24

9.       COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES............................................27
         (a)      Daily Reports..................................................................................27
         (b)      Monthly Reports................................................................................27
         (c)      Financial Statements...........................................................................28
         (d)      Annual Projections.............................................................................28
         (e)      Explanation of Budgets and Projections.........................................................28
         (f)      Public Reporting...............................................................................28
         (g)      Other Information..............................................................................29

10.      TERMINATION; AUTOMATIC RENEWAL..........................................................................29

                                      -i-

<PAGE>
<CAPTION>

<S>      <C>                                                                                                     <C>
11.      REPRESENTATIONS AND WARRANTIES..........................................................................29
         (a)      Financial Statements and Other Information.....................................................30
         (b)      Locations......................................................................................30
         (c)      Loans by the Borrowers.........................................................................30
         (d)      Accounts and Inventory.........................................................................30
         (e)      Liens..........................................................................................31
         (f)      Organization, Authority and No Conflict........................................................31
         (g)      Litigation.....................................................................................31
         (h)      Compliance with Laws and Maintenance of Permits................................................31
         (i)      Affiliate Transactions.........................................................................32
         (j)      Names and Tradenames...........................................................................32
         (k)      Equipment......................................................................................32
         (l)      Enforceability.................................................................................32
         (m)      Solvency.......................................................................................32
         (n)      Indebtedness...................................................................................33
         (o)      Margin Security and Use of Proceeds............................................................33
         (p)      Parent, Subsidiaries and Affiliates............................................................33
         (q)      No Defaults....................................................................................33
         (r)      Employee Matters...............................................................................33
         (s)      Intellectual Property..........................................................................33
         (t)      Environmental Matters..........................................................................33
         (u)      ERISA Matters..................................................................................34
         (v)      Shareholder Debt...............................................................................34

12.      AFFIRMATIVE COVENANTS...................................................................................34
         (a)      Maintenance of Records.........................................................................35
         (b)      Notices........................................................................................35
         (c)      Compliance with Laws and Maintenance of Permits................................................36
         (d)      Inspection and Audits..........................................................................36
         (e)      Insurance......................................................................................37
         (f)      Collateral.....................................................................................38
         (g)      Use of Proceeds................................................................................38
         (h)      Taxes..........................................................................................39
         (i)      Intellectual Property..........................................................................39

13.      NEGATIVE COVENANTS......................................................................................40
         (a)      Guaranties.....................................................................................40
         (b)      Indebtedness...................................................................................40
         (c)      Liens..........................................................................................40
         (d)      Mergers, Sales, Acquisitions, Subsidiaries and Other Transactions Outside the
                  Ordinary Course of Business....................................................................40
         (e)      Dividends and Distributions....................................................................41
         (f)      Investments; Loans.............................................................................42
         (g)      Fundamental Changes, Line of Business..........................................................42
         (h)      Equipment......................................................................................42
         (i)      Use of Proceeds................................................................................42
         (j)      Affiliate Transactions.........................................................................43

                                      -ii-

<PAGE>
<CAPTION>

<S>      <C>                                                                                                     <C>
         (k)      Settling of Accounts...........................................................................43
         (l)      Management Fees; Expenses......................................................................43
         (m)      Shareholder Debt...............................................................................44
         (n)      Availability...................................................................................44
         (o)      Parent Subordination...........................................................................44
         (p)      Transfer of Assets.............................................................................44
         (q)      Transfer of Shareholder Debt...................................................................45

14.      FINANCIAL COVENANTS.....................................................................................45
         (a)      Tangible Net Worth.............................................................................45
         (b)      Fixed Charge Coverage..........................................................................45
         (c)      Consolidated EBITDA............................................................................45
         (d)      Capital Expenditure Limitations................................................................45

15.      DEFAULT.................................................................................................45
         (a)      Payment........................................................................................46
         (b)      Breach of this Agreement and the Other Agreements..............................................46
         (c)      Breaches of Other Obligations..................................................................46
         (d)      Breach of Representations and Warranties.......................................................46
         (e)      Loss of Collateral.............................................................................46
         (f)      Levy, Seizure or Attachment....................................................................34
         (g)      Bankruptcy or Similar Proceedings..............................................................47
         (h)      Appointment of Receiver........................................................................47
         (i)      Judgment.......................................................................................47
         (j)      Dissolution of Obligor.........................................................................47
         (k)      Default or Revocation of Guaranty..............................................................47
         (l)      Criminal Proceedings...........................................................................48
         (m)      Change of Control..............................................................................48
         (n)      Change of Management...........................................................................48
         (o)      Material Adverse Change........................................................................48

16.      REMEDIES UPON AN EVENT OF DEFAULT.......................................................................48

17.      CONDITIONS PRECEDENT....................................................................................49

18.      INDEMNIFICATION.........................................................................................52

19.      NOTICE..................................................................................................52

20.      CHOICE OF GOVERNING LAW: CONSTRUCTION: FORUM SELECTION..................................................53

21.      MODIFICATION AND BENEFIT OF AGREEMENT...................................................................53

22.      HEADINGS OF SUBDIVISIONS................................................................................54

23.      POWER OF ATTORNEY.......................................................................................54

24.      CONFIDENTIALITY.........................................................................................54

                                     -iii-

<PAGE>
<CAPTION>

<S>      <C>                                                                                                     <C>
25.      COUNTERPARTS............................................................................................54

26.      ELECTRONIC SUBMISSIONS..................................................................................54

27.      WAIVER OF JURY TRIAL: OTHER WAIVERS.....................................................................55

28.      JOINT AND SEVERAL OBLIGATIONS; GUARANTEES...............................................................56
</TABLE>

                                      -iv-

<PAGE>

EXHIBITS

Exhibit A         Business and Collateral Locations

Exhibit B         Compliance Certificate

Exhibit C         Commercial Tort Claims

Exhibit D         Form of Capital Expenditure Note

Exhibit E         Financial Statements

SCHEDULES

Schedule A              Account Debtors

Schedule 11(g)          Litigation

Schedule 11(i)          Affiliate Transactions

Schedule 11(j)          Names and Trade Names

Schedule 11(n)          Indebtedness

Schedule 11(p)          Parents, Subsidiaries and Affiliates

Schedule 13(a)          Guaranties

Schedule 17(a)          Closing Document List

                                      -v-

<PAGE>

                           LOAN AND SECURITY AGREEMENT

                  THIS LOAN AND  SECURITY  AGREEMENT  (as  amended,  modified or
supplemented  from  time to  time,  this  "AGREEMENT")  made  this  24th  day of
September,  2001  by  and  among  LASALLE  BUSINESS  CREDIT,  INC.,  a  Delaware
corporation ("LENDER"),  located at 135 South LaSalle Street, Chicago,  Illinois
60603-4105,   and  PROTECTIVE  APPAREL   CORPORATION  OF  AMERICA,  a  New  York
corporation  ("PACA"),  POINT BLANK BODY  ARMOR,  INC.,  a Delaware  corporation
("POINT  BLANK") and NDL  PRODUCTS,  INC.,  a Florida  corporation  ("NDL",  and
together  with PACA and Point Blank,  collectively,  the  "BORROWERS"  and each,
individually,  a "BORROWER"),  and DHB INDUSTRIES,  INC., a Delaware corporation
(f/k/a DHB Capital Group, Inc., the "PARENT" or a "GUARANTOR").

                                   WITNESSETH:

                  WHEREAS,  the Borrowers may, from time to time,  request Loans
and Letters of Credit from Lender, and the parties wish to provide for the terms
and conditions upon which such Loans or other financial accommodations,  if made
by Lender, shall be made;

                  NOW,  THEREFORE,  in  consideration of any Loan (including any
Loan by  renewal  or  extension)  or  Letter  of  Credit  hereafter  made to the
Borrowers by Lender, and for other good and valuable consideration,  the receipt
and sufficiency of which are hereby  acknowledged by the Borrowers,  the parties
agree as follows:

1.       DEFINITIONS.

                  "ACCOUNT", "ACCOUNT DEBTOR", "CHATTEL PAPER", "COMMERCIAL TORT
CLAIMS",   "DEPOSIT   ACCOUNTS",   "DOCUMENTS",   "ELECTRONIC   CHATTEL  PAPER",
"EQUIPMENT",   "FIXTURES",   "GENERAL  INTANGIBLES",   "GOODS",   "INSTRUMENTS",
"INVENTORY",  "INVESTMENT PROPERTY",  "LETTER-OF-CREDIT  RIGHT",  "PROCEEDS" AND
"TANGIBLE  CHATTEL  PAPER" shall have the respective  meanings  assigned to such
terms in the New York Uniform Commercial Code, as the same may be in effect from
time to time.

                  "ADJUSTED   AVAILABILITY"  shall  mean,  as  of  any  date  of
determination,  an amount, determined by the Lender in a commercially reasonable
manner,  equal to the excess of (a) the Revolving Loan Limit OVER (b) the sum of
(i) the principal  amount of all  outstanding  Revolving Loans and all Letter of
Credit  Obligations PLUS (ii) the aggregate amount of all outstanding and unpaid
trade payables and other  obligations of the Borrowers which are more than sixty
(60) days past due as of such date.

                  "AFFILIATE"  shall  mean any  Person  (i)  which  directly  or
indirectly through one or more intermediaries  controls, is controlled by, or is
under common control with, Parent or any Borrower,  (ii) which beneficially owns
or holds five percent (5%) or more of the voting control or  outstanding  equity
interests of Parent or any  Borrower,  or (iii) five percent (5%) or more of the
voting control or outstanding equity interests of which is beneficially owned or
held by Parent or any Borrower.

<PAGE>

                  "ANNUAL TERM LOAN PREPAYMENT" shall have the meaning specified
in SUBSECTION 2(D)(IV)(B) hereof.

                  "AVAILABILITY" shall mean, as of any date of determination, an
amount,  determined by the Lender in a commercially  reasonable manner, equal to
the excess of (a) the  Revolving  Loan  Limit OVER (b) the sum of the  principal
amount of all outstanding Revolving Loans and all Letter of Credit Obligations.

                  "BLOCKED   ACCOUNT"  shall  have  the  meaning   specified  in
SUBSECTION 8(A) hereof.

                  "BUSINESS  DAY" shall mean any day other  than a  Saturday,  a
Sunday or (i) with respect to all matters, determinations, fundings and payments
in connection with LIBOR Rate Loans,  any day on which banks in London,  England
or Chicago,  Illinois are required or permitted to close,  and (ii) with respect
to all other  matters,  any day that banks in Chicago,  Illinois are required or
permitted to close.

                  "CAPITAL  EXPENDITURE  LOAN  LIMIT"  shall  have  the  meaning
specified in SUBSECTION 2(C) hereof.

                  "CAPITAL EXPENDITURE LOANS" shall mean the Loans made pursuant
to SUBSECTION 2(C) hereof.

                  "CAPITAL EXPENDITURE NOTE" shall have the meaning specified in
SUBSECTION 17(C) hereof.

                  "CAPITAL EXPENDITURES" shall mean, with respect to any period,
the  aggregate  of  all  expenditures  (whether  paid  in  cash  or  accrued  as
liabilities and including  expenditures for capitalized lease  obligations) made
by each of the  Borrowers  during  such period  that are  required by  generally
accepted  accounting  principles,  consistently  applied,  to be  included in or
reflected by the property,  plant and equipment or similar fixed asset  accounts
(or intangible  accounts subject to  amortization)  on the consolidated  balance
sheet of Parent and its Subsidiaries.

                  "CASH PROCEEDS" shall have the meaning specified in SUBSECTION
2(D)(IV)(A) hereof.

                  "CLOSING DOCUMENT  CHECKLIST" shall have the meaning specified
in SUBSECTION 17(A)(I) hereof.

                  "COLLATERAL" shall mean all of the property of the Parent, the
Borrowers and the DHB Subsidiaries described in SECTION 5 hereof,  together with
all other real or personal  property  of any Obligor or any other  Person now or
hereafter  pledged  or  assigned  to  Lender  to  secure,   either  directly  or
indirectly, repayment of any of the Liabilities.

                  "COLLATERAL  MANAGEMENT FEE" shall have the meaning  specified
in SUBSECTION 12(D) hereof.

                  "DEFAULT" shall have the meaning  specified in SUBSECTION 2(A)
hereof.

                                      -2-

<PAGE>

                  "DFAS-CO"  shall mean  Defense  Financing & Account  Service -
Columbus, Ohio.

                  "DFAS ACCOUNT  SUBLIMIT"  shall have the meaning  specified in
the definition of "ELIGIBLE ACCOUNT".

                  "DHB SUBSIDIARY " shall mean each of DHB Armor Group,  Inc., a
Delaware corporation,  DHB Sports Group, Inc., a Delaware  corporation,  Lanxide
Armor Products Inc., a Delaware  corporation,  and Orthopedic Products,  Inc., a
Florida corporation.

                  "DISTRIBUTION"  shall have the meaning specified in SUBSECTION
13(O) hereof.

                  "EBITDA"  shall  mean,  with  respect to any  period,  the net
income of Parent and its consolidated Subsidiaries, after taxes, for such period
(excluding  any after-tax  gains or losses on the sale of assets  outside of the
ordinary course of business and excluding other after-tax extraordinary gains or
losses) PLUS interest expense, income tax expense, depreciation and amortization
for such period,  MINUS or PLUS gains or losses  attributable to any fixed asset
sales made  during  such  period (to the extent  not  already  excluded  in this
definition),  PLUS or MINUS any other non-cash  charges or gains which have been
subtracted or added in calculating  net income after taxes for such period,  all
on a consolidated basis.

                  "ELIGIBLE  ACCOUNT"  shall mean an Account owing to a Borrower
which  is  acceptable  to  Lender  in  its  sole  discretion,   exercised  in  a
commercially reasonable manner, for lending purposes.  Without limiting Lender's
discretion,  Lender  shall  consider an Account  (or  portion  thereof) to be an
Eligible Account if it meets, and so long as it continues to meet, the following
requirements:

                  (i) it is genuine and in all respects what it purports to be;

                  (ii) it is owned by a Borrower, such Borrower has the right to
subject it to a security  interest in favor of Lender or assign it to Lender and
it is subject to a first priority perfected security interest in favor of Lender
and to no other claim, lien, security interest or encumbrance whatsoever,  other
than Permitted Liens;

                  (iii) it arises  from (A) the  performance  of  services  by a
Borrower in the ordinary course of such Borrower's  business,  and such services
have been fully  performed and  acknowledged  and accepted by the Account Debtor
thereunder;  or (B) the sale or lease of  Goods by a  Borrower  in the  ordinary
course of such  Borrower's  business,  and (w) such Goods have been completed in
accordance with the Account  Debtor's  specifications  (if any) and delivered to
the Account Debtor, (x) or, in the case of Accounts where a department or agency
of the U.S. Government is the Account Debtor, such Goods have been segregated in
an area of a  warehouse  where such  Borrower  to which such  Accounts  are owed
stores Inventory,  clearly  designated as containing Goods to be shipped to U.S.
military  bases  and  which  Goods  have  been  accepted  and  approved  by such
department  or agency on a completed  and signed form DD-250,  (y) and shall not
include any portion of Goods  which such  Account  Debtor has refused to accept,
returned or offered to return,  which are the subject of such  Account,  and (z)
such  Borrower has  possession  of, or such Borrower has delivered to Lender (at
Lender's request),  shipping and delivery receipts  evidencing  delivery of such
Goods;

                                      -3-

<PAGE>

                  (iv)   it is evidenced by an invoice  rendered  to the Account
Debtor  thereunder and is not  outstanding  beyond the earlier of (i) sixty (60)
days  past the due date and (ii) (x) in the case of all  Account  Debtors  other
than  DFAS-CO,  ninety  (90) days past the  invoice  date and (y) in the case of
DFAS-CO,  one hundred and fifty days past the invoice  date,  PROVIDED  that not
more than  $3,000,000 in the aggregate  outstanding  at any one time of Accounts
described  in this  clause  (y) (the  "DFAS  ACCOUNT  SUBLIMIT")  may be  deemed
"ELIGIBLE  ACCOUNTS",  PROVIDED FURTHER, in the event that additional  contracts
are  awarded by DFAS-CO  to a  Borrower,  Lender  may,  in its sole  discretion,
exercised  in a  commercially  reasonable  manner,  after  discussion  with such
Borrower,  increase the DFAS Account Sublimit in incremental  amounts, but in no
event to an amount greater than $5,000,000,  for the purpose of financing all or
a portion of the increased Accounts to be generated under such new contracts, so
long as no Event of Default  shall have  occurred and be  continuing,  PROVIDED,
FURTHER that if more than fifty percent (50%) of the aggregate  dollar amount of
invoices owing by a particular Account Debtor are ineligible hereunder, then all
Accounts owing by that Account Debtor shall be deemed ineligible;

                  (v)  it is a  valid,  legally  enforceable  and  unconditional
obligation of the Account Debtor  thereunder;  PROVIDED that any portion of such
Account,  and only such  portion,  which is  subject  to  setoff,  counterclaim,
credit,  allowance or adjustment by such Account Debtor, or to any claim by such
Account  Debtor  denying  liability  thereunder in whole or in part shall not be
deemed 'Eligible' hereunder;

                  (vi) it does not arise out of a contract  or order which fails
in any material respect to comply with the requirements of applicable law;

                  (vii)  the  Account  Debtor  thereunder  is  not  a  director,
officer,  employee or agent of Parent or a Borrower,  a Subsidiary of a Borrower
or Parent or an Affiliate of Parent or a Borrower;

                  (viii) (a) on and after the date ninety-one (91) days from the
         date of this Agreement (the  "COMPLIANCE  Date"),  it is not an Account
         with  respect  to which  the  Account  Debtor is the  United  States of
         America, or any department,  agency or instrumentality thereof (each, a
         "FEDERAL ENTITY"),  unless the Borrower to which the Account is payable
         has duly  assigned  its right to payment of such  Account to the Lender
         pursuant to, and in full  compliance  with,  the Federal  Assignment of
         Claims Act of 1940, as amended;  PROVIDED,  HOWEVER, that, on and after
         the  Compliance  Date,  an Account  that is an Eligible  Account in all
         other respects  shall not be deemed to be ineligible  under this clause
         (viii)(a)  solely  because it has not been duly  assigned in compliance
         with the Federal  Assignment of Claims Act of 1940, so long as the face
         amount of each such Account does not exceed $10,000;  PROVIDED FURTHER,
         that, on and after the Compliance  Date,  notwithstanding  the terms of
         the preceding proviso, that portion of the aggregate amount of all such
         Accounts  outstanding  at any one time which  exceeds  $60,000 shall be
         ineligible hereunder.

                           (b) it is not an  Account  with  respect to which the
         Account  Debtor is any state or local  government,  or any  department,
         agency or  instrumentality  thereof,  unless the  Borrower to which the
         Account is payable has assigned its right to payment of such Account to
         the  Lender  pursuant  to,  and in  full  compliance  with,  any  local
         applicable

                                      -4-

<PAGE>

         law  comparable  to the  Federal  Assignment  of  Claims  Act of  1940;
         PROVIDED,  HOWEVER,  that an Account that is an Eligible Account in all
         other respects  shall not be deemed to be ineligible  under this clause
         (viii)(b)  solely  because it has not been duly  assigned in compliance
         with such applicable  local law, so long as (I) the face amount of such
         Account   does   not   exceed   $15,000;    PROVIDED   FURTHER,   that,
         notwithstanding the terms of the preceding proviso, that portion of the
         aggregate amount of all such Accounts outstanding at any one time which
         exceeds $50,000 shall be ineligible hereunder.

                  (ix) it is not an Account  with  respect to which the  Account
Debtor is located in a state which requires the Borrower to which the Account is
payable,  as a precondition to commencing or maintaining an action in the courts
of that state,  either to (A) receive a certificate  of authority to do business
and be in  good  standing  in such  state;  or (B)  file a  notice  of  business
activities report or similar report with such state's taxing  authority,  unless
(x) such Borrower has taken the actions described in clauses (A) or (B); (y) the
failure to take one of the actions  described in either clause (A) or (B) may be
cured  retroactively by such Borrower at its election;  or (z) such Borrower has
proven, to Lender's  satisfaction,  that it is exempt from any such requirements
under any such state's laws;

                  (x)  the Account Debtor is located within the United States of
America;

                  (xi)  it  is not an Account with respect to which the  Account
Debtor's  obligation  to pay is subject to any  repurchase  obligation or return
right, as with sales made on a bill-and-hold, guaranteed sale, sale on approval,
sale or return or  consignment  basis,  provided,  HOWEVER,  that Accounts in an
aggregate  amount of up to $1,000,000  outstanding  at any one time arising from
sales made to DFAS-CO on a  bill-and-hold  basis shall not be  ineligible  under
this  clause  (xi)  so  long as such  Accounts  otherwise  constitute  "ELIGIBLE
ACCOUNTS";

                  (xii) it is not an  Account  (A)  with  respect  to which  any
representation  or warranty  contained in this Agreement is untrue; or (B) which
violates any of the covenants of any Borrower contained in this Agreement;

                  (xiii) it is not an Account which,  when added to a particular
Account  Debtor's  other  indebtedness  to any Borrower,  exceeds (A) 10% of all
Accounts of all Borrowers, except for those Account Debtors listed on SCHEDULE A
hereto, or hereafter  approved by Lender in its sole discretion,  exercised in a
commercially  reasonable  manner,  or (B) a credit limit determined by Lender in
its sole discretion,  exercised in a commercially  reasonable  manner,  for that
Account Debtor (except that Accounts  excluded from Eligible  Accounts solely by
reason of this clause  (xiii)  shall be Eligible  Accounts to the extent of such
credit limit);

                  (xiv) it does not arise out of  progress  billings or prior to
completion  of an order,  or is not subject to any adverse  security  deposit or
other  similar  advance  made by or for the  benefit of the  applicable  Account
Debtor;

                  (xv)  it is  not an  Account  which  constitutes  advertising,
finance charges, service charges or excise taxes; and

                                      -5-

<PAGE>

                  (xvi) it is not an Account  with respect to which the prospect
of payment or  performance  by the  Account  Debtor is or will be  impaired,  as
determined  by  Lender  in its  sole  discretion,  exercised  in a  commercially
reasonable manner;

                  "ELIGIBLE  INVENTORY"  shall mean  Inventory of each  Borrower
which is acceptable to Lender in its sole discretion,  exercised in commercially
reasonable manner, for lending purposes.  Without limiting Lender's  discretion,
Lender shall  consider  Inventory to be Eligible  Inventory if it meets,  and so
long as it continues to meet, the following requirements:

                  (i) it is owned by a Borrower,  such Borrower has the right to
subject  it to a  security  interest  in favor of Lender  and it is subject to a
first priority  perfected  security  interest in favor of Lender and to no other
claim, lien, security interest or encumbrance  whatsoever,  other than Permitted
Liens;

                  (ii) it is located on one of the premises  listed on EXHIBIT A
(or other  locations  of which  Lender has been  advised in writing  pursuant to
SUBSECTION 12(B)(I) hereof) and is not in transit except between such locations;

                  (iii) if held for sale or lease or furnishing  under contracts
of service,  it is (except as Lender may  otherwise  consent in writing) new and
unused and free from defects which would, in Lender's sole  determination,  made
in a commercially reasonable manner, affect its market value;

                  (iv) it is not stored with a bailee, consignee,  warehouseman,
processor or similar party unless  Lender has given its prior  written  approval
and the relevant Borrower has caused any such bailee,  consignee,  warehouseman,
processor or similar party to issue and deliver to Lender, in form and substance
acceptable  to  Lender,  such  Uniform  Commercial  Code  financing  statements,
warehouse  receipts,  waivers and other documents as Lender shall require, or is
on consignment to a Borrower from any Person;

                  (v)  Lender  has  determined,   in  accordance  with  Lender's
customary  business  practices,  that it is not  unacceptable  due to age, type,
category or quantity;

                  (vi) it does not  consist  of  supplies,  packaging,  parts or
sample Inventory;

                  (vii) no Borrower has returned, has attempted to return, is in
the  process of  returning  or intends to return  such  Inventory  to the vendor
thereof;

                  (viii)  it is  not  damaged,  obsolete,  slow  moving  or  not
currently  usable or saleable in the normal course of the applicable  Borrower's
operations; and

                  (ix) it is not  Inventory (A) with respect to which any of the
representations  and warranties  contained in this Agreement are untrue;  or (B)
which violates any of the covenants of any Borrower contained in this Agreement.

