<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>axr8k011707exh101.txt
<TEXT>

                                                                    Exhibit 10.1



             SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

     This SECOND  AMENDED AND RESTATED LOAN AND SECURITY  AGREEMENT  dated as of
January  16,  2007 (the  "Agreement"),  is  executed  by and among  KABLE  MEDIA
SERVICES,  INC., a Delaware  corporation ("KMS"),  KABLE NEWS COMPANY,  INC., an
Illinois  corporation  ("KNC"),  KABLE DISTRIBUTION  SERVICES,  INC., a Delaware
corporation ("KDS"),  KABLE NEWS EXPORT, LTD., a Delaware corporation  ("KEXP"),
KABLE  NEWS  INTERNATIONAL,   INC.,  a  Delaware  corporation  ("KINT"),   KABLE
FULFILLMENT  SERVICES,  INC., a Delaware corporation ("KFS"),  KABLE FULFILLMENT
SERVICES OF OHIO, INC., a Delaware corporation ("KFSO"), PALM COAST DATA HOLDCO,
INC.,  a  Delaware  corporation  ("PCD"),  and PALM COAST  DATA,  LLC a Delaware
limited  liability  company ("PCD LLC")  (collectively,  the  "Borrowers"),  and
LASALLE  BANK  NATIONAL   ASSOCIATION,   a  national  banking  association  (the
"Lender"), whose address is 135 South LaSalle Street, Chicago, Illinois 60603.

                                R E C I T A L S:
                                - - - - - - - -

     A. The Lender and KNC, KDS, KEXP, KINT, KFS and KFSO are parties to Amended
and Restated Loan and Security  Agreement dated as of April 28, 2005, as amended
by First  Amendment to Amended and Restated  Loan and Security  Agreement  dated
April 27, 2006 and as amended,  modified or supplemented  from time to time (the
"Existing Loan Agreement") and other agreements dated as of April 28, 2005.

     B. The Borrowers have applied for a joint and several (i) revolving  credit
facility from the Lender  consisting  of a revolving  credit loan and letters of
credit in an aggregate  principal amount of up to  $35,000,000.00 to be used, in
part,  to fund a portion of the  acquisition  by KMS of PCD and its  subsidiary,
PCD, LLC and for working capital needs, (ii) secured term loan of $3,036,000.00,
(iii) a capital expenditure line of credit from the Lender in an amount of up to
$1,500,000.00  to finance the cost of new Equipment and (iv) a revolving  credit
loan in an amount  not to exceed the  lesser of (A)  $10,000,000.00  and (B) the
Bauer Borrowing Base.

     C. The  Borrowers  have  requested  that the Lender  amend and  restate the
Existing  Loan  Agreement to (i) cancel the  existing  credit  facilities,  (ii)
consolidate,  in part, the revolving credit facilities and certain existing term
debt and (iii) add KMS, PCD and PCD, LLC as additional Borrowers.

     D. The  Lender is  willing  to do the same on the terms and  subject to the
conditions  contained  herein  and  in  the  other  agreements,   documents  and
instruments contemplated under the terms of this Agreement.
<PAGE>

     NOW THEREFORE,  in consideration of the premises,  and the mutual covenants
and agreements set forth herein, the Borrowers and the Lender agree as follows:

                              A G R E E M E N T S:

Section 1. DEFINITIONS.
           -----------

     1.1 Defined  Terms.  For the  purposes  of this  Agreement,  the  following
         --------------
capitalized words and phrases shall have the meanings set forth below.

     "Account  Debtor" shall mean any Person who is and/or may become  obligated
      ---------------
to any of the Borrowers under or on account of any of the Accounts.

     "Accounts"  shall mean trade  accounts  receivable  of any of the Borrowers
      --------
arising out of the bona fide sale of goods and/or performance of services in the
ordinary  course of such  Borrower's  business  which have been invoiced by such
Borrower.

     "Acquisition" shall mean any transaction or series of related  transactions
      -----------
for the purpose of or resulting,  directly or indirectly, in (a) the acquisition
of  all  or  substantially  all  of  the  assets  of a  Person,  or  of  all  or
substantially  all of any business or division of a Person,  (b) the acquisition
of in  excess of 50% of the  Capital  Securities  of any  Person,  or  otherwise
causing any Person to become a Subsidiary,  or (c) a merger or  consolidation or
any other combination with another Person (other than a Person that is already a
Subsidiary).

     "Affiliate"  of any Person shall mean (a) any other Person which,  directly
      ---------
or indirectly, controls or is controlled by or is under common control with such
Person,  (b) any officer or director of such Person, and (c) with respect to the
Lender,  any entity  administered  or managed by the Lender,  or an Affiliate or
investment advisor thereof and which is engaged in making,  purchasing,  holding
or  otherwise  investing  in  commercial  loans.  A Person shall be deemed to be
"controlled  by"  any  other  Person  if  such  Person  possesses,  directly  or
indirectly,  power to  direct  or cause  the  direction  of the  management  and
policies of such Person  whether by contract,  ownership  of voting  securities,
membership interests or otherwise.

     "Applicable  Margin"  shall mean,  for any day, the rate per annum added to
      ------------------
LIBOR or Fixed  LIBOR to  determine  the  Facility A Interest  Rate,  Facility C
Interest Rate and Facility D Interest Rate as determined by the ratio of average
daily Senior Debt of the  Borrowers  for the prior fiscal  quarter to EBITDA for
the prior twelve months as set forth below opposite the level (the "Level") then
in effect;  it being  understood that the Applicable  Margin for (i) LIBOR Loans
and  Fixed  LIBOR  Loans  shall be the  percentage  set forth  under the  column
"LIBOR",  (ii) Prime  Rate Loans  shall be the  percentage  set forth  under the
column "Prime",  and (iii) the  Non-Utilization Fee Rate shall be the percentage
set forth under the column "Non-Use Fee":

                                       2
<PAGE>

<TABLE>
<S>           <C>                                    <C>                     <C>                    <C>

------------- -------------------------------------- ----------------------- ---------------------- ------------------
              Ratio of Average Daily                 Spread over:            Spread over:           Non-Use Fee
              ----------------------
Level         Senior Debt/TTM EBITDA                 LIBOR                   Prime                  (Revolvers A
-----         ----------------------                 -----                   -----                  ------------
                                                                                                    and D)
                                                                                                    ------

------------- -------------------------------------- ----------------------- ---------------------- ------------------
I             > 2.25 to 1                            250 bps                 0 bps                  25 bps

------------- -------------------------------------- ----------------------- ---------------------- ------------------
II            > 1.50 to 1 and < 2.25 to 1            225 bps                 0 bps                  25 bps

------------- -------------------------------------- ----------------------- ---------------------- ------------------
III           > 1.00 to 1 and < 1.50 to 1            200 bps                 0 bps                  25 bps

------------- -------------------------------------- ----------------------- ---------------------- ------------------
IV            > .50 to 1 and < 1.00 to 1             175 bps                 0 bps                  25 bps

------------- -------------------------------------- ----------------------- ---------------------- ------------------
V             < .50 to 1                             150 bps                 0 bps                  25 bps

------------- -------------------------------------- ----------------------- ---------------------- ------------------
</TABLE>

provided that until  receipt of the January 31, 2007  financial  statements  and
compliance  certificate,  the  applicable  interest  rate margins shall be those
corresponding to Level III.

     "Asset  Disposition"  shall  mean  the  sale,  lease,  assignment  or other
      ------------------
transfer for value (each a "Disposition")  by the Borrowers to any Person (other
than any other Borrower or any Subsidiary  that becomes a Borrower) of any asset
or right of the Borrowers  (including,  the loss,  destruction  or damage of any
thereof or any actual or threatened (in writing to the Borrowers)  condemnation,
confiscation,  requisition,  seizure  or  taking  thereof),  other  than (a) the
Disposition  of any  asset  which is to be  replaced,  and is in fact  replaced,
within one hundred eighty (180) days with another asset performing the same or a
similar function unless Borrowers  reasonably  decide they no longer need it for
the continued operation of their business, (b) the sale or lease of Inventory in
the ordinary course of business,  (c) leases and licenses in the ordinary course
of business, (d) Investments permitted under this Agreement,  (e) use of cash in
the ordinary course of business,  (f) Restricted  Payments  permitted under this
Agreement  and (g) other  Dispositions  in any fiscal  year the net  proceeds of
which do not in the aggregate exceed One Million Dollars ($1,000,000)  provided,
that the Borrowers  may exceed such limit upon prior receipt of written  consent
thereto from the Lender.

     "Bankruptcy  Code" shall mean the United  States  Bankruptcy  Code,  as now
      ----------------
existing or hereafter amended.

     "Bauer"  shall  mean  Heinrich  Bauer  Verlag  Beteilgungs  GMBH,  a German
      -----
corporation authorized to do business in New Jersey.

     "Bauer Accounts" shall mean all accounts receivable of KDS from wholesalers
      --------------
or other direct  customers of KDS  representing a right to payment of a monetary
obligation as shown on KDS'  statements to such  wholesalers or other  customers
arising  solely  from  the  distribution,  sale or other  disposition  by KDS of
magazines provided by Bauer in connection with the Bauer Distribution Agreement.

                                       3
<PAGE>

     "Bauer Borrowing Base" shall mean 40% of the unpaid amount of all otherwise
      --------------------
eligible Bauer Accounts (subject to the Bauer Sublimit Amount).

     "Bauer Distribution  Agreement" shall mean the Distribution Agreement dated
      -----------------------------
as of  January  3,  2006  between  Bauer  and KDS,  as the same may be  amended,
supplemented or otherwise modified from time to time.

     "Bauer  Event of Default"  shall mean a material  default as defined in the
      -----------------------
Bauer   Distribution   Agreement  or  other  default  by  KDS  under  the  Bauer
Distribution  Agreement  if it becomes  the basis of an Act of  Enforcement  (as
defined in the Intercreditor Agreement).

     "Bauer  Sublimit  Amount" means a maximum advance under the Facility D Loan
      -----------------------
for Bauer Accounts of $10,000,000.

     "Borrowing  Base"  shall  mean  an  amount  equal  to  the  lesser  of  (i)
      ---------------
$35,000,000  and (ii) the  total of (a) 85% of the  unpaid  amount  (net of such
reserves  and  allowances  as the  Lender  deems  necessary  in  its  reasonable
discretion) of all Eligible  Domestic Accounts plus (b) 60% of the unpaid amount
(net of such  reserves  and  allowances  as the Lender  deems  necessary  in its
reasonable  discretion) of all Eligible Foreign  Accounts  (subject to a maximum
advance of US$3,000,000). Lender reserves the right to amend the initial advance
rate of the Borrowing Base for PCD, LLC Accounts  within thirty (30) days of the
completion of the field audit examination of PCD, LLC.

     "Borrowing Base  Certificate"  shall mean a certificate to be signed by the
      ---------------------------
Borrowers  certifying to the accuracy of the Borrowing Base amount and the Bauer
Borrowing Base, in form reasonably satisfactory to the Lender.

     "Business Day" shall mean any day other than a Saturday,  Sunday or a legal
      ------------
holiday on which banks are  authorized  or required to be closed for the conduct
of  commercial  banking  business  in Chicago,  Illinois or solely to  establish
LIBOR, in London, England.

     "Canadian  Subsidiary"  shall mean Kable News  Company of Canada,  Ltd.,  a
      --------------------
corporation organized under the laws of the Province of Ontario, Canada.

     "Capital  Expenditures" shall mean all expenditures  (including Capitalized
      ---------------------
Lease  Obligations)  which,  in  accordance  with GAAP,  would be required to be
capitalized and shown on the  consolidated  balance sheet of the Borrowers,  but
excluding expenditures made in connection with the replacement,  substitution or
restoration  of assets to the extent  financed (i) from  insurance  proceeds (or
other similar recoveries) paid on account of the loss of or damage to the assets
being replaced or restored or (ii) with awards of compensation  arising from the
taking by eminent domain or condemnation of the assets being replaced.

     "Capital  Lease" shall mean,  as to any Person,  a lease of any interest in
      --------------
any kind of property or asset,  whether real,  personal or mixed, or tangible or
intangible, by such Person, as lessee, that is, or should be, in accordance with
Financial  Accounting  Standards Board Statement No. 13, as amended from time to


                                       4
<PAGE>

time, or, if such statement is not then in effect, such statement of GAAP as may
be applicable, recorded as a "capital lease" on the balance sheet of such Person
prepared in accordance with GAAP.

     "Capital  Securities"  shall mean, with respect to any Person,  all shares,
      -------------------
interests,  participations or other  equivalents  (however  designated,  whether
voting or  non-voting)  of such Person's  capital,  whether now  outstanding  or
issued or acquired after the date hereof,  including  common  shares,  preferred
shares,  membership interests in a limited liability company, limited or general
partnership interests in a partnership or any other equivalent of such ownership
interest.

     "Capitalized  Lease  Obligations"  shall mean, as to any Person, all rental
      -------------------------------
obligations of such Person, as lessee under a Capital Lease which are or will be
required to be capitalized on the balance sheet of such Person.

     "Cash  Collateralize"  shall mean to deliver cash collateral to the Lender,
      -------------------
to be held as cash  collateral for  outstanding  Letters of Credit,  pursuant to
documentation  reasonably  satisfactory to the Lender.  Derivatives of such term
have corresponding meanings.

     "Cash Equivalent  Investment"  shall mean, at any time, (a) any evidence of
      ---------------------------
Debt,  maturing not more than one year after such time,  issued or guaranteed by
the United  States  government  or any agency  thereof,  (b)  commercial  paper,
maturing  not more  than one year from the date of issue,  or  corporate  demand
notes,  in each case (unless issued by the Lender or its holding  company) rated
at  least  A-l  by  Standard  &  Poor's  Ratings  Services,  a  division  of The
McGraw-Hill  Companies,  Inc. or P-l by Moody's Investors Service, Inc., (c) any
certificate of deposit,  time deposit or banker's acceptance,  maturing not more
than one year after such time, or any overnight  Federal Funds  transaction that
is  issued or sold by the  Lender or its  holding  company  (or by a  commercial
banking  institution  that is a member of the Federal  Reserve  System and has a
combined   capital  and  surplus  and   undivided   profits  of  not  less  than
$500,000,000),  (d) any repurchase  agreement  entered into with the Lender,  or
other  commercial  banking  institution of the nature referred to in clause (c),
which (i) is secured by a fully perfected security interest in any obligation of
the type  described  in any of clauses  (a)  through  (c) above,  and (ii) has a
market value at the time such  repurchase  agreement is entered into of not less
than  100% of the  repurchase  obligation  of the  Lender,  or other  commercial
banking institution, thereunder, (e) money market accounts or mutual funds which
invest primarily in assets satisfying the foregoing requirements,  and (f) other
short term liquid investments approved in writing by the Lender.

     "Change of  Control"  shall  mean the  occurrence  of any of the  following
      ------------------
events: (a) KMS shall cease to own and control, directly or indirectly,  100% of
the outstanding  Capital  Securities of KDS; (b) KDS shall cease to, directly or
indirectly,  own and  control  100% of each  class  of the  outstanding  Capital
Securities of KEXP and KINT or of the surviving or resulting  corporation in the
event of their merger or consolidation;  (c) KMS shall cease to own and control,
directly or indirectly,  100% of the outstanding  Capital Securities of KNC; (d)
KNC shall cease to,  directly or indirectly,  own and control 100% of each class
of the  outstanding  Capital  Securities  of KFS and KFSO or of the surviving or
resulting  corporation in the event of their merger or  consolidation or (e) the
granting by KMS, directly or indirectly, of a security interest in its ownership


                                       5
<PAGE>

interest in any of the Borrowers, which could result in a change in the identity
of the  individuals  or  entities in control of such  Borrower.  For the purpose
hereof,  the terms "control" or  "controlling"  shall mean the possession of the
power to direct,  or cause the direction of, the  management and policies of the
Borrower(s) by contract or voting of securities or ownership interests.

     "Collateral" shall mean, with respect to any Borrower, any and all of their
      ----------
respective  property,  of any  kind  or  description,  tangible  or  intangible,
wheresoever  located and whether now existing or hereafter  arising or acquired,
along with the products and proceeds therefrom,  including,  but not limited to,
the following:

          (a) all  property  of, or for the  account of,  such  Borrower  now or
     hereafter coming into the possession,  control or custody of, or in transit
     to,  the  Lender  or any  agent or bailee  for the  Lender  or any  parent,
     Affiliate or Subsidiary of the Lender or any participant with the Lender in
     the Loans (whether for safekeeping,  deposit, collection,  custody, pledge,
     transmission or otherwise), including all earnings, dividends, interest, or
     other  rights  in  connection  therewith  and  the  products  and  proceeds
     therefrom, including the proceeds of insurance thereon; and

          (b) the additional property of such Borrower,  whether now existing or
     hereafter  arising or acquired,  and  wherever  now or  hereafter  located,
     together  with  all  additions  and  accessions   thereto,   substitutions,
     betterments and replacements therefor, products and Proceeds therefrom, and
     all of such Borrower's books and records and recorded data relating thereto
     (regardless  of the medium of recording or storage),  together  with all of
     the Borrower's  right,  title and interest in and to all computer  software
     required to utilize,  create, maintain and process any such records or data
     on electronic media, identified and set forth as follows:

               (i) All  Accounts  and all  Goods  whose  sale,  lease  or  other
          disposition  by such Borrower has given rise to Accounts and have been
          returned to, or  repossessed  or stopped in transit by, such Borrower,
          or rejected or refused by an Account Debtor;

               (ii) All Inventory, including, without limitation, raw materials,
          work-in-process and finished goods;

               (iii)  All  Goods  (other  than  Inventory),  including,  without
          limitation,  embedded  software,  Equipment,  vehicles,  furniture and
          Fixtures;

               (iv) All Software and computer programs;

               (v) All Securities,  Investment  Property,  Financial  Assets and
          Deposit Accounts;

                                       6
<PAGE>

               (vi) All Chattel Paper,  Electronic  Chattel Paper,  Instruments,
          Documents, Letter of Credit Rights, all proceeds of letters of credit,
          Health-Care-Insurance   Receivables,   Supporting  Obligations,  notes
          secured by real estate, Commercial Tort Claims,  intellectual property
          including  copyrights  and  General  Intangibles,   including  Payment
          Intangibles; and

               (vii) All Proceeds (whether Cash Proceeds or Noncash Proceeds) of
          the foregoing property,  including,  without limitation, all insurance
          policies and proceeds of insurance payable by reason of loss or damage
          to the foregoing property, including unearned premiums, and of eminent
          domain or condemnation awards.

     Notwithstanding  the foregoing,  Collateral  shall not include (A) any real
property of any of the Borrowers,  (B) any property of or for account of, or any
Borrower's  interest  in the  Capital  Securities  of any other  Borrower or any
Subsidiary of any Borrower, including the Canadian Subsidiary.

     "Collateral Access Agreement" shall mean an agreement in form and substance
      ---------------------------
reasonably satisfactory to the Lender pursuant to which a mortgagee or lessor of
real  property  on  which  Collateral  is  stored  or  otherwise  located,  or a
warehouseman,  processor or other bailee of Inventory or other property owned by
the Borrowers, acknowledges the Liens of the Lender and waives any Liens held by
such  Person on such  property,  and, in the case of any such  agreement  with a
mortgagee  or lessor,  permits the Lender  reasonable  access to and use of such
real property following the occurrence and during the continuance of an Event of
Default,  to  assemble,  complete  and sell any  collateral  stored or otherwise
located thereon.

     "Compliance   Certificate"   shall  mean  a   Compliance   Certificate   in
      ------------------------
substantially the form of Exhibit A.
                          ---------

     "Contingent   Liability"   and   "Contingent   Liabilities"   shall   mean,
      ----------------------           ------------------------
respectively,  each  obligation  and  liability  of the  Borrowers  and all such
obligations and liabilities of the Borrowers incurred pursuant to any agreement,
undertaking or arrangement by which the Borrower:  (a)  guarantees,  endorses or
otherwise  becomes  or is  contingently  liable  upon  (by  direct  or  indirect
agreement,  contingent  or otherwise,  to provide  funds for payment,  to supply
funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor
against loss) the indebtedness,  dividend,  obligation or other liability of any
other Person in any manner  (other than by  endorsement  of  instruments  in the
course of collection), including without limitation, any indebtedness,  dividend
or other  obligation  which may be issued or incurred at some future  time;  (b)
guarantees  the payment of dividends or other  distributions  upon the shares or
ownership  interest  of any other  Person;  (c)  undertakes  or agrees  (whether
contingently or otherwise):  (i) to purchase,  repurchase,  or otherwise acquire
any indebtedness, obligation or liability of any other Person or any property or
assets constituting security therefor,  (ii) to advance or provide funds for the
payment or discharge of any  indebtedness,  obligation or liability of any other
Person  (whether  in the  form of  loans,  advances,  stock  purchases,  capital
contributions or otherwise),  or to maintain solvency,  assets, level of income,


                                       7
<PAGE>

working  capital or other financial  condition of any other Person,  or (iii) to
make payment to any other Person  other than for value  received;  (d) agrees to
lease property or to purchase  securities,  property or services from such other
Person with the purpose or intent of assuring the owner of such  indebtedness or
obligation  of  the  ability  of  such  other  Person  to  make  payment  of the
indebtedness or obligation; (e) to induce the issuance of, or in connection with
the issuance of, any letter of credit for the benefit of such other  Person;  or
(f) undertakes or agrees otherwise to assure a creditor against loss. The amount
of any Contingent  Liability  shall (subject to any limitation set forth herein)
be deemed to be the outstanding principal amount (or maximum permitted principal
amount, if larger) of the indebtedness, obligation or other liability guaranteed
or supported thereby.

     "Cost of Funds  Rate"  shall mean a fixed rate of  interest  based upon the
      -------------------
then-current cost of funds index of the Lender for a four-year period.

     "Debt"  shall  mean,  as  to  any  Person,  without  duplication,  (a)  all
      ----
indebtedness  of such Person;  (b) all borrowed money of such Person  (including
principal,  interest,  fees and  charges),  whether or not  evidenced  by bonds,
debentures,  notes  or  similar  instruments;  (c)  all  obligations  to pay the
deferred purchase price of property or services; (d) all obligations, contingent
or  otherwise,  with respect to the maximum face amount of all letters of credit
(whether or not drawn),  bankers' acceptances and similar obligations issued for
the account of such  Person  (including  the Letters of Credit),  and all unpaid
drawings in respect of such letters of credit,  bankers' acceptances and similar
obligations;  (e) all indebtedness  secured by any Lien on any property owned by
such Person,  whether or not such  indebtedness  has been assumed by such Person
(provided, however, if such Person has not assumed or otherwise become liable in
respect  of such  indebtedness,  such  indebtedness  shall be deemed to be in an
amount equal to fair market  value of the  property  subject to such Lien at the
time of  determination);  (f) the  aggregate  amount  of all  Capitalized  Lease
Obligations  of such  Person;  (g) all  Contingent  Liabilities  of such Person,
whether or not reflected on its balance  sheet;  (h) all Hedging  Obligations of
such Person;  (i) all Debt of any  partnership of which such Person is a general
partner unless it is non-recourse to the general  partner;  and (j) all monetary
obligations of such Person under (i) a so-called synthetic, off-balance sheet or
tax retention  lease, or (ii) an agreement for the use or possession of property
(other than an operating  lease) creating  obligations that do not appear on the
balance  sheet of such Person but which,  upon the  insolvency  or bankruptcy of
such Person,  would be characterized as the indebtedness of such Person (without
regard to accounting treatment).  Notwithstanding the foregoing,  Debt shall not
include  (A) trade  payables  and  accrued  expenses  incurred by such Person in
accordance  with customary  practices and in the ordinary  course of business of
such Person,  or (B) accumulated  other  comprehensive  loss with respect to any
unpaid  liabilities  relating to any  Employee  Plan of any Borrower as would be
shown on a  consolidated  balance sheet of the Borrowers  prepared in accordance
with GAAP.

     "Default  Rate" shall mean a per annum rate of interest  equal to the Prime
      -------------
Rate plus two percent (2.00%).

     "Depreciation"   shall  mean  the  total  amounts  added  to  depreciation,
      ------------
amortization, obsolescence, valuation and other proper reserves, as reflected on
each of the Borrower's  financial  statements and determined in accordance  with
GAAP.

                                       8
<PAGE>

     "EBITDA" shall mean, for any specified period, the sum of the following for
      ------
such period:  (a) Net Income,  plus (b) Interest  Charges;  plus (c) federal and
state  income  taxes  (including  the  Illinois   replacement   tax);  plus  (d)
Depreciation;  plus (e) non-cash management  compensation  expense; plus (f) all
other non-cash  charges,  in each case to the extent included in determining Net
Income for such period. For purposes of determining compliance with Section 10.3
of this Agreement as of the end of any fiscal  quarter,  EBITDA for the 12-month
period ending at the end of any such fiscal quarter shall include on a pro-forma
bases EBITDA of PCD for any portion of such 12-month period that is prior to the
acquisition  by KMS of PCD and PCD, LLC. For the purpose  hereof,  EBITDA of PCD
for the  12-month  period  preceding  such  acquisition  shall be  deemed  to be
$7,000,000, accumulated ratably over such 12-month period.