                  "ENVIRONMENTAL LAWS" shall mean all federal,  state, district,
local and foreign laws,  rules,  regulations,  ordinances,  and consent  decrees
relating to health,  safety,  hazardous substances,  pollution and environmental
matters, as now or at any time hereafter in effect,

                                      -6-

<PAGE>

applicable to any  Borrower's  business or  facilities  owned or operated by any
Borrower,  including  laws  relating  to  emissions,   discharges,  releases  or
threatened releases of pollutants, contamination, chemicals, or hazardous, toxic
or dangerous  substances,  materials or wastes into the environment  (including,
without  limitation,  ambient air, surface water,  ground water, land surface or
subsurface  strata)  or  otherwise  relating  to  the  generation,  manufacture,
processing,  distribution,  use,  treatment,  storage,  disposal,  transport  or
handling of Hazardous Materials.

                  "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, modified or restated from time to time.

                  "EVENT OF DEFAULT" shall have the meaning specified in SECTION
15 hereof.

                  "EXCESS  CASH  FLOW"  shall  have  the  meaning  specified  in
SUBSECTION 2(D)(IV)(B) hereof.

                  "FEDERAL   CONTRACT"  shall  have  the  meaning  specified  in
SUBSECTION 12(C) hereof.

                  "FEDERAL  ENTITY"  shall have the meaning  specified in clause
(viii)(a) of the definition of Eligible Account.

                  "FISCAL  YEAR" shall mean each  twelve  (12) month  accounting
period of Parent, which ends on December 31 of each year.

                  "FIXED   CHARGES"   shall   mean  for  any   period,   without
duplication,  all payments,  whether or not scheduled,  of principal  during the
applicable   period  with  respect  to  all   indebtedness  of  Parent  and  its
Subsidiaries,  on a consolidated  basis, for borrowed money,  plus all payments,
whether or not scheduled, of principal during the applicable period with respect
to all  capitalized  lease  obligations  of Parent  and its  Subsidiaries,  on a
consolidated  basis,  plus all payments,  whether or not scheduled,  of interest
during the applicable  period with respect to all indebtedness of Parent and its
Subsidiaries,  on a consolidated  basis,  for borrowed money  including  capital
lease  obligations,  plus  unfinanced  Capital  Expenditures  of Parent  and its
Subsidiaries,  on a  consolidated  basis,  during the  applicable  period,  plus
payments during the applicable period in respect of income or franchise taxes of
Parent and its  Subsidiaries,  on a consolidated  basis,  plus the amount of all
dividends paid by Parent and its Subsidiaries, on a consolidated basis.

                  "GUARANTOR" or "GUARANTORS" shall have the respective meanings
specified in SUBSECTION 28(B) hereof.

                  "HAZARDOUS  MATERIALS"  shall  mean  any  hazardous,  toxic or
dangerous  substance,  materials  and  wastes,  including,  without  limitation,
hydrocarbons   (including   naturally   occurring  or  man-made   petroleum  and
hydrocarbons),  flammable explosives,  asbestos,  urea formaldehyde  insulation,
radioactive  materials,   biological  substances,   polychlorinated   biphenyls,
pesticides,  herbicides  and  any  other  kind  and/or  type  of  pollutants  or
contaminants (including,  without limitation,  materials which include hazardous
constituents),  sewage,  sludge,  industrial  slag,  solvents  and/or  any other
similar  substances,  materials,  or wastes and including any other  substances,
materials or wastes that are or become  regulated  under any  Environmental  Law

                                      -7-

<PAGE>

(including, without limitation any that are or become classified as hazardous or
toxic under any Environmental Law).

                  "INDEMNIFIED  PARTY"  shall  have  the  meaning  specified  in
SECTION 18 hereof.

                  "INTEREST   PERIOD"  shall  have  the  meaning   specified  in
SUBSECTION 4(A)(II) hereof.

                  "LASALLE  BANK" shall mean LaSalle Bank National  Association,
Chicago, Illinois.

                  "LETTER OF CREDIT"  shall mean any Letter of Credit  issued on
behalf of a Borrower in accordance with this Agreement.

                  "LETTER OF CREDIT  OBLIGATIONS"  shall mean, as of any date of
determination,  the sum of (i) the aggregate  undrawn face amount of all Letters
of Credit and (ii) the  aggregate  unreimbursed  amount of all drawn  Letters of
Credit not already converted to Loans hereunder.

                  "LIABILITIES" shall mean any and all obligations,  liabilities
and  indebtedness  of each  Borrower  to Lender or to any parent,  affiliate  or
subsidiary  of  Lender,  of any and  every  kind and  nature,  arising  under or
pursuant to this Agreement or the transactions contemplated hereunder, howsoever
created, arising or evidenced and howsoever owned, held or acquired, whether now
or  hereafter  existing,  whether  now due or to become  due,  whether  primary,
secondary,  direct,  indirect,  absolute,  contingent  or otherwise  (including,
without limitation, obligations of performance), whether several, joint or joint
and several,  and whether arising or existing under written or oral agreement or
by operation of law.

                  "LIBOR  RATE" shall mean,  with respect to any LIBOR Rate Loan
for any  Interest  Period,  a rate per annum equal to (a) the  offered  rate for
deposits in United States dollars for a period equal to such Interest  Period as
it appears on Telerate  page 3750 as of 11:00 a.m.  (London  time) two  Business
Days prior to the first day of such Interest Period.  "Telerate page 3750" means
the display  designated  as "Page 3750" on the  Telerate  Service (or such other
page as may replace page 3750 of that  service or such other  service) as may be
nominated by the British  Bankers'  Association as the vendor for the purpose of
displaying  British Bankers'  Association  interest  settlement rates for United
States dollar  deposits,  divided by (b) a number equal to 1.0 minus the maximum
reserve  percentages  (express  as  a  decimal  fraction)   including,   without
limitation,  basic  supplemental,  marginal  and  emergency  reserves  under any
regulations  of the Board of  Governors of the Federal  Reserve  System or other
governmental authority having jurisdiction with respect thereto, as now and from
time to time in effect,  for  Eurocurrency  funding  (currently  referred  to as
"EUROCURRENCY  LIABILITIES" in Regulation D of such Board) which are required to
be maintained by Lender by the Board of Governors of the Federal Reserve System.
The LIBOR Rate shall be adjusted  automatically  on and as of the effective date
of any change in such reserve percentage.

                  "LIBOR RATE LOANS" shall mean the Loans bearing  interest with
reference to the LIBOR Rate.

                  "LIFE INSURANCE  ASSIGNMENT"  shall mean an Assignment of Life
Insurance  Policy to be executed by the owner and the  beneficiary  thereof,  in
form and substance

                                      -8-

<PAGE>

satisfactory  to the  Lender,  collaterally  assigning  to the  Lender  the Life
Insurance Policy in order to secure payment of the Liabilities.

                  "LIFE  INSURANCE  POLICY" shall have the meaning  specified in
SUBSECTION 12(J) hereof.

                  "LOANS" shall mean all loans and advances made by Lender to or
on behalf of any Borrower hereunder.

                  "LOCK BOX" shall have the meaning specified in SUBSECTION 8(B)
hereof.

                  "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on the business, property, assets, prospects, operations or condition, financial
or otherwise, of a Person.

                  "MAXIMUM LOAN LIMIT" shall mean Eighteen Million Eight Hundred
Thousand and No/100 Dollars ($18,800,000).

                  "MAXIMUM   REVOLVING   LOAN  LIMIT"  shall  have  the  meaning
specified in SUBSECTION 2(A) hereof.

                  "OBLIGOR"  shall mean Parent and each  Borrower and each other
Person who is or shall  become  primarily or  secondarily  liable for any of the
Liabilities.

                  "ORIGINAL TERM" shall have the meaning specified in SECTION 10
hereof.

                  "OTHER AGREEMENTS" shall mean all agreements,  instruments and
documents, other than this Agreement, including, without limitation, guaranties,
mortgages,  trust deeds,  pledges,  powers of attorney,  consents,  assignments,
contracts,  notices,  security agreements,  leases, financing statements and all
other writings heretofore,  now or from time to time hereafter executed by or on
behalf of Parent,  one or more  Borrowers,  one or more DHB  Subsidiaries or any
other Obligor and delivered to Lender or to any parent,  affiliate or subsidiary
of Lender in connection  with the Liabilities or the  transactions  contemplated
hereby,  as each of the same may be amended,  modified or supplemented from time
to time.

                  "PAYMENT  CONDITIONS"  shall  have the  meaning  specified  in
SUBSECTION 13(E) hereof.

                  "PBGC" shall have the meaning specified in SUBSECTION 12(B)(V)
hereof.

                  "PERMITTED  ACQUISITION"  and "PERMITTED  ACQUISITIONS"  shall
have the respective meanings specified in SUBSECTION 13(d) hereof.

                  "PERMITTED JV INVESTMENT" and "PERMITTED JV INVESTMENTS" shall
have the respective meanings specified in SUBSECTION 13(F) hereof.

                  "PERMITTED  LIENS" shall mean (i) liens of lessors under lease
agreements and statutory liens of landlords, carriers, warehousemen, processors,
mechanics,  materialmen or suppliers incurred in the ordinary course of business
and  securing  amounts  not  yet  due or

                                      -9-

<PAGE>

declared to be due by the claimant thereunder;  (ii) liens or security interests
in favor of Lender; (iii) zoning restrictions and easements, licenses, covenants
and  other  restrictions  affecting  the  use  of  real  property  that  do  not
individually  or in  the  aggregate  have  a  material  adverse  effect  on  any
Borrower's  ability  to use such  real  property  for its  intended  purpose  in
connection with such Borrower's business; (iv) liens in connection with purchase
money indebtedness and capitalized  leases otherwise  permitted pursuant to this
Agreement;  PROVIDED,  that such liens attach only to the assets the purchase of
which was financed by such purchase money  indebtedness  or which is the subject
of such capitalized  leases; (v) liens securing the payment of Taxes not yet due
or the  payment of which is being  contested  in good  faith and by  appropriate
proceedings  for which  adequate  reserves have been  established  to the extent
required  by  GAAP,   consistently   applied;   (vi)   deposits   under  workers
compensation,  unemployment  insurance or social security laws, or to secure the
performance  of bids,  tenders,  contracts  or  leases,  or to secure  statutory
obligations,  surety or appeal bonds,  or other bonds in the ordinary  course of
business;  (vii) liens  securing  judgments  or awards  which do not  constitute
Events of  Default  hereunder  and which are being  appealed  while a stay is in
effect;  (viii) other liens that secure  obligations,  the  aggregate  principal
amount of which does not exceed, as of any date of determination,  Five Thousand
and No/100 Dollars ($5,000); (ix) liens that secure the Shareholder Debt and (x)
liens to which Lender has given its prior written consent.

                  "PERMITTED  TRANSFEREE" shall have the meaning given such term
in SUBSECTION 13(Q) hereof.

                  "PERSON"  shall  mean  any  individual,  sole  proprietorship,
partnership,  joint venture, trust,  unincorporated  organization,  association,
corporation, limited liability company, institution, entity, party or foreign or
United States government (whether federal,  state,  county,  city,  municipal or
otherwise),  including,  without  limitation,  any  instrumentality,   division,
agency, body or department thereof.

                  "PLAN" shall have the meaning specified in SUBSECTION 12(B)(V)
hereof.

                  "PRIME  RATE" shall mean  LaSalle  Bank's  publicly  announced
prime rate (which is not intended to be LaSalle  Bank's lowest or most favorable
rate in effect at any time) in effect from time to time.

                  "PRIME RATE LOANS" shall means the Loans bearing interest with
reference to the Prime Rate.

                  "REGULATORY  CHANGE"  shall  have  the  meaning  specified  in
SUBSECTION 4(B)(III) hereof.

                  "RENEWAL TERM" shall have the meaning  specified in SECTION 10
hereof.

                  "REVOLVING  LOAN LIMIT"  shall have the meaning  specified  in
SUBSECTION 2(A) hereof.

                  "REVOLVING   LOANS"  shall  have  the  meaning   specified  in
SUBSECTION 2(A) hereof.

                                      -10-

<PAGE>

                  "SHAREHOLDER DEBT" shall mean the indebtedness owing by Parent
to David H. Brooks,  an individual,  the aggregate  unpaid  principal  amount of
which  indebtedness,  immediately  prior  to the  making  of the  initial  Loans
hereunder, is approximately $16,000,000.

                  "SUBSIDIARY"  shall mean, as to any Person, any corporation of
which more than fifty  percent  (50%) of the  outstanding  capital  stock having
ordinary  voting  power to elect a majority  of the board of  directors  of such
corporation  (irrespective  of whether  at the time stock of any other  class of
such  corporation  shall  have or  might  have  voting  power by  reason  of the
happening of any contingency) is at the time,  directly or indirectly,  owned by
such Person,  or any partnership,  joint venture or limited liability company of
which more than fifty percent (50%) of the outstanding  equity  interests are at
the time,  directly or  indirectly,  owned by such Person or any  partnership of
which such Person is a general partner.

                  "TANGIBLE  NET WORTH"  shall mean,  with  respect to a Person,
such Person's  shareholders'  equity (including retained earnings) LESS the book
value (to the extent  included in such  shareholders'  equity) of all intangible
assets,  including,  without  limitation,   non-marketable  securities,  prepaid
expenses,  deferred  tax assets and, in the case of the Parent or any  Borrower,
"other assets" as reflected on such Person's  balance sheet,  PLUS the amount of
any LIFO  reserve  and the amount of any debt  subordinated  to  Lender,  all as
determined under generally accepted  accounting  principles applied, in the case
of the Parent, on a basis consistent with the consolidated  financial statements
of the Parent and its Subsidiaries dated as of December 31, 2000;

                  "TAX"  shall  mean any tax,  levy,  impost,  duty,  deduction,
withholding or charges of whatever  nature  required to be paid by Lender (i) in
relation to any LIBOR Rate Loans and the applicable  LIBOR Rate,  and/or (ii) to
be withheld or deducted from any payment otherwise required hereby to be made by
one or more Borrowers to Lender; PROVIDED, that the term "TAX" shall not include
any taxes imposed upon the net income of Lender.

                  "TERM  LOAN" shall have the meaning  specified  in  SUBSECTION
2(B) hereof.

                  "TREASURY RATE" shall have the meaning specified in SUBSECTION
                  4(A)(IV)  hereof.  "TRIGGERING  EVENT"  shall have the meaning
                  specified in SUBSECTION 8(B) hereof.

         2.       LOANS.

                  (A) REVOLVING LOANS.

                  Subject to the terms and  conditions of this Agreement and the
Other Agreements,  during the Original Term and any Renewal Term,  commencing on
the date the  conditions in SUBSECTION  17(A) are  satisfied,  Lender shall make
revolving loans and advances to one or more Borrowers (the "REVOLVING LOANS") in
an amount up to the sum of the following sublimits (the "REVOLVING LOAN LIMIT"):

                  (i) Up to  eighty-five  percent (85%) of the face amount (less
maximum  discounts,  credits and allowances  which may be taken by or granted to
Account  Debtors  in

                                      -11-

<PAGE>

connection therewith in the ordinary course of each Borrower's business) of such
Borrower's Eligible Accounts; PLUS

                  (ii) Up to the least of the following amounts: (I) Ten Million
and No/100 Dollars  ($10,000,000),  (II) an amount equal to the sum of (x) up to
fifty-five  percent  (55%) of the  lower  of cost or  market  value of  Eligible
Inventory  consisting of raw materials,  PLUS (y) the lesser of Two Million Five
Hundred Thousand and No/100 Dollars  ($2,500,000)  and up to fifty-five  percent
(55%) of the lower of cost or market value of Eligible  Inventory  consisting of
finished  goods,  PLUS (z) the lesser of Two Million Five  Hundred  Thousand and
No/100 Dollars  ($2,500,000) and up to twenty-five percent (25%) of the lower of
cost or market value of Eligible Inventory  consisting of  work-in-process;  and
(III) an amount equal to up to eighty  percent (80%) of the orderly  liquidation
value of Eligible  Inventory  consisting of raw materials,  work-in-process  and
finished goods,  where cost shall be determined based on the  first-in-first-out
method, and orderly liquidation value shall be determined based on the then most
recent  appraisal of inventory of Borrowers  performed by The Buxbaum  Group (or
other appraisal company satisfactory to Lender);  PROVIDED, that, after applying
the  applicable  advance  rates set forth above in this clause (ii), in no event
shall Lender make any Revolving  Loans  against the value of Eligible  Inventory
located  at  premises  which  are  neither  owned nor  leased by the  applicable
Borrower  in an amount to exceed One  Hundred  Twenty-Five  Thousand  and No/100
Dollars ($125,000) at any one time; PLUS

                  (iii)  Up to  fifty  percent  (50%)  of  the  face  amount  of
documentary  Letters of Credit issued or guaranteed by Lender for the purpose of
purchasing Eligible Inventory; PROVIDED, that such Letters of Credit are in form
and substance satisfactory to Lender; MINUS

                  (iv) such reserves as Lender elects,  in its sole  discretion,
exercised in a commercially reasonable manner, to establish from time to time;

PROVIDED,  that (x) the sum of the Letters of Credit to be issued  under  clause
(iii) above,  together with the aggregate  undrawn amount of all standby Letters
of Credit issued or guaranteed by Lender,  with respect to all Borrowers,  shall
at no time  exceed Two  Million  and  No/100  Dollars  ($2,000,000)  and (y) the
Revolving Loan Limit with respect to Revolving  Loans made to all Borrowers,  at
any one time outstanding,  shall in no event exceed Fifteen Million Five Hundred
Thousand and No/100 Dollars ($15,500,000) (the "MAXIMUM REVOLVING LOAN LIMIT").

                  The aggregate unpaid principal  balance of the Revolving Loans
made to all Borrowers, at any one time outstanding, shall not at any time exceed
the  lesser  of (i)  the  Revolving  Loan  Limit  MINUS  the  Letter  of  Credit
Obligations of all Borrowers and (ii) the Maximum Revolving Loan Limit MINUS the
Letter of Credit  Obligations of all Borrowers.  If at any time the  outstanding
aggregate  principal  amount of such Revolving  Loans exceeds the Revolving Loan
Limit MINUS such Letter of Credit Obligations, or any portion of the outstanding
principal of such Revolving Loans and such Letter of Credit Obligations  exceeds
any applicable  sublimit  within the Revolving Loan Limit,  the Borrowers  shall
immediately,  on a joint and several basis,  and without the necessity of demand
by Lender,  pay to Lender  such amount as may be  necessary  to  eliminate  such
excess, and Lender shall apply such payment to the outstanding  principal amount
of the  Revolving  Loans  which are Prime  Rate Loans  until  paid in full,  and

                                      -12-

<PAGE>

thereafter,  to any other  outstanding  Revolving Loans, in such order as Lender
shall determine in its sole discretion.

                  Each  Borrower   hereby   authorizes   Lender,   in  its  sole
discretion, exercised in a commercially reasonable manner, to charge any of such
Borrower's  accounts  or  advance  Revolving  Loans  to  make  any  payments  of
principal, interest, fees, costs or expenses required to be made to Lender under
this Agreement or the Other Agreements.

                  A  request  for a  Revolving  Loan  shall  be made or shall be
deemed to be made, each in the following manner: Each Borrower shall give Lender
same day notice,  no later than 11:30 A.M.  (New York time) for such day, of its
request for a Revolving Loan as a Prime Rate Loan, and at least two (2) Business
Days prior notice of its request for a Revolving  Loan as a LIBOR Rate Loan,  in
which  notice such  Borrower  shall  specify the amount and type of the proposed
borrowing  and the proposed  borrowing  date;  PROVIDED,  HOWEVER,  that no such
request may be made at a time when there  exists an Event of Default or an event
which,  with the  passage of time or giving of notice,  will  become an Event of
Default  (a  "DEFAULT").  In the  event  that a  Borrower  maintains  a  control
disbursement  account at LaSalle Bank,  each check presented for payment against
such  control  disbursement  account and any other charge or request for payment
against  such  control  disbursement  account  shall  constitute a request for a
Revolving  Loan as a Prime  Rate Loan.  As an  accommodation  to each  Borrower,
Lender  may  permit  telephone  requests  for  Revolving  Loans  and  electronic
transmittal of instructions,  authorizations, agreements or reports to Lender by
such Borrower.  Unless a Borrower  specifically directs Lender in writing not to
accept or act upon telephonic or electronic  communications  from such Borrower,
Lender shall have no liability to such Borrower for any loss or damage  suffered
by such Borrower as a result of Lender's honoring of any requests,  execution of
any  instructions,  authorizations  or  agreements  or  reliance  on any reports
communicated to it telephonically or electronically  and purporting to have been
sent to Lender by such  Borrower,  and  Lender  shall have no duty to verify the
origin of any such communication or the authority of the Person sending it.

                  Each Borrower hereby irrevocably authorizes Lender to disburse
the proceeds of each Revolving Loan requested by such Borrower,  or deemed to be
requested by such  Borrower,  as follows:  the proceeds of each  Revolving  Loan
requested  under  SUBSECTION  2(a) hereof shall be disbursed by Lender in lawful
money of the United States of America in  immediately  available  funds,  in the
case of the initial borrowing by such Borrower,  in accordance with the terms of
the  written  disbursement  letter from such  Borrower,  and in the case of each
subsequent  borrowing,  by wire  transfer  or  Automated  Clearing  House  (ACH)
transfer to such bank account as may be agreed upon by such  Borrower and Lender
from time to time,  or  elsewhere if pursuant to a written  direction  from such
Borrower.

                                      -13-

<PAGE>

         (B)      TERM LOAN.

                  Subject to the terms and  conditions of this Agreement and the
Other Agreements, on the date that the conditions in SUBSECTION 17(A) hereof are
satisfied,  Lender  shall  make a term loan to Point  Blank in the amount of One
Million  Eight  Hundred  Thousand  and No/100  Dollars  ($1,800,000)  (the "TERM
LOAN").

         (C)      CAPITAL EXPENDITURE LOANS.

                  Subject to the terms and  conditions of this Agreement and the
Other  Agreements,  from time to time  after  the  initial  Loans  are  advanced
hereunder, Lender shall make advances (each such advance, a "CAPITAL EXPENDITURE
LOAN") to the Borrowers of up to  seventy-five  percent (75%) of the net invoice
cost (exclusive of sales taxes,  delivery charges and other "soft" costs related
to such  purchase)  of  Equipment  to be  purchased  with the  proceeds  of such
advances,  which  Equipment  is  acceptable  to Lender  in its sole  discretion,
exercised in a commercially  reasonable manner, and upon which Lender shall have
a first priority perfected security interest;  PROVIDED,  that (i) the aggregate
principal  amount of Capital  Expenditure  Loans  advanced  hereunder  shall not
exceed One Million Five Hundred  Thousand and No/100 Dollars  ($1,500,000)  (the
"CAPITAL EXPENDITURE LOAN LIMIT"), (ii) at least five (5) Business Days prior to
any such Capital  Expenditure Loan advanced  hereunder,  the Borrower requesting
the  Capital  Expenditure  Loan shall have  furnished  to Lender an invoice  and
acceptance letter for the Equipment being purchased and shall have executed such
documents  and taken such other  actions as Lender shall  require to assure that
Lender has a first priority perfected security interest in such Equipment, (iii)
each Capital  Expenditure  Loan advanced  hereunder shall be in an amount of not
less than One Hundred  Thousand  and No/100  Dollars  ($100,000),  and (iv) such
Borrower  shall have executed and  delivered to Lender a promissory  note in the
form OF EXHIBIT D annexed hereto,  in a principal  amount equal to the amount of
the Capital Expenditure Loan to be made to such Borrower.

         (D)      REPAYMENTS.

                  The obligation of the Borrowers to repay the Liabilities shall
be joint and several. The Liabilities shall be repaid as follows:

                  (i) REPAYMENT OF REVOLVING  LOANS. The Revolving Loans and all
other Liabilities  (other than the Term Loan and the Capital  Expenditure Loans)
shall be repaid in full on the last day of the  Original  Term,  or any  Renewal
Term,  if this  Agreement  is renewed  pursuant to SECTION 10 hereof.  Revolving
Loans  borrowed  as Prime  Rate  Loans  may be repaid at any time in whole or in
part.  Revolving  Loans borrowed as LIBOR Rate Loans may be repaid at the end of
the relevant Interest Period.

                  (ii)  REPAYMENT OF TERM LOAN. The Term Loan shall be repaid in
thirty-five (35) consecutive monthly installments of principal, on the first day
of each month,  commencing November 1, 2001, of which the first twenty-four (24)
installments  shall be in the amount of  Sixty-Two  Thousand  Five  Hundred  and
No/100 Dollars ($62,500) each and the remaining eleven (11)  installments  shall
be in the amount of Eight Thousand Three Hundred Thirty-Three and No/100 Dollars
($8,333) each; PROVIDED, that any remaining outstanding principal balance of the

                                      -14-

<PAGE>

Term Loan shall be repaid on the  earlier  to occur of last day of the  Original
Term and the date of  termination  of this  Agreement  pursuant  to  SECTION  10
hereof.  If any such payment due date is not a Business  Day,  then such payment
shall be made on the next  succeeding  Business Day, and such  extension of time
shall be included  in the  computation  of the amount of  interest  and fees due
hereunder.

                  (iii)  REPAYMENT OF CAPITAL  EXPENDITURE  LOANS.  Each Capital
Expenditure Loan shall be repaid in consecutive equal monthly  installments,  on
the first day of each month, commencing with the first day of the calendar month
immediately  following  the month in which  such  Capital  Expenditure  Loan was
advanced,  based on an  amortization  schedule  consisting of sixty (60) months;
PROVIDED,  however,  that any remaining  outstanding  principal  balance of such
Capital  Expenditure Loan shall be repaid on the earlier to occur of last day of
the Original  Term and the date of  termination  of this  Agreement  pursuant to
SECTION 10;  PROVIDED  FURTHER,  that if this  Agreement is renewed  pursuant to
SECTION 10 hereof,  such Capital Expenditure Loan shall continue to be repaid in
consecutive  equal  monthly  installments  of principal in amounts  based on the
amortization schedule then in effect, until the earlier of (i) repayment in full
thereof, (ii) the last day of such Renewal Term or (iii) the date of termination
of  this  Agreement  pursuant  to  SECTION  10,  on  which  date  any  remaining
outstanding  principal of such Capital Expenditure Loan shall be repaid in full.
If any such  payment due date is not a Business  Day,  then such  payment may be
made on the next  succeeding  Business  Day and such  extension of time shall be
included in the computation of the amount of interest and fees due hereunder.

                  (iv)  MANDATORY  PREPAYMENTS  OF THE TERM LOAN AND THE CAPITAL
EXPENDITURE LOANS.

                          (A) SALES OF ASSETS.  Upon  receipt of the proceeds of
the sale or other  disposition of any  Equipment,  or if any of the Equipment is
damaged,  destroyed or taken by  condemnation  in whole or in part, the proceeds
thereof (such  proceeds,  "CASH  PROCEEDS")  shall be paid by the Borrowers on a
joint and several basis to Lender as a mandatory  prepayment of the Term Loan or
the Capital  Expenditure  Loan which was advanced  against the value and for the
purchase  of such  asset,  such  payment to be  applied  against  the  remaining
installments  of principal in the inverse order of their  maturities  until such
Term Loan or  Capital  Expenditure  Loan is repaid  in full,  and then  shall be
applied to any  remaining  installments  of principal  of any other  outstanding
Capital  Expenditure  Loan, in the inverse order of their respective  maturities
until repaid in full, and then,  upon repayment in full of the Term Loan and all
outstanding   Capital   Expenditure   Loans,  shall  be  applied  to  the  other
Liabilities,  as determined by Lender,  in its sole  discretion,  exercised in a
commercially reasonable manner; PROVIDED, that, with respect to no more than One
Hundred Thousand and No/100 Dollars ($100,000) of aggregate Cash Proceeds in any
one Fiscal Year,  such Cash  Proceeds  shall not be required to be so applied on
such date so long as (i) no  Default  or Event or  Default  exists on such date,
(ii) the  Borrowers  deliver  a  certificate  on or prior to such date to Lender
stating that such Cash Proceeds  shall be used to purchase  Equipment to be used
in the ordinary  course of business in  compliance  with this  Agreement  within
ninety  (90) days  following  the date  such Cash  Proceeds  are  received  by a
Borrower  and (iii)  such  Cash  Proceeds  shall be placed in a cash  collateral
account  with  LaSalle  Bank  until  such  time as they are so  used;  PROVIDED,
FURTHER,  that if all or any portion of such Cash  Proceeds  which are not being
applied to the  repayment of either the Term Loan or Capital  Expenditure  Loans
pursuant to the previous proviso of this SUBSECTION 4(D)(IV)(A) are not used

                                      -15-

<PAGE>

for the purchase of Equipment within such ninety (90) day period, such remaining
portion  thereof  shall be applied on the last day of such period as a mandatory
prepayment in accordance with this SUBSECTION 4(D)(IV)(A).

                          (B) EXCESS CASH FLOW.  Ten (10) days after  receipt of
Parent's  Fiscal Year end audited  financial  statements  for each Fiscal  Year,
commencing  with the Fiscal Year ending  December 31, 2002, the Borrowers  shall
make a mandatory  prepayment of the Term Loan in an amount equal to  twenty-five
percent (25%) of the Parent's Excess Cash Flow (as defined below) for the Fiscal
Year  just  ended,   such   prepayment  to  be  applied  against  the  remaining
installments  of principal in the inverse order of their  maturities,  with such
mandatory prepayments to continue until the date on which the Term Loan shall be
repaid in full (each such  prepayment,  an "ANNUAL TERM LOAN  PREPAYMENT").  For
purposes hereof, "EXCESS CASH FLOW" shall mean, for each Fiscal Year, EBITDA for
such period,  minus taxes of Parent and its Subsidiaries paid during such period
and any  distributions  made to  Parent's  shareholders  during  such  period in
respect of taxes for such period,  minus non-PIK  interest  payable  during such
period,  minus actual  principal  payments  made with respect to long-term  debt
during such period, minus all unfinanced Capital Expenditures during such period
on a  consolidated  basis,  without  taking  into  consideration  any  insurance
proceeds  received by Parent or any  Borrower in payment of damages  incurred by
Parent or such Borrower as result of Hurricane Irene in October 1999.

                  (E) NOTES.

                  The Loans shall, in Lender's sole  discretion,  exercised in a
commercially  reasonable manner, be evidenced by one or more promissory notes in
form and substance  satisfactory  to Lender,  and the entries on such promissory
notes shall be deemed to be accurate,  absent manifest error.  However,  if such
Loans are not so evidenced,  such Loans may be evidenced  solely by entries upon
the books and records maintained by Lender.

         3.       LETTERS OF CREDIT.

                  (A) GENERAL TERMS.

                  Subject to the terms and  conditions  of the Agreement and the
Other  Agreements,  during the Original Term or any Renewal Term,  commencing on
the date the conditions in SUBSECTION  17(A) are  satisfied,  Lender may, in its
sole  discretion,  from  time to time  cause to be  issued  and  co-sign  for or
otherwise  guarantee,  upon the  request  of any  Borrower,  documentary  and/or
standby Letters of Credit;  PROVIDED,  that the aggregate undrawn face amount of
all such  Letters  of Credit  shall at no time  exceed  Two  Million  and No/100
Dollars  ($2,000,000).  Payments  made by Lender to any Person on account of any
Letter of Credit shall constitute  Revolving Loans hereunder,  and each Borrower
agrees that each  payment made by the issuer of a Letter of Credit in respect of
a Letter of Credit shall  constitute a request by the  Borrowers for a Revolving
Loan to reimburse such issuer.  The Borrowers shall agree on a joint and several
basis to remit to Lender a Letter of Credit  fee equal to two  percent  (2%) per
annum on the aggregate undrawn face amount of all Letters of Credit outstanding,
which fee shall be payable  monthly in arrears on the last  Business Day of each
month.  The  Borrowers  shall also agree on a joint and several  basis to pay on
demand  the  normal and  customary  administrative  charges of the issuer of

                                      -16-

<PAGE>

the Letter of Credit for issuance, amendment,  negotiation, renewal or extension
of any Letter of Credit.

                  (B) REQUESTS FOR LETTERS OF CREDIT.

                  The request by any  Borrower  for the  issuance of a Letter of
Credit shall be made in writing at least two (2) Business Days prior to the date
such Letter of Credit is to be issued.  Each such request shall specify the date
such Letter of Credit is to be issued, the amount thereof,  the name and address
of the beneficiary  thereof and a description of the transaction to be supported
thereby.  Any such notice shall be  accompanied  by the form of Letter of Credit
requested and any application or reimbursement  agreement required by the issuer
of such  Letter of  Credit.  If any term of such  application  or  reimbursement
agreement is  inconsistent  with this  Agreement,  then the  provisions  of this
Agreement shall control to the extent of such inconsistency.

                  (C) OBLIGATIONS ABSOLUTE.

                  The  Borrowers  shall be  obligated  jointly and  severally to
reimburse  the  issuer of any  Letter  of  Credit,  or  Lender,  if  Lender  has
reimbursed  such  issuer on any one or more of the  Borrowers'  behalf,  for any
payments  made in respect of any Letter of  Credit,  which  obligation  shall be
unconditional  and  irrevocable and shall be paid regardless of: (i) any lack of
validity or enforceability of any Letter of Credit, (ii) any amendment or waiver
of or consent or departure  from all or any  provisions of any Letter of Credit,
this  Agreement or any Other  Agreement,  (iii) the existence of any claim,  set
off,  defense or other  right which any  Borrower  or any other  Person may have
against  any  beneficiary  of any Letter of Credit,  Lender or the issuer of the
Letter of Credit, (iv) any draft or other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid, or insufficient in any respect
or any statement  therein  being untrue or  inaccurate  in any respect,  (v) any
payment  under any  Letter of Credit  against  presentation  of a draft or other
document that does not comply with the terms of such Letter of Credit,  and (vi)
any  other  act or  omission  to act or delay of any kind of the  issuer of such
Letter  of  Credit,  the  Lender  or any  other  Person  or any  other  event or
circumstance that might otherwise  constitute a legal or equitable  discharge of
any of the Borrowers' obligations hereunder, except in any case to the extent of
the issuer's or the  Lender's  gross  negligence  or willful  misconduct.  It is
understood  and agreed by each  Borrower that the issuer of any Letter of Credit
may accept  documents  that appear on their face to be in order without  further
investigation  or  inquiry,  regardless  of any  notice  or  information  to the
contrary.

                  (D) EXPIRATION DATES OF LETTERS OF CREDIT.

                  The expiration date of each Letter of Credit shall be no later
than the  earlier  of (i) one (1) year  from the date of  issuance  and (ii) the
thirtieth  (30th) day prior to the end of the Original Term or any Renewal Term.
Notwithstanding  the  foregoing,  a Letter of Credit may provide  for  automatic
extensions of its expiration date for one or more one (1) year periods,  so long
as the issuer thereof has the right to terminate the Letter of Credit at the end
of each one (1) year period and no extension  period  extends past the thirtieth
(30th) day prior to the end of the Original Term or any Renewal Term.

                                      -17-

<PAGE>

         4.       INTEREST, FEES AND CHARGES.

                  (A) INTEREST RATE.

                  Subject to the terms and conditions set forth below, the Loans
shall bear  interest at the per annum rates of interest set forth in  SUBSECTION
(I), (II), (III) or (IV) below:

                  (i) Prime  Rate Loans  shall bear  interest  as  follows:  (a)
Revolving  Loans  borrowed as Prime Rate Loans shall bear  interest at the Prime
Rate in effect  from time to time,  (b)  portions  of the Term Loan  borrowed as
Prime Rate Loans shall bear interest at one-half of one percent (0.5%) in excess
of the Prime Rate in effect from time to time,  and (c)  portions of any Capital
Expenditure Loan borrowed as Prime Rate Loans shall bear interest at one-quarter
of one percent  (0.25%) in excess of the Prime Rate in effect from time to time.
The rates of interest set forth in this clause (i) shall increase or decrease by
an amount equal to each increase or decrease in the Prime Rate  effective on the
effective date of each such change in the Prime Rate.

                  (ii) LIBOR Rate Loans  shall bear  interest  as  follows:  (a)
Revolving  Loans  borrowed  as LIBOR Rate Loans  shall bear  interest at two and
one-half percent (2.5%) in excess of the LIBOR Rate for the applicable  Interest
Period,  (b)  portions of the Term Loan  borrowed as LIBOR Rate Loans shall bear
interest at three percent  (3.0%) in excess of the LIBOR Rate for the applicable
Interest  Period and (c) portions of any Capital  Expenditure  Loan  borrowed as
LIBOR Rate Loans shall bear interest at two and  three-quarters  percent (2.75%)
in excess of the LIBOR Rate for the  applicable  Interest  Period,  in each case
such interest rate to remain fixed for such Interest Period.  "INTEREST  PERIOD"
shall mean any continuous  period of thirty (30),  sixty (60),  ninety (90), one
hundred eighty (180) or if available, two hundred seventy (270) or three hundred
sixty (360) days,  as selected from time to time by the  requesting  Borrower by
irrevocable notice (in writing, by telex, telegram or cable) given to Lender not
less  than two (2)  Business  Days  prior to the  first  day of each  respective
Interest  Period;  PROVIDED that: (A) each such Interest Period  occurring after
such initial  Interest Period shall commence on the day on which the immediately
preceding  Interest Period expires;  (B) the final Interest Period shall be such
that its  expiration  occurs on or before  the end of the  Original  Term or any
Renewal  Term;  and (C) if for any reason a  requesting  Borrower  shall fail to
timely select an Interest  Period,  then such Loans shall continue as, or revert
to, Prime Rate Loans.

                  (iii) Upon the  occurrence  of an Event of Default  and during
the  continuance  thereof,  all Loans  shall  bear  interest  at the rate of two
percent  (2.0%)  per annum in  excess of the  interest  rate  otherwise  payable
thereon, which interest shall be payable on demand.

(iv) The  Borrowers  may elect at any time to pay interest on all or any portion
of the outstanding  principal  balance of the Term Loan, for its remaining term,
at a fixed  rate of  interest  equal  to the  Treasury  Rate  plus a  margin  of
interest,  which margin shall be  determined  in the sole  discretion of Lender,
exercised in a commercially  reasonable  manner,  and shall be commensurate with
the  margins  applied  to Prime  Rate  Loans and  LIBOR  Rate  Loans  hereunder.
"TREASURY  RATE" means with respect to a request by the  Borrowers in connection
with the Term Loan pursuant to this SUBSECTION  4(A)(IV),  a fixed interest rate
per annum equal to the sum of (i) the rate of maturity  of U.S.  Treasury  Bills
maturing on, or as nearly as possible  prior to, the  maturity  date of the Term
Loan,  such  rate  to be  determined  by  the  Lender  as of  the  Business  Day

                                      -18-

<PAGE>

immediately  preceding  the first day the Treasury  Rate shall be applied,  PLUS
(ii)  Lender's cost  (expressed as a percentage  per annum) to acquire such U.S.
Treasury issues.  The determination of the Treasury Rate by Lender shall, in the
absence of manifest error, be conclusive.

                  (v) All interest shall be calculated on the basis of a 360-day
year. Unless otherwise indicated herein, interest shall be payable in arrears on
the first Business Day of each month.

                  (B) OTHER LIBOR PROVISIONS.

                  (i) Subject to the provisions of this Agreement, the Borrowers
shall  have the option  (A) as of any date,  to  convert  all or any part of the
Prime Rate Loans to, or request  that new Loans be made as,  LIBOR Rate Loans of
various  Interest  Periods,  (B) as of the last day of any Interest  Period,  to
continue  all or any  portion  of the  relevant  LIBOR  Rate Loans as LIBOR Rate
Loans;  (C) as of the last day of any  Interest  Period,  to convert  all or any
portion of the LIBOR Rate Loans to Prime  Rate  Loans;  and (D) at any time,  to
request new Loans as Prime Rate Loans; PROVIDED, that Loans may not be continued
as or converted to LIBOR Rate Loans, if the  continuation or conversion  thereof
would  violate the  provisions  of  SUBSECTIONS  4(B)(II) or  4(B)(III)  of this
Agreement or if an Event of Default has occurred and is continuing.

                  (ii) Lender's  determination of LIBOR as provided above, shall
be conclusive, absent manifest error. Furthermore, if Lender determines, in good
faith (which determination shall be conclusive, absent manifest error), prior to
the  commencement  of any  Interest  Period,  that (A) U.S.  Dollar  deposits of
sufficient amount and maturity for funding the Loans are not available to Lender
in the London Interbank Eurodollar market in the ordinary course of business, or
(B) by reason of circumstances affecting the London Interbank Eurodollar market,
adequate and fair means do not exist for ascertaining the rate of interest to be
applicable to the Loans requested by the Borrowers to be LIBOR Rate Loans or the
Loans  bearing  interest at the rates set forth in  SUBSECTION  4(A)(II) of this
Agreement  shall not represent the effective  pricing to Lender for U.S.  Dollar
deposits of a comparable  amount for the  relevant  period (such as for example,
but not limited to, official  reserve  requirements  required by Regulation D to
the extent not given effect in  determining  the rate),  Lender  shall  promptly
notify the  Borrowers  and (1) all  existing  LIBOR Rate Loans shall  convert to
Prime Rate  Loans upon the end of the  applicable  Interest  Period,  and (2) no
additional LIBOR Rate Loans shall be made until such circumstances are cured.

                  (iii) If, after the date hereof,  the  introduction of, or any
change in, any applicable law, treaty,  rule,  regulation or guideline or in the
interpretation  or administration  thereof by any governmental  authority or any
central bank or other fiscal,  monetary or other authority  having  jurisdiction
over  Lender or its  lending  offices (a  "REGULATORY  CHANGE"),  shall,  in the
opinion of counsel to Lender,  make it  unlawful  for Lender to make or maintain
LIBOR Rate Loans,  then Lender shall  promptly  notify the Borrowers and (A) the
LIBOR  Rate  Loans  shall  immediately  convert  to Prime Rate Loans on the last
Business Day of the then existing  Interest  Period or Interest  Periods,  or on
such  earlier  date as  required by law and (B) no  additional  LIBOR Rate Loans
shall be made until such circumstance is cured.

                                      -19-

<PAGE>

                  (iv) If, for any reason,  a LIBOR Rate Loan is repaid prior to
the last  Business Day of any  Interest  Period or if a LIBOR Rate Loan does not
occur on a date  specified by any of the Borrowers in their request  (other than
as a result of a default by Lender),  the Borrowers  agree jointly and severally
to indemnify  Lender against any loss (including any loss on redeployment of the
deposits or other funds  acquired by Lender to fund or maintain  such LIBOR Rate
Loan), cost or expense incurred by Lender as a result of such prepayment.

                  (v) If any Regulatory  Change (whether or not having the force
of law) shall (A) impose,  modify or deem  applicable any  assessment,  reserve,
special deposit or similar requirement against assets held by, or deposits in or
for  the  account  of or  loans  by,  or  any  other  acquisition  of  funds  or
disbursements by, Lender;  (B) subject Lender or the LIBOR Rate Loans to any Tax
or change the basis of taxation of payments to Lender of  principal  or interest
due from the Borrowers to Lender  hereunder (other than a change in the taxation
of the  overall  net  income of  Lender);  or (C)  impose  on  Lender  any other
condition regarding the LIBOR Rate Loans or Lender's funding thereof, and Lender
shall determine (which  determination  shall be conclusive,  absent any manifest
error) that the result of the  foregoing  is to  increase  the cost to Lender of
making or maintaining  the LIBOR Rate Loans or to reduce the amount of principal
or interest  received by Lender  hereunder,  then the Borrowers shall be jointly
and severally  obligated to pay to Lender, on demand, such additional amounts as
Lender  shall,  from time to time,  determine are  sufficient to compensate  and
indemnify Lender from such increased cost or reduced amount.

                  (vi) Lender shall receive  payments of amounts of principal of
and interest with respect to the LIBOR Rate Loans free and clear of, and without
deduction  for, any Taxes.  If (A) Lender shall be subject to any Tax in respect
of any LIBOR  Rate Loans or any part  thereof  or,  (B) the  Borrowers  shall be
required  to  withhold  or deduct any Tax from any such  amount,  the LIBOR Rate
applicable  to such LIBOR Rate Loans  shall be adjusted by Lender to reflect all
additional  costs incurred by Lender in connection with the payment by Lender or
the  withholding  by the Borrowers of such Tax and the  Borrowers  shall provide
Lender with a statement  detailing  the amount of any such Tax actually  paid by
the  Borrowers.  Determination  by Lender of the amount of such  costs  shall be
conclusive,  absent manifest error. If after any such adjustment any part of any
Tax paid by Lender is subsequently  recovered by Lender,  Lender shall reimburse
the  Borrowers to the extent of the amount so  recovered.  A  certificate  of an
officer  of Lender  setting  forth the  amount  of such  recovery  and the basis
therefor shall be conclusive, absent manifest error.

                  (vii) Each  request for LIBOR Rate Loans shall be in an amount
of not less than Five Hundred  Thousand and No/100  Dollars  ($500,000),  and in
integral multiples of One Hundred Thousand and No/100 Dollars ($100,000).

                  (viii) Unless otherwise specified by the Borrowers,  all Loans
shall be Prime Rate Loans.

                  (ix) No more than six (6)  Interest  Periods  may be in effect
with respect to outstanding LIBOR Rate Loans at any one time.

                                      -20-

<PAGE>

                  (x) No  more  than  ninety  percent  (90%)  of  the  aggregate
principal amount of Loans outstanding at any one time may be LIBOR Rate Loans.

                  (C) FEES AND CHARGES.

                  (i) CLOSING FEE: The Borrowers  agree jointly and severally to
pay to Lender a closing fee of Seventy  Thousand and No/100  Dollars  ($70,000),
which fee shall be fully earned and payable on the date of  disbursement  of the
initial Loans  hereunder.  Lender  acknowledges its receipt on or about July 27,
2001 of payment by  Borrowers  of a commitment  fee of $25,000.  Lender  further
acknowledges  its  receipt  of a good  faith  deposit  of  $30,000  prior to the
acceptance by Parent of Lender's  initial  proposal dated May 30, 2001. Both the
commitment fee and the good faith deposit shall be applied by Lender as a credit
against  the  payment  of the  aforedescribed  closing  fee,  less all costs and
out-of-pocket expenses incurred by Lender prior to the date hereof in connection
with this Agreement.

                  (ii)  UNUSED LINE FEE:  The  Borrowers  jointly and  severally
agree to pay to Lender an unused  line fee of  one-quarter  of one  percent  per
annum (0.25%) of the  difference  each month  between (i) the Maximum  Revolving
Loan Limit PLUS the Capital  Expenditure  Loan Limit and (ii) the average  daily
balance  of  the  Revolving  Loans,  PLUS  the  outstanding   Letter  of  Credit
Obligations,  PLUS the outstanding  principal amount of all Capital  Expenditure
Loans,  in  each  case  for  such  month;  PROVIDED,  that  such  fee  shall  be
three-eighths  of one  percent  per annum  (0.375%)  for any month in which such
difference is less than Four Million and No/100 Dollars  ($4,000,000).  Said fee
shall be fully  earned by Lender  and  payable  monthly  in arrears on the first
Business Day of each month for the previous  month,  and shall be  calculated on
the basis of a 360 day year.