     "Eligible Account" and "Eligible  Accounts" shall mean each Account and all
      ----------------       ------------------
such Accounts  (exclusive of sales,  excise or other similar taxes) owing to any
of the Borrowers which meets each of the following requirements:

          (a) it is  genuine  in all  respects  and has  arisen in the  ordinary
     course of the Borrower's  business from (i) the  performance of services by
     the Borrowers,  which services have been fully performed,  acknowledged and
     accepted by the Account  Debtor or (ii) the sale,  license,  assignment  or
     lease of Goods or Software by the Borrowers,  including C.O.D. sales, which
     Goods  have  been  completed  in  accordance  with  the  Account   Debtor's
     specifications  (if any)  and  delivered  to and  accepted  by the  Account
     Debtor,  and the Borrowers  have  possession  of, or have  delivered to the
     Lender at the Lender's request,  shipping and delivery receipts  evidencing
     such delivery;

          (b) it is  subject  to a  perfected  (except  in the case of  Eligible
     Foreign  Accounts),  first  priority Lien in favor of the Lender and is not
     subject to any other assignment, claim or Lien;

          (c) it is the valid, legally enforceable and unconditional  obligation
     of the  Account  Debtor  with  respect  thereto,  and is not subject to the
     fulfillment of any condition whatsoever or any counterclaim, credit (except
     as  provided  in  subsection  (h) of  this  definition),  trade  or  volume
     discount,  allowance,  discount, rebate or adjustment by the Account Debtor
     with  respect  thereto,  or to any  claim by such  Account  Debtor  denying
     liability  thereunder  in whole or in part and, with respect to any Account
     other than a Account,  the Account  Debtor has not refused to accept and/or
     has not  returned or offered to return any of the Goods or  services  which
     are the subject of such Account;

          (d) the Account  Debtor with respect  thereto is a resident or citizen
     of, and is located within, the United States,  Canada (other than Quebec or
     Inuit), Australia,  Belgium, the Caribbean Islands of the Bahamas, Bermuda,
     Cayman  Islands,  Jamaica  or Puerto  Rico,  France,  the  United  Kingdom,
     Germany,  Spain,  Switzerland,  Norway,  Portugal,  Sweden,  Greece, Italy,
     Singapore,  Mexico or New  Zealand,  unless  the sale of goods or  services
     giving rise to such Account is on letter of credit,  banker's acceptance or
     other credit support terms reasonably satisfactory to the Lender;

                                       9
<PAGE>

          (e) it is not an Account (i) arising from a "sale on approval",  "sale
     or return",  "consignment",  or  "guaranteed  sale",  or are subject to any
     other  repurchase  or return  agreement  or (ii)  arising  from a "bill and
     hold";

          (f) it is not an  Account  with  respect  to which  possession  and/or
     control of the goods  sold  giving  rise  thereto  is held,  maintained  or
     retained by the Borrower (or by any agent or custodian of the Borrower) for
     the account of, or subject to,  further  and/or future  direction  from the
     Account Debtor with respect thereto;

          (g)  it  arises  out  of  contracts  with  the  United  States  or any
     department,  agency or  instrumentality  thereof (including the branches of
     the United  States  military)  but only to the extent that such Accounts do
     not exceed an aggregate  face amount of  $1,000,000,  unless the  Borrowers
     have  assigned its right to payment of such Account to the Lender  pursuant
     to  the  Assignment  of  Claims  Act  of  1940,  and  evidence  (reasonably
     satisfactory  to the Lender) of such  assignment  has been delivered to the
     Lender,  or any state,  county,  city or other  governmental  body,  or any
     department,  agency or  instrumentality  thereof  (to the extent  that such
     Accounts exceed an aggregate face amount of $1,000,000);

          (h) if the Borrower  maintains a credit  limit for an Account  Debtor,
     the  aggregate  dollar  amount of Accounts  due from such  Account  Debtor,
     including such Account, does not exceed such credit limit;

          (i) if the Account is evidenced by chattel paper or an instrument, the
     originals  of such chattel  paper or  instrument  shall have been  endorsed
     and/or  assigned and  delivered to the Lender or, in the case of electronic
     chattel  paper,  shall be in the control of the  Lender,  in each case in a
     manner satisfactory to the Lender;

          (j) it is an  Account  stated in a  monthly  statement  or an  Account
     invoiced (and dated as of such date) and, in each case, sent to the Account
     Debtor thereof within the Borrowers'  normal monthly billing cycle,  but in
     no event later than thirty (30) days after the shipment and delivery to the
     Account  Debtor of the Goods giving rise thereto or the  performance of the
     services giving rise thereto and (i) as to KDS and its  Subsidiaries  which
     is due and payable  within ninety (90) days past the original  invoice date
     (otherwise known as the monthly  statement date) thereof,  (ii) in the case
     of  Accounts  pertaining  to KNC,  KFS,  KFSO  and PCD LLC the  Account  is
     evidenced by an invoice  which is due and payable  within  forty-five  (45)
     days  after the  invoice  date and is no more than sixty (60) days past the
     due  date  of the  invoice,  and  (iii)  in the  case of  Eligible  Foreign
     Accounts,  is evidenced by an invoice  which is due and payable  within one
     hundred  and  twenty  (120)  days  after  the  invoice  date,  in each case
     according to the original terms of sale;

          (k) it is not an Account  with  respect to an Account  Debtor  that is
     located  in  any  jurisdiction   which  has  adopted  a  statute  or  other
     requirement  with  respect to which any Person that obtains  business  from


                                       10
<PAGE>

     within such jurisdiction  must file a notice of business  activities report
     or make any other  required  filings in a timely manner in order to enforce
     its claims in such jurisdiction's courts unless (i) such notice of business
     activities  report has been duly and timely filed or the Borrower is exempt
     from  filing  such report and has  provided  the Lender  with  satisfactory
     evidence of such  exemption or (ii) the failure to make such filings may be
     cured retroactively by the Borrower for a nominal fee;

          (l)  the  Account  Debtor  with  respect  thereto  is  not  any of the
     Borrowers or an Affiliate of a Borrower;

          (m) such Account  does not arise out of a contract or order which,  by
     its terms, forbids or makes void or unenforceable the assignment thereof by
     the Borrowers to the Lender and is not  unassignable  to the Lender for any
     other reason;

          (n)  there is no  bankruptcy,  insolvency  or  liquidation  proceeding
     pending by or against the Account Debtor with respect thereto,  nor has the
     Account  Debtor  suspended  business,  made a  general  assignment  for the
     benefit of creditors or failed to pay its debts generally as they come due,
     and/or no condition or event has occurred having a material  adverse effect
     on the Account  Debtor  which would  require the  Accounts of such  Account
     Debtor to be deemed uncollectible in accordance with GAAP;

          (o) it is not owed by an Account  Debtor with  respect to which thirty
     percent  (30.00%) or more of the aggregate  amount of outstanding  Accounts
     owed at such time by such Account Debtor is classified as ineligible  under
     clause (j) of this definition;

          (p) if the aggregate amount of all Accounts owed by the Account Debtor
     thereon  exceeds thirty percent  (30.00%),  of the aggregate  amount of all
     Accounts of such  Borrowers at such time,  then all  Accounts  owed by such
     Account  Debtor to such  Borrowers in excess of such amount shall be deemed
     ineligible; provided, that, upon the combination of any two Account Debtors
     who have Accounts owing to the Borrowers by reason of a merger, acquisition
     or otherwise, the Account Debtors shall be treated as separate entities for
     a period  of three (3)  months  for the  purpose  of  determining  Eligible
     Accounts  pursuant  to this  clause  (p);  provided,  further,  that if the
     aggregate amount of Accounts owed by such Account Debtors during such three
     (3) month period exceeds sixty percent  (60.00%) of the aggregate amount of
     all Accounts of the Borrowers at such time,  then all Accounts owed by such
     Account  Debtors to the  Borrowers in excess of such amount shall be deemed
     ineligible;

          (q) it is an Account otherwise  eligible  hereunder,  to the extent of
     any excess of any reserve,  as calculated in accordance with the applicable
     Borrowing Base  Certificate,  created by the Borrowers for future return of
     Goods or any  adjustments  in  estimated  returns of Goods as  compared  to
     actual returns of Goods to date;

          (r) it is an  Account  with  respect to which the  Borrower  is or may
     become liable to the Account Debtor for goods sold or services  rendered by


                                       11
<PAGE>

     such  Account  Debtor to any of the  Borrowers,  but only to the  extent in
     excess of the Borrowers'  then aggregate  liability to such Account Debtor;
     and

          (s) it does not violate the  negative  covenants  and does satisfy the
     affirmative covenants of the Borrowers contained in this Agreement.

An Account  which is at any time an  Eligible  Account,  but which  subsequently
fails to meet any of the foregoing requirements,  shall forthwith cease to be an
Eligible  Account.  Further,  with respect to any Account,  if the Lender at any
time  hereafter  determines in its  reasonable  discretion  that the prospect of
payment or performance by the Account Debtor with respect  thereto is materially
impaired for any reason  whatsoever,  such Account shall cease to be an Eligible
Account after notice of such  determination  is given to the  Borrowers.  Lender
reserves the right to amend the criteria for and definition of Eligible Accounts
of PCD and PCD,  LLC  within  thirty  (30) days of  completion  of the  Lender's
initial field audit of PCD, LLC.

     "Eligible  Costs"  means with  respect to Facility C Loan,  ninety  percent
      ---------------
(90%) of the Lender-approved invoices (which shall not include transportation or
installation  costs) for Collateral up to an amount not to exceed the balance of
the Facility C Loan Commitment.

     "Eligible  Domestic  Accounts" shall mean all accounts  whereby the Account
      ----------------------------
Debtor is a resident or citizen of, and is located within,  the United States or
Canada (other than Quebec or Inuit).

     "Eligible  Foreign  Accounts" shall mean all Eligible  Accounts whereby the
      ---------------------------
Account  Debtor is a resident  or citizen of and is located  within,  Australia,
Belgium, the Caribbean Islands of the Bahamas,  Bermuda, Cayman Islands, Jamaica
or Puerto Rico, France, the United Kingdom, Germany, Spain, Switzerland, Norway,
Portugal, Sweden, Greece, Italy, Singapore, Mexico or New Zealand, .

     "Employee Plan" includes any pension, stock bonus, employee stock ownership
      -------------
plan, retirement, profit sharing, deferred compensation,  stock option, bonus or
other  incentive plan,  whether  qualified or  nonqualified,  or any disability,
medical,  dental or other health  plan,  life  insurance or other death  benefit
plan,  vacation  benefit plan,  severance plan or other employee benefit plan or
arrangement,  including, without limitation,  those pension,  profit-sharing and
retirement  plans of the Borrowers  described from time to time in the financial
statements of the Borrowers and any pension plan,  welfare plan, defined benefit
plans  (as  defined  in  ERISA)  or  any  multiemployer   plan,   maintained  or
administered  by any  Borrower  or to which any  Borrower  is a party or has any
liability or by which any Borrower is bound.

     "Environmental  Laws"  shall mean all present or future  federal,  state or
      -------------------
local laws,  statutes,  common law duties,  rules,  regulations,  ordinances and
codes, together with all administrative or judicial orders,  consent agreements,
directed  duties,  requests,  licenses,   authorizations  and  permits  of,  and
agreements with, any governmental authority, in each case relating to any matter
arising  out of or  relating  to public  health  and  safety,  or  pollution  or
protection  of the  environment  or  workplace,  including  any of the foregoing


                                       12
<PAGE>

relating to the presence,  use,  production,  generation,  handling,  transport,
treatment,  storage,  disposal,  distribution,   discharge,  emission,  release,
threatened release, control or cleanup of any Hazardous Substance.

     "Equipment"  shall mean  "equipment" as defined in the UCC that is owned by
      ---------
any Borrower,  including,  without  limitation,  any and all of such  Borrower's
machinery,  equipment,  vehicles, fixtures,  furniture,  computers,  appliances,
tools,  and other tangible  personal  property (other than  inventory),  whether
located on such Borrower's premises or located elsewhere,  together with any and
all accessions,  parts and  appurtenances  thereto,  whether  presently owned or
hereafter acquired by such Borrower.

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

     "Event of Default" shall mean any of the events or conditions which are set
      ----------------
forth in Section 11 hereof.

     "Facility  A  Interest  Rate"  shall  mean the  Borrowers'  option of (i) a
      ---------------------------
floating per annum rate of interest  equal to the Prime Rate plus the Applicable
Margin or (ii) the  LIBOR  Rate  plus the  Applicable  Margin or (iii) the Fixed
LIBOR Rate.

     "Facility A Loan" and  "Facility A Loans"  shall mean,  respectively,  each
      ---------------        ----------------
direct advance and the aggregate of all such direct  advances made by the Lender
to the Borrowers under and pursuant to this  Agreement,  as set forth in Section
2.1 of this Agreement.

     "Facility A Loan Availability"  shall mean, at any time, an amount equal to
      ----------------------------
the Facility A Loan Commitment minus the Letter of Credit Obligations.

     "Facility A Loan  Commitment"  shall mean  Thirty  Five  Million and 00/100
      ---------------------------
Dollars  ($35,000,000),  subject  to the  Letter of Credit  Commitment,  as such
amount may be reduced pursuant to Section 2.1(c)(ii) hereof.

     "Facility A Maturity  Date" shall mean,  the earlier of (i) May 1, 2010 and
      -------------------------
(ii) the  acceleration  of such Loan upon the  occurrence of an Event of Default
affecting such Loan, unless extended by the Lender pursuant to any modification,
extension or renewal note  executed by the  Borrowers and accepted by the Lender
in its sole and absolute  discretion in substitution  for a Facility A Revolving
Note.

     "Facility  A Revolving  Note"  shall mean a  revolving  note in the form of
      ---------------------------
Exhibit B hereto,  dated as of the date hereof,  in the amount of the Facility A
Loan  Commitment and maturing on the Facility A Maturity Date,  duly executed by
the Borrowers and payable to the order of the Lender,  together with any and all
renewal, extension,  modification or replacement notes executed by the Borrowers
and delivered to the Lender and given in substitution therefor.

     "Facility B Interest Rate" shall mean 6.4% per annum.
      ------------------------

                                       13
<PAGE>

     "Facility B Loan" shall mean the term loan  consolidating  the aggregate of
      ---------------
all prior direct  advances made by the Lender under the Existing Loan Agreement,
as set forth in Section 2.2 of this Agreement.

     "Facility B Loan  Commitment"  shall mean Three Million Thirty Six Thousand
      ---------------------------
and 00/100 Dollars ($3,036,000.00).

     "Facility B Maturity Date" shall mean, the earlier of (i) December 31, 2009
      ------------------------
and (ii) the  acceleration  of such  Loan  upon  the  occurrence  of an Event of
Default  affecting  such Loan,  unless  extended  by the Lender  pursuant to any
modification,  extension or renewal note  executed by the Borrowers and accepted
by the Lender in its sole and absolute discretion in substitution for a Facility
B Term Note.

     "Facility  B Term  Note"  shall  mean a term note in the form of  Exhibit C
      ----------------------
hereto,  dated as of the date  hereof,  in the  amount  of the  Facility  B Loan
Commitment  and  maturing  on  Facility B Maturity  Date,  duly  executed by the
Borrowers  and  payable to the order of the  Lender,  together  with any and all
renewal, extension,  modification or replacement notes executed by the Borrowers
and delivered to the Lender and given in substitution therefor.

     "Facility C CapEx Note" shall mean a capital  expenditure  note in the form
      ---------------------
of Exhibit D hereto,  dated as of the date hereof, in the amount of the Facility
C Loan Commitment and maturing on the Facility C Maturity Date, duly executed by
the Borrowers and payable to the order of the Lender,  together with any and all
renewal, extension,  modification or replacement notes executed by the Borrowers
and delivered to the Lender and given in substitution therefor.

     "Facility  C  Interest  Rate"  shall  mean the  Borrowers'  option of (i) a
      ---------------------------
floating per annum rate of interest  equal to the Prime Rate plus the Applicable
Margin,  (ii) the LIBOR Rate plus the Applicable Margin or (iii) the Fixed LIBOR
Rate.

     "Facility C Loan" and  "Facility C Loans"  shall mean,  respectively,  each
      ---------------        ----------------
direct advance and the aggregate of all such direct  advances made by the Lender
to the Borrowers under and pursuant to this  Agreement,  as set forth in Section
2.3 of this Agreement.

     "Facility C Loan  Commitment"  shall mean One Million Five Hundred Thousand
      ---------------------------
and 00/100 Dollars  ($1,500,000.00),  as such amount may be reduced  pursuant to
Section 2.3 hereof.

     "Facility C Maturity  Date" shall mean,  the earlier of (i) May 1, 2010 and
      -------------------------
(ii) the  acceleration  of such Loan upon the  occurrence of an Event of Default
affecting such Loan, unless extended by the Lender pursuant to any modification,
extension or renewal note  executed by the  Borrowers and accepted by the Lender
in its sole and absolute discretion in substitution for a Facility C CapEx Note.

                                       14
<PAGE>

     "Facility  D  Interest  Rate"  shall  mean the  Borrowers'  option of (i) a
      ---------------------------
floating per annum rate of interest equal to the Prime Rate, (ii) the LIBOR Rate
or (iii) the Fixed LIBOR Rate.

     "Facility D Loan" and  "Facility D Loans"  shall mean,  respectively,  each
      ---------------        ----------------
direct advance and the aggregate of all such direct  advances made by the Lender
to the Borrowers under and pursuant to this  Agreement,  as set forth in Section
2.4 of this Agreement.

     "Facility D Loan Availability"  shall mean, at any time, an amount equal to
      ----------------------------
the lesser of: (a) Facility D Loan Commitment or (b) the Bauer Sublimit Amount.

     "Facility D Loan  Commitment"  shall mean Ten  Million  and 00/100  Dollars
      ---------------------------
($10,000,000), as such amount may be reduced pursuant to Section 2.4 hereof.

     "Facility D Maturity  Date" shall mean,  the earlier of (i) May 1, 2010 and
      -------------------------
(ii) the  acceleration  of such Loan upon the  occurrence of an Event of Default
affecting such Loan, unless extended by the Lender pursuant to any modification,
extension or renewal note  executed by the  Borrowers and accepted by the Lender
in its sole and absolute  discretion in substitution  for a Facility D Revolving
Note.

     "Facility  D Revolving  Note"  shall mean a  revolving  note in the form of
      ---------------------------
Exhibit E hereto,  dated as of the date hereof,  in the amount of the Facility D
Loan  Commitment and maturing on the Facility D Maturity Date,  duly executed by
the Borrowers and payable to the order of the Lender,  together with any and all
renewal, extension,  modification or replacement notes executed by the Borrowers
and delivered to the Lender and given in substitution therefor.

     "Fixed  LIBOR Loan" shall mean a Loan  bearing  interest at the Fixed LIBOR
      -----------------
Rate made pursuant to Section  2.1(b) in the case of a Facility A Loan,  Section
2.3(b)  in the case of a  Facility  C Loan and  Section  2.4(b) in the case of a
Facility D Loan.

     "Fixed  LIBOR  Rate"  shall  mean,  for each Fixed  LIBOR  Loan,  a rate of
      ------------------
interest  equal to LIBOR for a 30 day interest  period on the first Business Day
of a month plus the Applicable LIBOR Margin.

     "Funded  Debt" shall mean,  as to any Person,  all Debt of such Person that
      ------------
matures  more than one year from the date of its  creation  (or is  renewable or
extendible, at the option of such Person, to a date more than one year from such
date).

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


                                       15
<PAGE>

shall be deemed in  compliance  with GAAP despite the absence of  footnotes  and
fiscal year-end adjustments as required by GAAP.

     "Hazardous  Substances" shall mean (a) any petroleum or petroleum products,
      ---------------------
radioactive  materials,  asbestos in any form that is or could  become  friable,
urea  formaldehyde  foam  insulation,  dielectric  fluid  containing  levels  of
polychlorinated  biphenyls,  radon gas and mold; (b) any  chemicals,  materials,
pollutant or substances  defined as or included in the  definition of "hazardous
substances",  "hazardous waste",  "hazardous  materials",  "extremely  hazardous
substances",   "restricted   hazardous  waste",   "toxic   substances",   "toxic
pollutants", "contaminants",  "pollutants" or words of similar import, under any
applicable Environmental Law; and (c) any other chemical, material or substance,
the exposure to, or release of which is prohibited,  limited or regulated by any
governmental  authority  or for which any duty or  standard  of care is  imposed
pursuant to, any Environmental Law.

     "Hedging  Agreement"  shall mean any interest  rate,  currency or commodity
      ------------------
swap agreement,  cap agreement or collar  agreement,  and any other agreement or
arrangement designed to protect a Person against fluctuations in interest rates,
currency exchange rates or commodity prices.

     "Hedging  Obligation" shall mean, with respect to any Person, any liability
      -------------------
of such Person under any Hedging Agreement.

     "Indemnified  Party" and  "Indemnified  Parties" shall mean,  respectively,
      ------------------        --------------------
each of the Lender and any parent  corporation,  Affiliate or  Subsidiary of the
Lender, and each of their respective officers, directors,  employees,  attorneys
and agents, and all of such parties and entities.

     "Intellectual  Property" shall mean the collective reference to all rights,
      ----------------------
priorities and privileges  relating to  intellectual  property,  whether arising
under  United  States,  multinational  or foreign laws or  otherwise,  including
copyrights,  patents,  service marks and trademarks,  and all  registrations and
applications for registration  therefor and all licensees thereof,  trade names,
domain names,  technology,  know-how and processes, and all rights to sue at law
or in equity for any  infringement or other  impairment  thereof,  including the
right to receive all proceeds and damages therefrom.

     "Intercreditor Agreement" shall mean the Intercreditor Agreement,  dated as
      -----------------------
of  February  6, 2006,  by and among  Lender,  Bauer and KDS as amended by First
Amendment To  Intercreditor  Agreement  dated as of April 27, 2006, and amended,
modified or supplemented from time to time.

     "Interest  Charges"  shall  mean,  for any  period,  the  sum  of:  (a) all
      -----------------
interest,  charges  and related  expenses  payable  with  respect to that fiscal
period to a lender in connection  with borrowed  money or the deferred  purchase
price of assets that are treated as interest in accordance  with GAAP,  plus (b)
                                                                        ----

                                       16
<PAGE>

the portion of Capitalized  Lease Obligations with respect to that fiscal period
that should be treated as interest in accordance with GAAP, plus (c) all charges
paid or payable  (without  duplication)  during that period with  respect to any
Hedging  Agreements,  plus (d) all  debt,  discount  and  expense  amortized  or
                      ----
required to be amortized in the determination of Net Income for such period.

     "Investment"  shall mean,  with respect to any Person,  any  investment  in
      ----------
another Person (other than a Borrower or a Subsidiary of a Borrower that becomes
a Borrower under this  Agreement),  whether by acquisition of any debt or equity
security, by making any loan or advance, by becoming obligated with respect to a
Contingent  Liability in respect of obligations of such other Person (other than
travel and similar  advances to employees in the ordinary  course of  business);
provided,  that any  advance  made to a  publisher  in the  ordinary  course  of
business in an amount not to exceed  $1,500,000 in the aggregate and $500,000 to
any one publisher shall not be considered an Investment hereunder.

     "Lender Product  Agreements"  shall mean those certain  agreements  entered
      --------------------------
into from time to time by the Borrowers  with the Lender or any Affiliate of the
Lender concerning Lender Products.

     "Lender  Product  Obligations"  shall  mean all  obligations,  liabilities,
      ----------------------------
contingent reimbursement obligations,  fees, and expenses owing by the Borrowers
to the Lender or any  Affiliate  of the Lender  pursuant to or  evidenced by the
Lender Product  Agreements and irrespective of whether for the payment of money,
whether direct or indirect,  absolute or  contingent,  due or to become due, now
existing or hereafter arising.

     "Lender  Products"  shall mean any  service  or  facility  extended  to the
      ----------------
Borrowers by the Lender or any  Affiliate of the Lender,  including:  (a) credit
cards, (b) credit card processing services, (c) debit cards, (d) purchase cards,
(e) ACH Transactions,  (f) cash management,  including controlled  disbursement,
accounts  or  services,   (g)  Rate  Management   Transactions  or  (h)  Hedging
Agreements.

     "Letter of Credit" and "Letters of Credit"  shall mean any Letter of Credit
      ----------------       -----------------
issued on behalf of Borrowers in accordance with Section 2.7of this Agreement.

     "Letter of Credit  Application" shall mean, with respect to any request for
      -----------------------------
the issuance of a Letter of Credit,  a letter of credit  application in the form
being used by the Lender at the time of such  request  for the type of Letter of
Credit requested.

     "Letter of Credit Commitment" shall mean Two Hundred Fifty Thousand Dollars
      ---------------------------
(US$250,000).

     "Letter of Credit Fee Rate" means 1.5% per annum.
      -------------------------

     "Letter of Credit Maturity Date" shall mean the Facility A Maturity Date.
      ------------------------------

     "Letter of Credit  Obligations" shall mean, at any time, an amount equal to
      -----------------------------
the  aggregate of the  original  face amounts of all Letters of Credit minus the


                                       17
<PAGE>

sum of (i) the  amount of any  reductions  in the  original  face  amount of any
Letter of Credit which did not result from a draw thereunder, (ii) the amount of
any payments made by the Lender with respect to any draws made under a Letter of
Credit for which the Borrowers have  reimbursed the Lender,  (iii) the amount of
any payments made by the Lender with respect to any draws made under a Letter of
Credit  which have been  converted  to a Facility A Loan as set forth in Section
2.5 and (iv) the  portion of any issued but expired  Letter of Credit  which has
not been drawn by the  beneficiary  thereunder.  For purposes of determining the
outstanding Letter of Credit Obligations at any time, the Lender's acceptance of
a draft drawn on the Lender  pursuant to a Letter of Credit  shall  constitute a
draw on the applicable Letter of Credit at the time of such acceptance.

     "Liabilities" shall mean at all times all liabilities of the Borrowers that
      -----------
would  be  shown  as  such on a  balance  sheet  of the  Borrowers  prepared  in
accordance with GAAP.

     "LIBOR" shall mean,  with respect to any LIBOR Interest  Period,  a rate of
      -----
interest  equal to (a) the per annum rate of  interest  at which  United  States
dollar  deposits for a period equal to the relevant  LIBOR  Interest  Period are
offered in the London  Interbank  Eurodollar  market at 11:00 a.m. (London time)
two Business Days prior to the  commencement  of such interest  period (or three
Business  Days prior to the  commencement  of such  Interest  Period if banks in
London,  England were not open and dealing in offshore  United States dollars on
such second  preceding  Business  Day), as displayed in the Bloomberg  Financial
Markets system (or other authoritative source selected by the Lender in its sole
discretion),  divided by (b) a number  determined by  subtracting  from 1.00 the
then stated maximum reserve percentage for determining reserves to be maintained
by member  banks of the  Federal  Reserve  System  for  Eurocurrency  funding or
liabilities as defined in Regulation D (or any successor category of liabilities
under  Regulation D), or, if LIBOR is not  determinable  in accordance  with the
foregoing,  as LIBOR is  otherwise  determined  by the Lender in its  reasonable
discretion.  The Lender's  determination  of LIBOR shall be  conclusive,  absent
manifest error.