                  (iii) COSTS AND  EXPENSES:  The  Borrowers  shall be obligated
jointly  and  severally  to  reimburse  Lender for all out-of  pocket  costs and
expenses,   including,   without  limitation,   legal  expenses  and  reasonable
attorneys' fees incurred by Lender in connection with the (i)  documentation and
consummation of this transaction and any other  transactions  between the Parent
and/or Borrowers and Lender, including,  without limitation,  Uniform Commercial
Code and other public record  searches and filings,  overnight  courier or other
express or messenger  delivery,  appraisal costs,  surveys,  title insurance and
environmental audit or review costs; (ii) collection,  protection or enforcement
of any rights in or to the Collateral;  (iii) collection of any Liabilities; and
(iv)  administration  and  enforcement  of any of  Lender's  rights  under  this
Agreement,  PROVIDED,  HOWEVER,  that the  Borrowers  shall not be  obligated to
reimburse Lender for its normal overhead expenses and/or for attorneys' fees for
services  performed  on or before the date of this  Agreement to the extent such
fees exceed $25,000.  Lender hereby  acknowledges  receipt from the Borrowers of
$25,000 in respect of payment of such attorney's  fees. The Borrowers shall also
agree  jointly and severally to pay all normal  service  charges with respect to
all accounts  maintained by the  Borrowers  with Lender and LaSalle Bank and any
additional  services  requested by any of the Borrowers  from Lender and LaSalle
Bank. All such costs,  expenses and charges  shall,  if owed to LaSalle Bank, be
reimbursed  by Lender and, in such event or in the event such costs and expenses
are owed to Lender,  constitute Liabilities  hereunder,  shall be payable by the
Borrowers jointly and severally to Lender on demand, and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder.

                                      -21-

<PAGE>

                  (D) MAXIMUM INTEREST.

                  It is the intent of the parties  that the rate of interest and
other charges to the Borrowers under this Agreement shall be lawful;  therefore,
if for any reason the interest or other charges payable under this Agreement are
found by a court of competent jurisdiction, in a final determination,  to exceed
the limit which Lender may lawfully charge the Borrowers, then the obligation to
pay interest and other charges shall automatically be reduced to such limit and,
if any amount in excess of such limit  shall  have been paid,  then such  amount
shall be refunded to the Borrowers.

         5.       COLLATERAL.

                  (A) GRANT OF SECURITY INTEREST TO LENDER.

                  As  security  for the payment of all Loans made and Letters of
Credit issued now or in the future by Lender to the Borrowers  hereunder and for
the payment or other satisfaction of all other Liabilities, each of Parent, each
Borrower and each DHB Subsidiary hereby assigns to Lender and grants to Lender a
continuing  security interest in the following property of Parent, such Borrower
or such DHB Subsidiary,  whether now or hereafter owned,  existing,  acquired or
arising and wherever now or hereafter located:  (a) all Accounts (whether or not
Eligible  Accounts)  and all Goods whose  sale,  lease or other  disposition  by
Parent,  such  Borrower or such DHB  Subsidiary,  has given rise to Accounts and
have been returned to, or  repossessed  or stopped in transit by,  Parent,  such
Borrower or such DHB Subsidiary;  (b) all Chattel Paper, Instruments,  Documents
and General  Intangibles  (including,  without limitation,  all patents,  patent
applications,  trademarks,  trademark applications,  tradenames,  trade secrets,
goodwill, copyrights, copyright applications, registrations, licenses, software,
franchises,  customer  lists,  tax refund claims,  claims  against  carriers and
shippers,  guarantee claims,  contracts rights,  payment  intangibles,  security
interests,  security deposits and rights to indemnification);  (c) all Inventory
(whether or not  Eligible  Inventory);  (d) all Goods  (other  than  Inventory),
including,  without  limitation,  Equipment,  vehicles  and  Fixtures;  (e)  all
Investment Property; (f) all Deposit Accounts, bank accounts, deposits and cash;
(g) all Letter-of-Credit  Rights; (h) Commercial Tort Claims listed on EXHIBIT C
hereto;  (i) all policies and  certificates  of insurance of Parent insuring the
property and assets of any of the Borrowers and the Life Insurance  Policy,  and
all policies and  certificates  of  insurance  of each  Borrower;  (j) any other
property of Parent,  each Borrower and each DHB Subsidiary,  now or hereafter in
the  possession,  custody  or  control  of Lender  or any  agent or any  parent,
affiliate or subsidiary of Lender or any participant with Lender in the Loans or
Letters  of  Credit,   for  any  purpose  (whether  for  safekeeping,   deposit,
collection,  custody,  pledge,  transmission or otherwise) and (k) all additions
and accessions to, substitutions for, and replacements, products and Proceeds of
the foregoing property, including, without limitation, proceeds of all insurance
policies insuring the foregoing property,  and all of Parent's,  such Borrower's
or such DHB Subsidiary's  books and records relating to any of the foregoing and
to such Parent's or Borrower's business.

                  (B) OTHER SECURITY.

                  Lender,  in its sole discretion,  without waiving or releasing
any obligation,  liability or duty of Parent, any Borrower or any DHB Subsidiary
under this Agreement or the Other

                                      -22-

<PAGE>

Agreements  or any Event of  Default,  may at any time or times  hereafter,  but
shall not be obligated to, pay,  acquire or accept an assignment of any security
interest,  lien,  encumbrance or claim (other than Permitted  Liens) asserted by
any  Person  in,  upon or  against  the  Collateral.  All sums paid by Lender in
respect thereof and all costs, fees and expenses including,  without limitation,
reasonable attorney fees, all court costs and all other charges relating thereto
incurred by Lender shall constitute  Liabilities,  payable by the Borrowers on a
joint and several basis to Lender on demand and, until paid, shall bear interest
at the highest rate then applicable to Loans hereunder.

                  (C) POSSESSORY COLLATERAL.

                  Immediately  upon the  receipt  by Parent  and/or  one or more
Borrowers  and/or one or more DHB  Subsidiaries of any portion of the Collateral
evidenced  by  an  agreement,   Instrument  or  Document,   including,   without
limitation, any Tangible Chattel Paper and any Investment Property consisting of
certificated  securities,  Parent and/or such Borrower or Borrowers  and/or such
DHB Subsidiary or DHB Subsidiaries  shall deliver the original thereof to Lender
together  with  an  appropriate   endorsement  or  other  specific  evidence  of
assignment thereof to Lender (in form and substance acceptable to Lender). If an
endorsement  or  assignment  of any such items shall not be made for any reason,
Lender is hereby irrevocably  authorized,  as the attorney and agent-in-fact for
Parent  and/or such  Borrower or  Borrowers  and/or such DHB  Subsidiary  or DHB
Subsidiaries,  to  endorse or assign  the same on behalf of Parent  and/or  such
Borrower or Borrowers and/or such DHB Subsidiary or DHB Subsidiaries.

                  (D) ELECTRONIC CHATTEL PAPER.

                  To the extent that Parent and/or one or more Borrowers  and/or
one or more DHB  Subsidiaries  obtain or maintain any Electronic  Chattel Paper,
Parent  and/or such  Borrower or  Borrowers  and/or such DHB  Subsidiary  or DHB
Subsidiaries shall create, store and assign the record or records comprising the
Electronic  Chattel Paper in such a manner that (i) a single  authoritative copy
of the record or records  exists  which is  unique,  identifiable  and except as
otherwise  provided in clauses (iv), (v) and (vi) below,  unalterable,  (ii) the
authoritative  copy identifies  Lender as the assignee of the record or records,
(iii) the authoritative  copy is communicated to and maintained by the Lender or
its  designated  custodian,  (iv)  copies  or  revisions  that add or  change an
identified  assignee  of the  authoritative  copy  can  only  be made  with  the
participation of Lender, (v) each copy of the authoritative copy and any copy of
a copy is readily  identifiable as a copy that is not the authoritative copy and
(vi) any  revision  of the  authoritative  copy is  readily  identifiable  as an
authorized or unauthorized revision.

         6.       PRESERVATION   OF  COLLATERAL   AND   PERFECTION  OF  SECURITY
                  INTERESTS THEREIN.

                  The Parent,  the Borrowers and the DHB Subsidiaries  shall, at
Lender's request, at any time and from time to time,  authenticate,  execute and
deliver to Lender such financing statements,  documents and other agreements and
instruments  (and pay the cost of filing  or  recording  the same in all  public
offices  deemed  necessary  or  desirable  by Lender) and do such other acts and
things or cause  third  parties  to do such  other acts and things as Lender may
deem  necessary or desirable in its sole  discretion  in order to establish  and
maintain a valid,  attached

                                      -23-

<PAGE>

and perfected  security  interest in the Collateral in favor of Lender (free and
clear of all other  liens,  claims,  encumbrances  and  rights of third  parties
whatsoever,  whether  voluntarily or  involuntarily  created,  except  Permitted
Liens) to secure  payment of the  Liabilities,  and in order to  facilitate  the
collection  of the  Collateral.  Each of  Parent,  each  Borrower  and  each DHB
Subsidiary  irrevocably  hereby makes,  constitutes and appoints Lender (and all
Persons  designated by Lender for that purpose) as Parent's,  such Borrower's or
such DHB Subsidiary's  true and lawful attorney and agent-in-fact to execute and
file such financing  statements,  documents and other agreements and instruments
and do such other acts and things as may be  necessary  to preserve  and perfect
Lender's security interest in the Collateral.  Each of Parent, each Borrower and
each DHB Subsidiary further agrees that a carbon,  photographic,  photostatic or
other  reproduction  of this  Agreement  or of a  financing  statement  shall be
sufficient as a financing statement.  Each of Parent, each Borrower and each DHB
Subsidiary further authorizes,  notifies and confirms the prior filing by Lender
of any and all financing statements which identify Parent, such Borrower or such
DHB  Subsidiary as debtor,  Lender as secured party and any or all Collateral as
collateral.

         7.       POSSESSION OF COLLATERAL AND RELATED MATTERS.

                  Unless an Event of Default  has  occurred  and is  continuing,
each  Borrower  shall  have the  right,  except as  otherwise  provided  in this
Agreement,  in the ordinary  course of such  Borrower's  business,  to (a) sell,
lease or furnish  under  contracts of service any of such  Borrower's  Inventory
normally held by such Borrower for any such purpose; and (b) use and consume any
raw materials, work in process or other materials normally held by such Borrower
for such  purpose;  PROVIDED,  HOWEVER,  that a sale in the  ordinary  course of
business  shall not include any  transfer  or sale in  satisfaction,  partial or
complete, of a debt owed by such Borrower.

         8.       COLLECTIONS.

                  (a) Each Borrower shall direct all of its Account Debtors that
remit payment on the Accounts due to such Borrower by electronic  funds transfer
to remit such amounts directly to a deposit account in Lender's name which shall
be  established  by  such  Borrower  at  LaSalle  Bank or at  another  financial
institution  acceptable  to Lender  (each a "BLOCKED  ACCOUNT").  The  financial
institution with which such Blocked Account is established shall acknowledge and
agree,  in a manner  satisfactory  to Lender,  that the amounts in such  Blocked
Account  are the sole and  exclusive  property  of Lender,  that such  financial
institution  will  follow  the  instructions  of  Lender  with  respect  to  the
disposition  of funds in the Blocked  Account  without  further  consent of such
Borrower,  that such  financial  institution  has no right of setoff against the
Blocked Account or against any account maintained by such financial  institution
into which any amounts are  remitted by Account  Debtors of such  Borrower,  and
that the financial  institution shall wire, or otherwise transfer in immediately
available funds to Lender in a manner  satisfactory  to Lender,  funds deposited
into the  Blocked  Account on a daily  basis as such funds are  collected.  Each
Borrower  agrees that all payments made to the Blocked  Account of such Borrower
or  otherwise  received  by Lender,  whether in  respect of the  Accounts  or as
Proceeds of other  Collateral  or  otherwise,  will be applied on account of the
Liabilities then due and payable in accordance with the terms of this Agreement;
provided,  that so long as no Event of Default has occurred  and is  continuing,
payments received by Lender shall not be applied to the unmatured portion of the
LIBOR Rate  Loans,  but shall be held in an  interest  bearing  cash  collateral
account

                                      -24-

<PAGE>

maintained  by Lender,  until the  earlier of (i) the last  Business  Day of the
Interest Period applicable to such LIBOR Rate Loan and (ii) the occurrence of an
Event of Default.  The Borrowers  jointly and  severally  agree to pay all fees,
costs and  expenses  in  connection  with  opening and  maintaining  the Blocked
Accounts.  All of such fees,  costs and expenses,  if not paid by the Borrowers,
may be paid by  Lender  and in such  event  all  amounts  paid by  Lender  shall
constitute  Liabilities  hereunder,  shall be payable to Lender by the Borrowers
jointly and severally upon demand,  and, until paid,  shall bear interest at the
highest  rate  then  applicable  to Loans  hereunder.  For the  purpose  of this
section, each Borrower irrevocably hereby makes, constitutes and appoints Lender
(and all Persons  designated by Lender for that purpose) as such Borrower's true
and lawful attorney and agent-in-fact.

                  (b) Upon the occurrence of a Triggering  Event,  each Borrower
shall be required to direct all of its Account  Debtors to remit all payments on
the Accounts  due to such  Borrower,  other than  payments by  electronic  funds
transfer,  directly to a post office box (a "LOCK BOX") designated by, and under
the exclusive  control of Lender at the financial  institution where the Blocked
Account has been established for such Borrower.  All payments  received into the
Lock Box will be  deposited  into such Blocked  Account.  At all times after the
occurrence  of a  Triggering  Event,  if a Borrower,  Parent,  any  Affiliate or
Subsidiary of Parent or a Borrower, any shareholder, officer, director, employee
or agent of the Parent or such  Borrower or Affiliate or Subsidiary of Parent or
such  Borrower or any other Person  acting for or in concert with such  Borrower
shall receive monies,  checks, notes, drafts or other payments relating to or as
Proceeds of Accounts or other  Collateral,  such  Borrower  and each such Person
shall  receive  all  such  items  in trust  for,  and as the sole and  exclusive
property of, such Lender and, immediately upon receipt thereof,  shall remit the
same (or cause the same to be remitted)  in kind to the Blocked  Account of such
Borrower.  At all times after the  occurrence  and during the  continuance  of a
Triggering Event, all checks, drafts,  instruments and other items of payment or
Proceeds of Collateral  shall be endorsed by the Borrower in receipt  thereof to
Lender,  and,  if that  endorsement  of any such item  shall not be made for any
reason,  Lender is hereby  irrevocably  authorized  to endorse  the same on such
Borrower's  behalf. For the purpose of this section,  each Borrower  irrevocably
hereby makes,  constitutes  and appoints  Lender (and all persons  designated by
Lender  for that  purpose)  as such  Borrower's  true and  lawful  attorney  and
agent-in-fact  (i) to endorse  such  Borrower's  name upon said items of payment
and/or Proceeds of Collateral and upon any Chattel Paper, Document,  Instrument,
invoice  or  similar  document  or  agreement  relating  to any  Account of such
Borrower or Goods pertaining thereto;  (ii) to take control in any manner of any
item of payment or Proceeds  thereof and (iii) to have access to any lock box or
postal box into which any of such  Borrower's  mail is  deposited,  and open and
process all mail addressed to such Borrower and deposited therein.

                  A "TRIGGERING EVENT" shall mean any of the following:  (x) the
occurrence  of an Event of Default or (y) the  determination  by Lender that the
dollar  amount of all  payments  made on  Accounts  which have been  remitted by
electronic funds transfer to the Blocked Accounts over the aggregate of payments
made on all Accounts, expressed as a percentage, is:

                          (i) for the thirty-day  period  commencing on the date
         of this Agreement, less than fifty percent (50%);

                                      -25-

<PAGE>

                          (ii) during any  sixty-day  period  ending on or after
         the date  sixty  days from,  but prior to the date one  hundred  twenty
         (120) days from,  the date of this  Agreement,  less than fifty percent
         (50%);

                          (iii) during any  sixty-day  period ending on or after
         the date one hundred twenty (120) days from the date of this Agreement,
         less than seventy percent (70%); PROVIDED,  that solely for purposes of
         compliance  with this clause (iii) and  calculating  the percentage set
         forth  herein,  payments  made on  Accounts  which  have been  remitted
         initially  by an  Account  Debtor to a  Borrower  by  electronic  funds
         transfer and then remitted by such Borrower to the  applicable  Blocked
         Account (such payments,  the "REFERENCED  PAYMENTS") shall be deemed to
         have been remitted  directly by the  applicable  Account Debtor to such
         Blocked  Account so long as (x) such Borrower  immediately  remits such
         funds electronically to such Blocked Account (or, if the Borrowers fail
         to make immediate  remittance to the applicable  Blocked  Account other
         than due to the Borrowers'  negligence,  such remittance is made within
         three  days of receipt  of such  funds by the  Borrowers)  and (y) such
         Borrower continues to use its best efforts to cause such Account Debtor
         to remit via  electronic  funds  transfer any future  payments  made on
         Accounts directly to such Blocked Account;  PROVIDED,  FURTHER, that in
         no event during any such sixty-day period shall the aggregate amount of
         Referenced Payments exceed twenty percent (20%) of the aggregate amount
         of all payments made by Account Debtors on all Accounts.

                  (c)  Lender  may,  at any time and from time to time after the
occurrence and during the continuance of an Event of Default,  whether before or
after  notification  to any  Account  Debtor  and  whether  before  or after the
maturity  of  any of  the  Liabilities,  (i)  enforce  collection  of any of any
Borrower's  Accounts or other  amounts owed to a Borrower by suit or  otherwise;
(ii)  exercise  all  of  a  Borrower's  rights  and  remedies  with  respect  to
proceedings  brought to  collect  any  Accounts  or other  amounts  owed to such
Borrower;  (iii) surrender,  release or exchange all or any part of any Accounts
or other amounts owed to such Borrower, or compromise or extend or renew for any
period  (whether  or not  longer  than the  original  period)  any  indebtedness
thereunder, as Lender may deem appropriate in its reasonable judgment; (iv) sell
or assign any Account of a Borrower or other amount owed to a Borrower upon such
terms,  for such amount and at such time or times as Lender  deems  advisable in
its reasonable  judgment;  (v) prepare,  file and sign a Borrower's  name on any
proof of claim in  bankruptcy  or other  similar  document  against  any Account
Debtor or other Person  obligated to such  Borrower;  and (vi) do all other acts
and things which are  necessary,  in Lender's  sole  discretion,  exercised in a
commercially reasonable manner, to fulfill any Borrower's obligations under this
Agreement  and to allow Lender to collect the Accounts or other  amounts owed to
any Borrower. In addition to any other provision hereof, Lender may at any time,
after the occurrence and during the  continuance of an Event of Default,  at the
Borrowers' expense,  notify any parties obligated on any of the Accounts to make
payment directly to Lender of any amounts due or to become due thereunder.

                  (d) For  purposes of  calculating  interest  and fees,  Lender
shall,  within  one (1)  Business  Day after  receipt by Lender at its office in
Chicago,  Illinois  of (i) checks and (ii) cash or other  immediately  available
funds from collections of items of payment and Proceeds of any Collateral, apply
such  collections or Proceeds  against the Liabilities then due in such order as

                                      -26-

<PAGE>

Lender shall determine in its sole  discretion.  For purposes of determining the
amount of Loans  available  for  borrowing  purposes,  checks  and cash or other
immediately available funds from collections of items of payment and Proceeds of
any Collateral  shall be applied against the Liabilities then due, in such order
as Lender shall determine in its sole discretion, on the day of receipt, subject
to actual collection.

                  (e) On a monthly basis,  Lender shall deliver to the Borrowers
an account  statement  showing all Loans,  charges and payments,  which shall be
deemed final,  binding and conclusive  upon the Borrowers,  unless the Borrowers
notify Lender in writing,  specifying any error therein,  within sixty (60) days
of the date such  account  statement is received by the  Borrowers  and any such
notice shall only constitute an objection to the items specifically identified.

         9.       COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES.

                  (A) DAILY REPORTS.

                  The Borrowers  shall deliver to Lender an executed  daily loan
report and  certificate  in Lender's  then current form on each day on which any
Borrower  requests a Revolving  Loan,  and in any event at least once each week,
which shall be accompanied  by copies of each  Borrower's  sales  journal,  cash
receipts  journal and credit memo journal for the relevant  period.  Such report
shall  reflect the  activity of such  Borrower  with respect to Accounts of such
Borrower for the  immediately  preceding  week,  and shall be in a form and with
such specificity as is reasonably  satisfactory to Lender and shall contain such
additional  information  concerning  Accounts and Inventory as may be reasonably
requested by Lender  including,  without  limitation,  but only if  specifically
requested by Lender,  copies of all invoices  prepared in  connection  with such
Accounts. To the extent that information  concerning Inventory is required to be
provided more often than monthly under this SUBSECTION 9(A), Lender acknowledges
and  agrees  that such  information  shall only be  required  to be updated on a
monthly basis.

                  (B) MONTHLY REPORTS.

                  The  Borrowers  shall  deliver to Lender,  in  addition to any
other reports, as soon as practicable and in any event: (i) within ten (10) days
after the end of each calendar  month,  (A) a detailed trial balance of Accounts
aged per invoice date, in form and substance  reasonably  satisfactory to Lender
including,  without  limitation,  the names  and  addresses  (which  may be in a
separate  document or ledger) or such  comparable  information  as is reasonably
satisfactory  to the  Lender of all  Accounts,  and (B) a summary  and detail of
accounts  payable  (such  Accounts and accounts  payable  divided into such time
intervals  as Lender may  require in its  reasonable  discretion),  including  a
listing of any held checks;  and (ii) within eighteen (18) days after the end of
each calendar month, the general ledger inventory account balance,  an inventory
report and Lender's standard form of Inventory report then in effect or the form
most recently  requested from the Borrowers by Lender, for the Borrowers by each
category of Inventory, together with a description of the monthly change in each
category of Inventory.

                                      -27-

<PAGE>

                  (C) FINANCIAL STATEMENTS.

                  The Borrowers shall deliver to Lender the following  financial
information,  all of which  shall  be  prepared  in  accordance  with  generally
accepted accounting principles consistently applied, and shall be accompanied by
a  compliance  certificate  in the form of  EXHIBIT B hereto,  which  compliance
certificate shall include a calculation of all financial  covenants contained in
this  Agreement:  (i) no later  than  thirty  (30)  days  after  the end of each
calendar month, copies of internally prepared financial  statements,  including,
without limitation,  balance sheets and statements of income, retained earnings,
cash  flow  and  shareholders  equity,  of  Parent  and its  Subsidiaries,  on a
consolidated and consolidating  basis,  certified by the Chief Financial Officer
of Parent,  and (ii) no later than ninety (90) days after the end of each Fiscal
Year, audited annual financial statements including, without limitation, balance
sheets and statements of income,  retained earnings, cash flows and stockholders
equity,  of  Parent  and its  Subsidiaries,  on a  consolidated  basis,  with an
unqualified  opinion by Paritz and Co., or other  independent  certified  public
accountants  selected by Parent and  reasonably  satisfactory  to Lender,  which
financial  statements shall be accompanied by (A) a letter from such accountants
acknowledging  that they are aware that a primary  intent of Parent in obtaining
such financial statements is to influence Lender and that Lender is relying upon
such  financial  statements  in  connection  with  the  exercise  of its  rights
hereunder  and (B) copies of any  management  letters sent to the Parent by such
accountants.

                  (D) ANNUAL PROJECTIONS.