     "LIBOR  Interest  Period"  shall mean,  as to any LIBOR  Loan,  a period of
      -----------------------
either  overnight  or of thirty  (30),  sixty  (60),  ninety (90) or one hundred
eighty  (180) days  commencing  on a Business  Day as selected by the  Borrowers
pursuant to this Agreement, as the case may be; provided that:

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

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

                                       18
<PAGE>

               (c) the Borrowers may not select any LIBOR Interest  Period for a
          Facility  A  Loan,  Facility  C Loan or  Facility  D Loan  beyond  the
          scheduled Maturity Date.

     "LIBOR Loan" or "LIBOR  Loans" shall mean that  portion,  and  collectively
      ----------      ------------
those portions, of the aggregate outstanding principal balance of the Loans that
bear interest at a LIBOR Rate for the Facility A Loans,  the Facility C Loans or
the Facility D Loans, as applicable.

     "LIBOR Rate" shall mean,  for each LIBOR Loan, a rate of interest  equal to
      ----------
LIBOR for the relevant LIBOR Interest Period plus the Applicable LIBOR Margin.

     "Lien" shall mean, with respect to any Person, any interest granted by such
      ----
Person in any real or  personal  property,  asset or other  right owned or being
purchased or acquired by such Person (including, without limitation, an interest
in respect of a Capital  Lease)  which  secures  payment or  performance  of any
obligation and shall include any mortgage,  lien,  encumbrance,  title retention
lien,  charge  or other  security  interest  of any  kind,  whether  arising  by
contract, as a matter of law, by judicial process or otherwise.

     "Loan Documents" shall mean each of the agreements,  documents, instruments
      --------------
and  certificates  set forth in Section 3.1  hereof,  and any and all such other
instruments,  documents,  certificates and agreements from time to time executed
and delivered by the Borrowers or any of their Affiliates for the benefit of the
Lender  pursuant  to any of the  foregoing,  and all  amendments,  restatements,
supplements and other modifications thereto.

     "Loans"  shall mean,  collectively,  all  Facility A Loans,  the Facility B
      -----
Loan,  all Facility C Loans,  all Facility D Loans and all other  extensions  of
credit made by the Lender to the Borrowers and all Letter of Credit Obligations,
under and pursuant to this Agreement.

     "Lockbox" shall have the meaning set forth in Section 6.9(a) hereof.
      -------

     "Lockbox  Account"  shall  have the  meaning  set forth in  Section  6.9(a)
      ----------------
hereof.

     "Lockbox  Agreement"  shall have the  meaning  set forth in Section  3.1(o)
      ------------------
hereof.

     "Master Letter of Credit  Agreement"  shall mean, at any time, with respect
      ----------------------------------
to the issuance of Letters of Credit, a Master Letter of Credit Agreement in the
form being used by the Lender at such time.

     "Material Adverse Effect" shall mean (a) a material adverse change in, or a
      -----------------------
material  adverse  effect  upon,  the assets,  business,  properties,  condition
(financial or  otherwise)  or results of operations of the Borrowers  taken as a
whole which, if quantifiable,  does or would be reasonably expected to result in
a reduction in retained earnings of more than Three Million Dollars ($3,000,000)
after taking into account all deductions, credits, or other tax benefits allowed
with  respect  to the event (b) a  material  impairment  of the  ability  of the
Borrowers to perform any of the Obligations under any of the Loan Documents,  or
(c) a material  adverse effect on (i) any substantial  portion of the Collateral


                                       19
<PAGE>

of the Borrowers, (ii) the legality,  validity, binding effect or enforceability
against the  Borrowers of any of the Loan  Documents,  (iii) the  perfection  or
priority of the Liens on any  substantial  portion of the Collateral  granted to
the  Lender  under any Loan  Document  by the  Borrowers,  or (iv) the rights or
remedies of the Lender with respect to the Borrowers under any Loan Document.

     "Maturity Date" shall mean, collectively, the Facility A Maturity Date, the
      -------------
Facility B Maturity  Date, the Facility C Maturity Date, the Facility D Maturity
Date and Letter of Credit Maturity Date.

     "Merger Agreement" shall mean the Agreement and Plan of Merger by and among
      ----------------
AMREP  Corporation,  Glen Garry  Acquisition,  Inc.,  KMS, PCD, PCD LLC, and the
Sellers set forth in the agreement dated as of November 7, 2006

     "Net Income" shall mean, with respect to the Borrowers for any period,  the
      ----------
consolidated net income (or loss) of the Borrowers for such period as determined
in accordance  with GAAP,  excluding any gains or losses  (within the meaning of
GAAP) from Asset  Dispositions,  any extraordinary gains or losses and any gains
or losses from discontinued operations (within the meaning of GAAP).

     "Non-Excluded  Taxes"  shall  have the  meaning  set forth in  Section  2.8
      -------------------
hereof.

     "Non-Utilization  Fee" shall  have the  meaning  set forth in Section  8.23
      --------------------
hereof.

     "Note" and "Notes" shall mean, respectively,  each of and collectively, the
      ----       -----
Facility A Revolving  Note,  the Facility B Term Note, the Facility C CapEx Note
and the Facility D Revolving Note.

     "Obligations"  shall mean the Loans, as evidenced by any Note, all interest
      -----------
accrued  thereon  (including  interest  which would be payable as  post-petition
interest in connection with any bankruptcy or similar proceeding, whether or not
permitted  as a claim  thereunder),  any  fees  due the  Lender  hereunder,  any
expenses  incurred by the Lender hereunder and any and all other liabilities and
obligations  of the  Borrowers to the Lender under this  Agreement and any other
Loan  Document,  including  any  reimbursement  obligations  of the Borrowers in
respect of Letters of Credit and surety bonds,  all Hedging  Obligations  of the
Borrowers  existing or entered onto during the term of this Agreement  which are
owed to the  Lender or any  Affiliate  of the  Lender,  and all  Lender  Product
Obligations  of the  Borrowers  existing or entered into during the term of this
Agreement,  all in each case howsoever  created,  arising or evidenced,  whether
direct or indirect, absolute or contingent, now or hereafter existing, or due or
to become due, together with any and all renewals or extensions thereof.

     "Obligor" shall mean the Borrowers, any accommodation endorser, third party
      -------
pledgor,  or any other party other than the  Principal  Shareholder  liable with
respect to the Obligations.

                                       20
<PAGE>

     "OFAC" shall have the meaning specified in Section 8.3 of this Agreement.
      ----

     "Organizational   Identification   Number"  means,  with  respect  to  each
      ----------------------------------------
Borrower, the organizational  identification number assigned to such Borrower by
the applicable  governmental  unit or agency of the jurisdiction of organization
of such Borrower.

     "Other Taxes" shall mean any present or future stamp or  documentary  taxes
      -----------
or any other  excise or property  taxes,  charges or similar  levies which arise
from the execution,  delivery, enforcement or registration of, or otherwise with
respect to, this Agreement or any of the other Loan Documents.

     "Permitted  Business"  shall mean any business  conducted by one or more of
      -------------------
the Borrowers on the closing date and all other  businesses  reasonably  related
thereto.

     "Permitted Liens" shall mean (a) Liens for federal or other material Taxes,
      ---------------
assessments  or  other  governmental  charges  not at  the  time  delinquent  or
thereafter  payable  without  penalty  or  being  contested  in  good  faith  by
appropriate  proceedings  and,  in each  case,  for  which the  affected  Person
maintains  adequate  reserves in accordance with GAAP and in respect of which no
Lien has been filed;  (b) Liens arising in the ordinary course of business (such
as (i) Liens of carriers,  warehousemen,  lessors, mechanics and materialmen and
other similar Liens,  and (ii) Liens in the form of deposits or pledges incurred
in connection with worker's  compensation,  unemployment  compensation and other
types of social security  (excluding Liens arising under ERISA) or in connection
with surety bonds, bids, performance bonds and similar obligations) for sums not
overdue or being  contested  in good faith by  appropriate  proceedings  and not
involving  any  advances or borrowed  money or the  deferred  purchase  price of
property or services,  which do not in the aggregate materially detract from the
value of the property or assets of the  Borrowers or  materially  impair the use
thereof in the operation of the Borrower's business and, in each case, for which
it maintains  adequate  reserves in accordance with GAAP and in respect of which
no Lien has been filed;  (c) Liens  described  on Schedule 9.2 as of the closing
                                                  ------------
date and the  replacement,  extension or renewal of any such Lien upon or in the
same  property  subject  thereto  arising  out  of  the  extension,  renewal  or
replacement  of the  Debt  secured  thereby  (without  increase  in  the  amount
thereof); (d)  attachments, appeal bonds, judgments and other similar Liens, for
sums not  exceeding  Five  Hundred  Thousand  and 00/100  Dollars  ($500,000.00)
arising in connection  with court  proceedings,  provided the execution or other
                                                 --------
enforcement of such Liens is effectively  stayed and the claims secured  thereby
are being actively contested in good faith and by appropriate proceedings and to
the extent such  judgments or awards do not constitute an Event of Default under
Section 11.8 hereof; (e) easements,  rights of way, restrictions,  minor defects
------------
or  irregularities  in title and other  similar  Liens  not  interfering  in any
material respect with the ordinary conduct of the business of the Borrowers; (f)
subject  to the  limitation  set  forth in  Section  9.1(e),  Liens  arising  in
                                            ---------------
connection  with  Capitalized  Lease  Obligations  (and  attaching  only  to the
property  being leased and products  and proceeds  thereof);  (g) subject to the
limitation set forth in Section  9.1(e),  Liens that  constitute  purchase money
                        ---------------
security  interests on any property  securing  Debt  incurred for the purpose of
financing all or any part of the cost of acquiring such property,  provided that
                                                                   --------
any  such  Lien  attaches  to  such  property  within  twenty  (20)  days of the


                                       21
<PAGE>

acquisition  thereof and attaches solely to the property so acquired;  (h) Liens
granted  to the Lender  hereunder  and under the Loan  Documents;  (i) usual and
customary  rights of set off;  (j) other  Liens  which in the  aggregate  secure
Obligations not exceeding Five Hundred Thousand and 00/100 Dollars ($500,000.00)
and (k) Liens  covering  the Bauer  Accounts  and their  proceeds  securing  the
obligations of KDS under the Bauer Distribution Agreement.

     "Permitted Perfection Limitations" shall mean a limitation on the perfected
      --------------------------------
status of Collateral to the extent that (a) perfection  would require a notation
on the  records of the issuer of title  (such as motor  vehicle  titles)  and no
notation is requested or made or (b) the laws of a  jurisdiction  outside of the
United States of America governs the issue of perfection.

     "Person"  shall mean any natural  person,  partnership,  limited  liability
      ------
company, limited liability partnership, corporation, trust, joint venture, joint
stock company, association, unincorporated organization, government or agency or
political subdivision thereof, or other entity, whether acting in an individual,
fiduciary or other capacity.

     "Prime Loan" or "Prime  Loans" shall mean that  portion,  and  collectively
      ----------      ------------
those portions, of the aggregate outstanding principal balance of the Loans that
bear interest at the Prime Rate.

     "Prime Rate" shall mean the  floating  per annum rate of interest  which at
      ----------
any time, and from time to time, shall be most recently  announced by the Lender
as its Prime or Base Rate,  which is not intended to be the  Lender's  lowest or
most  favorable  rate of interest  at any one time.  The  effective  date of any
change in the Prime Rate shall for purposes hereof be the date the Prime Rate is
changed by the Lender.  The Lender  shall not be obligated to give notice of any
change in the Prime Rate.

     "Principal   Shareholder"  shall  mean  AMREP   Corporation,   an  Oklahoma
      -----------------------
corporation.

     "Rate  Management  Transaction"  shall mean any  transaction  (including an
      -----------------------------
agreement with respect  thereto) now existing or hereafter  entered into between
Borrower and Lender which is a rate swap, basis swap,  forward rate transaction,
commodity swap, commodity option,  equity or equity index swap, equity or equity
index option, bond option,  interest rate option,  foreign exchange transaction,
cap transaction,  floor transaction,  collar transaction,  forward  transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar  transaction  (including  any option with respect to any of
these  transactions) or any combination  thereof,  whether linked to one or more
interest rates,  foreign  currencies,  commodity prices,  equity prices or other
financial measures.

     "Regulatory  Change" shall mean 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 the Lender or
its lending office.


                                       22
<PAGE>

     "Senior Debt" means all Debt of Borrowers other than Subordinated Debt.
      -----------

     "Shareholder's  Equity"  shall mean at any time the total  assets minus the
      ---------------------
total  liabilities  adjusted to eliminate  the effect of net  accumulated  other
comprehensive  loss  with  respect  to any  unpaid  liabilities  related  to any
Employee  Plan as would be shown on a  consolidated  balance  sheet of Borrowers
prepared in accordance with GAAP.

     "Subordinated  Debt" shall mean that  portion of the Debt of the  Borrowers
      ------------------
which is subordinated to the Obligations in a manner reasonably  satisfactory to
the  Lender,  including,  but not  limited  to,  right  and time of  payment  of
principal and interest.

     "Subsidiary" and "Subsidiaries" shall mean,  respectively,  with respect to
      ----------       ------------
any Person, each and all such corporations,  partnerships, limited partnerships,
limited liability companies,  limited liability partnerships,  joint ventures or
other  entities of which or in which such Person owns,  directly or  indirectly,
such number of  outstanding  Capital  Securities as have more than fifty percent
(50.00%) of the  ordinary  voting  power for the  election of directors or other
managers of such  corporation,  partnership,  limited liability company or other
entity.  Unless the context otherwise  requires,  each reference to Subsidiaries
herein shall be a reference to Subsidiaries of the Borrower.

     "Taxes"  shall mean any and all present and future taxes,  duties,  levies,
      -----
imposts,  deductions,  assessments,  charges  or  withholdings,  and any and all
liabilities (including interest and penalties and other additions to taxes) with
respect to the foregoing.

     "Total  Debt"  shall  mean  all  Debt  of the  Borrowers,  determined  on a
      -----------
consolidated basis,  excluding (i) Contingent  Liabilities (except to the extent
constituting  Contingent  Liabilities  in respect of the Debt of a Person  other
than  Borrowers),  (ii)  Hedging  Obligations,  (iii) Debt of Borrowers to other
Borrowers and Debt of Subsidiaries to Borrowers, and (iv) contingent obligations
in respect of undrawn Letters of Credit.

     "UCC"  shall  mean the  Uniform  Commercial  Code in effect in the state of
      ---
Illinois from time to time.

     "United States  Treasury  Securities"  means actively  traded United States
      -----------------------------------
Treasury bonds, bills and notes.

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

     "Voidable  Transfer"  shall have the  meaning  set forth in  Section  13.22
      ------------------                                          --------------
hereof.

     "Wholly-Owned  Subsidiary"  shall mean any  Subsidiary of which or in which
      ------------------------
one or more of the Borrowers own,  directly or indirectly,  one hundred  percent
(100%) of the Capital Securities of such Subsidiary.

                                       23
<PAGE>

     1.2 Accounting Terms. Any accounting terms used in this Agreement which are
         ----------------
not specifically  defined herein shall have the meanings  customarily given them
in  accordance  with GAAP.  Calculations  and  determinations  of financial  and
accounting terms used and not otherwise  specifically  defined hereunder and the
preparation  of financial  statements  to be  furnished  to the Lender  pursuant
hereto shall be made and prepared,  both as to classification of items and as to
amount,  in  accordance  with GAAP as used in the  preparation  of the financial
statements  of the Borrowers on the date of this  Agreement  except as otherwise
required  by  changes  in GAAP.  If any  changes  in  accounting  principles  or
practices  from those used in the  preparation  of the financial  statements are
hereafter occasioned by the promulgation of rules,  regulations,  pronouncements
and  opinions by or required by the  Securities  and  Exchange  Commission,  the
Financial  Accounting  Standards  Board or the  American  Institute of Certified
Public   Accountants  (or  any  successor   thereto  or  agencies  with  similar
functions),  which  results in a material  change in the method of accounting in
the financial  statements required to be furnished to the Lender hereunder or in
the  calculation of financial  covenants,  standards or terms  contained in this
Agreement,  the parties  hereto agree to enter into good faith  negotiations  to
amend such  provisions  so as  equitably to reflect such changes to the end that
the criteria for  evaluating  the  financial  condition and  performance  of the
Borrowers  will be the same after such changes as they were before such changes;
and if the  parties  fail to  agree on the  amendment  of such  provisions,  the
Borrowers will furnish financial statements in accordance with such changes, but
shall provide  calculations for all financial  covenants,  perform all financial
covenants and otherwise observe all financial  standards and terms in accordance
with applicable  accounting principles and practices in effect immediately prior
to such changes. Calculations with respect to financial covenants required to be
stated in accordance  with  applicable  accounting  principles  and practices in
effect  immediately prior to such changes shall be reviewed and certified by the
Borrower's  accountants.  Calculations  of all accounting  items included within
each financial covenant or other determination set forth in this Agreement shall
be on a consolidated basis for the Borrowers.

     1.3 Other Terms  Defined in UCC.  All other  capitalized  words and phrases
         ---------------------------
used  herein  and not  otherwise  specifically  defined  herein  shall  have the
respective  meanings  assigned  to such terms in the UCC, to the extent the same
are used or defined therein.

     1.4 Other Interpretive Provisions.
         -----------------------------

          (a) The  meanings  of  defined  terms are  equally  applicable  to the
     singular  and plural  forms of the defined  terms.  Whenever the context so
     requires, the neuter gender includes the masculine and feminine, the single
     number  includes the plural,  and vice versa,  and in  particular  the word
     "Borrower" shall be so construed.

          (b) Section  and  Schedule  references  are to this  Agreement  unless
     otherwise specified. The words "hereof", "herein" and "hereunder" and words
     of similar import when used in this Agreement shall refer to this Agreement
     as a whole and not to any particular provision of this Agreement

                                       24
<PAGE>

          (c) The  term  "including"  is not  limiting,  and  means  "including,
     without limitation".

          (d) In the  computation  of periods of time from a specified date to a
     later specified date, the word "from" means "from and including"; the words
     "to" and "until" each mean "to but excluding", and the word "through" means
     "to and including".

          (e) Unless  otherwise  expressly  provided herein,  (i) references  to
     agreements  (including  this  Agreement and the other Loan  Documents)  and
     other  contractual  instruments  shall be deemed to include all  subsequent
     amendments, restatements,  supplements and other modifications thereto, but
     only to the extent such  amendments,  restatements,  supplements  and other
     modifications  are not  prohibited by the terms of any Loan  Document,  and
     (ii) references  to  any  statute  or  regulation  shall  be  construed  as
     including all  statutory and  regulatory  provisions  amending,  replacing,
     supplementing or interpreting such statute or regulation.

          (f) To the extent any of the  provisions  of the other Loan  Documents
     are inconsistent  with the terms of this Agreement,  the provisions of this
     Agreement shall govern.

          (g) This  Agreement  and the  other  Loan  Documents  may use  several
     different  limitations,  tests  or  measurements  to  regulate  the same or
     similar  matters.   All  such  limitations,   tests  and  measurements  are
     cumulative and each shall be performed in accordance with its terms.

Section 2. COMMITMENT OF THE LENDER.
           ------------------------

2.1 Facility A Loans.
    ----------------

          (a) Facility A Loan Commitment. Subject to the terms and conditions of
              --------------------------
     this  Agreement  and the other Loan  Documents,  and in  reliance  upon the
     representations and warranties of the Borrowers set forth herein and in the
     other Loan  Documents,  the Lender  agrees to make such Facility A Loans at
     such times as the  Borrowers may from time to time request  until,  but not
     including,  the  Facility  A  Maturity  Date,  and in such  amounts  as the
     Borrowers  may  from  time to time  request,  provided,  however,  that the
     aggregate principal balance of all Facility A Loans outstanding at any time
     shall not exceed the Facility A Loan Availability. Facility A Loans made by
     the Lender may be repaid and,  subject to the terms and conditions  hereof,
     borrowed again up to, but not including the Facility A Maturity Date unless
     the Facility A Loans are otherwise  accelerated,  terminated or extended as
     provided  in this  Agreement.  The  Facility  A Loans  shall be used by the
     Borrowers for the purpose of  refinancing  an existing  line of credit,  to
     provide for short term working  capital needs and fund the  acquisition  of
     PCD and PCD, LLC.

          (b)  Facility  A Loan  Interest  and  Payments.  Except  as  otherwise
               -----------------------------------------
     provided in this Section  2.1(b),  the  principal  amount of the Facility A
                      ---------------

                                       25
<PAGE>

     Loans  outstanding  from time to time shall bear interest at the applicable
     Facility A Interest  Rate.  Borrowers may elect the 30 day Fixed LIBOR Rate
     effective the first  Business Day of a month and may then draw upon and pay
     down  Facility  A Loans at that rate  during the month  without  premium or
     penalty.  Notwithstanding the foregoing, accrued and unpaid interest on the
     unpaid principal  balance of all Facility A Loans  outstanding from time to
     time shall be due and payable monthly,  in arrears,  commencing on the last
     Business Day of January,  2007 and  continuing  on the last Business Day of
     each  calendar  month  thereafter,  and on the  Facility A  Maturity  Date.
     Accrued and unpaid interest on the unpaid principal balance of all Facility
     A Loans  outstanding  from  time to time  which are  LIBOR  Loans  shall be
     payable on the last Business Day of each LIBOR Interest  Period  (provided,
     however,  that for LIBOR Interest  Periods of six months,  accrued interest
     shall also be paid on the date which is three  months from the first day of
     such LIBOR  Interest  Period),  commencing  on the first such date to occur
     after the date hereof,  on the date of any  principal  repayment of a LIBOR
     Loan and on the  Facility  A Maturity  Date.  Any  amount of  principal  or
     interest  on the  Facility A Loans  which is not paid when due,  whether at
     stated maturity, by acceleration or otherwise,  shall bear interest payable
     on demand at the Default Rate.

          (c) Facility A Loan Principal Payments.
              ----------------------------------

               (i)  Facility A Loan  Mandatory  Payments.  All  Facility A Loans
                    ------------------------------------
          hereunder  shall be repaid by the Borrowers on the Facility A Maturity
          Date for  Facility A Loans,  unless  payable  sooner  pursuant  to the
          provisions of this Agreement.  In the event the aggregate  outstanding
          principal  balance  of all  Facility  A Loans  and  Letter  of  Credit
          Obligations  hereunder  exceeds the  Facility A Loan  Commitment,  the
          Borrowers  shall,  without  notice or demand of any kind,  immediately
          make  such  repayments  of the  Facility  A Loans or take  such  other
          actions as are  satisfactory  to the Lender as shall be  necessary  to
          eliminate  such excess.  Also, if the Borrowers  choose not to convert
          any  Facility A Loan which is a LIBOR Loan to a Prime Loan as provided
          in Section 2.5(a),  then such Facility A Loan shall be due and payable
             --------------
          on the last Business Day of the then existing LIBOR Interest Period or
          on such earlier date as required by law, all without  further  demand,
          presentment,  protest  or notice of any kind,  all of which are hereby
          waived by the Borrower.

               (ii) Optional Prepayments; Voluntary Reductions or Termination of
                    ------------------------------------------------------------
          the Facility A Loan  Commitment.  The  Borrowers may from time to time
          -------------------------------
          prepay  the  Facility  A  Loans,  in whole  or in  part,  without  any
          prepayment  penalty  whatsoever,  provided that any  prepayment of the
          entire  principal  balance  shall  include  accrued  interest  on such
          Facility A Loans to the date of such  prepayment.  The  Borrowers  may
          from time to time on at least five Business Days' prior written notice
          received  by  the  Lender  permanently  reduce  the  Facility  A  Loan
          Commitment  to an amount not less than the  amounts  then  outstanding
          under any Facility A Loans plus the  outstanding  amount of all Letter
          of Credit  Obligations.  Any such reduction  shall be in an amount not
          less  than  $100,000  or  a  higher  integral   multiple  of  $50,000.
          Concurrently  with any reduction of the Facility A Loan  Commitment to

                                       26
<PAGE>

          zero,  the  Borrowers  shall pay all interest on the Facility A Loans,
          all Non-Utilization  Fees and all letter of credit fees and shall Cash
          Collateralize in full all Letters of Credit Obligations.

2.2 Facility B Loan.
    ---------------

          (a) Facility B Loan Commitment. Subject to the terms and conditions of
              --------------------------
     this  Agreement  and the other Loan  Documents,  and in  reliance  upon the
     representations and warranties of the Borrowers set forth herein and in the
     other Loan Documents,  the Lender agrees to make a Facility B Loan equal to
     the Facility B Loan  Commitment.  The Facility B Loan shall be available to
     the Borrowers in a single principal  advance on such date as the conditions
     set forth in Section 3 shall have been satisfied or waived.  The Facility B
     Loan shall be used by the Borrowers for  consolidating the aggregate unpaid
     amount of all prior  direct  advances  made by the  Lender  under the terms
     loans provided under the Existing Loan  Agreement.  The Facility B Loan may
     be prepaid in whole or in part at any time  without  penalty,  but shall be
     due in full on the  Facility B Maturity  Date,  unless the credit  extended
     under the Facility B Loan is otherwise accelerated,  terminated or extended
     as provided in this Agreement.

          (b) Facility B Loan Interest and Principal  Payments.  The outstanding
              ------------------------------------------------
     principal  balance of the Facility B Loan shall be repaid in equal  monthly
     installments  of principal each in the amount of Eighty Four Thousand Three
     Hundred Thirty Three and 33/100 Dollars  ($84,333.33)  plus interest at the
     Facility B Interest  Rate,  beginning  on the last  Business Day of January
     2007, and continuing on the last day of each month thereafter, with a final
     payment  of all  outstanding  principal  and  accrued  interest  due on the
     Facility B Maturity Date.  Principal  amounts repaid on the Facility B Term
     Note may not be borrowed again.  Any amount of principal or interest on the
     Facility B Loan which is not paid when due, whether at stated maturity,  by
     acceleration  or otherwise,  shall bear  interest  payable on demand at the
     Default Rate.

          (c) Facility B Loan  Optional  Prepayments.  Provided that no Event of
              --------------------------------------
     Default then exists under this  Agreement or the Loans,  the  Borrowers may
     voluntarily  prepay the principal  balance of the Facility B Loan, in whole
     or in part,  without any prepayment penalty  whatsoever,  at any time on or
     after the date  hereof.  Each  prepayment  of the  Facility B Loan shall be
     applied to the  scheduled  installments  of the  Facility B Loan in inverse
     order of maturity.

2.3 Facility C Loans.
    ----------------

          (a) Facility C Loan  Commitment.  Provided that an Event of Default or
              ---------------------------
     any event  which with  notice,  lapse of time or both would  constitute  an
     Event of  Default  does not then  exist,  the  Lender  shall  extend to the
     Borrowers  the  Facility  C  Loan  Commitment.  Subject  to the  terms  and
     conditions  of  this  Agreement,  from  the  date  hereof  through  but not
     including May 1, 2008,  the Lender shall from time to time make advances to
     the Borrowers  hereunder in an aggregate amount not to exceed the lesser of
     (i) the  Facility  C Loan  Commitment  and (ii)  the  Eligible  Costs.  The


                                       27
<PAGE>

     aggregate  amount available under Facility C hereunder shall not exceed the
     Facility C Loan  Commitment.  Each advance under Facility C hereunder shall
     be called a "Facility C Loan".  The  Facility C Loans shall be evidenced by
     the Facility C CapEx Note in the amount of the Facility C Loan  Commitment.
     No  advance  under  Facility  C may have a  maturity  date  later  than the
     Facility C Maturity Date.

          (b) Facility C Loan Interest and Principal Payments.
              -----------------------------------------------

               (i) The  Borrowers  shall  pay  all  interest  at the  applicable
          Facility C Interest Rate selected  pursuant to Section  2.3(e) monthly
          in arrears on each Facility C Loan  beginning on the last Business Day
          of the first full  calendar  month after such Facility C Loan was made
          hereunder  and  continuing  on the last  Business Day of each calendar
          month  thereafter  until all amounts due thereunder  have been paid in
          full.  Borrowers  may elect the 30 day Fixed LIBOR Rate  effective the
          first  Business  Day of a month  and may then  draw  upon and pay down
          Facility  C Loans at that rate  during  the month  without  premium or
          penalty.  Accrued and unpaid interest on the unpaid principal  balance
          of all Facility C Loans  outstanding from time to time which are LIBOR
          Loans shall be payable on the last Business Day of each LIBOR Interest
          Period  (provided,  however,  that for LIBOR  Interest  Periods of six
          months, accrued interest shall also be paid on the date which is three
          months from the first day of such LIBOR Interest  Period),  commencing
          on the first such date to occur after the date hereof,  on the date of
          any principal repayment of a LIBOR Loan and on the Facility C Maturity
          Date.

               (ii) In addition to the interest payments set forth in (i) above,
          commencing on the last  Business Day of the first full calendar  month
          after each Facility C CapEx Note was initially funded (the "Facility C
          Funding  Date")  and  continuing  on the  last  Business  Day of  each
          calendar  month through and including the Facility C Maturity Date for
          such  Facility C CapEx Note,  the  Borrowers  shall make equal monthly
          principal  payments in the amount  necessary  to  amortize  fully such
          Facility C CapEx Note over a period of not more than  forty-eight (48)
          months.  The  Borrowers  shall pay the  outstanding  principal  of and
          interest on the Facility C CapEx Note not later than on the Facility C
          Maturity Date.

               (iii) The  Borrowers  may from time to time prepay the Facility C
          Loans, in whole or in part, without any prepayment penalty whatsoever,
          provided  that any  prepayment of the entire  principal  balance shall
          include accrued  interest on such Facility C Loans to the date of such
          prepayment.

          (c) Timing of Loans and Advances.  Requests by the Borrowers for loans
              ----------------------------
     or  advances  under  Facility C Loans shall be made in writing at least two
     (2)  Business  Days  prior to each  proposed  advance  on forms  reasonably
     acceptable to the Lender, but, at the Lender's sole discretion,  the Lender
     may  make  an  advance  to the  Borrowers  upon  the  oral  request  of the
     Borrowers,  subject to confirmation by the Borrowers in writing.  Each such
     request shall be in the minimum  amount of $100,000 and $50,000  increments


                                       28
<PAGE>

     in excess  thereof and shall be  accompanied  or  preceded by invoices  and
     certificates setting forth, in form and substance  reasonably  satisfactory
     to the Lender,  the amount of Eligible  Costs upon which the requested loan
     or advance is to be based.  Not more than two (2)  Business  Days after the
     Lender's receipt of such request for advance,  the Lender shall provide the
     Borrowers  with  notice of the amount of  Eligible  Costs  approved  by the
     Lender for such  advance.  As a condition  to the Lender  making an advance
     with  respect to a  Facility C Loan,  the  Borrowers  shall  deliver to the
     Lender the  applicable  invoices and  certificates  relating  thereto.  The
     Borrowers  consent to the Lender filing  further  Uniform  Commercial  Code
     financing statements attaching such invoices and certificates.

          (d) One Loan or Advance.  All  Facility C Loans shall  constitute  one
              -------------------
     obligation  secured by the Lender's Lien in the Borrower  Collateral and by
     all other Liens now or hereafter granted by the Borrowers to the Lender.

          (e) Applicable  Rate. The Borrowers agree to pay interest on the daily
              ----------------
     balance of each Facility C Loan. The Borrowers  shall make an interest rate
     election per Facility C CapEx Loan  selecting  one of the  following  three
     interest  rate  modes  to  apply  to the  Facility  C Loan  for the  period
     commencing  on the date of the funding of the  Facility C Loan  through the
     Facility C Maturity  Date or Facility C Maturity  Date for such  Facility C
     Loan, as applicable:

               (i) a variable interest rate equal to the Prime Rate;
               (ii) the LIBOR Rate; or
               (iii) the Fixed LIBOR Rate

          The foregoing  notwithstanding,  after the  occurrence  and during the
     continuance of an Event of Default under this Agreement, the rate per annum
     on such Facility C Loan shall be equal to the Default Rate.

          (f)  Computation  of Interest.  In computing  interest on a Facility C
               ------------------------
     Loan, (i) the date of funding of such Facility C Loan shall be included and
     (ii)  the date of  payment  of such  Facility  C Loan  shall  be  excluded;
     provided that if a Facility C Loan is repaid on the same day on which it is
     made, one day's interest shall be paid on such Facility C Loan.

2.4 Facility D Loans.
    ----------------

          (a) Facility D Loan Commitment. Subject to the terms and conditions of
              --------------------------
     this  Agreement  and the other Loan  Documents,  and in  reliance  upon the
     representations and warranties of the Borrowers set forth herein and in the
     other Loan  Documents,  the Lender  agrees to make such Facility D Loans at
     such times as the  Borrowers may from time to time request  until,  but not
     including,  the  Facility  D  Maturity  Date,  and in such  amounts  as the
     Borrowers  may  from  time to time  request,  provided,  however,  that the
     aggregate principal balance of all Facility D Loans outstanding at any time
     shall not exceed the Facility D Loan Availability. Facility D Loans made by


                                       29
<PAGE>

     the Lender may be repaid and,  subject to the terms and conditions  hereof,
     borrowed again up to, but not including the Facility D Maturity Date unless
     the Facility D Loans are otherwise  accelerated,  terminated or extended as
     provided  in this  Agreement.  The  Facility  D Loans  shall be used by the
     Borrowers   for  the  purpose  of  financing   payments   under  the  Bauer
     Distribution Agreement.

          (b)  Facility  D Loan  Interest  and  Payments.  Except  as  otherwise
               -----------------------------------------
     provided in this Section  2.4(b),  the  principal  amount of the Facility D
     Loans  outstanding  from time to time shall bear interest at the applicable
     Facility D Interest  Rate.  Borrowers may elect the 30 day Fixed LIBOR Rate
     effective the first  Business Day of a month and may then draw upon and pay
     down  Facility  D Loans at that rate  during the month  without  premium or
     penalty.  Notwithstanding the foregoing, accrued and unpaid interest on the
     unpaid principal  balance of all Facility D Loans  outstanding from time to
     time shall be due and payable monthly,  in arrears,  commencing on the last
     Business Day of January,  2007 and  continuing  on the last Business Day of
     each  calendar  month  thereafter,  and on the  Facility D  Maturity  Date.
     Accrued and unpaid interest on the unpaid principal balance of all Facility
     D Loans  outstanding  from  time to time  which are  LIBOR  Loans  shall be
     payable on the last Business Day of each LIBOR Interest  Period  (provided,
     however,  that for LIBOR Interest  Periods of six months,  accrued interest
     shall also be paid on the date which is three  months from the first day of
     such LIBOR  Interest  Period),  commencing  on the first such date to occur
     after the date hereof,  on the date of any  principal  repayment of a LIBOR
     Loan and on the  Facility  D Maturity  Date.  Any  amount of  principal  or
     interest  on the  Facility D Loans  which is not paid when due,  whether at
     stated maturity, by acceleration or otherwise,  shall bear interest payable
     on demand at the Default Rate.

          (c) Facility D Loan Principal Payments.
              ----------------------------------

               (i)  Facility D Loan  Mandatory  Payments.  All  Facility D Loans
                    ------------------------------------
          hereunder  shall be repaid by the Borrowers on the Facility D Maturity
          Date,  unless  payable  sooner  pursuant  to the  provisions  of  this
          Agreement. In the event the aggregate outstanding principal balance of
          all  Facility D Loans  exceeds the Facility D Loan  Availability,  the
          Borrowers  shall,  without  notice or demand of any kind,  immediately
          make  such  repayments  of the  Facility  D Loans or take  such  other
          actions as are  satisfactory  to the Lender as shall be  necessary  to
          eliminate  such excess.  Also, if the Borrowers  choose not to convert
          any  Facility D Loan which is a LIBOR Loan to a Prime Loan as provided
          in Section 2.5(a),  then such Facility D Loan shall be due and payable
          on the last Business Day of the then existing LIBOR Interest Period or
          on such earlier date as required by law, all without  further  demand,
          presentment,  protest  or notice of any kind,  all of which are hereby
          waived by the Borrower.

               (ii) Optional Prepayments; Voluntary Reductions or Termination of
                    ------------------------------------------------------------
          the Facility D Loan  Commitment.  The  Borrowers may from time to time
          -------------------------------
          prepay  the  Facility  D  Loans,  in whole  or in  part,  without  any
          prepayment  penalty  whatsoever,  provided that any  prepayment of the
          entire  principal  balance  shall  include  accrued  interest  on such
          Facility A Loans to the date of such  prepayment.  The  Borrowers  may


                                       30
<PAGE>

          from time to time on at least five Business Days' prior written notice
          received  by  the  Lender  permanently  reduce  the  Facility  D  Loan
          Commitment  to an amount not less than the  amounts  then  outstanding
          under all Facility D Loans.  Any such reduction  shall be in an amount
          not less than  $100,000  or a higher  integral  multiple  of  $50,000.
          Concurrently  with any reduction of the Facility D Loan  Commitment to
          zero, the Borrowers shall pay all interest on the Facility D Loans and
          Non-Utilization Fees.

2.5 Additional LIBOR Loan Provisions.
    --------------------------------

          (a) LIBOR  Unavailability.  If the Lender determines in its reasonable
              ---------------------
     good  faith  judgment  (which  determination  shall be  conclusive,  absent
     manifest error) prior to the commencement of any LIBOR Interest Period that
     (i) the making or  maintenance  of any LIBOR Loan or Fixed LIBOR Loan would
     violate any applicable law, rule,  regulation or directive,  whether or not
     having  the  force  of law,  (ii)  United  States  dollar  deposits  in the
     principal  amount,  and for periods equal to the LIBOR Interest  Period for
     funding  any LIBOR Loan or any Fixed  LIBOR Loan are not  available  in the
     London  Interbank  Eurodollar  market in the  ordinary  course of business,
     (iii) by reason of circumstances  affecting the London Interbank Eurodollar
     market,  adequate  and fair means do not exist for  ascertaining  the LIBOR
     Rate to be applicable to the relevant LIBOR Loan or the Fixed LIBOR Rate to
     be applicable to the relevant Fixed LIBOR Loan, or (iv) the LIBOR Rate does
     not accurately  reflect the cost to the Lender of a LIBOR Loan or the Fixed
     LIBOR Rate does not  accurately  reflect  the cost to the Lender of a Fixed
     LIBOR Loan, the Lender shall promptly notify the Borrowers  thereof and, so
     long  as the  foregoing  conditions  continue,  none  of the  Loans  may be
     advanced as a LIBOR Loan thereafter. In addition, at the Borrowers' option,
     each  existing  LIBOR Loan shall be  immediately  (i)  converted to a Prime
     Loan, or (ii) due and payable without further demand, presentment,  protest
     or notice of any kind, all of which are hereby waived by the Borrowers.

          (b)  Regulatory  Change.  In addition,  if,  after the date hereof,  a
               ------------------
     Regulatory  Change  shall,  in the  reasonable  good faith  judgment of the
     Lender, make it unlawful for the Lender to make or maintain the LIBOR Loans
     or the Fixed  LIBOR  Loans,  then the  Lender  shall  promptly  notify  the
     Borrowers,  and none of the Loans may be  advanced as a LIBOR Loan or Fixed
     LIBOR  Loans  thereafter.   In  addition,  at  the  Borrowers'  option,  as
     applicable,  each  existing  LIBOR  Loan  and  Fixed  LIBOR  Loan  shall be
     immediately  (i)  converted to a Prime Loan (in the case of any LIBOR Loan,
     on the last Business Day of the then existing LIBOR  Interest  Period or on
     such  earlier  date as  required by law),  or (ii) due and payable  without
     further  demand (in the case of any LIBOR Loan, on the last Business Day of
     the then existing LIBOR Interest Period or on such earlier date as required
     by law),  all without  presentment,  protest or notice of any kind,  all of
     which are hereby waived by the Borrowers.

          (c) LIBOR Indemnity.  If any Regulatory  Change,  or compliance by the
              ---------------
     Lender or any Person  controlling  the Lender with any request or directive
     of any governmental  authority,  central bank or comparable agency (whether


                                       31
<PAGE>

     or not having  the force of law)  issued or  promulgated  after the date of
     this Agreement shall (i) 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, the Lender;  (ii) subject the Lender,  any LIBOR
     Loan or any Fixed LIBOR Loan to any tax, duty, charge,  stamp tax or fee or
     change the basis of  taxation of  payments  to the Lender of  principal  or
     interest  due from the  Borrowers  to the Lender  hereunder  (other  than a
     change in the taxation of the overall net income of the  Lender);  or (iii)
     impose on the Lender any other condition regarding such LIBOR Loan or Fixed
     LIBOR Loan or the Lender's funding thereof,  and the Lender shall determine
     in its  reasonable  good  faith  judgment  (which  determination  shall  be
     conclusive,  absent  manifest error) that the result of the foregoing is to
     increase  the  cost  to,  or to  impose  a cost  on,  the  Lender  or  such
     controlling  Person of making or  maintaining  such LIBOR Loan or to reduce
     the amount of principal or interest received by the Lender hereunder,  then
     the  Borrowers  shall pay to the  Lender  or such  controlling  Person,  on
     demand,  such  additional  amounts as the Lender shall,  from time to time,
     determine are  sufficient  to compensate  and indemnify the Lender for such
     increased  cost or reduced  amount;  provided that (i) the Lender  provides
     Borrowers notice thereof within thirty (30) days of such Regulatory  Change
     or  applicable  request  or  directive  and  (ii)  if the  Lender  or  such
     controlling Person could mitigate the amount by changing its lending office
     or taking similar action, it will do so as long as there are no detrimental
     consequences to the Lender or such controlling Person.

     2.6 Interest and Fee Computation;  Collection of Funds. Except as otherwise
         --------------------------------------------------
set forth  herein,  all interest and fees shall be  calculated on the basis of a
year  consisting  of 360 days and  shall be paid for the  actual  number of days
elapsed.  Principal payments submitted in funds not immediately  available shall
continue  to bear  interest  until  collected.  If any payment to be made by the
Borrowers  hereunder  or under any Note  shall  become due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall be included in computing any interest in respect of
such payment.  Notwithstanding  anything to the contrary  contained herein,  the
final  payment due under any of the Loans must be made by wire transfer or other
immediately  available  funds.  All payments made by the Borrowers  hereunder or
under any of the Loan Documents shall be made without setoff,  counterclaim,  or
other defense. To the extent permitted by applicable law, all payments hereunder
or  under  any of the  Loan  Documents  (including  any  payment  of  principal,
interest,  or fees) to, or for the  benefit,  of any Person shall be made by the
Borrowers  free and clear of, and  without  deduction  or  withholding  for,  or
account of, any taxes now or hereinafter imposed by any taxing authority.

     2.7  Letters  of  Credit.  Subject  to the  terms  and  conditions  of this
          -------------------
Agreement and upon (i) the execution by the Borrowers and the Lender of a Master
Letter of Credit  Agreement in form and substance  reasonably  acceptable to the
Lender (together with all amendments,  modifications  and restatements  thereof,
the "Master Letter of Credit Agreement"), and (ii) the execution and delivery by
the  Borrowers,  and the  acceptance  by the  Lender,  in its sole and  absolute
discretion,  of a Letter of Credit  Application,  the Lender agrees to issue for


                                       32
<PAGE>

the account of the Borrowers  such Letters of Credit in the standard form of the
Lender and otherwise in form and substance reasonably  acceptable to the Lender,
from time to time during the term of this Agreement, provided that the Letter of
Credit  Obligations  may not at any time exceed the Letter of Credit  Commitment
and provided  further,  that no Letter of Credit shall have an  expiration  date
later than the Letter of Credit  Maturity  Date. The amount of any payments made
by the Lender  with  respect to draws  made by a  beneficiary  under a Letter of
Credit for which the  Borrowers  have  failed to  reimburse  the Lender upon the
earlier of (i) the Lender's demand for repayment, or (ii) five (5) days from the
date of such payment to such beneficiary by the Lender,  shall be deemed to have
been  converted to a Facility A Loan as of the date such payment was made by the
Lender to such beneficiary. Upon the occurrence and during the continuance of an
Event of a  Default  and at the  option  of the  Lender,  all  Letter  of Credit
Obligations  shall be converted to Facility A Loans  consisting  of Prime Loans,
all without demand, presentment, protest or notice of any kind, all of which are
hereby  waived by the  Borrowers.  To the  extent the  provisions  of the Master
Letter of Credit Agreement  differ from, or are inconsistent  with, the terms of
this Agreement, the provisions of this Agreement shall govern.

     2.8 Taxes.
         -----

          (a) All payments made by the Borrowers  under this Agreement  shall be
     made free and clear of, and  without  deduction  or  withholding  for or on
     account of, any present or future  income,  stamp or other  taxes,  levies,
     imposts,  duties,  charges,  fees,  deductions  or  withholdings,   now  or
     hereafter  imposed,  levied,   collected,   withheld  or  assessed  by  any
     governmental  authority,  excluding  net income taxes and  franchise  taxes
     (imposed in lieu of net income taxes)  imposed on the Lender as a result of
     a present or former  connection  between the Lender and the jurisdiction of
     the governmental  authority imposing such tax or any political  subdivision
     or taxing  authority  thereof or therein  (other  than any such  connection
     arising solely from the Lender having executed,  delivered or performed its
     obligations or received a payment under, or enforced, this Agreement or any
     other Loan Document).  If any such  non-excluded  taxes,  levies,  imposts,
     duties,   charges,   fees,   deductions  or   withholdings   (collectively,
     "Non-Excluded  Taxes") or Other Taxes are required to be withheld  from any
     amounts  payable to the  Lender  hereunder,  the  amounts so payable to the
     Lender shall be  increased  to the extent  necessary to yield to the Lender
     (after payment of all  Non-Excluded  Taxes and Other Taxes) interest or any
     such  other  amounts  payable  hereunder  at the  rates  or in the  amounts
     specified in this Agreement,  provided,  however,  that the Borrowers shall
     not be  required to increase  any such  amounts  payable to the Lender with
     respect to any  Non-Excluded  Taxes that are  attributable  to the Lender's
     failure to comply with the requirements of Section 2.8(c).

          (b)  The  Borrowers   shall  pay  any  Other  Taxes  to  the  relevant
     governmental authority in accordance with applicable law.

          (c) At the request of the Borrowers and at the  Borrowers'  sole cost,
     the Lender shall take reasonable steps to (i) contest its liability for any
     Non-Excluded  Taxes or Other Taxes that have not been paid,  or (ii) seek a
     refund of any Non-Excluded Taxes or Other Taxes that have been paid.

                                       33
<PAGE>

          (d) Whenever any Non-Excluded  Taxes or Other Taxes are payable by the
     Borrowers,  as promptly as possible  thereafter the Borrowers shall send to
     the Lender a certified copy of an original official receipt received by the
     Borrowers  showing  payment  thereof.  If the  Borrowers  fails  to pay any
     Non-Excluded  Taxes  or Other  Taxes  when  due to the  appropriate  taxing
     authority  or fails to remit to the Lender the  required  receipts or other
     required  documentary  evidence or if any  governmental  authority seeks to
     collect a  Non-Excluded  Tax or Other Tax directly  from the Lender for any
     other  reason,  the  Borrowers  shall  indemnify the Lender on an after-tax
     basis for any  incremental  taxes,  interest or  penalties  that may become
     payable by the Lender.

          (e) The agreements in this Section shall survive the  satisfaction and
     payment of the Obligations and the termination of this Agreement.

     2.9 Security Interest.  The Loans and Letters of Credit shall be secured by
         -----------------
the Lender's  priority  security interest in and Lien upon all of the Collateral
and by all other security interests,  Liens, claims and encumbrances heretofore,
now or at any time or times  hereafter  granted by the  Borrowers to the Lender,
subject to the Intercreditor Agreement.

Section 3. CONDITIONS OF BORROWING.
           -----------------------

     Notwithstanding any other provision of this Agreement, the Lender shall not
be  required  to  disburse  or  make  all or any  portion  of the  Loans  to the
Borrowers, if any of the following conditions pertaining to such Borrowers shall
have occurred.

     3.1 Loan Documents.  The Borrowers shall have failed to execute and deliver
         --------------
to the  Lender  any of the  following  Loan  Documents,  all of  which  must  be
reasonably  satisfactory  to the  Lender  and  the  Lender's  counsel  in  form,
substance and execution:

          (a) Second  Amended and  Restated  Loan and  Security  Agreement.  Two
              ------------------------------------------------------------
     copies of this Agreement.

          (b) Facility A Revolving Note. The Facility A Revolving Note.
              -------------------------

          (c) Facility B Term Note. The Facility B Term Note.
              --------------------

          (d) Facility C CapEx Note. The Facility C CapEx Note.
              ---------------------

          (e) Facility D Revolving Note. The Facility D Revolving Note.
              -------------------------

          (f)  Master  Letter  of  Credit  Agreement.  Master  Letter  of Credit
               -------------------------------------
     Agreement  prepared  by  and  reasonably  acceptable  to the  Lender,  duly
     executed by the Borrowers in favor of the Lender.

                                       34
<PAGE>

          (g) Subordination Agreement. A Subordination Agreement dated as of the
              -----------------------
     date of this Agreement,  from each holder of Subordinated Debt, in the form
     prepared by and reasonably  acceptable to the Lender in the form of Exhibit
                                                                         -------
     F hereto.
     -

          (h) Patent and  Trademark  Security  Agreement.  Amended and  Restated
              ------------------------------------------
     Patent  and  Trademark   Security  Agreement  prepared  by  and  reasonably
     acceptable  to the Lender,  duly  executed by the Borrowers in favor of the
     Lender in the form of Exhibit G hereto.
                           ---------

          (i) Copyright   Security   Agreement.   Copyright  Security  Agreement
              --------------------------------
     prepared by and reasonably acceptable to the Lender, in favor of the Lender
     in the form of Exhibit H hereto.
                    ---------

          (j) Collateral  Access  Agreement.  If and when requested by Lender, a
              -----------------------------
     Collateral  Access  Agreement from the owner,  lessor or mortgagee,  as the
     case may be,  of any real  estate  whereon  any  Collateral  is  stored  or
     otherwise located, in the form prepared by and reasonably acceptable to the
     Lender,  except  where  the  Borrowers  have used  commercially  reasonable
     efforts to obtain the same and are unable to do so.

          (k) Borrowing Base  Certificates.  A Borrowing Base Certificate in the
              ----------------------------
     form prepared by the Lender and attached as Exhibit I hereto,  certified as
     accurate by the applicable  Borrowers,  and acceptable to the Lender in its
     sole discretion.

          (l) Search Results;  Lien  Terminations.  Copies of UCC search reports
              -----------------------------------
     dated such a date as is reasonably  acceptable  to the Lender,  listing all
     effective  financing  statements  which name the Borrowers and any of their
     Subsidiaries, under their present names and any previous names, as debtors,
     together with (i) copies of such financing statements,  (ii) payoff letters
     evidencing  repayment  in full of all  existing  Debt to be repaid with the
     Loans,  the termination of all agreements  relating thereto and the release
     of all Liens granted in connection therewith, with UCC or other appropriate
     termination  statements  and documents  effective to evidence the foregoing
     (other  than  Permitted  Liens),  and  (iii)  such  other  UCC  termination
     statements as the Lender may reasonably request.