                  As soon as  practicable  and in any event no later than thirty
(30) days prior to the  beginning  of each  Fiscal  Year,  the  Borrowers  shall
deliver to Lender projected  balance sheets,  statements of income and cash flow
for Parent and its  Subsidiaries,  on a consolidated and, to the extent prepared
by Parent or the Borrowers,  on a  consolidating,  basis, for each of the twelve
(12) months during such Fiscal Year,  which shall include the  assumptions  used
therein, together with appropriate supporting details as reasonably requested by
Lender.

                  (E) EXPLANATION OF BUDGETS AND PROJECTIONS.

                  In conjunction with the delivery of the annual presentation of
projections or budgets referred to in SUBSECTION 9(D) above, the Borrowers shall
deliver a letter  signed by the  President or a Vice  President of Parent and by
the Treasurer or Chief Financial  Officer of Parent,  describing,  comparing and
analyzing,  in  reasonable  detail,  all  changes and  developments  between the
anticipated  financial  results  included in such projections or budgets and the
historical financial statements of Parent and its Subsidiaries.

                  (F) PUBLIC REPORTING.

                  Promptly upon the filing thereof,  the Borrowers shall deliver
to Lender copies of all registration statements and annual,  quarterly,  monthly
or other regular reports which Parent or any of its Subsidiaries  files with the
Securities  and  Exchange  Commission,  as well as promptly  providing to Lender
copies of any reports and proxy statements delivered to its shareholders.

                                      -28-

<PAGE>

                  (G) OTHER INFORMATION.

                  Promptly  following  request  therefor  by Lender,  such other
business or financial  data,  reports,  appraisals and projections as Lender may
reasonably request.

         10.      TERMINATION; AUTOMATIC RENEWAL.

                  THIS  AGREEMENT  SHALL BE IN EFFECT FOR A PERIOD (SUCH PERIOD,
THE "ORIGINAL  TERM") FROM THE DATE HEREOF UNTIL THE DATE WHICH  COINCIDES  WITH
THE THIRD YEARLY ANNIVERSARY HEREOF, AND SHALL BE EXTENDED THEREAFTER (EACH SUCH
EXTENSION  BEING REFERRED TO HEREIN AS A "RENEWAL TERM") SOLELY AT THE OPTION OF
THE LENDER,  UNLESS (A) THE DUE DATE OF THE LIABILITIES IS ACCELERATED  PURSUANT
TO SECTION 16 HEREOF OR (B) THE BORROWERS  ELECT TO TERMINATE  THIS AGREEMENT AT
THE END OF THE ORIGINAL  TERM OR AT THE END OF ANY RENEWAL TERM BY GIVING LENDER
WRITTEN NOTICE OF SUCH ELECTION AT LEAST  FORTY-FIVE  (45) DAYS PRIOR TO THE END
OF THE ORIGINAL  TERM OR THE THEN CURRENT  RENEWAL TERM AND BY PAYING ALL OF THE
LIABILITIES  IN FULL ON THE LAST DAY OF SUCH TERM.  If one or more of the events
specified  in  clause  (A) or (B)  occurs,  then (i)  Lender  shall not make any
additional Loans or issue any additional  Letters of Credit on or after the date
identified as the date on which the Liabilities are to be repaid;  and (ii) this
Agreement  shall  terminate on the date thereafter that the Liabilities are paid
in full. At such time as the Borrowers  have repaid all of the  Liabilities  and
this  Agreement  has  terminated,  (i) the  Borrowers  shall deliver to Lender a
release,  in form  and  substance  reasonably  satisfactory  to  Lender,  of all
obligations  and liabilities of Lender and its officers,  directors,  employees,
agents,  parents,  subsidiaries  and  affiliates  to the  Borrowers,  and if the
Borrowers are obtaining new financing from another  lender,  the Borrowers shall
deliver  such  lender's   indemnification  of  Lender,  in  form  and  substance
reasonably satisfactory to Lender, effective for a period not longer than ninety
(90) days after the termination of this  Agreement,  for checks which Lender has
credited to any account of the Borrowers,  but which subsequently are dishonored
for any reason or for automatic  clearinghouse  or wire transfers not yet posted
to any  account  of the  Borrowers,  and (ii) the  Lender  shall  deliver to the
Borrowers and all Obligors, in form and substance reasonably satisfactory to the
Borrowers,  a  release  of all  obligations  and shall  discharge  all liens and
security interests,  including any filed financing statements, and shall provide
Borrowers copies thereof.  If, prior to the first anniversary of this Agreement,
the  Borrowers  elect  to  terminate  this  Agreement  and  prepay  all  of  the
Liabilities,  the  Borrowers  agree  jointly and severally to pay to Lender as a
prepayment fee, in addition to the payment of all other  Liabilities,  an amount
equal to one percent (1%) of the Maximum Revolving Loan Limit. There shall be no
prepayment  fee relating to any subsequent  termination of the Revolving  Loans,
and  there  shall  be no  prepayment  fee  imposed  on the  Borrowers  upon  any
prepayment of the Term Loan or any Capital Expenditure Loan made hereunder.

         11.      REPRESENTATIONS AND WARRANTIES.

                  Parent  and each  Borrower  hereby  represent  and  warrant to
Lender, as applicable,  which  representations and warranties (whether appearing
in this SECTION 11 or  elsewhere)  shall

                                      -29-

<PAGE>

be true at the time of such Borrower's  execution  hereof and the closing of the
transactions  described  herein or related  hereto,  shall remain true until the
repayment in full and  satisfaction  of all the  Liabilities  and termination of
this Agreement,  and shall be remade by Parent and each Borrower, as applicable,
at the time each Loan is made pursuant to this Agreement.

                  (A) FINANCIAL STATEMENTS AND OTHER INFORMATION.

                  The financial statements and other information delivered or to
be  delivered  by Parent and the  Borrowers to Lender at or prior to the date of
this Agreement and which are attached  hereto as EXHIBIT E,  accurately  reflect
the financial  condition of Parent and each Borrower as of the dates thereof and
for the periods covered  thereby.  As of the date of this  Agreement,  there has
been no material  adverse change in the financial  condition,  the operations or
any other  status of Parent or any  Borrower  since the date of the most  recent
financial  statements  delivered to Lender prior to the date of this  Agreement.
All written information now or heretofore  furnished by Parent and the Borrowers
to Lender  is true and  correct  in all  material  respects  as of the date with
respect to which such information was furnished.

                  (B) LOCATIONS.

                  The office where each  Borrower  keeps its books,  records and
accounts  (or  copies  thereof)  concerning  the  Collateral,   such  Borrower's
principal place of business and all of such Borrower's other places of business,
locations of Collateral and post office boxes and locations of bank accounts are
as set forth in EXHIBIT A and at other locations  within the continental  United
States of which Lender has been  advised by the  Borrowers  in  accordance  with
SUBSECTION  12(B)(I).  The  Collateral,   including,   without  limitation,  the
Equipment (except any part thereof which the Borrowers shall have advised Lender
in writing consists of Collateral normally used in more than one state) is kept,
or, in the case of vehicles,  based,  only at the addresses set forth on EXHIBIT
A, and at other locations  within the continental  United States of which Lender
has been  advised by the  Borrowers  in writing in  accordance  with  SUBSECTION
12(B)(I) hereof.

                  (C) LOANS BY THE BORROWERS.

                  Neither Parent nor any Borrower has made any loans or advances
to any  Affiliate or other Person  except for advances  authorized  hereunder to
employees,  officers and  directors of Parent or any of the Borrowers for travel
and other expenses arising in the ordinary course of Parent's or such Borrower's
business and loans permitted pursuant to SUBSECTION 13(F) hereof.

                  (D) ACCOUNTS AND INVENTORY.

                  Each Account or item of Inventory  which the Borrowers  shall,
expressly or by implication,  request Lender to classify as an Eligible  Account
or as Eligible Inventory,  respectively, shall, as of the time when such request
is made,  conform in all respects to the requirements of such  classification as
set forth in the  respective  definitions  of "ELIGIBLE  ACCOUNT" and  "ELIGIBLE
INVENTORY" as set forth herein.

                                      -30-

<PAGE>

                  (E) LIENS.

                  Each  Borrower  is the  lawful  owner  of all  Collateral  now
purportedly owned or hereafter purportedly acquired by such Borrower,  free from
all liens,  claims,  security  interests and  encumbrances  whatsoever,  whether
voluntarily or  involuntarily  created and whether or not perfected,  other than
the Permitted Liens.

                  (F) ORGANIZATION,  AUTHORITY AND NO CONFLICT. (i) PACA is duly
organized,  validly  existing and in good standing in the State of New York, and
its state organizational identification number is 920413000037; (ii) Point Blank
is duly  organized,  validly  existing  and in good  standing  in the  State  of
Delaware,  and its state organizational  identification number is 2475533; (iii)
NDL is duly  organized,  validly  existing and in good  standing in the State of
Florida, and its state organizational identification number is P94000091162; and
(iv) Parent is duly  organized,  validly  existing  and in good  standing in the
State of Delaware and its state organizational identification number is 2431782.
Parent and each  Borrower is duly  qualified  and in good standing in all states
where the nature and extent of the business transacted by it or the ownership of
its assets  makes such  qualification  necessary  and where the failure to be so
qualified  would  not have a  Material  Adverse  Effect  on the  Parent  or such
Borrower,  except  that the  Parent is not  qualified  in the State of New York.
Parent  and each  Borrower  has the right and power and is duly  authorized  and
empowered  to enter  into,  execute  and deliver  this  Agreement  and the Other
Agreements and perform its obligations  hereunder and  thereunder.  Parent's and
each  Borrower's  execution,  delivery and performance of this Agreement and the
Other  Agreements  does not conflict with the  provisions of the  organizational
documents of Parent or such Borrower, any statute, regulation, ordinance or rule
of law, or any agreement,  contract or other document which may now or hereafter
be  binding  on  Parent  or such  Borrower,  and  Parent's  and such  Borrower's
execution,  delivery and performance of this Agreement and the Other  Agreements
shall not result in the imposition of any lien or other  encumbrance upon any of
Parent's or such  Borrower's  property under any existing  indenture,  mortgage,
deed of trust,  loan or credit  agreement or other  agreement or  instrument  by
which such Borrower or any of its property may be bound or affected.

                  (G) LITIGATION.

                  Except as disclosed on SCHEDULE 11(G) attached  hereto,  there
are no actions or proceedings which are pending or threatened  against Parent or
any  Borrower  which could  reasonably  be  expected to have a Material  Adverse
Effect on Parent or any Borrower,  and Parent and each Borrower shall,  promptly
upon becoming aware of any such pending or threatened action or proceeding, give
written  notice  thereof to Lender.  Neither  Parent  nor any  Borrower  has any
Commercial  Tort Claims  pending other than those set forth on EXHIBIT C hereto,
as EXHIBIT C may be amended from time to time.

                  (H) COMPLIANCE WITH LAWS AND MAINTENANCE OF PERMITS.

                  Parent  and  each  Borrower  has  obtained  all   governmental
consents,  franchises,  certificates,  licenses,  authorizations,  approvals and
permits,  the lack of which would have a Material  Adverse  Effect on Parent and
the Borrowers,  taken as a whole.  Parent and each

                                      -31-

<PAGE>

Borrower are in compliance in all material respects with all applicable federal,
state,  local and foreign statutes,  orders,  regulations,  rules and ordinances
(including,  without  limitation,   Environmental  Laws  and  statutes,  orders,
regulations,  rules and  ordinances  relating to taxes,  employer  and  employee
contributions  and  similar  items,  securities,  ERISA or  employee  health and
safety) the failure to comply with which would have a Material Adverse Effect on
Parent and the Borrowers, taken as a whole.

                  (I) AFFILIATE TRANSACTIONS.

                  Except as set forth on SCHEDULE  11(I)  hereto or as permitted
pursuant  to  SUBSECTION  11(C)  hereof,  neither  Parent  nor any  Borrower  is
conducting,  permitting or suffering to be conducted,  any transaction  with any
Affiliate  other than  transactions  with Affiliates for the purchase or sale of
Inventory or services in the ordinary course of business  pursuant to terms that
are no less  favorable to Parent or such Borrower than the terms upon which such
transfers or  transactions  would have been made had they been made to or with a
Person that is not an Affiliate.

                  (J) NAMES AND TRADENAMES.

                  Parent's and each Borrower's name has always been as set forth
on the  first  page of this  Agreement  and  Parent  and each  Borrower  uses no
tradenames,  assumed names,  fictitious names or division names in the operation
of its business, except in each case as set forth on SCHEDULE 11(J) hereto.

                  (K) EQUIPMENT.

                  Each Borrower has good and indefeasible and merchantable title
to and ownership of all of its Equipment.

                  (L) ENFORCEABILITY.

                  This Agreement and the Other Agreements to which Parent or any
Borrower is a party are the legal,  valid and binding  obligations  of Parent or
such Borrower, and are enforceable against Parent or such Borrower in accordance
with their respective  terms,  except as such  enforceability  may be limited by
bankruptcy,   insolvency,   fraudulent   conveyance  and  other  laws  affecting
creditors' rights,  and by general  limitations on the availability of equitable
remedies.

                  (M) SOLVENCY.

                  Parent and its  Subsidiaries,  taken as a whole, are, and each
Borrower, individually, is, after giving effect to the transactions contemplated
hereby,  solvent,  able to pay  its  debts  as  they  become  due,  has  capital
sufficient  to carry on its business,  now owns property  having a value both at
fair  valuation  and at present  fair  saleable  value  greater  than the amount
required to pay its debts,  and will not be rendered  insolvent by the execution
and delivery of this  Agreement or any of the Other  Agreements or by completion
of the transactions contemplated hereunder or thereunder.

                                      -32-

<PAGE>

                  (N) INDEBTEDNESS.

                  Except as set forth on SCHEDULE  11(N) hereto,  neither Parent
nor any Borrower is obligated  (directly or indirectly),  for any loans or other
indebtedness for borrowed money other than the Loans and the Letters of Credit.

                  (O) MARGIN SECURITY AND USE OF PROCEEDS.

                  No  Borrower  owns  any  margin  securities,  and  none of the
proceeds of the Loans  hereunder  shall be used for the purpose of purchasing or
carrying  any margin  securities  or for the purpose of reducing or retiring any
indebtedness which was originally  incurred to purchase any margin securities or
for any other purpose not permitted by Regulation U of the Board of Governors of
the Federal Reserve System as in effect from time to time.

                  (P) PARENT, SUBSIDIARIES AND AFFILIATES.

                  Except as set forth on SCHEDULE 11(P) hereto,  Parent and each
Borrower has no parents,  Subsidiaries  or other  Affiliates or  divisions,  and
neither  Parent nor any Borrower is engaged in any joint venture or  partnership
with any other Person.

                  (Q) NO DEFAULTS.

                  Neither  Parent nor any  Borrower is in default in any respect
under any contract, lease or commitment to which it is a party or by which it is
bound,  nor does  Parent nor any  Borrower  know of any  dispute  regarding  any
contract,  lease or  commitment  which would have a Material  Adverse  Effect on
Parent and the Borrowers, taken as a whole.

                  (R) EMPLOYEE MATTERS.

                  There are no  controversies  pending or, to any  Borrower's or
Parent's  knowledge,  threatened  between  Parent or any Borrower and any of its
respective  employees,  agents or  independent  contractors  other than employee
grievances  arising in the ordinary  course of business  which would not, in the
aggregate, have a Material Adverse Effect on Parent and the Borrowers,  taken as
a whole,  and Parent and each  Borrower  is in  compliance  with all federal and
state laws respecting employment and employment terms, conditions and practices,
except for such non-compliance which would not have a Material Adverse Effect on
Parent and the Borrowers, taken as a whole.

                  (S) INTELLECTUAL PROPERTY.

                  Parent and each Borrower possess adequate  licenses,  patents,
patent   applications,   copyrights,   service  marks,   trademarks,   trademark
applications, tradestyles and tradenames to continue to conduct their respective
businesses as heretofore conducted by them.

                  (T) ENVIRONMENTAL MATTERS.

                  Neither Parent nor any Borrower has generated,  used,  stored,
treated,  transported,  manufactured,  handled,  produced  or  disposed  of  any
Hazardous Materials,  on or off its premises

                                      -33-

<PAGE>

(whether  or not  owned by it) in any  manner  which at any  time  violates  any
Environmental  Law or any  license,  permit,  certificate,  approval  or similar
authorization thereunder,  and the operations of Parent and each Borrower comply
in all material respects with all Environmental Laws and all licenses,  permits,
certificates, approvals and similar authorizations thereunder. There has been no
investigation,  proceeding,  complaint,  order,  directive,  claim,  citation or
notice by any governmental  authority or any other Person, nor is any pending or
to the best of Parent's and each Borrower's knowledge threatened with respect to
any  non-compliance  with or violation of the requirements of any  Environmental
Law by Parent or such Borrower or the release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation,  use, storage,  treatment,
transportation,  manufacture,  handling, production or disposal of any Hazardous
Materials or any other  environmental,  health or safety  matter,  which affects
Parent or such Borrower or its business,  operations or assets or any properties
at which  Parent or such  Borrower  has  transported,  stored or disposed of any
Hazardous  Materials.  Neither  Parent nor any Borrower  has material  liability
(contingent  or  otherwise) in  connection  with a release,  spill or discharge,
threatened  or  actual,  of any  Hazardous  Materials  or the  generation,  use,
storage,  treatment,   transportation,   manufacture,  handling,  production  or
disposal of any Hazardous Materials.

                  (U) ERISA MATTERS.

                  Parent  and  each  Borrower  has  paid  and   discharged   all
obligations and liabilities  arising under ERISA of a character which, if unpaid
or  unperformed,  might  result in the  imposition  of a lien against any of its
properties or assets.

                  (V) SHAREHOLDER DEBT.

                  As of the  date of this  Agreement,  the sole  obligee  of the
Shareholder Debt is David H. Brooks,  and no other Person has any legal right to
receive any payment on account of the Shareholder Debt.

                  (W) LEVY, SEIZURE OR ATTACHMENT.

                  No Person has made or has attempted to make any levy,  seizure
or attachment upon any of the Collateral.

                  (X) DHB SUBSIDIARY.

                  No DHB Subsidiary owns any assets or property of any kind.

         12.      AFFIRMATIVE COVENANTS.

                  Until payment and  satisfaction in full of all Liabilities and
termination of this  Agreement,  unless Parent or the Borrowers  obtain Lender's
prior written consent  waiving or modifying any of their covenants  hereunder in
any specific  instance,  Parent and each Borrower,  as applicable,  covenant and
agree as follows:

                                      -34-

<PAGE>

                  (A) MAINTENANCE OF RECORDS.

                  Parent and each Borrower  shall at all times keep accurate and
complete  books,  records and accounts  with  respect to all of such  Borrower's
business activities, in accordance with sound accounting practices and generally
accepted accounting principles  consistently applied, and shall keep such books,
records and accounts,  and any copies thereof,  only at the addresses  indicated
for such purpose on EXHIBIT A.

                  (B) NOTICES.

                  Parent and the Borrowers shall:

                  (i)  LOCATIONS.  Promptly  (but in no event less than ten (10)
days prior to the occurrence  thereof) notify Lender of the proposed  opening of
any new place of business  or new  location  of  Collateral,  the closing of any
existing  place of  business or  location  of  Collateral,  any change of in the
location of any Borrower's books, records and accounts (or copies thereof),  the
opening or closing of any post  office  box,  the opening or closing of any bank
account or, if any of the  Collateral  consists of Goods of a type normally used
in more than one  state,  the use of any such  Goods in any state  other  than a
state in which the Borrowers have previously advised Lender that such Goods will
be used.

                  (ii) ELIGIBLE  ACCOUNTS AND INVENTORY.  Promptly upon becoming
aware  thereof,  notify  Lender if any Account or  Inventory  identified  by the
Borrowers  to  Lender as an  Eligible  Account  or  Eligible  Inventory  becomes
ineligible for any reason.

                  (iii) LITIGATION AND PROCEEDINGS. Promptly upon becoming aware
thereof,  notify  Lender of any  actions  or  proceedings  which are  pending or
threatened  against Parent or any Borrower  which might have a Material  Adverse
Effect on Parent or any Borrower, and of any Commercial Tort Claims of Parent or
any Borrower  which may arise,  which notice shall  constitute  Parent's or such
Borrower's authorization to amend EXHIBIT C to add such Commercial Tort Claim.

                  (iv) NAMES AND TRADENAMES.  Notify Lender within ten (10) days
of any change of any  Borrower's or Parent's  name or the use of any  tradename,
assumed  name,  fictitious  name or division  name not  previously  disclosed to
Lender in writing by a Borrower or Parent.

                  (v)  ERISA  MATTERS.   Promptly   notify  Lender  of  (x)  the
occurrence of any "reportable event" (as defined in ERISA) which might result in
the termination by the Pension Benefit Guaranty  Corporation (the "PBGC") of any
employee benefit plan ("PLAN")  covering any officers or employees of the Parent
or any Borrower, any benefits of which are, or are required to be, guaranteed by
the PBGC,  (y)  receipt of any  notice  from the PBGC of its  intention  to seek
termination  of any  Plan  or  appointment  of a  trustee  therefor  or (z)  its
intention to terminate or withdraw from any Plan.

                  (vi)  ENVIRONMENTAL  MATTERS.  Immediately  notify Lender upon
becoming aware of any investigation,  proceeding,  complaint,  order, directive,
claim,  citation or notice with respect to any non-compliance  with or violation
of the  requirements of any  Environmental  Law by Parent or any Borrower or the
generation,  use,  storage,  treatment,  transportation,  manufacture

                                      -35-

<PAGE>

handling,  production  or  disposal  of any  Hazardous  Materials  or any  other
environmental,  health or safety matter which affects  Parent or any Borrower or
its respective  business  operations or assets or any properties at which Parent
or any Borrower has transported, stored or disposed of any Hazardous Materials.

                  (vii) DEFAULT; MATERIAL ADVERSE CHANGE. Promptly advise Lender
of any material  adverse change in the business,  property,  assets,  prospects,
operations or condition,  financial or otherwise,  of Parent and the  Borrowers,
taken as a whole,  the  occurrence  of any  Event of  Default  hereunder  or the
occurrence  of any event  which,  if  uncured,  will become an Event of Default,
after notice or lapse of time (or both).

                  (viii) U.S. GOVERNMENT CONTRACTS. Promptly notify Lender, upon
entering into a new contract with any agency, department or other subdivision of
the U.S.  Government,  of such event, and provide Lender all information  Lender
may request,  such as size and duration of such  contract,  and all  information
necessary  for due  submission  of a Notice  of  Assignment  under  the  Federal
Assignment of Claims Act of 1940 with respect to such contract.

All of the  foregoing  notices  shall be provided by the  Borrowers to Lender in
writing.

                  (C) COMPLIANCE WITH LAWS AND MAINTENANCE OF PERMITS.

                  (i) Parent and each Borrower shall  maintain all  governmental
consents,  franchises,  certificates,  licenses,  authorizations,  approvals and
permits,  the lack of which would have a Material  Adverse  Effect on Parent and
the  Borrowers,  taken as a whole,  and Parent and each Borrower shall remain in
compliance  with all  applicable  federal,  state,  local and foreign  statutes,
orders,  regulations,  rules  and  ordinances  (including,  without  limitation,
Environmental  Laws and  statutes,  orders,  regulations,  rules and  ordinances
relating to taxes,  employer  and  employee  contributions  and  similar  items,
securities,  ERISA or employee  health and  safety)  the  failure  with which to
comply would have a Material  Adverse Effect on Parent and the Borrowers,  taken
as a whole.

                  (ii) Each  Borrower  shall use its best efforts to comply with
all of the  provisions  of the  Federal  Assignment  of Claims Act of 1940 on or
before the Compliance Date with respect to each material  contract such Borrower
entered  into  with each  Federal  Entity  prior to the date of this  Agreement;
PROVIDED,  that the  failure by a Borrower  to obtain  countersignatures  on any
notice of assignment shall not, of itself, constitute a Default hereunder.