          (m)  Organizational  and  Authorization  Document.  Copies  of (i) the
               --------------------------------------------
     Articles or  Certificate  of  Incorporation  or Articles or  Certificate of
     Organization of each Borrower;  (ii) resolutions of the board of directors,
     managers  or  members  of the  Borrowers  approving  and  authorizing  such
     Person's execution, delivery and performance of the Loan Documents to which
     it is party and the transactions  contemplated thereby; (iii) signature and
     incumbency  certificates  of the  officers  or  managers  of the  Borrowers
     executing any of the Loan Documents,  each of which the applicable Borrower
     hereby  certifies  to be true and  complete,  and in full  force and effect
     without modification,  it being understood that the Lender may conclusively
     rely on each such document and  certificate  until actually  advised by the
     Borrowers of any changes  therein;  and (iv) good standing  certificates in
     the state of organization of the Borrowers and in each other state in which
     a Borrower does business.

                                       35
<PAGE>

          (n) Insurance. Evidence satisfactory to the Lender of the existence of
              ---------
     insurance required to be maintained  pursuant to Section 8.6, together with
     evidence  that the Lender  has been  named as a loss  payee on all  related
     insurance  policies (except that with respect to policies  relating to PCD,
     LLC or PCD,  Borrowers shall have thirty (30) days after closing to provide
     such evidence).

          (o) Lockbox  Agreement.  The Master Cash Management  Service Agreement
              ------------------
     and  Supplement  to  the  Master  Cash  Management  Service  Agreement  Re:
     Wholesale Lockbox and Lockbox Related Services,  entered into in connection
     with the Existing Loan Agreement is in full force and effect.

          (p)  Opinion  of  Borrowers'  Counsel.  An  opinion  of counsel to the
               --------------------------------
     Borrowers in the form prepared by and in substance reasonably acceptable to
     Lender's counsel.

          (q)  Evidence  of  Palm  Data  Acquisition.  A  certified  copy of the
               -------------------------------------
     Certificate of Merger or other  documentation  reasonably  satisfactory  to
     Lender and its counsel that the  acquisition of PCD and PCD, LLC by KMS has
     closed.

          (r)  Additional   Documents.   Such  other   certificates,   financial
               ----------------------
     statements,  schedules,  resolutions,  opinions of counsel, notes and other
     documents  which are  provided  for  hereunder  or which the  Lender  shall
     require.

     3.2 Event of Default.  Any Event of Default,  or Unmatured Event of Default
         ----------------
shall have occurred and be continuing.

     3.3 Material Adverse Effect. The occurrence of a Material Adverse Effect.
         -----------------------

     3.4 Litigation.  Any litigation or governmental  proceeding shall have been
         ----------
instituted against any Borrower or any of its officers or shareholders  having a
Material Adverse Effect.

     3.5 Representations  and Warranties.  Any representation or warranty of any
         -------------------------------
Borrower  contained  herein or in any Loan Document shall be untrue or incorrect
in any material  respect as of the date of any Loan as though made on such date,
except to the extent such  representation  or warranty  expressly  relates to an
earlier date.

Section 4. NOTES EVIDENCING LOANS.
           ----------------------

     4.1  Facility A  Revolving  Notes.  The  Facility A Loans and the Letter of
          ----------------------------
Credit  Obligations  shall be evidenced by the Facility A Revolving Note. At the
time of the  initial  disbursement  of a  Facility  A Loan and at each  time any
additional  Facility A Loan shall be requested  hereunder or a repayment made in
whole or in part  thereon,  a  notation  thereof  shall be made on the books and
records of the Lender.  All amounts  recorded shall be, absent  manifest  error,
conclusive  and binding  evidence of (i) the principal  amount of the Facility A
Loans  advanced  hereunder  and the amount of all Letter of Credit  Obligations,
(ii) any accrued and unpaid  interest  owing on the Facility A Loans,  and (iii)


                                       36
<PAGE>

all amounts repaid on the Facility A Loans or the Letter of Credit  Obligations.
The failure to record any such  amount or any error in  recording  such  amounts
shall not,  however,  limit or otherwise affect the obligations of the Borrowers
under  the  Facility  A  Revolving  Note to repay  the  principal  amount of the
Facility A Loans, together with all interest accruing thereon.

     4.2  Facility B Term Note.  The  Facility B Term Loan shall be evidenced by
          --------------------
the Facility B Term Note.

     4.3 Facility C CapEx Notes.  The Facility C Loans shall be evidenced by the
         ----------------------
Facility C CapEx Note. At the time of the initial  disbursement  of a Facility C
Loan  and at each  time  any  additional  Facility  C Loan  shall  be  requested
hereunder or a repayment  made in whole or in part thereon,  a notation  thereof
shall be made on the books and records of the Lender. All amounts recorded shall
be, absent manifest error,  conclusive and binding evidence of (i) the principal
amount of the Facility C Loans advanced  hereunder,  (ii) any accrued and unpaid
interest  owing on the  Facility C Loans,  and (iii) all  amounts  repaid on the
Facility  C Loans.  The  failure  to  record  any such  amount  or any  error in
recording  such  amounts  shall  not,  however,  limit or  otherwise  affect the
obligations  of the  Borrowers  under the  Facility C CapEx  Notes and repay the
principal  amount of the Facility C Loans,  together with all interest  accruing
thereon.

     4.4 Facility D Revolving  Note.  The Facility D Loans shall be evidenced by
         --------------------------
the  Facility D Revolving  Note.  At the time of the initial  disbursement  of a
Facility  D Loan  and at each  time  any  additional  Facility  D Loan  shall be
requested  hereunder or a repayment made in whole or in part thereon, a notation
thereof  shall be made on the books  and  records  of the  Lender.  All  amounts
recorded shall be, absent manifest error, conclusive and binding evidence of (i)
the  principal  amount of the  Facility  D Loans  advanced  hereunder,  (ii) any
accrued and unpaid interest owing on the Facility D Loans, and (iii) all amounts
repaid on the  Facility D Loans.  The  failure to record any such  amount or any
error in recording such amounts shall not,  however,  limit or otherwise  affect
the  obligations  of the Borrowers  under the Facility D Revolving Note to repay
the principal amount of and all interest on the Facility Loans.



Section 5. MANNER OF BORROWING.
           -------------------

     5.1 Borrowing Procedures. Each Facility A Loan, Facility C Loan or Facility
         --------------------
D Loan may be  advanced  either as a Prime  Loan,  a Fixed LIBOR Loan or a LIBOR
Loan,  provided,  however,  that at any time, the Borrowers may identify no more
than five (5) Facility A Loans,  five (5) Facility C Loans and five (5) Facility
D Loans which may be LIBOR Loans and Borrowers may have only one (1) Fixed LIBOR
Loan Facility A Loan, one (1) Fixed LIBOR Loan Facility C Loan and one (1) Fixed
LIBOR Loan Facility D Loan at any one time.  Each Facility A Loan and Facility D
Loan shall be made  available to the Borrowers  upon any written,  electronic or
telecopy loan request which the Lender in good faith  believes to emanate from a
properly authorized  representative of the Borrowers,  whether or not that is in
fact the case.  Each such notice shall be effective  upon receipt by the Lender,


                                       37
<PAGE>

shall be irrevocable,  and shall specify the date,  amount and type of borrowing
and, in the case of a LIBOR Loan,  the initial LIBOR Interest  Period  therefor.
The Borrowers shall select LIBOR Interest Periods so as not to require a payment
or  prepayment of any LIBOR Loan during a LIBOR  Interest  Period for such LIBOR
Loan. The final LIBOR  Interest  Period for any LIBOR Loan must be such that its
expiration  occurs on or before the Maturity  Date of such Loan. A request for a
Prime Loan or an  overnight  LIBOR Loan Rate must be  received  by the Lender no
later than 11:00 a.m.  Chicago,  Illinois time, on the day it is to be funded. A
request for a LIBOR Loan (other  than an  overnight  rate) or a Fixed LIBOR Loan
must be (i)  received by the Lender no later than 11:00 a.m.  Chicago,  Illinois
time, three days before the day it is to be funded,  and (ii) in an amount equal
to One Hundred  Thousand and 00/100 Dollars  ($100,000.00)  or a higher integral
multiple of One Hundred Thousand and 00/100 Dollars ($100,000.00).  The proceeds
of each  Facility A Loan shall be made  available at the office of the Lender by
credit to the  account  of the  Borrowers  or by other  means  requested  by the
Borrowers  and  acceptable to the Lender.  The  Borrowers do hereby  irrevocably
confirm,  ratify  and  approve  all such  advances  by the  Lender and do hereby
indemnify  the  Lender  against  losses and  expenses  (including  court  costs,
attorneys' and paralegals' fees) and shall hold the Lender harmless with respect
thereto.


     5.2 LIBOR  Conversion and Continuation  Procedures.  (a) Upon notice to the
         ----------------------------------------------
Lender  as set  forth  above,  the  Borrowers  may,  subject  to the  terms  and
conditions of this Agreement,  (i) elect, as of any Business Day, to convert any
Facility A Loan , Facility C Loan or Facility D Loan that is a Prime Loan into a
LIBOR Loan or a Fixed  LIBOR Loan;  or (ii)  convert any LIBOR Loan into a Prime
Loan or a Fixed LIBOR Loan and convert any Fixed LIBOR Loan into a Prime Loan or
a LIBOR Loan.  Such notice shall  specify:  (A) the proposed date of conversion;
(B) the aggregate amount of Loans to be converted;  and (B) the type of Facility
A Loans, Facility C Loans or Facility D Loans, as applicable, resulting from the
proposed conversion.

          (b) Unless the  Borrowers  request that a LIBOR Loan be converted to a
     Prime Loan or a Fixed LIBOR Loan in accordance  with Section  5.2(a),  upon
                                                          ---------------
     the completion of the relevant  LIBOR  Interest  Period for such LIBOR Loan
     all LIBOR  Loans  shall  automatically  be  continued  with the same  LIBOR
     Interest Period as the LIBOR Interest Period then ended.

     5.3 Letters of Credit.  All Letters of Credit shall bear such  application,
         -----------------
issuance,  renewal,  negotiation  and  other  fees and  charges,  and bear  such
interest as charged by the Lender or  otherwise  payable  pursuant to the Master
Letter of Credit Agreement. In addition to the foregoing, all standby Letters of
Credit issued under and pursuant to this Agreement shall bear an annual issuance
fee equal to one and one-half percent (1.50%) of the face amount of such standby
Letter of  Credit,  payable  by the  Borrowers,  as  applicable,  quarterly,  in
advance, until (i) such Letter of Credit has expired or has been returned to the
Lender,  or (ii) the Lender has paid the  beneficiary  thereunder  the full face
amount of such Letter of Credit.

     5.4 Automatic  Debit.  In order to effectuate  the timely payment of any of
         ----------------
the Obligations  when due, the Borrowers hereby authorize and direct the Lender,
at the Lender's option, to debit the amount of the Obligations from any ordinary
deposit account of the applicable Borrowers, or as applicable,  hereunder to pay
the amount of the Obligations.

                                       38
<PAGE>

     5.5  Discretionary  Disbursements.  The  Lender,  in its sole and  absolute
          ----------------------------
discretion,  may immediately upon notice to the applicable  Borrowers,  disburse
any or all proceeds of the Loans made or available to the  applicable  Borrowers
pursuant to this  Agreement to pay any fees,  costs,  expenses or other  amounts
required to be paid by the applicable  Borrowers  hereunder and not so paid. All
monies  so  disbursed  shall  be a  part  of  the  Obligations,  payable  by the
applicable Borrowers on demand from the Lender.

Section 6. SECURITY FOR THE OBLIGATIONS.
           ----------------------------

     6.1 Security for  Obligations.  As security for the payment and performance
         -------------------------
of the Obligations  each of the Borrowers does hereby pledge,  assign,  transfer
and  deliver to the Lender and do hereby  grant to the Lender a  continuing  and
unconditional  first priority security interest in and to the Collateral subject
to Permitted Liens and Permitted Perfection Limitations.

     6.2  Possession  and  Transfer  of  Collateral.  Unless an Event of Default
          -----------------------------------------
exists  hereunder,  the Borrowers shall be entitled to possession and use of the
Collateral  (other than  Instruments or Documents,  Tangible  Chattel Paper, and
other Collateral required to be delivered to the Lender pursuant to this Section
6). The cancellation or surrender of any Note, upon payment or otherwise,  shall
not  affect the right of the Lender to retain  the  related  Collateral  for any
other  Obligations of the applicable  Borrowers.  Borrowers shall not effect any
Asset Disposition involving Collateral.

     6.3 Financing Statements.  The Borrowers shall, at the Lender's request, at
         --------------------
any time and from time to time, execute and deliver to the Lender such financing
statements,  amendments and other documents and do such acts as the Lender deems
reasonably  necessary in order to establish  and  maintain  valid,  attached and
perfected  first priority  security  interests in the Collateral in favor of the
Lender,  free and clear of all  Liens and  claims  and  rights of third  parties
whatsoever,  except Permitted Liens. The Borrowers hereby irrevocably  authorize
the Lender at any time, and from time to time, to file in any  jurisdiction  any
initial financing statements and amendments thereto without the signature of the
applicable  Borrower  that (a) indicate the  Collateral  (i) is comprised of all
assets of such  Borrower or words of similar  effect,  regardless of whether any
particular  asset  comprising a part of the Collateral falls within the scope of
Article  9 of the  Uniform  Commercial  Code of the  jurisdiction  wherein  such
financing  statement  or  amendment  is  filed,  or (ii) as being of an equal or
lesser scope or within greater detail as the grant of the security  interest set
forth  herein,  and (b) contain any other  information  required by Section 5 of
Article  9 of the  Uniform  Commercial  Code of the  jurisdiction  wherein  such
financing  statement or amendment is filed  regarding the  sufficiency or filing
office acceptance of any financing statement or amendment, including (i) whether
the applicable  Borrower is an  organization,  the type of organization  and any
Organizational  Identification  Number issued to such Borrower,  and (ii) in the
case of a financing statement filed as a fixture filing or indicating Collateral
as as-extracted  collateral or timber to be cut, a sufficient description of the


                                       39
<PAGE>

real property to which the Collateral relates. The Borrowers hereby agree that a
photocopy or other  reproduction of this Agreement is sufficient for filing as a
financing  statement  and the  Borrowers  authorize  the  Lender  to  file  this
Agreement as a financing  statement in any jurisdiction.  The Borrowers agree to
furnish any such information to the Lender promptly upon request.  The Borrowers
further  ratify and affirm  their  authorization  for any  financing  statements
and/or amendments thereto,  executed and filed by the Lender in any jurisdiction
prior to the date of this  Agreement.  In  addition,  the  Borrowers  shall make
appropriate  entries on their books and records disclosing the Lender's security
interests in the Collateral.

     6.4  Additional  Collateral.  The  Borrowers  shall  deliver  to the Lender
          ----------------------
immediately upon its demand,  such other collateral (such additional  collateral
shall under no  circumstances  include any real property of any of the Borrowers
or any  property  of, or for the account of, or any  Borrower's  interest in the
Capital  Securities  of any  Borrower  or any  Affiliate  or  Subsidiary  of any
Borrower) as the Lender may from time to time  request,  should the value of the
Collateral,  in  the  Lender's  reasonable  discretion,   decline,  deteriorate,
depreciate  or become  impaired,  and do hereby grant to the Lender a continuing
security  interest in such other collateral,  which, when pledged,  assigned and
transferred  to the  Lender  shall be and  become  part of the  Collateral.  The
Lender's security  interests in all of the foregoing  Collateral shall be valid,
complete and perfected whether or not covered by a specific assignment.

     6.5 Preservation of the Collateral. The Lender may, but is not required, to
         ------------------------------
take such actions from time to time as the Lender deems  appropriate to maintain
or protect the  Collateral.  The Lender shall have exercised  reasonable care in
the custody and  preservation  of the Collateral if the Lender takes such action
as the Borrowers shall  reasonably  request in writing which is not inconsistent
with the Lender's  status as a secured  party,  but the failure of the Lender to
comply  with any such  request  shall not  necessarily  be  deemed a failure  to
exercise reasonable care; provided, however, the Lender's responsibility for the
safekeeping of the Collateral shall (i) be deemed  reasonable if such Collateral
is accorded treatment  substantially  equal to that which the Lender accords its
own property,  and (ii) not extend to matters  beyond the control of the Lender,
including,  without  limitation,  acts  of  God,  war,  insurrection,   riot  or
governmental  actions.  In  addition,  any  failure of the Lender to preserve or
protect  any  rights  with  respect  to the  Collateral  against  prior or third
parties, or to do any act with respect to preservation of the Collateral, not so
requested  by the  Borrowers,  shall not  necessarily  be  deemed a  failure  to
exercise  reasonable care in the custody or preservation of the Collateral.  The
Borrowers  shall have the sole  responsibility  for taking such action as may be
necessary,  from time to time,  to preserve all rights of the  Borrowers and the
Lender in the Collateral against prior or third parties.

     6.6 Other Actions as to any and all Collateral. The Borrowers further agree
         ------------------------------------------
to take any other  action  reasonably  requested  by the  Lender  to ensure  the
attachment,  perfection  and first priority of, and the ability of the Lender to
enforce, the Lender's security interest in any and all of the Collateral subject
to Permitted  Liens and  Permitted  Perfection  Limitations  including,  without
limitation,  (a) causing the Lender's  name to be noted as secured  party on any
certificate  of title  for a titled  good if such  notation  is a  condition  to
attachment,  perfection or priority of, or ability of the Lender to enforce, the
Lender's security interest in such Collateral,  (b) complying with any provision
of any statute,  regulation or treaty of the United States as to any  Collateral
if compliance  with such provision is a condition to  attachment,  perfection or
priority of, or ability of the Lender to enforce, the Lender's security interest
in  such  Collateral,  (c)  using  commercially  reasonable  efforts  to  obtain


                                       40
<PAGE>

governmental  and other third party  consents and approvals,  including  without
limitation  any consent of any  licensor,  lessor or other  Person  obligated on
Collateral,  (d)  obtaining  waivers from  mortgagees  and landlords in form and
substance  reasonably  satisfactory  to the  Lender,  and (e) taking all actions
required by the UCC in effect  from time to time or by other law, as  applicable
in any relevant UCC  jurisdiction,  or by other law as applicable in any foreign
jurisdiction.  The  Borrowers  further  agree to  indemnify  and hold the Lender
harmless against claims of any Persons not a party to this Agreement  concerning
disputes arising over the Collateral.

     6.7 Collateral in the Possession of a Warehouseman or Bailee. If any of the
         --------------------------------------------------------
Collateral at any time is in the  possession of a  warehouseman  or bailee,  the
applicable  Borrower shall at any time that Lender so requires notify the Lender
thereof,  and shall use commercially  reasonable  efforts to obtain a Collateral
Access Agreement.

     6.8 Lockbox Arrangement.  (a) Each Borrower shall direct all of its Account
         -------------------
Debtors to make all payments on the Accounts  directly to a post office box (the
"Lockbox")  designated  by, and under the  exclusive  control  of,  the  Lender.
Pursuant to the Lockbox Agreement,  the Borrowers (except KMS, PCD and PCD, LLC)
have  established  the Lockbox and an account  (the  "Lockbox  Account")  in the
Borrowers' names with the Lender into which all payments received in the Lockbox
shall be deposited, and into which the Borrowers (except PCD, LLC until October,
2007 at which time PCD, LLC will execute the Lockbox Agreement) will immediately
deposit all payments made for Inventory sold by the Borrowers or the performance
of services by the  Borrowers,  and received by the  Borrowers in the  identical
form in  which  such  payments  were  made,  whether  by cash or  check.  If the
Borrowers or any director,  officer,  employee,  agent of the Borrowers,  or any
other  Person  acting for or in concert  with the  Borrowers  shall  receive any
monies,  checks,  notes,  drafts or other payments relating to or as proceeds of
Accounts or other  Collateral,  the Borrowers and each such Person shall receive
all such  items in trust for,  and as the sole and  exclusive  property  of, the
Lender and, immediately upon receipt thereof, shall remit the same (or cause the
same to be remitted) in kind to the Lockbox  Account.  The Borrowers  agree that
all payments made to such Lockbox and Lockbox  Account or otherwise  received by
the  Lender,  whether  in  respect  of the  Accounts  or as  proceeds  of  other
Collateral or otherwise, will be applied in accordance with Section 12.8 of this
Agreement.  The Borrowers agree to pay all reasonable  fees,  costs and expenses
which the Lender incurs in connection  with opening and  maintaining the Lockbox
and the Lockbox Account and depositing for collection by the Lender any check or
other item of payment received by the Lender on account of the Obligations.  All
of such fees, costs and expenses shall constitute Obligations  hereunder,  shall
be payable to the Lender by the Borrowers upon demand,  and,  until paid,  shall
bear  interest at the Default Rate and if not paid within thirty (30) days shall
be treated as a Facility A Advance.  All checks,  drafts,  instruments and other
items of payment or proceeds of Collateral shall be endorsed by the Borrowers to
the Lender,  and, if that endorsement of any such item shall not be made for any
reason, the Lender is hereby  irrevocably  authorized to endorse the same on the
Borrowers'  behalf. For the purpose of this section,  the Borrowers  irrevocably
hereby make,  constitute  and appoint the Lender (and all Persons  designated by
the Lender for that  purpose) as the  Borrowers'  true and lawful  attorney  and
agent-in-fact  (i) to  endorse  the  Borrowers'  name upon such items of payment
and/or proceeds of Collateral and upon any Chattel Paper, document,  instrument,


                                       41
<PAGE>

invoice  or  similar  document  or  agreement  relating  to any  Account  of the
Borrowers 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 the  Borrower's  mail is  deposited,  and open and
process all mail addressed to the Borrowers and deposited therein.

     6.9 Letter-of-Credit Rights. Borrowers represent and warrant to Lender that
         -----------------------
they have no material  Letter of Credit  Rights.  If a Borrower at any time is a
beneficiary  under a material letter of credit now or hereafter  issued in favor
of such Borrower, such Borrower shall promptly notify the Lender thereof and, at
the  request  and option of the  Lender,  such  Borrower  shall,  pursuant to an
agreement in form and substance  reasonably  satisfactory to the Lender,  either
(i) arrange for the issuer and any confirmer of such letter of credit to consent
to an  assignment  to the Lender of the proceeds of any drawing under the letter
of credit,  or (ii) arrange for the Lender to become the transferee  beneficiary
of the  letter of  credit,  with the Lender  agreeing,  in each  case,  that the
proceeds of any drawing under the letter to credit are to be applied as provided
in this Agreement.

     6.10 Release of Collateral.  At any time that any of the Collateral is sold
          ---------------------
or otherwise transferred to a Person (other than to a Borrower or any Subsidiary
of a  Borrower)  in  compliance  with the  terms  of this  agreement  (any  such
Collateral  being  the  "Sold  Collateral"),  the  Liens on the Sold  Collateral
created by this  Agreement  shall be released and  terminated  immediately,  and
Lender  shall take such actions as may be necessary to cause the Liens of record
with respect to the Sold Collateral to be released within twenty (20) days after
Lender  receives  written  notice from  Borrowers that such sale or transfer has
occurred.

     6.11 Electronic Chattel Paper and Transferable Records. Borrowers represent
          -------------------------------------------------
and warrant to Lender that they have no  Electronic  Chattel  Paper in excess of
$100,000.  If a  Borrower  at any time  holds or  acquires  an  interest  in any
electronic chattel paper or any "transferable  record",  as that term is defined
in Section  201 of the  federal  Electronic  Signatures  in Global and  National
Commerce Act, or in Section 16 of the Uniform Electronic  Transactions Act as in
effect in any relevant  jurisdiction  in excess of $100,000 such Borrower  shall
promptly notify the Lender thereof and, at the request of the Lender, shall take
such action as the Lender may  reasonably  request to vest in the Lender control
under Section 9-105 of the UCC of such electronic chattel paper or control under
Section 201 of the federal Electronic Signatures in Global and National Commerce
Act or, as the case may be,  Section 16 of the Uniform  Electronic  Transactions
Act, as so in effect in such  jurisdiction,  of such  transferable  record.  The
Lender  agrees  with the  Borrowers  that the Lender will  arrange,  pursuant to
procedures  satisfactory  to the Lender and so long as such  procedures will not
result in the Lender's loss of control, for the Borrowers to make alterations to
the electronic  chattel paper or  transferable  record  permitted  under Section
9-105 of the UCC or, as the case may be,  Section 201 of the federal  Electronic
Signatures  in Global and  National  Commerce  Act or Section 16 of the  Uniform
Electronic  Transactions  Act for a party in  control  to make  without  loss of
control.

Section 7. REPRESENTATIONS AND WARRANTIES.
           ------------------------------

                                       42
<PAGE>

     To induce the Lender to make Loans to the  Borrowers,  each Borrower  makes
the following representations and warranties, to the Lender, each of which shall
survive the execution and delivery of this Agreement.

     7.1 Borrower  Organization  and Name. (a) Each Borrower is a corporation or
         --------------------------------
limited  liability  company duly organized,  existing and in good standing under
the laws of the state of its organization, with full and adequate power to carry
on and conduct its business as presently  conducted and is validly  existing and
in good standing under the laws of the  jurisdiction of its  organization.  Each
Borrower is duly licensed or qualified in all foreign  jurisdictions wherein the
nature of its activities  require such  qualification  or licensing,  except for
such  jurisdictions  where the  failure to so qualify  would not have a Material
Adverse Effect. The Borrowers' Organizational  Identification Numbers are as set
forth on Schedule 7.1 attached hereto. The exact legal name of the Borrowers are
as set forth in the first paragraph of this  Agreement,  and except as set forth
on Schedule 7.1 attached hereto,  as of the date of this Agreement the Borrowers
do not  conduct,  nor have they during the last five (5) years prior to the date
of this Agreement conducted, business under any other names or trade names.