                  (D) INSPECTION AND AUDITS.

                  Parent and the Borrowers  shall permit Lender,  or any Persons
designated  by  it,  to  call  at any of the  Borrowers'  respective  places  of
business,  upon  reasonable  notice and at any reasonable  times,  and,  without
hindrance or delay, but without undue disruption to the Borrowers' business,  to
inspect the Collateral and to inspect,  audit,  check and make extracts from any
books, records,  journals,  orders, receipts and any correspondence of Parent or
any Borrower and other data relating to Parent's or any Borrower's business, the
Collateral or any  transactions  between the parties hereto,  and shall have the
right to make such verification  concerning  Parent's or any Borrower's business
as Lender  may  consider  reasonable  under the  circumstances.  Parent  and the
Borrowers shall furnish to Lender such  information  relevant to Lender's rights
under this

                                      -36-

<PAGE>

Agreement  as Lender  shall at any time and from time to time  request.  Lender,
through its officers,  employees or agents shall have the right, at any time and
from time to time, in Lender's name, to verify the validity, amount or any other
matter  relating to any of the  Accounts of any  Borrower,  by mail,  telephone,
telegraph or otherwise.  Parent and each Borrower  authorizes  Lender to discuss
the affairs, finances and business of Parent or such Borrower with any officers,
employees (as  designated  by the Parent or the  Borrowers) or directors of such
Borrower or Parent or any Affiliate,  and to discuss the financial  condition of
Parent or such  Borrower with Parent's and such  Borrower's  independent  public
accountants.  Any such  discussions  shall be without  liability to Lender or to
Parent's or such Borrower's independent public accountants.  The Borrowers shall
agree jointly and  severally to pay to Lender all  customary  fees and all costs
and  out-of-pocket  expenses  incurred  by Lender in the  exercise of its rights
hereunder,  including  fees in connection  with any audits or inspections of any
Collateral or Borrowers'  operations  or businesses  (such fee, the  "COLLATERAL
MANAGEMENT FEE"), which Collateral Management Fee shall be in the amount of $700
per day, per person;  PROVIDED,  HOWEVER,  that,  unless an Event of Default has
occurred and is  continuing,  the Borrowers  shall not be obligated to reimburse
Lender for more than four (4) of such audits or inspections conducted during any
one  365-day  period,  aggregating  no more  than  twenty  (20) days in any such
period.  All of such  fees,  costs and  expenses  shall  constitute  Liabilities
hereunder,  shall be payable on demand and,  until paid,  shall bear interest at
the highest rate then applicable to Loans hereunder.

                  (E) INSURANCE.

                  Each Borrower shall:

                  (i) Keep the  Collateral  properly  housed and insured for the
full insurable value thereof against loss or damage by fire,  theft,  explosion,
sprinklers,  collision  (in the case of motor  vehicles) and such other risks as
are customarily insured against by Persons engaged in businesses similar to that
of such Borrower,  with such companies,  in such amounts, with such deductibles,
and under policies in such form, as shall be reasonably  satisfactory to Lender.
Original (or certified)  copies of such policies of insurance have been or shall
be,  within ninety (90) days of the date hereof,  delivered to Lender,  together
with  evidence of payment of all premiums  due  therefor,  and shall  contain an
endorsement, in form and substance acceptable to Lender, showing loss under such
insurance  policies  payable  to Lender.  Such  endorsement,  or an  independent
instrument  furnished to Lender,  shall provide that the insurance company shall
give Lender at least thirty (30) days written  notice  before any such policy of
insurance is altered or canceled and that no act,  whether willful or negligent,
or default of such Borrower or any other Person shall affect the right of Lender
to  recover  under  such  policy  of  insurance  in case of loss or  damage.  In
addition,  after  the  occurrence  and  during  the  continuance  of an Event of
Default,  each  Borrower  shall cause to be executed and  delivered to Lender an
assignment of proceeds of its business  interruption  insurance  policies.  Each
Borrower  hereby directs all insurers under all policies of insurance to pay all
proceeds payable thereunder directly to Lender. Each Borrower irrevocably makes,
constitutes  and  appoints  Lender  (and  all  officers,   employees  or  agents
designated  by  Lender)  as  such  Borrower's  true  and  lawful  attorney  (and
agent-in-fact),  after the occurrence and during the  continuance of an Event of
Default,  for the purpose of making,  settling and  adjusting  claims under such
policies of insurance,  endorsing the name of such Borrower on any check, draft,
instrument  or other  item of  payment  for the  proceeds  of such

                                      -37-

<PAGE>

policies of insurance and making all  determinations  and decisions with respect
to such policies of insurance.

                  (ii) Maintain, at its expense, such public liability and third
party  property  damage  insurance  as  is  customary  for  Persons  engaged  in
businesses  similar to that of such  Borrower  with such  companies  and in such
amounts,  with  such  deductibles  and under  policies  in such form as shall be
reasonably  satisfactory  to Lender and original (or  certified)  copies of such
policies  have been or shall be,  within ninety (90) days after the date hereof,
delivered  to Lender,  together  with  evidence of payment of all  premiums  due
therefor;  each such  policy  shall  contain an  endorsement  showing  Lender as
additional  insured  thereunder and providing  that the insurance  company shall
give Lender at least  thirty  (30) days  written  notice  before any such policy
shall be altered or canceled.

If any Borrower at any time or times  hereafter shall fail to obtain or maintain
any of the policies of insurance  required  above or to pay when due any premium
relating  thereto,  then Lender,  without waiving or releasing any obligation or
default by such Borrower  hereunder,  may (but shall be under no obligation  to)
obtain and maintain  such  policies of insurance  and pay such premiums and take
such  other  actions  with  respect  thereto  as Lender  deems  advisable.  Such
insurance,  if obtained by Lender,  may, but need not,  protect such  Borrower's
interests or pay any claim made by or against such  Borrower with respect to the
Collateral. Such insurance may be more expensive than the cost of insurance such
Borrower  may be able to obtain on its own and may be  cancelled  only upon such
Borrower  providing  evidence  that it has  obtained  the  insurance as required
above.  All sums  disbursed  by  Lender  in  connection  with any such  actions,
including,  without limitation,  court costs,  expenses,  other charges relating
thereto  and  reasonable  attorneys'  fees,  shall  constitute  Revolving  Loans
hereunder,  shall be payable on demand by the Borrowers jointly and severally to
Lender and, until paid,  shall bear interest at the highest rate then applicable
to Revolving Loans hereunder.

                  (F) COLLATERAL.

                  Each Borrower  shall keep the  Collateral  owned by it in good
condition,  repair and order  (reasonable wear and tear excepted) and shall make
all  necessary  repairs to the Equipment  and  replacements  thereof so that the
operating  efficiency  and the value thereof shall at all times be preserved and
maintained.  Each Borrower  shall permit Lender to examine any of the Collateral
owned by it at any time and wherever  the  Collateral  may be located and,  each
Borrower shall,  immediately upon request therefor by Lender,  deliver to Lender
any and all  evidence of  ownership  of any  Equipment  owned by it,  including,
without  limitation,  certificates  of title and  applications  of  title.  Each
Borrower  shall,  at the request of Lender,  indicate on its records  concerning
Collateral  owned by it a  notation,  in form  satisfactory  to  Lender,  of the
security interest of Lender hereunder.

                  (G) USE OF PROCEEDS.

                  All monies and other  property  obtained by the Borrowers from
Lender pursuant to this Agreement  shall be used (i) to refinance  partially the
Shareholder  Debt,  (ii) for the  business  purposes of the  Borrowers,  such as
funding  the ongoing  working  capital  requirements  of the  Borrowers  and the
acquisition of Equipment,  (iii) to fund the  construction  of a ballistic range
and

                                      -38-

<PAGE>

the related  capital  expenditures  and (iv) to fund the payment of  transaction
costs  and  expenses  in  connection  with the  transactions  described  in this
Agreement.

                  (H) TAXES.

                  The  Parent and each  Borrower  shall  file all  required  tax
returns and pay all of its taxes when due, including,  without limitation, taxes
imposed by federal,  state or municipal agencies,  and shall cause any liens for
taxes to be promptly  released;  PROVIDED,  that Parent and each Borrower  shall
have the right to contest the payment of such taxes in good faith by appropriate
proceedings  so long as (i) the amount so contested is shown on Parent's or such
Borrower's  financial  statements;  (ii) the contesting of any such payment does
not give rise to a lien for  taxes;  and (iii)  Parent  or such  Borrower  shall
establish  an  adequate  reserve  therefor to the extent  required by  generally
accepted accounting principles,  consistently applied. If Parent or any Borrower
fails to pay any such taxes and in the absence of any such  contest by Parent or
Borrower,  Lender may (but shall be under no obligation  to) advance and pay any
sums  required  to pay any such taxes  and/or to secure the  release of any lien
therefor,  and any sums so advanced by Lender shall  constitute  Revolving Loans
hereunder,  shall be payable  by Parent or  Borrower  to Lender on demand,  and,
until paid, shall bear interest at the highest rate then applicable to Revolving
Loans hereunder;

                  (I) INTELLECTUAL PROPERTY.

                  Parent and each Borrower  shall  maintain  licenses,  patents,
patent   applications,   copyrights,   service  marks,   trademarks,   trademark
applications,  tradestyles and tradenames which such Person  reasonably deems to
be  adequate to  continue  its  business  as  heretofore  conducted  by it or as
hereafter conducted by it.

                  (J) KEY PERSON LIFE INSURANCE.

                  The Parent shall maintain  insurance upon the life of David H.
Brooks (the "LIFE INSURANCE  POLICY"),  with the death benefit  thereunder in an
amount not less than One  Million  Five  Hundred  Thousand  and  No/100  Dollars
($1,500,000).  The Borrowers  shall have caused the Life Insurance  Policy to be
delivered to the Lender within  thirty (30) days of the date of this  Agreement.
Parent shall at all times maintain the Life Insurance Assignment in favor of the
Lender in full force and effect. The Life Insurance Policy is in addition to any
and all other life insurance policies maintained by Parent or any Borrower,  and
Lender has no claim or rights to such other life insurance policies.

                  (K) SHAREHOLDER DEBT.

                  After  giving  effect to the  repayment of (i) Six Million and
No/100  Dollars  ($6,000,000)  of  principal  and (ii)  accrued  interest on the
Shareholder  Debt on or  about  the  date  of this  Agreement,  there  shall  be
outstanding  at all times (except to the extent paid out of the proceeds of life
insurance  policies (other than the Life Insurance  Policy) on the life of David
H. Brooks) at least Ten Million and No/100  Dollars  ($10,000,000)  of principal
(when  aggregated  with  any  accrued  and  unpaid  interest   thereon)  of  the
Shareholder Debt.

                                      -39-

<PAGE>

                  (L) PARENT QUALIFICATION.

                  Parent shall take all steps  necessary to become  qualified to
transact  business in the State of New York,  and shall be so  qualified  within
ninety (90) days of the date of this Agreement.

         13.      NEGATIVE COVENANTS.

                  Until payment and  satisfaction in full of all Liabilities and
termination of this Agreement, unless Parent and Borrowers obtain Lender's prior
written  consent  waiving or modifying any of their  covenants  hereunder in any
specific instance, Parent and each Borrower, as applicable, agree as follows:

                  (A) GUARANTIES.

                  No Borrower shall assume,  guarantee or endorse,  or otherwise
become liable in connection with, the obligations of any Person,  except (i) for
the existing  guaranties listed on SCHEDULE 13(A) hereto, (ii) by endorsement of
instruments  for deposit or collection or similar  transactions  in the ordinary
course of business,  (iii) for guaranties given to suppliers,  other vendors and
customers  in the  ordinary  course  of  business  and  (iv)  pursuant  to  this
Agreement.

                  (B) INDEBTEDNESS.

                  No Borrower shall create,  incur,  assume or become  obligated
(directly or indirectly), for any loans or other indebtedness for borrowed money
other than the Loans and  Liabilities,  except that the Borrowers may (i) borrow
money from a Person other than Lender on an unsecured and subordinated  basis if
a  subordination  agreement  in  favor  of  Lender  and in  form  and  substance
satisfactory  to Lender is executed and  delivered to Lender  relative  thereto;
(ii)  maintain  the  existing  indebtedness  listed  on  SCHEDULE  11(N)  hereto
(including the Shareholder  Debt);  (iii) incur unsecured  indebtedness to trade
creditors  in the  ordinary  course of  business  and for the  financing  of the
payment of insurance  premiums;  and (iv) incur purchase money  indebtedness  or
capitalized lease obligations in connection with Capital Expenditures  permitted
pursuant to  SUBSECTION  14(D)  hereof in an aggregate  principal  amount not to
exceed Two Hundred  Fifty  Thousand  and No/100  Dollars  ($250,000)  during any
Fiscal Year.

                  (C) LIENS.

                  No  Borrower  shall grant or permit to exist  (voluntarily  or
involuntarily)   any  lien,  claim,   security  interest  or  other  encumbrance
whatsoever on any of its assets, other than Permitted Liens.

                  (D)  MERGERS,  SALES,  ACQUISITIONS,  SUBSIDIARIES  AND  OTHER
TRANSACTIONS OUTSIDE THE ORDINARY COURSE OF BUSINESS.

                  No Borrower shall,  and in the case of clause (i) hereof,  the
Parent shall not, (i) enter into any merger or consolidation; PROVIDED, HOWEVER,
that any  Borrower  may merge  with and into any other  Person,  so long as such
Borrower is the  surviving  entity of such  merger,  and any Borrower may merger
with and into any other Borrower;  (ii) change the state of its

                                      -40-

<PAGE>

organization or enter into any transaction  which has the effect of changing its
state of  organization  (iii)  sell,  lease or  otherwise  dispose of any of its
assets other than in the ordinary  course of business;  (iv) purchase the stock,
other equity  interests or all or a material portion of the assets of any Person
or division of such Person,  PROVIDED,  HOWEVER, that the Borrowers may purchase
out of the ordinary  course of their business  assets of other Persons in one or
more transactions in an aggregate amount not to exceed Five Hundred Thousand and
no/100   Dollars   ($500,000)   in  any  one  Fiscal  Year  (each  a  "PERMITTED
ACQUISITION",  and  collectively,   the  "PERMITTED  ACQUISITIONS");   PROVIDED,
FURTHER, that such Permitted Acquisitions, when aggregated with the Permitted JV
Investments  made in any one Fiscal Year  pursuant to  SUBSECTION  13(F) hereof,
shall not exceed Seven Hundred Fifty Thousand and no/100  Dollars  ($750,000) in
any one  Fiscal  Year;  or (v) enter  into any  other  transaction  outside  the
ordinary course of its business,  including,  without limitation,  any purchase,
redemption  or  retirement  of any shares of any class of its stock or any other
equity interest,  and any issuance of any shares of, or warrants or other rights
to receive or purchase any shares of, any class of its stock or any other equity
interest. Except to the extent permitted by SUBSECTION 13(F) hereof, no Borrower
shall form any  Subsidiaries  or enter into any joint  ventures or  partnerships
with any other Person.

                  (E) DIVIDENDS AND DISTRIBUTIONS.

                  No  Borrower  shall  declare  or pay  any  dividend  or  other
distribution  (whether in cash or in kind) on any class of its stock (if it is a
corporation)  or on  account  of  any  equity  interest  in  itself  (if it is a
partnership,  limited liability company or other type of entity),  except to the
extent permitted under SUBSECTIONS  13(F), (L) OR (M) hereof, and solely for the
purposes  described  therein;  PROVIDED,  HOWEVER,  that,  in  addition  to  the
foregoing,  (i) the Borrowers may, on or about the date of this  Agreement,  pay
dividends to Parent for the purpose of (A) the  repayment by Parent of principal
of the Shareholder Debt, which dividends, when aggregated with any loans made by
the  Borrowers  to  Parent on or about the date of this  Agreement  pursuant  to
SUBSECTION  13(F)  hereof  for  the  purpose  of  repayment  by  Parent  of  the
Shareholder  Debt, shall not exceed Six Million and No/100  ($6,000,000) and (B)
the payment of accrued and unpaid interest on the Shareholder  Debt; and (ii) at
the end of each Fiscal Year,  commencing with the Fiscal Year ending on December
31,  2002,  so long as Lender shall have first  received  payment in full of the
Annual Term Loan Prepayment for such Fiscal Year, Borrowers may pay dividends to
Parent  which in the  aggregate  do not  exceed an amount  equal to  twenty-five
percent (25%) of Excess Cash Flow for such Fiscal Year, MINUS any amounts loaned
to Parent  pursuant to  SUBSECTION  13(F)  hereof,  PROVIDED,  FURTHER  that the
following  conditions (the "PAYMENT  CONDITIONS")  shall have been, or shall be,
met at the time of such proposed  payment pursuant to clause (ii) above: (A) the
proceeds of any such  proposed  payment made to Parent shall only be used to (i)
repay the  Shareholder  Debt or (ii)  repurchase  or redeem shares of the common
stock of Parent;  (B) no Default or Event of Default  shall have occurred and be
continuing on the date of, and immediately after giving effect to, such proposed
payment;  (C) for the  most  recently  ended  Fiscal  Year for  which  financial
statements are available,  commencing  with the Fiscal Year ending  December 31,
2002,  Net Income shall not have been less than Three Million and No/100 Dollars
($3,000,000); and (D) Adjusted Availability on the date of the proposed payment,
and  immediately  after  giving  effect  thereto,  shall be not less than  Three
Million and No/100 Dollars ($3,000,000).

                                      -41-

<PAGE>

                  (F) INVESTMENTS; LOANS.

                  No Borrower shall purchase or otherwise  acquire,  or contract
to purchase or otherwise acquire,  the obligations or stock of any Person, other
than direct obligations of the United States,  PROVIDED,  that the Borrowers may
make  investments in joint ventures in one or more  transactions in an aggregate
amount not to exceed Five Hundred Thousand and No/100 Dollars  ($500,000) in any
one  Fiscal  Year (each a  "PERMITTED  JV  INVESTMENT",  and  collectively,  the
"PERMITTED JV INVESTMENTS"); PROVIDED, however, that the maximum liability which
the Borrowers can incur in connection with any one Permitted JV Investment shall
be limited to the amount  invested  therein;  and PROVIDED,  further,  that such
Permitted JV Investments,  when aggregated with the Permitted  Acquisitions made
in any one Fiscal Year  pursuant to SUBSECTION  13(D)  hereof,  shall not exceed
Seven Hundred  Fifty  Thousand and No/100  Dollars  ($750,000) in any one Fiscal
Year;  nor shall any  Borrower  lend or otherwise  advance  funds to any Person,
except to the extent permitted under SUBSECTIONS  13(E), (L) OR (M) hereof,  and
solely for the  purposes  described  therein,  and except for  advances  made to
employees,  officers and directors for travel and other expenses  arising in the
ordinary  course of  business;  PROVIDED,  HOWEVER,  that,  in  addition  to the
foregoing,  (i) the Borrowers may, on or about the date of this Agreement,  make
loans to Parent for the purpose of (A) the  repayment  by Parent of principal of
the Shareholder  Debt,  which loans,  when aggregated with any dividends paid by
the  Borrowers  to  Parent on or about the date of this  Agreement  pursuant  to
SUBSECTION  13(E)  hereof for the purpose of repayment by Parent of principal of
the  Shareholder   Debt,  shall  not  exceed  Six  Million  and  No/100  Dollars
($6,000,000)  and  (B)  the  payment  of  accrued  and  unpaid  interest  on the
Shareholder  Debt;  and (ii) at the end of each Fiscal  Year,  so long as Lender
shall have first received payment in full of the Annual Term Loan Prepayment for
such Fiscal Year,  Borrowers  may make loans to Parent which in the aggregate do
not exceed an amount equal to twenty-five  percent (25%) of Excess Cash Flow for
such  Fiscal  Year  MINUS any  amounts  paid to Parent in the form of a dividend
pursuant to SUBSECTION 13(E) hereof,  PROVIDED that the Payment Conditions shall
have been, or shall be, met at the time of such proposed loan.

                  (G) FUNDAMENTAL CHANGES, LINE OF BUSINESS.

                  Neither Parent nor any Borrower shall amend its organizational
documents  or change its fiscal year in any manner  adverse to the  interests of
the Lender,  and no Borrower shall enter into a new line of business  materially
different from its current business.

                  (H) EQUIPMENT.

                  No Borrower shall (i) permit any Equipment to become a Fixture
to real  property  unless such real  property is owned by such  Borrower  and is
subject to a mortgage in favor of Lender, or (ii) permit any Equipment to become
an accession to any other  personal  property  unless such personal  property is
subject to a first priority lien in favor of Lender.

                  (I) USE OF PROCEEDS.

                  (i) No  Borrower  nor  any  Affiliate  thereof  shall  use any
portion of the proceeds of the Loans,  either  directly or  indirectly,  for the
purpose of (i) purchasing any securities underwritten or privately placed by ABN
AMRO Securities  (USA) Inc.  ("AASI"),  an

                                      -42-

<PAGE>

affiliate of Lender,  (ii)  purchasing  from AASI any  securities  in which AASI
makes a market, or (iii)  refinancing or making payments of principal,  interest
or  dividends  on any  securities  issued by a Borrower  or any  Affiliate,  and
underwritten, privately placed or dealt in by AASI.

                  (ii)    (A) The proceeds of the  dividends or loans  permitted
to be paid by the Borrowers pursuant to SUBSECTION 13(l)(i) hereof shall only be
used by Parent for the payment of management fees.

                          (B) The proceeds of the  dividends or loans  permitted
to be paid by the Borrowers  pursuant to SUBSECTION  13(L)(II) hereof shall only
be used by Parent for the payment of operating expenses.

                  (J) AFFILIATE TRANSACTIONS.

                  Expect as set forth on SCHEDULE  11(I)  hereto or as permitted
pursuant to SUBSECTION 11(C) hereof, no Borrower shall conduct, permit or suffer
to be  conducted,  transactions  with  Affiliates  for the  purchase  or sale of
Inventory or services in the ordinary course of business  pursuant to terms that
are less  favorable to such Borrower than the terms upon which such transfers or
transactions would have been made had they been made to or with a Person that is
not an Affiliate.

                  (K) SETTLING OF ACCOUNTS.

                  Except in the  ordinary  course of its  business,  no Borrower
shall settle or adjust any Account  identified  by the  Borrowers as an Eligible
Account or with respect to which the Account Debtor is an Affiliate  without the
consent  of Lender;  PROVIDED,  that  following  the  occurrence  and during the
continuance  of an Event of  Default,  no  Borrower  shall  settle or adjust any
Account without the consent of Lender.

                  (L) MANAGEMENT FEES; EXPENSES.

                  (i) The Borrowers  may, in addition to the dividends and loans
permitted to be paid or made under  SUBSECTIONS  13(E), (F) and (M) hereof,  pay
dividends and/or make loans to the Parent the proceeds of which shall be used to
fund the payment by Parent of management fees;  PROVIDED,  HOWEVER,  that (A) no
Default or Event of Default  shall have  occurred and be  continuing on the date
of, and  immediately  after  giving  effect to, such  payment;  and (B) Adjusted
Availability on the date of the proposed  payment,  and immediately after giving
effect  thereto,  on a combined basis for all Borrowers,  shall not be less than
Three Million and No/100 Dollars  ($3,000,000);  and (C) such payments shall not
aggregate  in any one Fiscal Year more than the lesser of (x) ten percent  (10%)
of net  income,  as defined  under  generally  accepted  accounting  principles,
consistently  applied,  of the Parent and its  Subsidiaries,  on a  consolidated
basis,  for the  immediately  prior  Fiscal  Year and (y) One Million and No/100
Dollars ($1,000,000).

                  (ii) The Borrowers may, in addition to the dividends and loans
permitted to be paid or made under  SUBSECTIONS  13(E), (F) and (M) hereof,  pay
dividends  and/or make loans to Parent in an aggregate  amount not to exceed One
Million and No/100 Dollars  ($1,000,000)  each calendar month for the payment by
Parent of its operating expenses.

                                      -43-

<PAGE>

                  (M) SHAREHOLDER DEBT.

                  In addition to the amounts which are permitted to be paid as a
dividend  by the  Borrowers  to Parent  pursuant  to  SUBSECTIONS  13(E) and (L)
hereof,  or loaned by Borrowers to Parent pursuant to SUBSECTIONS  13(F) and (L)
hereof,  so long as no Event of Default shall have occurred and be continuing or
shall occur as a result of such dividend  payment or loan, the Borrowers may pay
dividends  and make loans to Parent,  PROVIDED  the  proceeds  thereof  are used
concurrently  by Parent solely to fund scheduled  payments of interest on and/or
payments of accrued  interest on and/or payments of principal of the Shareholder
Debt,  and  PROVIDED  FURTHER  that Parent will not,  without the prior  written
consent of Lender,  (i) modify or amend any  material  term or  provision of the
documents or  instruments  evidencing  the  Shareholder  Debt or the  agreements
pursuant to which the  Shareholder  Debt is governed,  except in accordance with
SUBSECTION  13(Q) hereof,  or (ii) make any payment or prepayment of interest on
or principal of the Shareholder Debt, except for such scheduled  installments of
interest  thereon  and  principal  thereof  as are in effect on the date of this
Agreement,  accrued interest thereon and those  prepayments of principal thereof
allowed pursuant to SUBSECTIONS 13(E) AND (F) hereof.

                  (N) AVAILABILITY.

                  The  Borrowers  shall  maintain  at all  times,  on a combined
basis,  Availability  of not less than Five Hundred  Thousand and No/100 Dollars
($500,000).

                  (O) PARENT SUBORDINATION.

                  Parent agrees and  acknowledges  that its right to receive any
dividend,  loan or other  payment  from the  Borrowers  pursuant to  SUBSECTIONS
13(E),  (F), (L)(I) and (M) hereof (each, for purposes of this SUBSECTION 13(O),
a  "DISTRIBUTION"),  shall be  subordinate  and  junior in right of  payment  to
Lender's right to receive payment of the Liabilities.  Parent agrees that, until
all of the  Liabilities  shall have been repaid,  it shall  instruct each of the
Borrowers not to pay, and agrees not to accept payment of, any dividend, loan or
other  payment  of any kind from the  Borrowers;  PROVIDED,  that the Parent may
receive Distributions so long as no Default or Event of Default has occurred and
is continuing under this Agreement, or would be caused by any such Distribution.
If Parent  receives  any  Distribution  or any other  amounts from a Borrower in
violation of this SUBSECTION 13(O) or any other terms of this Agreement,  Parent
agrees to receive and hold in trust for and promptly turn over to the Lender, in
the form received, any such sums at any time paid to, or received by, the Parent
until  payment in full of the  Liabilities,  and to reimburse the Lender for all
costs,  including  reasonable  attorney's  fees,  incurred  by the Lender in the
course of collecting said sums,  should Parent fail voluntarily to turn the same
over to the Lender as herein required.

                  (P) TRANSFER OF ASSETS.

                  Notwithstanding  the  terms of  SUBSECTION  13(J)  hereof,  no
Borrower shall transfer any of its assets or property to any DHB Subsidiary.

                                      -44-

<PAGE>

                  (Q) TRANSFER OF SHAREHOLDER DEBT.

                  David H. Brooks  shall not assign or transfer  any interest in
the  Shareholder  Debt to any other Person without the prior written  consent of
Lender  which shall not be  unreasonably  withheld or delayed  (such  Person,  a
"PERMITTED  TRANSFEREE").  Any such Permitted  Transferee  shall be obligated to
execute a subordination  agreement  substantially  similar to the  Subordination
Agreement by and between the Lender and David H. Brooks,  dated the date of this
Agreement.

         14.      FINANCIAL COVENANTS.

                  Parent and the Borrowers shall maintain and keep in full force
and effect each of the financial covenants set forth below:

                  (A) TANGIBLE NET WORTH.

                  (i) The Tangible Net Worth of Parent and its Subsidiaries,  on
a  consolidated  basis,  shall not at any time be less than Three  Million  Five
Hundred Thousand and No/100 Dollars ($3,500,000).

                  (ii)  Each  Borrower  shall at all  times  maintain  a minimum
Tangible Net Worth of at least One Dollar.

                  (B) FIXED CHARGE COVERAGE.

                  Parent and the Borrowers  shall not permit the ratio of EBITDA
to Fixed  Charges,  as of the end of each fiscal  quarter,  commencing  with the
fiscal  quarter  ending on December 31, 2001, in each case with the  immediately
preceding three fiscal quarters, to be less than 2.20:1.00.

                  (C) CONSOLIDATED EBITDA.

                  Parent and the Borrowers shall not permit EBITDA as of the end
of each fiscal  quarter,  commencing  with the fiscal quarter ending on December
31, 2001, in each case with the immediately  preceding three fiscal quarters, to
be  less  than  Seven   Million  Five  Hundred   Thousand  and  No/100   Dollars
($7,500,000).

                  (D) CAPITAL EXPENDITURE LIMITATIONS.

                  Borrowers  shall not make any Capital  Expenditure  if,  after
giving effect to such Capital Expenditure,  the aggregate cost of all such fixed
assets purchased or otherwise acquired by the Borrowers would exceed Two Million
and No/100  Dollars  ($2,000,000)  during any Fiscal Year,  commencing  with the
Fiscal Year ending on December 31, 2002.

         15.      DEFAULT.

                  The  occurrence  of any one or more  of the  following  events
shall constitute an "EVENT OF DEFAULT" hereunder:

                                      -45-

<PAGE>

                  (A) PAYMENT.

                  The  failure of any the  Borrowers  to pay when due any of the
Liabilities.

                  (B) BREACH OF THIS AGREEMENT AND THE OTHER AGREEMENTS.

                  (i) The failure of any Obligor  (other than a DHB  Subsidiary)
to  perform,  keep  or  observe  any of  the  covenants,  conditions,  promises,
agreements or  obligations  of such Obligor  under this  Agreement or any of the
Other Agreements  (other than those contained in subsections  5(c), 9(a), except
to the extent information is required daily, 9(b) and 9(c), 12(a),  12(b), other
than clauses (ii) and (vii) therein, 12(c), 12(f) and 12(h); or

                  (ii) The failure of any Obligor (other than a DHB  Subsidiary)
to perform,  keep or observe (A) the covenants  contained in subsection 9(a), to
the extent such  information is required weekly and not daily,  and such default
shall have  continued  unremedied  for a period of two days;  (B) the  covenants
contained in subsections 5(c), 9(b), 9(c)(i), 12(a) or 12(b), other than clauses
(ii) and (vii) therein,  and such default shall have continued  unremedied for a
period of ten (10) days; or (C) the covenants contained in subsections 9(c)(ii),
12(c)(i), 12(f) or 12(h), and such default shall have continued unremedied for a
period  of thirty  (30)  days;  PROVIDED,  that with  respect  to the  covenants
contained in  subsections  12(a) and 12(c),  such default  shall have  continued
unremedied  for a period of thirty (30) days from the earlier of (x) the date on
which the  failure  was  discovered  by the  applicable  Obligor and (y) written
notice thereof was delivered by Lender to the Borrowers.

                  (C) BREACHES OF OTHER OBLIGATIONS.

                  The failure of any Obligor  (other than a DHB  Subsidiary)  to
(i) pay any amount when due on  indebtedness of such Obligor for borrowed money,
the then unpaid aggregate principal amount of which is Fifty Thousand and No/100
Dollars ($50,000) or greater, including without limitation the Shareholder Debt.

                  (D) BREACH OF REPRESENTATIONS AND WARRANTIES.

                  The making or  furnishing  by any  Obligor  (other  than a DHB
Subsidiary) to Lender of any representation,  warranty,  certificate,  schedule,
report or other communication within or in connection with this Agreement or the
Other Agreements or in connection with any other agreement  between such Obligor
and Lender, which is untrue or misleading in any material respect.

                  (E) LOSS OF COLLATERAL.

                  The loss,  theft,  damage or  destruction  of, or  (except  as
permitted  hereby) sale, lease or furnishing under a contract of service (unless
in the  ordinary  course of  business)  of any of the  Collateral  having a fair
market  value in  excess  of Two  Hundred  Fifty  Thousand  and  No/100  Dollars
($250,000).

                                      -46-

<PAGE>

                  (F) BANKRUPTCY OR SIMILAR PROCEEDINGS.

                  The  commencement  of  any  proceedings  in  bankruptcy  by or
against any Obligor  (other than a DHB  Subsidiary)  or for the  liquidation  or
reorganization  of any Obligor (other than a DHB  Subsidiary),  or alleging that
such  Obligor  (other than a DHB  Subsidiary)  is insolvent or unable to pay its
debts  as they  mature,  or for the  readjustment  or  arrangement  of any  such
Obligor's (other than a DHB Subsidiary's) debts, whether under the United States
Bankruptcy  Code or under  any  other  law,  whether  state or  federal,  now or
hereafter  existing,  for the  relief of  debtors,  or the  commencement  of any
analogous  statutory or  non-statutory  proceedings  involving  any such Obligor
(other than a DHB Subsidiary);  PROVIDED,  HOWEVER, that if such commencement of
proceedings  against  such  Obligor  is  involuntary,   such  action  shall  not
constitute an Event of Default unless such  proceedings are not dismissed within
forty-five (45) days after the commencement of such proceedings.

                  (G) APPOINTMENT OF RECEIVER.

                  The  appointment  of a  receiver  or trustee  for any  Obligor
(other than a DHB Subsidiary),  for any of the Collateral or for any substantial
part  of any  such  Obligor's  (other  than a DHB  Subsidiary's)  assets  or the
institution  of any  proceedings  for the  dissolution,  or the full or  partial
liquidation, or the merger or consolidation (unless such merger or consolidation
is  otherwise  permitted  hereunder),  of any  Obligor  which is a  corporation,
limited  liability  company  or a  partnership  (other  than a DHB  Subsidiary);
PROVIDED,  HOWEVER,  that if such  appointment  or  commencement  of proceedings
against such Obligor is  involuntary,  such action shall not constitute an Event
of Default unless such  appointment is not revoked or such  proceedings  are not
dismissed   within   forty-five  (45)  days  after  the   commencement  of  such
proceedings.

                  (H) JUDGMENT.

                  The entry of any  judgment  or order in an amount in excess of
One Hundred  Thousand and No/100 Dollars  ($100,000)  against any Obligor (other
than a DHB Subsidiary)  which remains  unsatisfied or undischarged and in effect
for  thirty  (30)  days  after  such  entry  without  a stay of  enforcement  or
execution.

                  (I) DISSOLUTION OF OBLIGOR.

                  The  dissolution of any Obligor (other than a DHB  Subsidiary)
which is a partnership, limited liability company, corporation or other entity.

                  (J) DEFAULT OR REVOCATION OF GUARANTY.

                  The occurrence of an event of default under, or the revocation
or termination of, any agreement,  instrument or document executed and delivered
by any Person to Lender  pursuant to which such Person has  guaranteed to Lender
the payment of all or any of the  Liabilities  or has granted  Lender a security
interest  in or lien  upon some or all of such  Person's  real  and/or  personal
property to secure the payment of all or any of the Liabilities.

                                      -47-

<PAGE>

                  (K) CRIMINAL PROCEEDINGS.

                  The  conviction of any Obligor  (other than a DHB  Subsidiary)
for any felony.

                  (L) CHANGE OF CONTROL.

                  The  failure  of (i) David H.  Brooks  and/or  members  of his
immediate family, to own beneficially and of record, and have voting control of,
at least  twenty  percent  (20%) of the issued  and  outstanding  voting  equity
interests of Parent or (ii) Parent to own  beneficially and of record all of the
issued and outstanding shares of capital stock of each Borrower.

                  (M) CHANGE OF MANAGEMENT.

                  If  David  H.  Brooks  shall  cease  to  be  the  Chairman  or
Co-Chairman  of the Board of Parent  at any time or shall  cease to be  actively
involved,  on a day-to day basis  (other than due to illness or vacation of less
than three months' duration), in the business of the Parent and the Borrowers.

                  (N) MATERIAL ADVERSE CHANGE.

                  Any  material  adverse  change  in the  Collateral,  business,
property, assets, prospects,  operations or condition, financial or otherwise of
Parent and the Borrowers,  taken as a whole, as determined by Lender in its sole
judgment,  exercised in a commercially  reasonable  manner, or the occurrence of
any  event  which,  in  Lender's  sole  judgment,  exercised  in a  commercially
reasonable manner, could have a Material Adverse Effect.

                  (O) LIFE INSURANCE POLICY.

                  Life Insurance  Policy shall be  terminated,  by the Parent or
otherwise;  or the Life Insurance  Policy shall be scheduled to terminate within
thirty (30) days and the Parent shall not have delivered a satisfactory  renewal
thereof to the Lender;  or the Parent  shall fail to pay any premium on any Life
Insurance  Policy  when due;  or the  Parent  shall take any other  action  that
impairs the value of the Life Insurance Policy.

                  16. REMEDIES UPON AN EVENT OF DEFAULT.

                  (a) Upon the  occurrence  of an Event of Default  described in
subsection  15(f)  hereof,   all  of  the  Liabilities   shall  immediately  and
automatically  become  due and  payable,  without  notice of any kind.  Upon the
occurrence of any other Event of Default,  all Liabilities may, at the option of
Lender,  and without  demand,  notice or legal process of any kind, be declared,
and immediately shall become, due and payable.

                  (b) Upon the occurrence and during the continuance of an Event
of Default,  (i) Lender may  exercise  from time to time any rights and remedies
available to it under the Uniform  Commercial Code and any other  applicable law
in addition to, and not in lieu of, any rights and remedies expressly granted in
this Agreement or in any of the Other  Agreements and all of Lender's rights and
remedies shall be cumulative and  non-exclusive  to the extent permitted by law,
(ii) in particular,  but not by way of limitation of the foregoing,  Lender may,
without notice,

                                      -48-

<PAGE>

demand or legal process of any kind (to the extent permitted by applicable law),
take  possession of any or all of the  Collateral  (in addition to Collateral of
which it already has possession), wherever it may be found, and for that purpose
may pursue the same wherever it may be found, and may enter onto any of premises
of the  Borrowers  where any of the  Collateral  may be,  and search  for,  take
possession of, remove, keep and store any of the Collateral until the same shall
be sold or  otherwise  disposed of, and Lender shall have the right to store the
same at any of premises of the  Borrowers  without cost to Lender,  and (iii) at
Lender's request,  the Borrowers shall, at Borrowers' expense,  which they agree
shall be a joint and several  obligation,  assemble the  Collateral  and make it
available  to  Lender  at one or more  places to be  designated  by  Lender  and
reasonably convenient to Lender and the Borrowers.  The Borrowers recognize that
if  Borrowers  fail to perform,  observe or discharge  any of their  Liabilities
under this  Agreement  or the Other  Agreements,  no remedy at law will  provide
adequate relief to Lender,  and agree that Lender shall be entitled to temporary
and  permanent  injunctive  relief in any such case  without  the  necessity  of
proving actual damages.  Any notification of intended  disposition of any of the
Collateral  required  by law will be  deemed  to be a  reasonable  authenticated
notification  of  disposition  if  given at least  ten (10)  days  prior to such
disposition  and such notice shall (i) describe  Lender and the Borrowers,  (ii)
describe the Collateral that is the subject of the intended  disposition,  (iii)
state the method of the  intended  disposition,  (iv) state that  Borrowers  are
entitled to an accounting of the Liabilities  and state the charge,  if any, for
an accounting and (v) state the time and place of any public  disposition or the
time  after  which any  private  sale is to be made.  Lender  may  disclaim  any
warranties  that  might  arise  in  connection  with  the  sale,  lease or other
disposition of the Collateral and has no obligation to provide any warranties at
such time.  Any Proceeds of any  disposition  by Lender of any of the Collateral
may be applied by Lender to the payment of  reasonable  expenses  in  connection
with  the  Collateral,   including,   without  limitation,  legal  expenses  and
reasonable  attorneys'  fees, and any balance of such Proceeds may be applied by
Lender  toward  the  payment  of such of the  Liabilities,  and in such order of
application, as Lender may from time to time elect.

         17.      CONDITIONS PRECEDENT.

                  (a) The  obligation  of Lender to fund the Term Loan,  to fund
the  initial  Revolving  Loan,  and to issue or cause to be issued  the  initial
Letter of  Credit,  if funded  or issued on the day of the  funding  of the Term
Loan, is subject to the satisfaction or waiver on or before such funding date of
the following conditions precedent:

                  (ii)  Lender  shall  have  received  each  of the  agreements,
opinions,  reports,  approvals,  consents,  certificates and other documents set
forth on the  closing  document  list  attached  hereto as  SCHEDULE  17(A) (the
"CLOSING DOCUMENT LIST");

                  (iii) Since June 30, 2001, no event shall have occurred  which
has had or could  reasonably  be expected to have a Material  Adverse  Effect on
Parent and its  Subsidiaries,  taken as a whole,  or on Parent or any  Borrower,
individually,  as  determined by Lender in its sole  discretion,  exercised in a
commercially reasonable manner;

                  (iv) Lender  shall have  received  payment in full of all fees
and expenses  payable to it by the  Borrowers or any other Obligor in connection
herewith, on or before disbursement of the initial Loans hereunder;

                                      -49-

<PAGE>

                  (v) Lender shall have determined that immediately after giving
effect to

                          (A) the  making  of the  Term  Loan  and  the  initial
Revolving Loans, if any, requested to be made on such date,

                          (B) the issuance of the initial  Letter of Credit,  if
any, requested to be made on such date,

                          (C) the payment of all fees due upon such date,

                          (D) the payment or  reimbursement  by the Borrowers of
Lender for all  closing  costs and  expenses  incurred  in  connection  with the
transactions contemplated hereby, and

                          (E) the  payment  of all  taxes  due and  owing by the
Parent and the Borrowers as of the date of this  Agreement,  and assuming all of
Borrowers'  trade  payables and  outstanding  debt which remain unpaid more than
sixty (60) days after the due dates  thereof on the date of  determination,  are
paid by drawing  additional  Revolving  Loans,  on a PRO FORMA  basis,  Adjusted
Availability  shall not be less than Four  Million  Five  Hundred  Thousand  and
No/100 Dollars ($4,500,000);

                  (vi) Lender shall have completed to its  satisfaction  its due
diligence  review of the Parent and the Borrowers,  their business and financial
affairs and the members of their  management  team,  Lender shall have  received
background  investigations  on the key operating members of such team, and shall
have reviewed to its satisfaction the results of a field  examination  performed
by Lender,  as of a recent date, of the Collateral,  including a final appraisal
report  prepared  by the Buxbaum  Group of the  Borrowers'  Inventory,  based on
acceptable valuation definitions,  and of the Parent's and each Borrower's books
and records;

                  (vii) Parent and the Borrowers,  taken as a whole, shall be in
compliance in all material  respects with all applicable legal  requirements and
shall not be in material default of any of their  respective  obligations to any
third parties;

                  (viii)   Lender  shall  have  received  and  reviewed  to  its
satisfaction  evidence of each  Borrower's  insurance  coverage and Lender shall
have  been  named as loss  payee or  additional  insured  under  each  policy of
insurance  (other  than  workers  compensation  insurance),  the  terms  of each
endorsement naming Lender as loss payee or additional insured to be satisfactory
to Lender;

                  (ix) Lender  shall have  received  financial  projections  for
Parent and its  Subsidiaries on a consolidated  basis, for the first twelve (12)
months after the date of this Agreement, together with financial projections for
the second and third years,  prepared on an annual basis, after the date of this
Agreement;

                  (x)  Lender  shall  have  had  satisfactory  discussions  with
appropriate  personnel of financial  institutions  with which Parent  and/or the
Borrowers have had banking or lending relationships;

                                      -50-

<PAGE>

                  (xi)  Lender and  counsel to Lender  shall have  received  and
reviewed to their  reasonable  satisfaction  all  documentation  and  agreements
evidencing and governing any  indebtedness of Parent or any Borrower,  including
the  Shareholder   Debt.  The  promissory  note,  as  amended,   evidencing  the
Shareholder  Debt shall have a maturity  date  subsequent to the last day of the
Original Term. The holder of the Shareholder  Debt and Lender shall have entered
into a subordination agreement (the provisions of which shall be satisfactory to
the Lender), pursuant to which (i) the Shareholder Debt shall be subordinated in
right  of  payment  to  the  prior  payment  and  satisfaction  in  full  of all
Liabilities,  and  (ii)  any  liens  or  security  interests  which  secure  the
Shareholder  Debt shall be  subordinated  in right of priority to those securing
the Liabilities;

                  (xii)   Lender   shall  have   reviewed   to  its   reasonable
satisfaction the corporate and capital structure of Parent and its Subsidiaries,
on a consolidated  basis,  as of the date of this  Agreement,  and the PRO FORMA
opening balance sheet and statement of sources and uses of funds, as of the date
of this Agreement, after giving effect to the repayment of up to Six Million and
No/100 Dollars  ($6,000,000)  in aggregate  principal  amount of the Shareholder
Debt. Upon such repayment of principal of the Shareholder  Debt,  there shall be
at least Ten Million and No/100 Dollars  ($10,000,000)  outstanding in aggregate
principal amount (when aggregated with any accrued and unpaid interest  thereon)
of the Shareholder Debt.

                  (xiii) Lender shall have received (i) landlord's  waivers with
respect to each property being leased by a Borrower and where a material portion
of the  Collateral  is  being  stored,  and,  if  required,  a  waiver  from any
landlord's  mortgagees and (ii) an acknowledgement and waiver of liens from each
warehouse in which a Borrower is storing a material portion of the Inventory;

                  (xiv)  Lender   shall  have   received  and  reviewed  to  its
reasonable  satisfaction  the  unclassified  sections of each  government  sales
contract to which  Parent or a Borrower is party,  including  without  imitation
each material contract between DFAS-CO and a Borrower; and

                  (xv) The Obligors  shall have executed and delivered to Lender
all such other documents, instruments and agreements which Lender determines are
reasonably necessary to consummate the transactions contemplated hereby.

                  (b)  After  the date of the  making  of the Term  Loan and the
initial  Revolving Loans and issuance of the initial Letters of Credit,  if any,
the  obligation  of Lender  to make any  requested  Loan or issue any  Letter of
Credit is subject to the  satisfaction  of the  conditions  precedent  set forth
below.  Each such request shall  constitute a  representation  and warranty that
such conditions are satisfied:

                  (i)  All  representations  and  warranties  contained  in this
Agreement  and the Other  Agreements  shall be true and correct in all  material
respects  on and as of the date of such  request,  as if then  made,  other than
representations and warranties that relate solely to an earlier date;

                  (ii) No Default or Event of Default shall have occurred and be
continuing, or would result from the making of the requested Loan or issuance of
the requested Letter of Credit, which has not been waived; and

                                      -51-

<PAGE>

                  (iii) Since June 30, 2001, no event has occurred which has had
or would be reasonably  likely to have a Material  Adverse  Effect on Parent and
its Subsidiaries, taken as a whole.

                  (c) Upon the  making of each  Capital  Expenditure  Loan,  the
Borrower  incurring  such  Capital  Expenditure  Loan  shall  execute  a Capital
Expenditure Note evidencing such Loan.