     7.2  Authorization.  The Borrowers have full right,  power and authority to
          -------------
enter into this  Agreement,  to make the  borrowings and execute and deliver the
Loan  Documents  as  provided  herein  and to  perform  all of their  duties and
obligations under this Agreement and the other Loan Documents. The execution and
delivery of this  Agreement and the other Loan  Documents will not, nor will the
observance or performance of any of the matters and things herein or therein set
forth,  violate or contravene any provision of law in any material respect or of
the articles of  incorporation  or bylaws of the  Borrowers.  All  necessary and
appropriate  action has been taken on the part of the Borrowers to authorize the
execution and delivery of this Agreement and the Loan Documents.

     7.3  Validity  and  Binding  Nature.  This  Agreement  and the  other  Loan
          ------------------------------
Documents  are the  legal,  valid  and  binding  obligations  of the  Borrowers,
enforceable  against the  Borrowers in accordance  with their terms,  subject to
bankruptcy,   insolvency  and  similar  laws  affecting  the  enforceability  of
creditors' rights generally and to general principles of equity.

     7.4 Consent; Absence of Breach. The execution,  delivery and performance of
         --------------------------
this Agreement,  the other Loan Documents and any other documents or instruments
to be executed and delivered by the Borrowers in connection with the Loans,  and
the borrowings by the Borrowers  hereunder,  do not and will not (a) require any
consent, approval,  authorization of, or filings with, notice to or other act by
or in respect of, any governmental authority or any other Person (other than any
consent or approval  which has been  obtained  and is in full force and effect);
(b)  conflict  with (i) in any  material  respect  any  provision  of law or any
applicable  regulation,  order,  writ,  injunction  or  decree  of any  court or
governmental  authority,  (ii) the articles or certificate of  incorporation  or
organization  or bylaws or operating  agreement of the Borrowers or any of their
Subsidiaries,   or  (iii)  in  any  material  respect  any  material  agreement,
indenture, instrument or other document, or any judgment, order or decree, which
is  binding  upon the  Borrowers  or any of their  Subsidiaries  or any of their


                                       43
<PAGE>

respective  properties or assets; or (c) require,  or result in, the creation or
imposition  of  any  Lien  on  any  asset  of the  Borrowers  or  any  of  their
Subsidiaries,  other than Liens in favor of the Lender created  pursuant to this
Agreement.

     7.5 Ownership of Properties; Liens. The Borrowers are the owners or lessees
         ------------------------------
of all of their respective  material  properties and assets,  real and personal,
tangible and intangible,  of any nature whatsoever  (including material patents,
trademarks,  trade names,  service marks and copyrights),  free and clear of all
Liens,  charges  and  claims  (including  infringement  claims  with  respect to
patents,  trademarks,  service  marks,  copyrights  and the  like),  other  than
Permitted Liens.

     7.6 Equity Ownership.  All issued and outstanding Capital Securities of the
         ----------------
Borrowers and each of their Subsidiaries are duly authorized and validly issued,
fully paid, non-assessable, and free and clear of all Liens other than Permitted
Liens and Liens in favor of the Lender,  if any, and such securities were issued
in compliance with all applicable state and federal laws concerning the issuance
of  securities.  As of the  date  hereof,  there  are no  pre-emptive  or  other
outstanding  rights,  options,  warrants,  conversion  rights  or other  similar
agreements  or  understandings  for the purchase or  acquisition  of any Capital
Securities of the Borrowers and each of its Subsidiaries.

     7.7  Intellectual  Property.  With  respect  to all  material  Intellectual
          ----------------------
Property used by the Borrowers,  the Borrowers own and possess or have a license
or other right to use all such  Intellectual  Property as are  necessary for the
conduct of the businesses of the Borrowers, without any infringement upon rights
of others which would  reasonably be expected to have a Material  Adverse Effect
upon the  Borrowers,  and no material  claim has been asserted and is pending by
any Person challenging or questioning the use of any such Intellectual  Property
or the validity or  effectiveness of any such  Intellectual  Property where such
claim would reasonably be expected to have a Material Adverse Effect nor do they
know of any valid basis for any such claim.

     7.8 Financial Statements.  All financial statements submitted to the Lender
         --------------------
have been prepared in accordance with GAAP on a basis, except as otherwise noted
therein  or on  Schedule  3.4 to  the  Merger  Agreement,  with  respect  to the
financial  statements  of PCD,  consistent  with the  previous  fiscal  year and
present  fairly in all material  respects in accordance  with GAAP the financial
condition of the Borrowers and the results of the  operations  for the Borrowers
as of such date and for the periods indicated. Since the date of the most recent
financial statement submitted by the Borrowers to the Lender,  there has been no
change  in the  financial  condition  or in the  assets  or  liabilities  of the
Borrowers having a Material Adverse Effect.

     7.9  Litigation  and  Contingent  Liabilities.   There  is  no  litigation,
          ----------------------------------------
arbitration   proceeding,   demand,  charge,  claim,  petition  or  governmental
investigation  or  proceeding  pending,  or to the  knowledge of the  Borrowers,
threatened, against the Borrowers, which, would reasonably be expected to have a
Material Adverse Effect upon the Borrowers ("Proceedings"),  except as set forth
in Schedule 7.9 or  disclosed  in the  Principal  Shareholder's  Securities  and
   ------------
Exchange  Commission  reports.  Borrowers  will provide prompt written notice to
Lender if any such  report  contains  information  with  respect  to  previously
undisclosed Proceedings. Other than any liability incident to such litigation or
proceedings,  the Borrowers have no material guarantee  obligations,  contingent


                                       44
<PAGE>

liabilities,  liabilities for taxes, or any long-term  leases or unusual forward
or long-term  commitments,  including any interest rate or foreign currency swap
or exchange transaction or other obligation in respect of derivatives,  that are
not  fully-reflected  or fully  reserved to the extent  required by GAAP or that
reasonably would be expected to result in a Material Adverse Effect.

     7.10  Event of  Default.  (a) No Event of  Default  or  Unmatured  Event of
           -----------------
Default  exists or would result from the  incurrence  by the Borrowers of any of
the Obligations  pertaining to the Borrowers hereunder or under any of the other
Loan Documents, and the Borrowers are not in default (without regard to grace or
cure periods) under any other contract or agreement to which it is a party,  the
effect of which would have a Material Adverse Effect upon the Borrowers.

     7.11 Adverse Circumstances. No condition,  circumstance,  event, agreement,
          ---------------------
document,  instrument,  restriction,  litigation  or proceeding  (or  threatened
litigation  or  proceeding  or basis  therefor)  exists  which (i) would  have a
Material  Adverse  Effect upon the  Borrowers,  or (ii)  constitutes  a Event of
Default or a Unmatured Event of Default.

     7.12  Environmental Laws and Hazardous  Substances.  The Borrowers have not
           --------------------------------------------
generated, used, stored, treated, transported,  manufactured,  handled, produced
or disposed of any  Hazardous  Substances,  on or off any of the premises of the
Borrowers  (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,  which  violation  would  have a  Material  Adverse  Effect.  The
Borrowers comply in all material  respects with all  Environmental  Laws and all
licenses, permits certificates,  approvals and similar authorizations thereunder
except where failure to comply would not have a Material Adverse Effect. In each
case  which  would  have a  Material  adverse  effect:  (i)  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 the Borrower's  knowledge,  threatened,  and the Borrowers  shall
immediately  notify the Lender upon  becoming  aware of any such  investigation,
proceeding,  complaint,  order, directive,  claim, citation or notice, and shall
take prompt and  appropriate  actions to respond  thereto,  with  respect to any
non-compliance  with, or violation of, the requirements of any Environmental Law
by the Borrowers or the release,  spill or discharge,  threatened or actual,  of
any   Hazardous   Material  or  the   generation,   use,   storage,   treatment,
transportation,  manufacture,  handling, production or disposal of any Hazardous
Material or any other environmental,  health or safety matter, which affects the
Borrowers or its business,  operations or assets or any  properties at which the
Borrowers have transported,  stored or disposed of any Hazardous Substances. The
Borrowers  have no material  liability,  contingent or otherwise,  in connection
with a release,  spill or  discharge,  threatened  or actual,  of any  Hazardous
Substances  or  the  generation,   use,  storage,   treatment,   transportation,
manufacture,  handling,  production or disposal of any Hazardous  Material.  The
Borrowers  further agree to allow the Lender or its agent  reasonable  access to
the properties of the Borrowers and its Subsidiaries to confirm  compliance with
all Environmental Laws, and the Borrowers shall, following  determination by the
Lender that there is material  non-compliance,  or any condition  which requires
any  action  by or on  behalf of the  Borrowers  in order to avoid any  material
non-compliance,  with any  Environmental  Law, at the  Borrower's  sole expense,


                                       45
<PAGE>

cause an independent  environmental engineer acceptable to the Lender to conduct
such tests of the relevant  site as are  appropriate,  and prepare and deliver a
report setting forth the result of such tests,  a proposed plan for  remediation
and an estimate of the costs thereof.

     7.13 Solvency,  etc. As of the date hereof,  and  immediately  prior to and
          --------------
after  giving  effect to the  issuance  of each  Letter of Credit  and each Loan
hereunder  and the  use of the  proceeds  thereof,  (a) the  fair  value  of the
Borrowers'  assets are greater than the amount of their  liabilities  (including
disputed,  contingent and unliquidated liabilities) as such value is established
and  liabilities  evaluated as required  under the Section 548 of the Bankruptcy
Code, (b) the present fair saleable value of the Borrowers'  assets are not less
than the amount  that will be required to pay the  probable  liability  on their
debts as they become absolute and matured, (c) the Borrowers are able to realize
upon their assets and pay their debts and other liabilities (including disputed,
contingent and unliquidated  liabilities) as they mature in the normal course of
business, (d) the Borrowers do not intend to, and do not believe that they will,
incur  debts or  liabilities  beyond  their  ability  to pay as such  debts  and
liabilities  mature,  and (e) the  Borrowers  are not  engaged in  business or a
transaction, and are not about to engage in business or a transaction, for which
their property would constitute unreasonably small capital.

     7.14  ERISA  Obligations.  All  Employee  Plans  meet the  minimum  funding
           ------------------
standards of Section 302 of ERISA and Section 412 of the  Internal  Revenue Code
where applicable, and each Employee Plan that is intended to be qualified within
the  meaning  of Section  401 of the  Internal  Revenue  Code is  qualified.  No
withdrawal   liability  has  been  incurred  under  any  Employee  Plan  and  no
"reportable  event" or  "prohibited  transaction"  (as such terms are defined in
ERISA),  has occurred with respect to any Employee  Plan,  unless in the case of
any  prohibited  transaction  such  transaction is the subject of a statutory or
administrative  exemption.  The Borrowers  have promptly 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.

     7.15 Labor Relations.  Except as would not reasonably be expected to have a
          ---------------
Material  Adverse  Effect,  (i) there are no  strikes,  lockouts  or other labor
disputes  against the  Borrowers  or, to the best  knowledge  of the  Borrowers,
threatened,  (ii) hours worked by and payment made to employees of the Borrowers
have  not  been in  violation  of the  Fair  Labor  Standards  Act or any  other
applicable law, and (iii) no unfair labor practice  complaint is pending against
the Borrowers or, to the best knowledge of the Borrowers,  threatened before any
governmental authority.

     7.16 Security Interest. This Agreement creates a valid security interest in
          -----------------
favor of the Lender in the  Collateral  to the extent the same may be created by
written  agreement  and,  when properly  perfected by filing in the  appropriate
jurisdictions,  or by possession or Control of such  Collateral by the Lender or
delivery of such Collateral to the Lender, shall constitute a valid,  perfected,
first-priority  security interest in such Collateral subject in each case to the
Intercreditor Agreement, Permitted Liens and Permitted Perfection Limitations.

     7.17 Lending  Relationship.  The  relationship  hereby created  between the
          ---------------------
Borrowers  and the Lender is and has been  conducted on an open and arm's length


                                       46
<PAGE>

basis in which no fiduciary  relationship  exists,  and the  Borrowers  have not
relied and are not relying on any such fiduciary  relationship in executing this
Agreement and in  consummating  the Loans.  The Lender  represents  that it will
receive any Note payable to its order as evidence of a bank loan.

     7.18 Business Loan. The Loans, including interest rate, fees and charges as
          -------------
contemplated  hereby,  (i) are  business  loans  within the  purview of 815 ILCS
205/4(1)(c),  as amended  from time to time,  (ii) are an  exempted  transaction
under the Truth In Lending Act, 12 U.S.C.  1601 et seq., as amended from time to
time, and (iii) do not, and when disbursed shall not,  violate the provisions of
the Illinois usury laws, any consumer credit laws or the usury laws of any state
which may have jurisdiction over this transaction, the Borrowers or any property
securing the Loans.

     7.19  Taxes.  Except as set forth in Schedule  7.19  attached  hereto,  the
           -----                          --------------
Borrowers  have timely  filed all  federal or  material  tax returns and reports
required  by law to have been filed by them and have paid all  federal and other
material  taxes,  governmental  charges and  assessments  due and  payable  with
respect  to such  returns,  except  any such  taxes or  charges  which are being
diligently  contested  in good faith by  appropriate  proceedings  and for which
adequate  reserves  in  accordance  with GAAP  shall  have been set aside on its
books,  are insured against or bonded over to the satisfaction of the Lender and
the contesting of such payment does not create a Lien on the Collateral which is
not a Permitted Lien. There is no material  controversy or objection pending, or
to the knowledge of the  Borrowers,  threatened in respect of any tax returns of
the  Borrowers.  The Borrowers  have made  adequate  reserves on their books and
records in  accordance  with GAAP for all taxes that have  accrued but which are
not yet due and  payable.  The failure to file the tax returns as  disclosed  on
Schedule 7.19 will not result in the occurrence of a Material Adverse Effect.
-------------

     7.20  Compliance with Regulation U. No portion of the proceeds of the Loans
           ----------------------------
shall  be used by the  Borrowers,  or any  Affiliate  of the  Borrowers,  either
directly or  indirectly,  for the purpose of  purchasing  or carrying any margin
stock,  within the meaning of  Regulation U as adopted by the Board of Governors
of the Federal Reserve System or any successor thereto.

     7.21 Governmental Regulation. The Borrowers and their Subsidiaries are not,
          -----------------------
or after giving effect to any loan, will not be, subject to regulation under the
Federal Power Act, the ICC Termination Act of 1995 or the Investment Company Act
of 1940 or to any federal or state statute or regulation limiting its ability to
incur indebtedness for borrowed money.

     7.22 Bank Accounts.  Except as listed on Schedule 7.22 attached hereto, all
          -------------                       -------------
concentration Deposit Accounts and concentration  operating bank accounts of the
Borrowers  and their  Subsidiaries  (other  than the  Canadian  Subsidiary)  are
located at the Lender.

     7.23 Place of Business. On the date of this Agreement,  the principal place
          -----------------
of  business,  the  location  of  books  and  records  and the  location  of all
Collateral,  if other than at such principal place of business,  is as set forth
on Schedule  7.23  attached  hereto and made a part hereof,  and the  applicable
   --------------
Borrowers shall promptly notify the Lender of any change in such locations.  The
Borrowers  will not remove or permit  the  Collateral  to be  removed  from such


                                       47
<PAGE>

locations without the prior written consent of the Lender,  except for Inventory
or  non-material  assets sold or disposed of in the usual and ordinary course of
the Borrower's business.

     7.24 Complete  Information.  This  Agreement and all financial  statements,
          ---------------------
schedules,  certificates and agreements previously or contemporaneously herewith
furnished  in writing by the  Borrowers  to the  Lender for  purposes  of, or in
connection with, this Agreement and the transactions contemplated hereby is, and
all written information  hereafter furnished by or on behalf of the Borrowers to
the Lender pursuant hereto or in connection  herewith will be, true and accurate
in every material  respect on the date as of which such  information is dated or
certified,  and this Agreement foes not omit any material fact necessary to make
such  information  not  misleading  in any  material  respect  in  light  of the
circumstances  under  which made (it being  recognized  by the  Lender  that any
projections  and  forecasts  provided by the  Borrowers  are based on good faith
estimates and  assumptions  believed by the Borrowers to be reasonable as of the
date of the applicable projections or assumptions and that actual results during
the period or periods  covered by any such  projections and forecasts may differ
from projected or forecasted results).

     7.25 Subordinated  Debt. The subordination  provisions of the Subordination
          ------------------
Agreement are enforceable  against the holders of the  Subordinated  Debt by the
Lender.  The Obligations  constitute Senior Debt entitled to the benefits of the
subordination provisions contained in the Subordination Agreement. The Borrowers
acknowledge  that the Lender is entering  into this  Agreement and is making the
Loans  in  reliance  upon  the  subordination  provisions  of the  Subordination
Agreement and this Section 7.25.
                   ------------

Section 8. AFFIRMATIVE COVENANTS.
           ---------------------











                                       48
<PAGE>

     Each Borrower makes the following covenants.

     8.1 Compliance with Lender Regulatory Requirements; Increased Costs. If the
         ---------------------------------------------------------------
Lender shall reasonably  determine that any Regulatory  Change, or compliance by
the Lender or any Person  controlling  the Lender with any request or  directive
issued or promulgated  after the date hereof (whether or not having the force of
law) of any  governmental  authority,  central bank or comparable  agency has or
would have the effect of  reducing  the rate of return on the  Lender's  or such
controlling  Person's  capital  as a  consequence  of the  Lender's  obligations
hereunder  or under any Letter of Credit to a level  below that which the Lender
or such controlling Person could have achieved but for such Regulatory Change or
compliance (taking into consideration the Lender's or such controlling  Person's
policies with respect to capital  adequacy) by an amount deemed by the Lender or
such  controlling  Person to be material or would otherwise reduce the amount of
any sum received or receivable  by the Lender under this  Agreement or under any
Note with  respect  thereto,  then from time to time,  upon demand by the Lender
(which demand shall be  accompanied  by a statement  setting forth the basis for
such demand and a calculation of the amount thereof in reasonable  detail),  the
Borrowers  shall pay  directly  to the Lender or such  controlling  Person  such
additional  amount as will compensate the Lender for such increased cost or such
reduction, so long as such amounts have accrued on or after the day which is one
hundred  eighty days (180) days prior to the date on which the Lender first made
demand.

     8.2  Borrower  Existence.  Each  Borrower  shall at all times  preserve and
          -------------------
maintain  (a)  its  existence  and  good  standing  in the  jurisdiction  of its
organization, and (b) its qualification to do business and good standing in each
jurisdiction where the nature of its business makes such qualification necessary
(other than such  jurisdictions  in which the failure to be qualified or in good
standing  would not  reasonably  be expected to have Material  Adverse  Effect).
Borrower shall at all times continue as a going concern in a Permitted  Business
provided any Borrower may merge with or into another Borrower so long as, if KMS
is a party to the merger,  KMS is the  survivor.  If a Borrower does not have an
Organizational  Identification Number and later obtains one, such Borrower shall
promptly notify the Lender of such Organizational Identification Number.

     8.3 Compliance With Laws. Each Borrower shall use the proceeds of the Loans
         --------------------
for working  capital,  the  acquisition  of PCD and PCD,  LLC and other  general
corporate or business  purposes not in  contravention of any requirements of law
and not in  violation  of this  Agreement,  and shall  comply  in all  respects,
including  the  conduct  of its  business  and  operations  and  the  use of its
properties and assets,  with all applicable laws, rules,  regulations,  decrees,
orders,  judgments,  licenses and permits,  except where failure to comply would
not reasonably be expected to have a Material Adverse Effect.  In addition,  and
without limiting the foregoing sentence,  each Borrower shall (a) ensure that no
person who owns a controlling interest in or otherwise controls such Borrower is
or shall be listed on the Specially Designated Nationals and Blocked Person List
or other  similar  lists  maintained  by the  Office of Foreign  Assets  Control
("OFAC"),  the  Department of the Treasury or included in any Executive  Orders,
(b) not use or permit the use of the proceeds of the Loans to violate any of the


                                       49
<PAGE>

foreign asset control  regulations of OFAC or any enabling  statute or Executive
Order  relating  thereto,  and (c) comply with all  applicable  Bank Secrecy Act
("BSA") laws and regulations, as amended.

     8.4  Payment  of  Taxes  and  Liabilities.  Each  Borrower  shall  pay  and
          ------------------------------------
discharge,  prior to  delinquency  and  before  penalties  accrue  thereon,  all
property and other taxes, and all  governmental  charges or levies against it or
any of the  Collateral,  as well as claims of any kind which,  if unpaid,  could
become a Lien on any of its  property;  provided  that the  foregoing  shall not
require such  Borrower to pay any such tax or charge so long as it shall contest
the  validity  thereof in good faith by  appropriate  proceedings  and shall set
aside on its books adequate reserves with respect thereto to the extent required
by GAAP  and,  in the case of a claim  which  could  become a Lien on any of the
Collateral,  such contest  proceedings  stay the foreclosure of such Lien or the
sale of any portion of the Collateral to satisfy such claim.

     8.5 Maintain Property. Each Borrower shall at all times maintain,  preserve
         -----------------
and keep its  material  plant,  properties  and  Equipment,  including,  but not
limited to, any Collateral, in satisfactory repair, working order and condition,
normal wear and tear excepted,  and shall from time to time make all needful and
proper repairs,  renewals,  replacements,  and additions  thereto so that at all
times the  efficiency  thereof  shall be fully  preserved and  maintained.  Each
Borrower  shall permit the Lender to examine and inspect such plant,  properties
and  Equipment,  including,  but not  limited  to,  any  Collateral,  and at all
reasonable times during normal business hours and upon reasonable prior notice.

     8.6  Maintain  Insurance.  The  Borrowers  will  keep  its and  each of its
          -------------------
Subsidiaries'   insurable   properties   adequately  insured  at  all  times  by
financially sound and reputable insurers;  maintain such other insurance to such
extent and against such risks as is reasonable and prudent, including commercial
general  liability  insurance  against  claims for  personal  injury or death or
property  damage  occurring upon, in, about or in connection with the use of any
properties  owned,  occupied or controlled by it, director and officer liability
insurance and business interruption insurance; and maintain such other insurance
as may be required by  applicable  law, in each case naming the Lender as a loss
payee, lien  holder/mortgagee or additional insured. Each Borrower shall furnish
to the Lender a certificate  setting  forth in reasonable  detail the nature and
extent of all insurance  maintained by such Borrower,  which shall be reasonably
acceptable in all respects to the Lender.  Each Borrower shall cause each issuer
of an insurance policy to provide the Lender with an endorsement (i) showing the
Lender as lender loss payee with  respect to each policy of property or casualty
insurance;  and (ii) providing that thirty (30) days notice will be given to the
Lender prior to any  cancellation  of, material  reduction or change in coverage
provided by or other material modification to such policy.  Borrowers shall have
thirty  (30)  days from the  closing  date to  provide  Lender  certificates  of
insurance and endorsements with respect to PCD and PCD, LLC.

     In the event a Borrower either fails to provide the Lender with evidence of
the insurance  coverage  required by this Section or at any time hereafter shall
fail to obtain or maintain any of the policies of insurance  required  above, or
to pay any  premium  in  whole or in part  relating  thereto,  then the  Lender,
without  waiving  or  releasing  any  obligation  or  default  by such  Borrower


                                       50
<PAGE>

hereunder,  may at any time (but shall be under no obligation to so act), obtain
and maintain such policies of insurance and pay such premiums and take any other
action with respect thereto,  which the Lender deems  advisable.  This insurance
coverage  (a) may,  but need not,  protect  such  Borrower's  interests  in such
property, including, but not limited to, the Collateral, and (b) may not pay any
claim made by, or against,  such  Borrower  in  connection  with such  property,
including,  but not limited to, the  Collateral.  Such Borrower may later cancel
any such insurance  purchased by the Lender, but only after providing the Lender
with evidence that such Borrower has obtained the insurance coverage required by
this  Section.  If the  Lender  purchases  insurance  for the  Collateral,  such
Borrower will be responsible for the costs of that insurance, including interest
and any other charges that may be imposed with the  placement of the  insurance,
until the effective date of the cancellation or expiration of the insurance. The
costs of the insurance  may be added to the principal  amount of the Loans owing
hereunder by such Borrower. The costs of the insurance may be more than the cost
of the insurance such Borrower may be able to obtain on its own.

     8.7 ERISA Liabilities; Employee Plans. Each Borrower shall (i) keep in full
         ---------------------------------
force and effect any and all Employee  Plans which are presently in existence or
may, from time to time, come into existence  under ERISA,  and not withdraw from
any such Employee Plans, unless such withdrawal can be effected or such Employee
Plans can be  terminated  without  liability  to the  Borrower  in excess of One
Million  dollars  ($1,000,000.00)  after  taking into  account  all  deductions,
credits,  or other tax benefits  allowed with respect to the  termination;  (ii)
make  contributions  to all of such  Employee  Plans in a timely manner and in a
sufficient  amount to comply with the standards of ERISA;  including the minimum
funding standards of ERISA; (iii) comply with all material requirements of ERISA
which relate to such Employee  Plans;  (iv) notify the Lender  immediately  upon
receipt  by the  Borrowers  of  any  notice  concerning  the  imposition  of any
withdrawal  liability or of the  institution  of any  proceeding or other action
which  may  result  in  the  termination  of  any  such  Employee  Plans  or the
appointment of a trustee to administer such Employee Plans;  (v) promptly advise
the  Lender  of  the  occurrence  of  any  "Reportable   Event"  or  "Prohibited
Transaction"  (as such terms are  defined in  ERISA),  with  respect to any such
Employee  Plans;  and (vi)  amend  any  Employee  Plan  that is  intended  to be
qualified  within the meaning of Section 401 of the Internal Revenue Code to the
extent necessary to keep the Employee Plan qualified,  and to cause the Employee
Plan to be  administered  and  operated  in a manner  that  does not  cause  the
Employee Plan to lose its qualified status.

     8.8  Financial  Statements.  Each  Borrower  shall at all times  maintain a
          ---------------------
system of accounting  consistent with their existing  practices as modified from
time  to  time  in  accordance  with  GAAP  and  generally  accepted  accounting
standards,  on the accrual basis of accounting and in all respects in accordance
with GAAP, and KMS shall furnish to the Lender or its authorized representatives
such  information  regarding  the business  affairs,  operations  and  financial
condition KMS and its Subsidiaries, including, but not limited to:

          (a) within five (5) Business Days of when available, and in any event,
     within one  hundred  and twenty  (120) days after the close of each  fiscal
     year, (i) a copy of the annual audited consolidated financial statements of
     the Borrowers, containing a balance sheet, statement of income and retained
     earnings  and  statement  of cash flows for the fiscal  year then ended and
     (ii) such other information  (including  non-financial  information) as the


                                       51
<PAGE>

     Lender may request, in reasonable detail, all such financial  statements to
     be prepared in accordance with GAAP consistently applied and such financial
     statements to be reported on and accompanied by the unqualified  opinion of
     McGladrey  &  Pullen  LLP  or  such  other  independent   certified  public
     accountants  selected by  Borrowers  and  reasonably  acceptable  to Lender
     together with (i) a certificate  from such  accountants to the effect that,
     in making the  examination  necessary  for the signing of such annual audit
     report, such accountants have not become aware of any Event of Default that
     has occurred and is continuing,  or, if such  accountants have become aware
     of any such event, describing it and the steps, if any, being taken to cure
     it and (ii) the computations of such accountants  evidencing  compliance by
     the Borrowers with the financial  covenants contained in Section 10 of this
                                                              ----------
     Agreement;

          (b) Intentionally Omitted.

          (c) within five (5) Business Days of when available, and in any event,
     within forty-five (45) days following the end of the fiscal quarters ending
     in July,  October  and  January  of each year and  within  sixty  (60) days
     following the end of the fiscal quarter ending in April of each year, (i) a
     copy of the consolidated  financial  statements of the Borrowers  regarding
     such fiscal  quarter,  including a balance  sheet,  statement of income and
     retained  earnings and statement of cash flows for the fiscal  quarter then
     ended,   and  (ii)  such   other   information   (including   non-financial
     information) as the Lender may reasonably  request,  in reasonable  detail,
     prepared  and  certified as true and correct by the  applicable  Borrowers'
     treasurer or chief financial officer; and


     No change with respect to such accounting  principles  shall be made by the
Borrowers  without  giving  prior  notification  to the  Lender.  The  Borrowers
represent and warrant to the Lender that the financial  statements  delivered to
the Lender at or prior to the execution and delivery of this Agreement and to be
delivered at all times thereafter accurately reflect and will accurately reflect
the financial  condition of the Borrowers in all material respects in accordance
with GAAP except as  disclosed  on Schedule  3.4 to the Merger  Agreement,  with
respect to the  financial  statements of PCD. The Lender shall have the right at
reasonable  times during normal  business hours to inspect the books and records
of the Borrowers and make extracts  therefrom,  but, except after the occurrence
and during the continuation of an Event of Default, no more frequently than once
per  calendar  year.  All such  inspections  shall be at the  Lender's  expense;
provided that no Event of Default or Unmatured Event of Default exists.

     8.9 Supplemental Financial Statements. Each Borrower shall immediately upon
         ---------------------------------
receipt  thereof,  provide to the  Lender  copies of  interim  and  supplemental
reports  if any,  submitted  to such  Borrower  by  independent  accountants  in
connection with any interim audit or review of the books of such Borrower.

     8.10 Borrowing Base Certificates.  KMS shall, within thirty (30) days after
          ---------------------------
the end of each  month,  deliver  to the  Lender a  Borrowing  Base  Certificate
separately  detailing  Eligible Domestic  Accounts,  Eligible Bauer Accounts and


                                       52
<PAGE>

Eligible  Foreign  Accounts  dated as of the last  Business  Day of such  month,
certified as true and correct by an authorized  representative of the applicable
Borrowers  and  reasonably  acceptable  to the  Lender in  accordance  with this
Agreement; provided, however, at any time an Event of Default exists, the Lender
may  require  the  Borrowers  to  deliver   Borrowing  Base   Certificates  more
frequently.

     8.11 Aged Accounts Schedule.  Each Borrower shall,  within thirty (30) days
          ----------------------
after the end of each  month,  deliver  to the  Lender an aged  schedule  of the
Accounts of such  Borrower,  listing  the name and amount due from each  Account
Debtor and showing the aggregate amounts due from (a) 0-30 days, (b) 31-60 days,
(c) 61-90 days and (d) more than 90 days,  and  certified  as  accurate  by such
Borrower's treasurer or chief financial officer.

     8.12  Covenant   Compliance   Certificate.   The  Borrowers  shall,  within
           -----------------------------------
forty-five  45 days of the end of each of their first three fiscal  quarters and
within sixty 60 days of the end of their fourth fiscal quarters,  deliver to the
Lender a duly completed compliance certificate, certified as true and correct by
an  appropriate  officer of such  Borrower  (but  without  personal  liability),
containing a computation of each of the financial covenants set forth in Section
                                                                         -------
10 and stating that such Borrowers have not become aware of any Event of Default
--
or Unmatured Event of Default,  that has occurred and is continuing or, if there
is any such Event of Default or Unmatured Event of Default describing it and the
steps, if any, being taken to cure it.

     8.13 Field  Audits.  The  Borrowers  shall permit the Lender to inspect the
          -------------
Inventory,  other assets and/or other business  operations of the Borrowers,  to
perform  appraisals of the  Equipment of the  Borrowers  and to inspect,  audit,
check and make copies of, and extracts from, the books, records,  computer data,
computer programs,  journals,  orders,  receipts,  correspondence and other data
relating to Inventory,  Accounts and any other Collateral,  the results of which
must be satisfactory to the Lender in the Lender's sole and absolute discretion.
All such  inspections or audits by the Lender shall be at the Lender's  expense,
provided  that no  Event of  Default  or  Unmatured  Event  of  Default  exists.
Notwithstanding the foregoing,  the Borrowers shall reimburse the Lender for the
expense of one  inspection  or audit to be  performed  on PCD,  LLC on or before
February 28, 2007 up to a maximum amount of $10,000.

     8.14 Other Reports.  Each Borrower shall, within such period of time as the
          -------------
Lender may reasonably  specify,  deliver to the Lender such other  schedules and
reports as the Lender may reasonably  require,  including  copies of invoices on
all machinery and equipment purchased.

     8.15 Collateral  Records.  Each Borrower shall keep full and accurate books
          -------------------
and  records  relating  to the  Collateral  to the extent  necessary  to prepare
accurate  balance  sheets in accordance  with GAAP and shall mark such books and
records to indicate the Lender's Lien in the Collateral.

     8.16  Intellectual  Property.  Each Borrower shall  maintain,  preserve and
           ----------------------
renew all  material  Intellectual  Property  necessary  for the  conduct  of its
business  except where the failure to do so would not  reasonably be expected to
have a Material Adverse Effect.



                                       53
<PAGE>

     8.17 Notice of  Proceedings.  Each Borrower,  promptly upon becoming aware,
          ----------------------
shall  give  written  notice to the  Lender of any  litigation,  arbitration  or
governmental  investigation  or  proceeding  not  previously  disclosed  by  the
Borrowers to the Lender which has been  instituted  or, to the knowledge of such
Borrower,  is threatened  against such Borrower or any of its Subsidiaries or to
which any of their  respective  properties is subject which would  reasonably be
expected to have a Material Adverse Effect.

     8.18 Notice of Event of Default or Material  Adverse Effect.  The Borrowers
          ------------------------------------------------------
shall,  immediately after the commencement thereof, give notice to the Lender in
writing of the  occurrence  of any Event of Default  or any  Unmatured  Event of
Default,  or the occurrence of any condition or event having a Material  Adverse
Effect.

     8.19 Environmental  Matters.  If any release or threatened release or other
          ----------------------
disposal of Hazardous  Substances shall occur or shall have occurred on any real
property  or any other  assets of a Borrower  or any of its  Subsidiaries,  such
Borrower  shall  cause the prompt  containment  and  removal  of such  Hazardous
Substances  and the  remediation  of such  real  property  or  other  assets  as
necessary  to comply with all  Environmental  Laws and to preserve  the value of
such  real  property  or other  assets  unless  the  failure  to do so would not
reasonably be expected to have a Material  Adverse Effect.  Without limiting the
generality of the foregoing, each Borrower shall comply in all material respects
with any  Federal  or state  judicial  or  administrative  order  requiring  the
performance  at any real  property of the Borrowers of activities in response to
the release or threatened release of a Hazardous  Substance.  To the extent that
the transportation of Hazardous Substances is permitted by this Agreement,  each
Borrower shall,  and shall cause its  Subsidiaries to, dispose of such Hazardous
Substances,  or of any  other  wastes,  only  at  licensed  disposal  facilities
operating in compliance with Environmental Laws in all material respects.

     8.20  Further  Assurances.  Each  Borrower  shall take such  actions as are
           -------------------
necessary  or as the Lender may  reasonably  request from time to time to ensure
that its Obligations  under the Loan Documents are secured by substantially  all
of the  assets  of such  Borrower  and its  Subsidiaries  (other  than  any real
property of any of the  Borrowers  or any property of, or for the account of, or
the Borrowers'  interests in the Capital  Securities of any of its Subsidiaries)
subject to Permitted Liens and Permitted Perfection Limitations, in each case as
the Lender may reasonably determine, including (a) the execution and delivery of
security agreements,  pledge agreements,  mortgages,  deeds of trust,  financing
statements  and  other  documents,  and the  filing or  recording  of any of the
foregoing,  and (b) the delivery of Collateral with respect to which  perfection
is obtained by possession.

     8.21  Lockbox  Agreement.  Prior to October  2007,  PCD, LLC shall become a
           ------------------
party to the Lockbox Agreement.

     8.22 Banking Relationship. Each Borrower covenants and agrees, at all times
          --------------------
during the term of this Agreement,  to utilize the Lender as its primary bank of
account and  depository  for all  financial  services,  including  all receipts,
disbursements, cash management and related service.

                                       54
<PAGE>

     8.23  Non-Utilization  Fee.  The  Borrowers  agree  to pay to the  Lender a
           --------------------
Non-Utilization  fee equal to  one-quarter of one percent per annum of the total
of (i) the  Facility  A Loan  Commitment,  minus  (ii) the sum of (A) the  daily
average of the aggregate  principal amount of all Facility A Loans  outstanding,
plus (B) the daily  average  of the  aggregate  amount  of the  Letter of Credit
Obligations,  and (ii) on the Facility D Loan Commitment,  minus (ii) the sum of
the daily  average of the  aggregate  principal  amount of all  Facility D Loans
outstanding which non-utilization fees shall be (x) calculated on the basis of a
year consisting of 365 days, (y) paid for the actual number of days elapsed, and
(z) payable  quarterly in arrears on the last business day of each April,  July,
October and  January,  commencing  on January 31,  2007,  and on the  Facility A
Maturity Date and the Facility D Maturity Date.

Section 9. NEGATIVE COVENANTS.
           ------------------

     Each Borrower makes the following covenants.

     9.1 Debt.  Each Borrower shall not either  directly or indirectly,  create,
         ----
assume,   incur  or  have   outstanding  any  Debt  (including   purchase  money
indebtedness),  or become  liable,  whether as  endorser,  guarantor,  surety or
otherwise, for any debt or obligation of any other Person, except:

          (a) the Obligations under this Agreement and the other Loan Documents;

          (b) obligations of such Borrower for Taxes, assessments,  municipal or
     other governmental charges;

          (c) obligations of such Borrower for accounts payable,  other than for
     money borrowed, incurred in the ordinary course of business;

          (d)  Hedging  Obligations  incurred  in  favor  of  the  Lender  or an
     Affiliate thereof for bona fide hedging purposes and not for speculation;

          (e) Capitalized  Lease  Obligations and Debt for Capital  Expenditures
     incurred  after the date of this  Agreement,  provided  that, the aggregate
     amount of all such Debt  incurred  at any time shall not exceed  $3,000,000
     per year other than the Loans;

          (f) Debt of any Borrower to any other Borrower;

          (g) Debt  described  on  Schedule  9.1 and any  extension,  renewal or
     refinancing  thereof  so  long  as  the  principal  amount  thereof  is not
     increased;

          (h)  Contingent  Liabilities  of any Borrower or any Subsidiary of any
     Borrower; and

                                       55
<PAGE>

          (i) Debt of any  Borrower  which is  subordinated  in  writing  to the
     payment of such Borrower's  Obligations  under this Agreement and the other
     Loan Documents in substantially the form of Exhibit F to this Agreement.
                                                 ---------

     9.2  Encumbrances.  Each Borrower shall not either  directly or indirectly,
          ------------
create,  assume,  incur or  suffer  or permit to exist any Lien or charge of any
kind or character  upon any asset of such  Borrower,  whether  owned at the date
hereof or hereafter acquired, except for Permitted Liens.

     9.3  Investments.  Each Borrower shall not,  either directly or indirectly,
          -----------
make or have outstanding any Investment, except:

          (a) the acquisition of PCD and PCD, LLC;

          (b)  contributions  by such Borrower to the capital of any  Subsidiary
     which has granted a first perfected  security interest in substantially all
     of its/their assets in favor of the Lender (other than assets excluded from
     the definition of Collateral);

          (c) Investments constituting Debt permitted by Section 9.1;
                                                         -----------

          (d) Contingent Liabilities  constituting Debt permitted by Section 9.1
                                                                     -----------
     or Liens permitted by Section 9.2;
                           -----------

          (e) Cash Equivalent Investments;

          (f) bank deposits in the ordinary course of business, provided that on
     or after October 31, 2007 the aggregate  amount of all such deposits  which
     are  maintained  with any bank other than the Lender  shall not at any time
     exceed $100,000;

          (g) Investments in securities of Account Debtors received  pursuant to
     any plan of  reorganization  or similar  arrangement upon the bankruptcy or
     insolvency of such account debtors;

          (g) Investments by a Borrower in any other Borrower; and

          (h)  Loans  to  publisher   customers  in  an  amount  not   exceeding
     $500,000.00   to  any  one  publisher   and  not  exceeding   $1,500,000.00
     outstanding at any one time; and

          (i) Investments listed on Schedule 9.3 as of the closing date;
                                    ------------

provided,  however,  that (i) any  Investment  which when made complies with the
requirements  of the  definition of the term "Cash  Equivalent  Investment"  may
continue to be held  notwithstanding  that such  Investment  if made  thereafter
would  not  comply  with such  requirements;  and (ii) no  Investment  otherwise
permitted  by  subsections  (b)  or  (c)  shall  be  permitted  to be  made  if,


                                       56
<PAGE>

immediately  before or after  giving  effect  thereto,  any Event of  Default or
Unmatured Event of Default exists.

     9.4  Transfer;  Merger;  Sales.  Each  Borrower  shall not,  whether in one
          -------------------------
transaction or a series of related transactions, (a) be a party to any merger or
consolidation,  or purchase or otherwise acquire all or substantially all of the
assets or any Capital  Securities of any class of, or any  partnership  or joint
venture  interest in, any other Person  (other than to effect an  Investment  or
Acquisition   permitted  by  this  Agreement),   except  for  any  such  merger,
consolidation,  sale,  transfer,  conveyance,  lease or  assignment of or by any
Wholly-Owned  Subsidiary  into such  Borrower or a merger of two  Borrowers or a
merger or  consolidation  to effect an Acquisition  permitted by this Agreement,
(b) pledge, sell,  transfer,  convey or lease all or any substantial part of its
assets or Capital  Securities  (including the sale of Capital  Securities of any
Subsidiary),  except for sales of Inventory in the ordinary  course of business,
(c) create any new Subsidiaries or (d) sell or assign, with or without recourse,
any receivables.

     9.5  Issuance  of Capital  Securities.  Each  Borrower  shall not issue any
          --------------------------------
Capital  Securities  other than (a) any  issuance  of shares of such  Borrower's
common Capital  Securities  pursuant to any employee or director option program,
benefit plan or compensation  program, or (b) any issuance of Capital Securities
by a Subsidiary to a Borrower.

     9.6  Distributions.  (a) Subject to the  requirements of Section 10 hereof,
          -------------
the Borrowers may make any payments of  management  fees or similar  payments to
the Principal Shareholder and distributions,  dividends,  stock,  repurchases to
any of its equityholders,  provided that (i) such distributions or dividends are
from net income or retained earnings,  and (ii) no Unmatured Event of Default or
Event of Default exists as of the date of such distribution or dividend or would
otherwise be created thereby.  Notwithstanding  the foregoing,  any Borrower may
make  tax  allocation  payments  to the  Principal  Shareholder  so  long as the
allocations   reasonably  reflect  economic  reality,  any  Subsidiary  may  pay
dividends or make other distributions payable to any Borrower, and Borrowers may
make payments to the extent permitted under the Subordination Agreement(s)

          (b) The Borrowers shall not purchase or redeem any of their respective
     equity  interests  or any  warrants,  options  or other  rights in  respect
     thereof except from another Borrower and in compliance with Section 10.

     9.7  Transactions  with  Affiliates.  Each Borrower shall not,  directly or
          ------------------------------
indirectly,  enter  into or  permit  to exist  any  transaction  with any of its
Affiliates or with any director, officer or employee of such Borrower other than
transactions  in the ordinary  course of the business of such  Borrower and upon
fair and  reasonable  terms which,  if  requested by the Lender,  shall be fully
disclosed to the Lender and are no less favorable to such Borrower than would be
obtained in a comparable  arm's length  transaction with a Person that is not an
Affiliate  of such  Borrower  (other than payment of  dividends,  distributions,
stock repurchases or Investments permitted by this Agreement).

                                       57
<PAGE>

     9.8 Unconditional Purchase Obligations.  Each Borrower shall not enter into
         ----------------------------------
or be a party to any contract for the purchase of  materials,  supplies or other
property  or  services  if such contract  requires  that  payment be  made by it
regardless of whether delivery is ever made of such materials, supplies or other
property or services.

     9.9  Cancellation of Debt. Each Borrower shall not cancel any claim or debt
          --------------------
owing to it, except for reasonable  consideration  or in the ordinary  course of
business.

     9.10  Inconsistent  Agreements.  Each  Borrower  shall not  enter  into any
           ------------------------
agreement  containing  any provision  which would (a) be violated or breached in
any  material  respect by any  borrowing  by such  Borrower  hereunder or by the
performance  by such Borrower of any of its  Obligations  hereunder or under any
other Loan  Document,  (b) prohibit  such Borrower from granting to the Lender a
Lien on any of its assets or (c)  create or permit to exist or become  effective
any  encumbrance  or  restriction  on the ability of any  Subsidiary  to (i) pay
dividends or make other distributions to such Borrower,  or pay any Debt owed to
such Borrower,  (ii) make loans or advances to such Borrower,  or (iii) transfer
any of its assets or  properties  to such  Borrower,  other  than (A)  customary
restrictions and conditions  contained in agreements relating to the sale of all
or a  substantial  part of the  assets  of any  Subsidiary,  provided  that such
restrictions  and  conditions  apply only to the Subsidiary or assets to be sold
and such sale is permitted by this  Agreement,  (B) restrictions  or  conditions
imposed by any agreement  relating to purchase  money Debt,  Capital  Leases and
other  secured  Debt  permitted  by  this  Agreement  if  such  restrictions  or
conditions  apply  only to the  property  or  assets  securing  such  Debt,  and
(C) customary   provisions  in  leases  and  other  contracts   restricting  the
assignment thereof.

     9.11 Use of Proceeds. No Borrower or any of such Borrower's Subsidiaries or
          ---------------
Affiliates  shall use any portion of the proceeds of the Loans,  either directly
or indirectly,  for the purpose of purchasing any securities underwritten by ABN
AMRO Incorporated, an Affiliate of the Lender.

     9.12 Intentionally deleted.

     9.13  Business  Activities;  Change  of  Legal  Status  and  Organizational
           ---------------------------------------------------------------------
Documents. Each Borrower shall not (a) engage in any line of business other than
---------
the Permitted  Businesses,  (b) without  providing  prior written  notice to the
Lender,  change its name, its  Organizational  Identification  Number, if it has
one, its type of  organization,  its jurisdiction of organization or other legal
structure, or (c) permit its charter,  bylaws or other organizational  documents
to be amended or  modified  in any way which  could  reasonably  be  expected to
materially adversely affect the interests of the Lender.

Section 10. FINANCIAL COVENANTS.
            -------------------

     10.1  Shareholder's  Equity.  As of the end of  each  fiscal  quarter,  the
           ---------------------
Borrowers shall maintain consolidated Shareholder's Equity in an amount not less
than $40,000,000.00.

                                       58
<PAGE>

     10.2 Fixed Charge  Coverage.  As of the end of each fiscal  quarter for the
          ----------------------
trailing  twelve  months,  the  Borrowers  shall  maintain a ratio of (a) EBITDA
eliminating  the effect of any  extraordinary  items as determined in accordance
with GAAP minus the sum,  without  duplication,  of (i) all income taxes paid or
          -----
payable by the Borrowers  (including pursuant to tax sharing agreements with the
Principal   Shareholder)  with  respect  to  their  income,   (ii)  all  Capital
Expenditures  of the Borrowers to the extent not financed with Funded Debt (iii)
principal  payments on Subordinated Debt, and (iv) all dividends paid in cash by
the  Borrowers  during such period to (b) the sum of (i)  Interest  Charges plus
                                                                            ----
(ii) required  payments of principal of Funded Debt (excluding  principal due on
the Facility A Maturity Date) and (iii) interest  payments on Subordinated  Debt
of not less than 1.15 to 1.00.

     10.3 Senior Debt to EBITDA Ratio. The Borrowers shall not permit the Senior
          ---------------------------
Debt to EBITDA  ratio as of the last day of any  fiscal  quarter  to exceed  the
applicable ratio set forth below for such computation period:

         Computation                                           Senior Debt to
         Periods Ending                                        EBITDA Ratio
         --------------                                        ------------
         1/31/2007,4/30/2007,7/31/2007,                         3.0
         10/31/2007 and 1/31/2008
         4/30/08,7/31/2008,10/31/2008 and 1/31/2009             2.5
         4/30/09 and thereafter                                 2.0


Section 11. EVENTS OF DEFAULT.
            -----------------

     Except as otherwise  provided in this  Agreement,  the  Borrowers,  without
notice or demand of any kind,  shall be in default under this Agreement upon the
occurrence of any of the following events (each an "Event of Default").

     11.1 Nonpayment of Obligations. Any amount due and owing on any Note or any
          -------------------------
of the Obligations, whether by its terms or as otherwise provided herein, is not
paid within five (5) days after  notice from the Lender that such amount was not
paid when due.

     11.2 Misrepresentation.  Any written warranty, representation,  certificate
          -----------------
or statement of any Borrower in this Agreement,  the other Loan Documents or any
other agreement with the Lender shall be false in any material respect when made
or  deemed  made,  or if any  financial  data or any  other  information  now or
hereafter furnished to the Lender by or on behalf of any Borrower shall prove to
be false, inaccurate or misleading in any material respect.

     11.3  Nonperformance.  Any failure to perform or default in the performance
           --------------
of any  covenant,  condition or agreement  contained in this  Agreement  and, if
capable of being  cured,  such  failure  to  perform  or default in  performance
continues  for a period of five (5) days after the Borrowers  receive  notice or
knowledge from any source of such failure to perform or default in  performance,
or in the other Loan  Documents or any other  agreement with the Lender and such


                                       59
<PAGE>

failure to perform or default in  performance  continues  beyond any  applicable
grace or cure period.

     11.4 Default  under Loan  Documents.  Any event of default under any of the
          ------------------------------
other  Loan  Documents,  all  of  which  covenants,  conditions  and  agreements
contained  therein  are  hereby   incorporated  in  this  Agreement  by  express
reference,  shall be and constitute an Event of Default under this Agreement and
any other of the  Obligations  if the default  continues  for fifteen  (15) days
after notice of the default.

     11.5 Default  under Other Debt.  Any default by any Borrower in the payment
          -------------------------
of any Debt for any other  obligation in an amount  exceeding  Three Hundred and
Fifty Thousand and 00/100ths  ($350,000.00)  beyond any period of grace provided
with  respect  thereto or in the  performance  of any other term,  condition  or
covenant contained in any agreement  (including,  but not limited to any capital
or operating  lease or any  agreement in connection  with the deferred  purchase
price of property)  under which any such  obligation  is created,  the effect of
which default is to cause or permit the holder of such  obligation (or the other
party to such other  agreement) to cause such  obligation to become due prior to
its stated maturity or terminate such other agreement.

     11.6 Other Material Obligations. Any default in the payment when due, or in
          --------------------------
the  performance  or  observance  of, any material  obligation  of, or condition
agreed to by, any Borrower  with  respect to any  material  purchase or lease of
goods or services where such default,  singly or in the aggregate with all other
such  defaults,  might  reasonably  be expected to have with  respect a Material
Adverse Effect.

     11.7  Bankruptcy,  Insolvency,  etc.  Any  Borrower  becomes  insolvent  or
           -----------------------------
generally  fails to pay, or admits in writing its  inability  or refusal to pay,
debts  as they  become  due;  or any  Borrower  applies  for,  consents  to,  or
acquiesces in the appointment of a trustee, receiver or other custodian for such
Borrower or any property thereof,  or makes a general assignment for the benefit
of creditors; or, in the absence of such application, consent or acquiescence, a
trustee,  receiver or other  custodian  is  appointed  for any Borrower or for a
substantial  part of the  property of any thereof and is not  discharged  within
sixty (60) days; or any bankruptcy,  reorganization,  debt arrangement, or other
case or proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation  proceeding,  is commenced in respect of any  Borrower,  and if such
case or  proceeding  is not  commenced by such  Borrower,  it is consented to or
acquiesced in by such Borrower,  or remains  undismissed for sixty (60) days; or
any Borrower  takes any action to authorize,  or in  furtherance  of, any of the
foregoing.