         18.      INDEMNIFICATION.

                  The Borrowers  agree,  on a joint and several basis, to defend
(with counsel reasonably  satisfactory to Lender),  protect,  indemnity and hold
harmless  Lender,  each  affiliate or  subsidiary  of Lender,  and each of their
respective  officers,  directors,  employees,  attorneys  and  agents  (each  an
"INDEMNIFIED  PARTY")  from and  against any and all  liabilities,  obligations,
losses, damages,  penalties,  actions, judgments, suits, claims, costs, expenses
and  disbursements of any kind or nature  (including,  without  limitation,  the
disbursements  and the reasonable fees of counsel for each Indemnified  Party in
connection  with  any  investigative,  administrative  or  judicial  proceeding,
whether or not the Indemnified Party shall be designated a party thereto), which
may be imposed on,  incurred  by, or asserted  against,  any  Indemnified  Party
(whether  direct,  indirect or  consequential  and whether based on any federal,
state or local laws or regulations,  including,  without limitation,  securities
laws and  regulations,  Environmental  Laws and commercial laws and regulations,
under common law or in equity,  or based on contract or otherwise) in any manner
relating to or arising out of this Agreement or any Other Agreement, or any act,
event or transaction  related or attendant  thereto,  the making or issuance and
the  management of the Loans or any Letters of Credit or the use or intended use
of the proceeds of the Loans or any Letters of Credit;  PROVIDED,  HOWEVER, that
the Borrowers shall not have any obligation  hereunder to any Indemnified  Party
with respect to matters  caused by or resulting  from the willful  misconduct or
gross negligence of any Indemnified Party. To the extent that the undertaking to
indemnify set forth in the preceding sentence may be unenforceable because it is
violative  of any  law or  public  policy,  the  Borrowers  shall  satisfy  such
undertaking  to the maximum extent  permitted by applicable  law. Any liability,
obligation,  loss,  damage,  penalty,  cost or expense covered by this indemnity
shall be paid to each Indemnified Party on demand,  and, failing prompt payment,
shall,  together  with interest  thereon at the highest rate then  applicable to
Loans hereunder from the date incurred by each  Indemnified  Party until paid by
the  Borrowers,  be added to the  Liabilities of the Borrowers and be secured by
the Collateral. The provisions of this Section 18 shall survive the satisfaction
and payment of the other Liabilities and the termination of this Agreement.

         19.      NOTICE.

                  All written  notices  and other  written  communications  with
respect to this  Agreement  shall be sent by  ordinary,  certified  or overnight
mail,  by telecopy or  delivered  in person,  and in the case of Lender shall be
sent to it at 565 Fifth Avenue, 27th Floor, New York, NY 10017, attention Credit
Manager,  facsimile  number  212-986-4205,  and,  in the case of  Parent  or the
Borrowers  shall be sent to it at its  principal  place of business set forth on
EXHIBIT A hereto or as otherwise directed by Parent or the Borrowers in writing.
All notices shall be deemed  received upon actual receipt  thereof or refusal of
delivery.

                                      -52-

<PAGE>

         20.      CHOICE OF GOVERNING LAW: CONSTRUCTION: FORUM SELECTION.

                  This  Agreement  and the Other  Agreements  are  submitted  by
Parent and the  Borrowers  to Lender for  Lender's  acceptance  or  rejection at
Lender 's  principal  place of business as an offer by the  Borrowers  to borrow
monies from Lender now and from time to time hereafter, and shall not be binding
upon Lender or become  effective until accepted by Lender,  in writing,  at said
place of  business.  If so  accepted  by Lender,  this  Agreement  and the Other
Agreements  shall be deemed to have been made at said  place of  business.  THIS
AGREEMENT  AND THE OTHER  AGREEMENTS  SHALL BE GOVERNED  AND  CONTROLLED  BY THE
INTERNAL  LAWS  OF THE  STATE  OF NEW  YORK AS TO  INTERPRETATION,  ENFORCEMENT,
VALIDITY,  CONSTRUCTION,  EFFECT, AND IN ALL OTHER RESPECTS,  INCLUDING, WITHOUT
LIMITATION,  THE LEGALITY OF THE INTEREST RATE AND OTHER CHARGES,  BUT EXCLUDING
PERFECTION OF THE SECURITY INTERESTS IN COLLATERAL,  WHICH SHALL BE GOVERNED AND
CONTROLLED  BY THE LAWS OF THE RELEVANT  JURISDICTION.  If any provision of this
Agreement  shall be held to be prohibited by or invalid  under  applicable  law,
such provision  shall be ineffective  only to the extent of such  prohibition or
invalidity,  without  invalidating  the remainder of such provision or remaining
provisions of this Agreement.

                  To induce  Lender to accept  this  Agreement,  Parent  and the
Borrowers  irrevocably agree that, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER
OR  RESPECT,  ARISING  OUT OF OR FROM OR  RELATED TO THIS  AGREEMENT,  THE OTHER
AGREEMENTS  OR THE  COLLATERAL  SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN
THE CITY OF NEW  YORK,  STATE OF NEW YORK;  PROVIDED  that  Lender  may elect to
commence  an action or  proceeding  with  respect to the  Collateral  in another
jurisdiction.  PARENT  AND  THE  BORROWERS  HEREBY  CONSENT  AND  SUBMIT  TO THE
JURISDICTION OF ANY LOCAL,  STATE OR FEDERAL COURTS LOCATED WITHIN SAID CITY AND
STATE.  Parent  and the  Borrowers  hereby  irrevocably  appoint  and  designate
Greenberg  Traurig,  LLP, whose address is 885 Third Avenue, New York, NY 10022,
Attn:  Robert Stein, Esq. (or any other person having and maintaining a place of
business  in such state  whom  Parent  and the  Borrowers  may from time to time
hereafter  designate upon ten (10) days written notice to Lender and whom Lender
has  agreed  in its sole  discretion  in  writing  is  satisfactory  and who has
executed an agreement in form and substance  satisfactory  to Lender agreeing to
act as such  attorney  and agent),  as Parent's and  Borrowers'  true and lawful
attorney and duly  authorized  agent for acceptance of service of legal process.
Parent and the  Borrowers  agree that  service of such  process upon such person
shall constitute personal service of such process upon Parent and the Borrowers.
PARENT AND THE  BORROWERS  HEREBY  WAIVE ANY RIGHT THEY MAY HAVE TO  TRANSFER OR
CHANGE  THE  VENUE  OF  ANY  LITIGATION  BROUGHT  AGAINST  PARENT  OR ANY OF THE
BORROWERS BY LENDER IN ACCORDANCE WITH THIS SECTION.

         21.      MODIFICATION AND BENEFIT OF AGREEMENT.

                  This  Agreement and the Other  Agreements may not be modified,
altered or amended  except by an agreement  in writing  signed by Parent and the
Borrowers  parties  thereto  or such  other  person who is a party to such Other
Agreement and Lender.  Parent and the

                                      -53-

<PAGE>

Borrowers  may not  sell,  assign  or  transfer  this  Agreement,  or the  Other
Agreements or any portion thereof,  including,  without limitation,  Parent's or
Borrowers' rights, titles,  interest,  remedies,  powers or duties hereunder and
thereunder.  The Parent and the  Borrowers  hereby  consent  to  Lender's  sale,
assignment,  transfer  or other  disposition,  at any time and from time to time
hereafter,  of  this  Agreement,  or the  Other  Agreements,  or of any  portion
thereof, or participations  therein,  including,  without  limitation,  Lender's
rights, titles,  interest,  remedies,  powers and/or duties and agrees that they
shall  execute and deliver such  documents as Lender may  reasonably  request in
connection with any such sale, assignment, transfer or other disposition.

         22.      HEADINGS OF SUBDIVISIONS.

                  The  headings  of  subdivisions  in  this  Agreement  are  for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of this Agreement.

         23.      POWER OF ATTORNEY.

                  Parent  and the  Borrowers  acknowledge  and agree  that their
appointment  of Lender as their  attorney  and  agent-in-fact  for the  purposes
specified in this Agreement is an appointment coupled with an interest and shall
be irrevocable until all of the Liabilities (other than inchoate indemnification
obligations) are satisfied and paid in full and this Agreement is terminated.

         24.      CONFIDENTIALITY.

                  Parent,  the Borrowers and Lender hereby agree and acknowledge
that any and all  information  relating to Parent and the Borrowers which is (i)
furnished by Parent or a Borrower to Lender (or to any affiliate of Lender); and
(ii)  non-public,   confidential  or  proprietary  in  nature,   shall  be  kept
confidential by Lender or such affiliate and not used for any purpose other than
in connection with this Agreement and the transactions  contemplated  hereunder;
PROVIDED,  HOWEVER,  that such information and other credit information relating
to Parent or a Borrower may be distributed by Lender or such affiliate (subject,
to the extent practicable,  to the restrictions set forth in this SECTION 24) to
Lender's  or  such  affiliate's,   directors,  officers,  employees,  attorneys,
affiliates, assignees,  participants,  auditors, agents and regulators, and upon
the  order of a court or other  governmental  agency  having  jurisdiction  over
Lender or such affiliate,  to any other party.  Parent, the Borrowers and Lender
further  agree  that  this  provision  shall  survive  the  termination  of this
Agreement.  Notwithstanding  the  foregoing,  Parent  and the  Borrowers  hereby
consent to Lender publishing, with Parent's prior reasonable review) a tombstone
or  similar   advertising   material  relating  to  the  financing   transaction
contemplated by this Agreement.

         25.      COUNTERPARTS.

                  This  Agreement  and  any  amendments,  waivers,  consents  or
supplements  may be  executed  in any number of  counterparts  and by  different
parties  hereto in separate  counterparts,  each of which,  when so executed and
delivered,  shall be deemed an original,  but all of which counterparts together
shall constitute but one agreement.

         26.      ELECTRONIC SUBMISSIONS.

                                      -54-

<PAGE>

                  Upon not less than thirty (30) days' prior written notice (the
"APPROVED  ELECTRONIC  FORM NOTICE"),  Lender may permit or require (in Lender's
reasonable judgment, taking into account Borrowers' existing electronic systems)
that  any  of  the   documents,   certificates,   forms,   deliveries  or  other
communications,  authorized,  required or  contemplated by this Agreement or the
Other  Agreements,  be  submitted to Lender in  "APPROVED  ELECTRONIC  FORM" (as
hereafter defined), subject to any reasonable terms, conditions and requirements
in  the  applicable  Approved  Electronic  Forms  Notice.  For  purposes  hereof
"ELECTRONIC FORM" means e-mail, e-mail attachments,  data submitted on web-based
forms or any other  communication  method that delivers machine readable data or
information to Lender,  and "APPROVED  ELECTRONIC FORM" means an Electronic Form
that has been approved in writing by Lender (which approval has not been revoked
or  modified  by Lender)  and sent to Parent and the  Borrowers  in an  Approved
Electronic  Form  Notice.  Except  as  otherwise  specifically  provided  in the
applicable   Approved  Electronic  Form  Notice,  any  submissions  made  in  an
applicable  Approved  Electronic  Form shall have the same force and effect that
the same  submissions  would  have had if they had been  submitted  in any other
applicable  form  authorized,  required or contemplated by this Agreement or the
Other Agreements.

         27.      WAIVER OF JURY TRIAL: OTHER WAIVERS.

                  (a) PARENT,  THE  BORROWERS  AND LENDER EACH HEREBY WAIVES ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING  WHICH PERTAINS  DIRECTLY OR
INDIRECTLY TO THIS AGREEMENT, ANY OF THE OTHER AGREEMENTS, THE LIABILITIES,  THE
COLLATERAL,  ANY ALLEGED TORTIOUS CONDUCT BY PARENT OR ANY BORROWER OR LENDER OR
WHICH,  IN ANY WAY,  DIRECTLY  OR  INDIRECTLY,  ARISES  OUT OF OR RELATES TO THE
RELATIONSHIP  BETWEEN PARENT AND THE BORROWERS,  ON THE ONE HAND, AND LENDER. IN
NO  EVENT  SHALL  LENDER  BE  LIABLE  FOR  LOST  PROFITS  OR  OTHER  SPECIAL  OR
CONSEQUENTIAL DAMAGES.

                  (b) Parent and each Borrower hereby waive demand, presentment,
protest  and  notice of  nonpayment,  and  further  waives  the  benefit  of all
valuation, appraisal and exemption laws.

                  (c) Parent and each  Borrower  hereby waive the benefit of any
law that would otherwise  restrict or limit Lender or any affiliate of Lender in
the  exercise  of its  right,  which is hereby  acknowledged  and  agreed to, to
set-off  against the  Liabilities,  without  notice at any time  hereafter,  any
indebtedness,  matured or unmatured, owing by Lender or such affiliate of Lender
to Parent or any Borrower, including, without limitation, any deposit account at
Lender or such affiliate.

                  (d) PARENT AND EACH BORROWER HEREBY WAIVE ALL RIGHTS TO NOTICE
AND  HEARING  OF ANY KIND  PRIOR TO THE  EXERCISE  BY  LENDER  OF ITS  RIGHTS TO
REPOSSESS  THE  COLLATERAL  OF THE  BORROWERS  WITHOUT  JUDICIAL  PROCESS  OR TO
REPLEVY, ATTACH OR LEVY UPON SUCH COLLATERAL.

                                      -55-

<PAGE>

                  (e)  Lender's  failure,  at any  time or times  hereafter,  to
require  strict  performance  by Parent or any Borrower of any provision of this
Agreement or any of the Other Agreements shall not waive, affect or diminish any
right  of  Lender   thereafter  to  demand  strict  compliance  and  performance
therewith.  Any suspension or waiver by Lender of an Event of Default under this
Agreement or any default  under any of the Other  Agreements  shall not suspend,
waive or affect any other  Event of Default  under this  Agreement  or any other
default  under  any of the  Other  Agreements,  whether  the  same is  prior  or
subsequent  thereto and whether of the same or of a different kind or character.
No delay on the part of Lender in the exercise of any right or remedy under this
Agreement  or any Other  Agreement  shall  preclude  other or  further  exercise
thereof  or the  exercise  of any  right or  remedy.  None of the  undertakings,
agreements, warranties, covenants and representations of Parent or the Borrowers
contained  in this  Agreement  or any of the  Other  Agreements  and no Event of
Default under this Agreement or default under any of the Other  Agreements shall
be deemed to have been  suspended or waived by Lender unless such  suspension or
waiver is in writing,  signed by Lender and directed to Parent or the  Borrowers
specifying such suspension or waiver.

         28.      JOINT AND SEVERAL OBLIGATIONS; GUARANTEES.

                  (a) Each Borrower  shall be jointly and severally  liable with
each other Borrower for the payment and performance when due of all Liabilities.

                  (b) For purposes of this subsection  28(b), each of Parent and
each  Borrower  shall  be  referred  to   individually   as  a  "GUARANTOR"  and
collectively, as the "GUARANTORS". Each Guarantor unconditionally guarantees, as
a primary  obligor and not merely as a surety,  jointly and severally  with each
other  Guarantor,  the due and punctual payment of the principal and interest on
each of the  Loans  and all  Letter  of  Credit  Obligations  and all  fees  due
hereunder,  in each case when and as due, whether at maturity,  by acceleration,
by notice of prepayment or otherwise,  and the due and punctual  performance  of
all other Liabilities. Each Guarantor further agrees that the Liabilities may be
extended and renewed,  in whole or in part,  without notice to or further assent
from it, and that it will remain bound upon its  guarantee  notwithstanding  any
extension or renewal of any Liabilities.

                  (c) Each Guarantor  waives  presentment  to, demand of payment
from and protest to the  Borrowers  of any of the  Liabilities,  and also waives
notice of acceptance of its guarantee and notice of protest for nonpayment.  The
obligations of a Guarantor hereunder shall not be affected by (a) the failure of
the  Lender to assert  any  claim or  demand or to  enforce  any right or remedy
against  the  Borrowers  or any other  Guarantor  under the  provisions  of this
Agreement or any of the Other Documents or otherwise; (b) any recission, waiver,
amendment or modification of any of the terms or provisions of this Agreement or
any of the Other Agreements;  (c) the release of any security held by the Lender
for the  Liabilities;  or (d) the failure of the Lender to exercise any right or
remedy against any other Guarantor of the Liabilities.

                  (d)  Each   Guarantor   further   agrees  that  its  guarantee
constitutes  a guarantee of payment when due and not of  collection,  and waives
any  right to  require  that any  resort be had by the  Lender  to any  security
(including,  without  limitation,  any  Collateral)  held  for  payment  of  the
Liabilities  or to any balance of any deposit  account or credit on the books of
the Lender in favor of any Guarantor or any other person.

                                      -56-

<PAGE>

                  (e) The  obligations of each Guarantor  hereunder shall not be
subject to any reduction, limitation,  impairment or termination for any reason,
including,   without  limitation,  any  claim  of  waiver,  release,  surrender,
alteration  or  compromise,  and shall not be subject to any  defense or setoff,
counterclaim,  recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of the Liabilities or otherwise. Without limiting
the generality of the  foregoing,  the  obligations of each Guarantor  hereunder
shall not be discharged or impaired or otherwise  affected by the failure of the
Lender  to  assert  any claim or demand or to  enforce  any  remedy  under  this
Agreement or under any Other  Agreements,  by any waiver or  modification of any
provision thereof, by any default,  failure or delay,  willful or otherwise,  in
the performance of the Liabilities, or by any other act or omission which may or
might  in any  manner  or to any  extent  vary  the  risk of such  Guarantor  or
otherwise operate as a discharge of such Guarantor as a matter of law or equity.

                  (f) Each  Guarantor  further  agrees that its guarantee  shall
continue to be  effective or be  reinstated,  as the case may be, if at any time
payment,  or any part  thereof,  of principal of or interest on any Liability is
rescinded  or must  otherwise be returned by the Lender upon the  bankruptcy  or
reorganization of a Guarantor or otherwise.

                  (g) Each  Guarantor  hereby  agrees not to assert or exercise,
until all Liabilities have been paid or satisfied in full and the Borrowers have
no further right to borrow Loans  hereunder,  any and all rights of  subrogation
against the  Borrowers  and their  property  and all rights of  indemnification,
contribution and  reimbursement  from the Borrowers and their property,  in each
case in connection  with this  guarantee and any payments  made  hereunder,  and
regardless  of whether  such  rights  arise by  operation  of law,  pursuant  to
contract or otherwise.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                      -57-

<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.

                          LASALLE BUSINESS CREDIT, INC., as Lender

                          By____________________________________________________
                          Its___________________________________________________

                          PROTECTIVE APPAREL CORPORATION OF AMERICA, as Borrower

                          ______________________________________________________

                          By____________________________________________________
                          Its___________________________________________________

                          POINT BLANK BODY ARMOR, INC., as Borrower

                          ______________________________________________________

                          By____________________________________________________
                          Its___________________________________________________

                          NDL PRODUCTS, INC., as Borrower

                          ______________________________________________________

                          By____________________________________________________
                          Its___________________________________________________

                          DHB INDUSTRIES INC., as Guarantor

                          ______________________________________________________

                          By____________________________________________________
                          Its___________________________________________________

                                      -58-

<PAGE>

                          DHB ARMOR GROUP, INC., as Grantor

                          ______________________________________________________

                          By____________________________________________________
                          Its___________________________________________________

                          DHB SPORTS GROUP, INC., as Grantor

                          ______________________________________________________

                          By____________________________________________________
                          Its___________________________________________________

                          LANXIDE ARMOR PRODUCTS INC., as Grantor

                          ______________________________________________________

                          By____________________________________________________
                          Its___________________________________________________

                          ORTHOPEDIC PRODUCTS, INC., as Grantor

                          ______________________________________________________

                          By____________________________________________________
                          Its___________________________________________________

                                      -59-

<PAGE>

                                    EXHIBIT A

                        BUSINESS AND COLLATERAL LOCATIONS

                  Attached to and made a part of that  certain Loan and Security
Agreement of even date herewith by and among PROTECTIVE  APPAREL  CORPORATION OF
AMERICA, POINT BLANK ARMOR, INC., and NDL PRODUCTS,  INC. (each a "BORROWER" and
collectively,  the  "BORROWERS"),  DHB CAPITAL  GROUP INC. and LASALLE  BUSINESS
CREDIT, INC. ("LENDER").

A.       Each Borrower's  Business  Locations (please indicate which location is
         the principal  place of business and at which  locations  originals and
         all copies of each Borrower's books, records and accounts are kept).
         1.
         2.
         3.
B.       Other locations of Collateral (including, without limitation, warehouse
         locations,  processing locations,  consignment  locations) and all post
         office boxes of each Borrower. Please indicate the relationship of such
         location to each Borrower (i.e. public warehouse, processor, etc.).
         1.
         2.
         3.
C.       Bank  Accounts  of  each  Borrower (other  than  those at  LaSalle Bank
         National Association):
                BANK (WITH ADDRESS)        ACCOUNT NUMBER      TYPE OF ACCOUNT
         1.
         2.
         3.

<PAGE>

                                    EXHIBIT B
                             COMPLIANCE CERTIFICATE

                  Attached to and made a part of that  certain Loan and Security
Agreement,  as it may be amended in accordance with its terms from time to time,
including all exhibits attached thereto (the "AGREEMENT"), dated as of September
24, 2001, by and among PROTECTIVE  APPAREL  CORPORATION OF AMERICA,  POINT BLANK
BODY ARMOR, INC., and NDL PRODUCTS, INC. (each a "BORROWER"), DHB CAPITAL GROUP,
INC. and LASALLE BUSINESS CREDIT, INC. ("LENDER").

                  This  Certificate is submitted  pursuant to subsection 9(c) of
the Agreement.

                  The undersigned hereby certifies to Lender that as of the date
of this Certificate:

                  1.       The undersigned is  the _____________________ of  the
Borrowers.

                  2.       There  exists  no event or  circumstance  which is or
which with the passage of time, the giving of notice,  or both would  constitute
an Event of Default,  as that term is defined in the  Agreement,  or, if such an
event of circumstance  exists,  a writing  attached hereto  specifies the nature
thereof,  the period of  existence  thereof and the action  that the  applicable
Borrower has taken or proposes to take with respect thereto.

                  3.       No material adverse change in the condition,financial
or  otherwise,  business,  property,  or  results of  operations  of DHB and its
Subsidiaries,  taken as a whole,  has  occurred  since [DATE OF LAST  COMPLIANCE
CERTIFICATE/LAST FINANCIAL STATEMENTS DELIVERED PRIOR TO CLOSING], or, if such a
change has occurred,  a writing attached hereto specifies the nature thereof and
the  action  that such  Borrower  has  taken or  proposes  to take with  respect
thereto.

                  4.       Each Borrower is in  compliance  with the  represent-
ations,  warranties and covenants in the Agreement,  or, if such Borrower is not
in  compliance  with  any  representations,   warranties  or  covenants  in  the
Agreement, a writing attached hereto specifies the nature thereof, the period of
existence  thereof  and the action that such  Borrower  has taken or proposes to
take with respect thereto.

                  5.       The financial statements  of  each   Borrower   being
concurrently  delivered herewith have been prepared in accordance with generally
accepted  accounting  principles  consistently  applied  and there  have been no
material changes in accounting policies or financial reporting practices of such
Borrower since [DATE OF THE LAST COMPLIANCE  CERTIFICATE/DATE  OF LAST FINANCIAL
STATEMENTS DELIVERED PRIOR TO CLOSING] or, if any such change has occurred, such
changes are set forth in a writing attached hereto.

                                      -2-

<PAGE>

                  6.       Attached hereto is a true and correct calculation  of
the financial covenants contained in the Agreement.

                                      -3-

<PAGE>

                                    EXHIBIT C
                             COMMERCIAL TORT CLAIMS

                                      -4-

<PAGE>

                                    EXHIBIT D
                        FORM OF CAPITAL EXPENDITURE NOTE

                                   [TO FOLLOW]

                                      -5-

<PAGE>

                                  SCHEDULE 11I

                             AFFILIATE TRANSACTIONS

                                      -6-

<PAGE>

                                  SCHEDULE 11J

                              NAMES AND TRADE NAMES

                                      -7-

<PAGE>

                                  SCHEDULE 11N

                                  INDEBTEDNESS

                                      -8-

<PAGE>

                                  SCHEDULE 11P

                       PARENTS SUBSIDIARIES AND AFFILIATES

                                      -9-

<PAGE>

                                  SCHEDULE 17A

                              CLOSING DOCUMENT LIST

                                      -10-

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