     11.8 Judgments.  The entry of any  non-appealable  final judgment,  decree,
          ---------
levy,  attachment,  garnishment  or other  process,  or the  filing  of any Lien
against any Borrower in respect of the  foregoing  which is not fully covered by
insurance and such  judgment or other process shall not have been,  within sixty
(60) days from the entry  thereof,  (i) bonded over to the  satisfaction  of the
Lender, (ii) vacated, or (iii) discharged.

     11.9 Change in Control. The occurrence of any Change in Control.
          -----------------

                                       60
<PAGE>

     11.10  Collateral  Impairment.  The entry of any  judgment,  decree,  levy,
            ----------------------
attachment, garnishment or other process, or the filing of any Lien against, any
of the Collateral or any collateral under a separate security agreement securing
any of the  Obligations  and such judgment or other process shall not have been,
within  sixty  (60)  days  from  the  entry  thereof,  (i)  bonded  over  to the
satisfaction of the Lender and appealed,  (ii) vacated, or (iii) discharged,  or
the loss, theft,  destruction,  seizure or forfeiture,  or the occurrence of any
material  deterioration  or  impairment  of any of the  Collateral or any of the
collateral under any security agreement securing any of the Obligations,  or any
material  decline or depreciation in the value or market price thereof  (whether
actual or  reasonably  anticipated),  which causes the  Collateral,  in the sole
opinion of the Lender acting in good faith, to become unsatisfactory as to value
or  character,  or which  causes the  Lender to  reasonably  believe  that it is
insecure and that the  likelihood  for repayment of the  Obligations  is or will
soon be impaired,  time being of the essence.  The cause of such  deterioration,
impairment,  decline or depreciation  shall include,  but is not limited to, the
failure by the Borrowers to do any act deemed reasonably necessary by the Lender
to preserve and maintain the value and collectability of the Collateral.

     11.11 Material Adverse Effect. The occurrence of any development, condition
           -----------------------
or event which has a Material Adverse Effect.

For the  avoidance  of doubt and  notwithstanding  any other  provision  of this
Agreement, the parties hereto expressly covenant and agree that for the purposes
of this  Agreement  and the other Loan  Documents,  all Loans (a) shall be fully
cross-collateralized by all of the assets of the Borrowers,  (b) cross-defaulted
with each other,  except that a Bauer Event of Default  will not  constitute  an
Event of Default under this Agreement; it being understood, however, that in the
event of a Bauer  Event of  Default  Lender  may (i) apply the  remaining  Bauer
Collateral   proceeds  under  the  circumstances   contemplated   under  Section
4(a)(ii)(3) of the Intercreditor Agreement,  (ii) cease funding under Facility D
and (iii)  accelerate the Facility D Loan, and (c) the Facility D Loans shall be
secured solely by the Bauer  Accounts,  but the Bauer Accounts shall also secure
the Facility A Loans,  the  Facility B Loans and the  Facility C Loans,  in each
case as governed by the Intercreditor Agreement.




                                       61
<PAGE>

Section 12. REMEDIES.
            --------

     Upon the  occurrence  of an Event of  Default,  the  Lender  shall have all
rights,  powers and  remedies  set forth in the Loan  Documents,  in any written
agreement  or  instrument  (other  than this  Agreement  or the Loan  Documents)
relating to any of the Obligations or any security therefor,  as a secured party
under the UCC or as otherwise provided at law or in equity. Without limiting the
generality of the  foregoing,  the Lender may, at its option upon the occurrence
of an  Event  of  Default,  declare  its  commitments  to  the  Borrowers  to be
terminated  and all  Obligations to be  immediately  due and payable,  provided,
however, that upon the occurrence of an Event of Default under Section 11.7, all
                                                               ------------
commitments of the Lender to the Borrowers shall  immediately  terminate and all
Obligations shall be automatically due and payable,  all without demand,  notice
or further action of any kind required on the part of the Lender.  The Borrowers
hereby waive any and all presentment,  demand, notice of dishonor,  protest, and
all other notices and demands in  connection  with the  enforcement  of Lender's
rights  under the Loan  Documents,  and hereby  consent to, and waive  notice of
release,  with  or  without  consideration,  of any of the  Borrowers  or of any
Collateral,  notwithstanding  anything contained herein or in the Loan Documents
to the contrary.  Lender shall use commercially reasonable efforts to notify the
Principal  Shareholder  prior to  exercising  any of the  remedies  available to
Lender under this Section 12; provided, however, that Lender shall not be liable
for failure to deliver notice, and the failure of Lender to notify the Principal
Shareholder  shall not in any way limit or impair  Lender's  rights and remedies
under this Agreement.

     12.1  Possession  and  Assembly of  Collateral.  From and after an Event of
           ----------------------------------------
Default,  the Lender may,  without notice,  demand or legal process of any kind,
take  possession of any or all of the  Collateral  (in addition to Collateral of
which the Lender already has possession), wherever it may be found, and for that
purpose may pursue the same wherever it may be found,  and may at any time enter
into any of the  Borrowers'  premises  where any of the  Collateral may be or is
supposed to 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 the
Lender  shall  have the right to store and  conduct a sale of the same in any of
the Borrower's  premises  without cost to the Lender.  At the Lender's  request,
from and after an Event of Default,  the Borrowers  will, at the Borrowers' sole
expense,  assemble the Collateral and make it available to the Lender at a place
or places to be designated  by the Lender which is reasonably  convenient to the
Lender and the Borrowers.

     12.2 Sale of Collateral. From and after an Event of Default, the Lender may
          ------------------
sell any or all of the Collateral at public or private sale, upon such terms and
conditions as the Lender may deem proper, and the Lender may purchase any or all
of the  Collateral at any such sale. The Borrowers  acknowledge  that the Lender
may be unable to effect a public  sale of all or any  portion of the  Collateral
because of certain legal and/or practical  restrictions and provisions which may
be applicable to the Collateral  and,  therefore,  may be compelled to resort to
one or more private sales to a restricted group of offerees and purchasers.  The
Borrowers  consent to any such  private  sale so made even  though at places and
upon terms less favorable  than if the Collateral  were sold at public sale. The
Lender shall have no obligation to clean-up or otherwise  prepare the Collateral
for sale.  The Lender may apply the net  proceeds,  after  deducting  all costs,
expenses,  attorneys' and  paralegals'  fees incurred or paid at any time in the


                                       62
<PAGE>

collection,  protection and sale of the Collateral and the  Obligations,  to the
payment of any Note and/or any of the other  Obligations,  returning  the excess
proceeds,  if any, to the Borrowers.  The Borrowers  shall remain liable for any
amount  remaining  unpaid after such  application,  with interest at the Default
Rate. Any notification of intended disposition of the Collateral required by law
shall be  conclusively  deemed  reasonably  and  properly  given if given by the
Lender at least ten (10) calendar days before the date of such disposition.  The
Borrowers  hereby  confirm,  approve and ratify all acts and deeds of the Lender
relating to the foregoing,  and each part thereof,  and expressly  waive any and
all claims of any nature, kind or description which it has or may hereafter have
against  the  Lender or its  representatives,  by reason of  taking,  selling or
collecting any portion of the Collateral.  The Borrowers  consent to releases of
the  Collateral  at any time  (including  prior to default)  and to sales of the
Collateral  in groups,  parcels or portions,  or as an  entirety,  as the Lender
shall deem appropriate. The Borrowers expressly absolve the Lender from any loss
or  decline  in  market  value  of any  Collateral  by  reason  of  delay in the
enforcement or assertion or  nonenforcement of any rights or remedies under this
Agreement.

     12.3 Standards for Exercising  Remedies.  To the extent that applicable law
          ----------------------------------
imposes duties on the Lender to exercise  remedies in a commercially  reasonable
manner,  each  of  the  Borrowers   acknowledges  and  agrees  that  it  is  not
commercially  unreasonable  for  the  Lender  (a)  to  fail  to  incur  expenses
reasonably  deemed   significant  by  the  Lender  to  prepare   Collateral  for
disposition  or  otherwise  to complete  raw  material or  work-in-process  into
finished goods or other finished products for disposition, (b) to fail to obtain
third party  consents for access to  Collateral  to be disposed of, or to obtain
or, if not required by other law, to fail to obtain  governmental or third party
consents for the  collection  or  disposition  of  Collateral to be collected or
disposed of, (c) to fail to exercise collection remedies against Account Debtors
or other Persons  obligated on Collateral or to remove liens or  encumbrances on
or any adverse claims against  Collateral,  (d) to exercise  collection remedies
against  Account Debtors and other Persons  obligated on Collateral  directly or
through the use of collection agencies and other collection specialists,  (e) to
advertise  dispositions of Collateral  through  publications or media of general
circulation,  whether or not the Collateral is of a specialized  nature,  (f) to
contact other Persons, whether or not in the same business as the Borrowers, for
expressions of interest in acquiring all or any portion of the  Collateral,  (g)
to hire one or more  professional  auctioneers  to assist in the  disposition of
Collateral,  whether or not the  collateral is of a specialized  nature,  (h) to
dispose of Collateral by utilizing  internet  sites that provide for the auction
of assets of the types  included in the  Collateral or that have the  reasonable
capability  of doing so, or that  match  buyers and  sellers  of assets,  (i) to
dispose of assets in  wholesale  rather  than  retail  markets,  (j) to disclaim
disposition warranties,  including, without limitation, any warranties of title,
(k) to purchase  insurance or credit  enhancements  to insure the Lender against
risks of loss,  collection  or  disposition  of  Collateral or to provide to the
Lender a guaranteed return from the collection or disposition of Collateral,  or
(l) to the extent deemed  appropriate  by the Lender,  to obtain the services of
other brokers, investment bankers, consultants and other professionals to assist
the  Lender in the  collection  or  disposition  of any of the  Collateral.  The
Borrowers   acknowledges  that  the  purpose  of  this  section  is  to  provide
non-exhaustive  indications of what actions or omissions by the Lender would not
be commercially  unreasonable in the Lender's  exercise of remedies  against the
Collateral and that other actions or omissions by the Lender shall not be deemed
commercially  unreasonable  solely on  account  of not being  indicated  in this
section.  Without  limitation  upon the  foregoing,  nothing  contained  in this


                                       63
<PAGE>

section shall be construed to grant any rights to the Borrowers or to impose any
duties on the  Lender  that  would  not have been  granted  or  imposed  by this
Agreement or by applicable law in the absence of this section.

     12.4 UCC and Offset Rights. From and after an Event of Default,  the Lender
          ---------------------
may exercise, from time to time, any and all rights and remedies available to it
under the UCC or under any other  applicable law in addition to, and not in lieu
of, any rights and remedies  expressly granted in this Agreement or in any other
agreements  between any  Borrower  and the Lender,  and may,  without  demand or
notice of any kind,  appropriate  and apply  toward  the  payment of such of the
Obligations,  whether  matured or unmatured,  including  costs of collection and
attorneys' and paralegals'  fees, and in such order of application as the Lender
may, from time to time,  elect,  any indebtedness of the Lender to any Borrower,
however created or arising,  including,  but not limited to, balances,  credits,
deposits,  accounts  or moneys of such  Obligor  in the  possession,  control or
custody of, or in transit to the Lender. The Borrowers,  on behalf of themselves
and each  Obligor,  hereby  waive the  benefit of any law that  would  otherwise
restrict  or limit the  Lender in the  exercise  of its  right,  which is hereby
acknowledged,  to appropriate at any time hereafter any such indebtedness  owing
from the Lender to any Obligor.

     12.5 Additional  Remedies.  From and after an Event of Default,  the Lender
          --------------------
shall have the right and power to:

          (a)  instruct  the  Borrowers,  at their own  expense,  to notify  any
     parties obligated on any of the Collateral,  including, but not limited to,
     any Account Debtors,  to make payment directly to the Lender of any amounts
     due or to become due  thereunder,  or the Lender may  directly  notify such
     obligors of the security  interest of the Lender,  and/or of the assignment
     to the Lender of the Collateral and direct such obligors to make payment to
     the Lender of any amounts due or to become due with  respect  thereto,  and
     thereafter,  collect any such amounts due on the  Collateral  directly from
     such Persons obligated thereon;

          (b) enforce  collection of any of the Collateral,  including,  but not
     limited to, any Accounts,  by suit or otherwise,  or make any compromise or
     settlement with respect to any of the Collateral, or surrender,  release or
     exchange all or any part thereof,  or  compromise,  extend or renew for any
     period  (whether or not longer than the original  period) any  indebtedness
     thereunder;

          (c) take  possession or control of any proceeds and products of any of
     the Collateral, including the proceeds of insurance thereon;

          (d) extend,  renew or modify for one or more  periods  (whether or not
     longer than the original  period) any Note,  any other of the  Obligations,
     any  obligation of any nature of any other obligor with respect to any Note
     or any of the Obligations;

                                       64
<PAGE>

          (e) grant  releases,  compromises or  indulgences  with respect to any
     Note,  any of the  Obligations,  any  extension  or  renewal  of any of the
     Obligations, any security therefor, or to any other obligor with respect to
     any Note or any of the Obligations;

          (f) transfer the whole or any part of securities  which may constitute
     Collateral  into the name of the  Lender or the  Lender's  nominee  without
     disclosing,  if the Lender so desires,  that such securities so transferred
     are subject to the security  interest of the Lender,  and any  corporation,
     association, or any of the managers or trustees of any trust issuing any of
     such securities,  or any transfer agent, shall not be bound to inquire,  in
     the event that the Lender or such  nominee  makes any  further  transfer of
     such securities,  or any portion thereof,  as to whether the Lender or such
     nominee  has the  right to make  such  further  transfer,  and shall not be
     liable for transferring the same;

          (g) vote the Collateral;

          (h) make an election with respect to the Collateral under Section 1111
     of the  Bankruptcy  Code or take  action  under  Section  364 or any  other
     section of the Bankruptcy Code; provided,  however, that any such action of
     the Lender as set forth herein shall not, in any manner whatsoever,  impair
     or affect the liability of the Borrowers hereunder,  nor prejudice,  waive,
     nor be construed to impair, affect,  prejudice or waive the Lender's rights
     and remedies at law, in equity or by statute, nor release,  discharge,  nor
     be construed to release or discharge, the Borrowers, any guarantor or other
     Person liable to the Lender for the Obligations; and

          (i) at any time, and from time to time, accept additions to, releases,
     reductions, exchanges or substitution of the Collateral, without in any way
     altering,  impairing,  diminishing  or  affecting  the  provisions  of this
     Agreement,  the Loan  Documents,  or any of the other  Obligations,  or the
     Lender's  rights  hereunder,  under  any  Note or  under  any of the  other
     Obligations.

     Each of the Borrowers  hereby ratify and confirm whatever the Lender may do
in compliance with applicable law with respect to the Collateral and agrees that
the Lender  shall not be liable for any error of judgment or mistakes of fact or
law  with  respect  to  actions  taken  in good  faith  in  connection  with the
Collateral.

     12.6 Attorney-in-Fact.  Each Borrower hereby irrevocably makes, constitutes
          ----------------
and appoints the Lender (and any officer of the Lender or any Person  designated
by the Lender for that  purpose) as such  Borrower's  true and lawful  proxy and
attorney-in-fact  (and  agent-in-fact) in such Borrower's name, place and stead,
with full power of  substitution,  to (i) take such actions as are  permitted in
this Agreement,  (ii) execute such financing  statements and other documents and
to do such  other  acts as the Lender  may  reasonably  require  to perfect  and
preserve the Lender's security interest in, and to enforce such interests in the
Collateral,  and (iii)  carry out any  remedy  provided  for in this  Agreement,
including, without limitation, endorsing such Borrower's name to checks, drafts,
instruments  and  other  items  of  payment,  and  proceeds  of the  Collateral,
executing  change of address forms with the postmaster of the United States Post


                                       65
<PAGE>

Office  serving  the  address  of such  Borrower,  changing  the  address of the
Borrower to that of the Lender, opening all envelopes addressed to such Borrower
and applying any payments  contained  therein to the Obligations.  Each Borrower
hereby  acknowledges  that the  constitution  and  appointment of such proxy and
attorney-in-fact are coupled with an interest and are irrevocable. Each Borrower
hereby ratifies and confirms all that such  attorney-in-fact  may do or cause to
be done by virtue of any provision of this Agreement.

     12.7 No Marshaling. The Lender shall not be required to marshal any present
          -------------
or future collateral  security  (including but not limited to this Agreement and
the Collateral)  for, or other  assurances of payment of, the Obligations or any
of them or to resort to such collateral  security or other assurances of payment
in any  particular  order.  To the  extent  that it  lawfully  may,  each of the
Borrowers  hereby  agrees  that it will  not  invoke  any  law  relating  to the
marshaling of collateral which might cause delay in or impede the enforcement of
the Lender's rights under this Agreement or under any other instrument  creating
or evidencing any of the  Obligations  or under which any of the  Obligations is
outstanding or by which any of the  Obligations is secured or payment thereof is
otherwise assured, and, to the extent that it lawfully may, the Borrowers hereby
irrevocably waives the benefits of all such laws.

     12.8  Application  of  Proceeds.  The  Lender  will  within  a time  period
           -------------------------
consistent  with the terms of the  Lockbox  Agreement  after  receipt of cash or
solvent credits from  collection of items of payment,  proceeds of Collateral or
any  other  source  pertaining  to the  Borrowers,  apply  the whole or any part
thereof  against the  Obligations  of the Borrowers  secured  hereby.  After the
occurrence and during the continuation of an Event of Default,  the Lender shall
further have the exclusive right to determine how, when and what  application of
such  payments  and  such  credits  shall be made on the  Obligations,  and such
determination  shall be conclusive upon the Borrowers.  After the occurrence and
during the continuation of an Event of Default,  any proceeds of any disposition
by the Lender of all or any part of the  Collateral  may be first applied by the
Lender to the payment of expenses  incurred by the Lender in connection with the
Collateral,  including  attorneys'  fees and legal  expenses as provided  for in
Section 13  hereof.  Any  excess  proceeds  shall be  promptly  remitted  to the
Borrowers

     12.9 No Waiver. No Event of Default shall be waived by the Lender except in
          ---------
writing.  No failure or delay on the part of the Lender in exercising any right,
power or remedy  hereunder shall operate as a waiver of the exercise of the same
or any other right at any other time;  nor shall any single or partial  exercise
of any such  right,  power or  remedy  preclude  any other or  further  exercise
thereof or the exercise of any other  right,  power or remedy  hereunder.  There
shall  be no  obligation  on the  part of the  Lender  to  exercise  any  remedy
available  to the  Lender in any order.  The  remedies  provided  for herein are
cumulative and not exclusive of any remedies provided at law or in equity.  Each
of the Borrowers  agrees that in the event that the  Borrowers  fail to perform,
observe or discharge any of their  respective  Obligations or liabilities  under
this Agreement or any other  agreements  with the Lender,  no remedy of law will
provide adequate relief to the Lender,  and further agrees that the Lender shall
be  entitled  to  temporary  and  permanent  injunctive  relief in any such case
without the necessity of proving actual damages.



                                       66
<PAGE>

     12.10  Letters of Credit.  With  respect to all Letters of Credit for which
            -----------------
presentment  for honor shall not have  occurred  at the time of an  acceleration
pursuant to this Section 12, the Borrowers  shall at such time deposit in a cash
                 ----------
collateral  account opened by the Lender an amount equal to the Letter of Credit
Obligations then outstanding. Amounts held in such cash collateral account shall
be applied by the Lender to the payment of drafts  drawn  under such  Letters of
Credit,  and the unused  portion  thereof after all such Letters of Credit shall
have  expired or been fully  drawn upon,  if any,  shall be applied to repay the
Obligations,  in such  order  of  application  as the  Lender  may,  in its sole
discretion, from time to time elect. After all such Letters of Credit shall have
expired or been fully drawn upon, all  commitments to make Loans  hereunder have
terminated and all other Obligations have been  indefeasibly  satisfied and paid
in full in cash, the balance,  if any, in such cash collateral  account shall be
returned  to the  Borrowers  or such other  Person as may be  lawfully  entitled
thereto.

Section 13. MISCELLANEOUS.
            -------------

     13.1  Obligations  Absolute.   None  of  the  following  shall  affect  the
           ---------------------
Obligations  of the Borrowers to the Lender under this Agreement or the Lender's
rights with respect to the Collateral:

          (a)  acceptance  or retention  by the Lender of other  property or any
     interest in property as security for the Obligations;

          (b) release by the Lender of the  Borrowers  or all or any part of the
     Collateral or of any party liable with respect to the Obligations;

          (c) release, extension,  renewal,  modification or substitution by the
     Lender of any Note, or any note evidencing any of the  Obligations,  or the
     compromise of the liability of the Borrowers of the Obligations; or

          (d) failure of the Lender to resort to any other security or to pursue
     the Borrowers or any other obligor liable for any of the Obligations before
     resorting to remedies against the Collateral.

     13.2 Termination.  This Agreement shall not terminate until the termination
          -----------
of and the full and complete  performance and  indefeasible  satisfaction of all
the  Obligations  (other than  contingent  indemnification  obligations  and any
matters which  expressly  survive  pursuant to Section 14.3  hereof),  whereupon
Lender shall promptly cause to be assigned,  transferred and delivered,  against
receipt but without any recourse,  warranty or  representation  whatsoever,  any
remaining  Collateral  to or on the order of the  Borrowers.  Lender  shall also
execute and deliver to each Borrower upon such  termination such UCC termination
statements and such other documentation as shall be reasonably requested by such
Borrower  to effect  the  termination  and  release  of the  Liens and  security
interests in favor of Lender affecting the Collateral.

     13.3 Entire Agreement.  This Agreement and the other Loan Documents (i) are
          ----------------
valid,  binding  and  enforceable  against  the  Borrowers  and  the  Lender  in


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<PAGE>

accordance with their respective  provisions and no conditions exist as to their
legal  effectiveness;  (ii) constitute the entire agreement  between the parties
with respect to the subject  matter hereof and thereof;  and (iii) are the final
expression  of the  intentions  of the  Borrowers  and the Lender.  No promises,
either expressed or implied,  exist between the Borrowers and the Lender, unless
contained  herein or  therein.  This  Agreement,  together  with the other  Loan
Documents,   supersedes   all   negotiations,    representations,    warranties,
commitments, term sheets, discussions, negotiations, offers or contracts (of any
kind or nature,  whether oral or written) prior to or  contemporaneous  with the
execution hereof with respect to any matter,  directly or indirectly  related to
the terms of this Agreement and the other Loan Documents. This Agreement and the
other  Loan  Documents  are the result of  negotiations  among the  Lender,  the
Borrowers and the other parties thereto, and have been reviewed (or have had the
opportunity to be reviewed) by counsel to all such parties, and are the products
of all parties.  Accordingly,  this Agreement and the other Loan Documents shall
not be construed more strictly against the Lender merely because of the Lender's
involvement in their preparation.

     13.4  Amendments;  Waivers.  No  delay  on the  part of the  Lender  in the
           --------------------
exercise of any right,  power or remedy shall operate as a waiver  thereof,  nor
shall any single or partial exercise by the Lender of any right, power or remedy
preclude other or further exercise thereof,  or the exercise of any other right,
power or remedy.  No  amendment,  modification  or waiver  of, or  consent  with
respect to, any provision of this Agreement or the other Loan Documents shall in
any event be effective  unless the same shall be in writing and  acknowledged by
the Lender and the Borrowers, and then any such amendment,  modification, waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.

     13.5 WAIVER OF DEFENSES. EACH OF THE BORROWERS, ON BEHALF OF ITSELF AND ANY
          ------------------
FUTURE  GUARANTOR OF ANY OF THE  OBLIGATIONS,  WAIVES  EVERY  PRESENT AND FUTURE
DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SETOFF WHICH THE BORROWER MAY NOW HAVE
OR HEREAFTER MAY HAVE TO ANY ACTION BY THE LENDER IN ENFORCING  THIS  AGREEMENT.
PROVIDED  THE LENDER  ACTS IN GOOD FAITH,  EACH OF THE  BORROWERS  RATIFIES  AND
CONFIRMS  WHATEVER  THE LENDER MAY DO PURSUANT  TO THE TERMS OF THIS  AGREEMENT.
THIS PROVISION IS A MATERIAL  INDUCEMENT  FOR THE LENDER  GRANTING ANY FINANCIAL
ACCOMMODATION TO THE BORROWERS.

     13.6 FORUM  SELECTION AND CONSENT TO  JURISDICTION.  ANY  LITIGATION  BASED
          ---------------------------------------------
HEREON,  OR ARISING OUT OF, UNDER,  OR IN CONNECTION  WITH THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT,  SHALL BE BROUGHT AND MAINTAINED  EXCLUSIVELY IN THE COURTS
OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS; PROVIDED THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
OPERATE TO PRECLUDE THE LENDER FROM  BRINGING  SUIT OR TAKING OTHER LEGAL ACTION
IN  ANY  OTHER  JURISDICTION.   EACH  OF  THE  BORROWERS  HEREBY  EXPRESSLY  AND
IRREVOCABLY  SUBMITS TO THE  JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS
AND OF THE UNITED STATES  DISTRICT  COURT FOR THE NORTHERN  DISTRICT OF ILLINOIS


                                       68
<PAGE>

FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. EACH OF THE BORROWERS
FURTHER  IRREVOCABLY  CONSENTS  TO THE  SERVICE OF PROCESS BY  REGISTERED  MAIL,
POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS.
EACH OF THE BORROWERS  HEREBY EXPRESSLY AND IRREVOCABLY  WAIVES,  TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY SUCH  LITIGATION  BROUGHT IN ANY SUCH COURT  REFERRED  TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.

     13.7  WAIVER OF JURY  TRIAL.  THE LENDER AND EACH OF THE  BORROWERS,  AFTER
           ---------------------
CONSULTING  OR  HAVING  HAD  THE  OPPORTUNITY  TO  CONSULT  WITH  COUNSEL,  EACH
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE IRREVOCABLY, ANY RIGHT TO A TRIAL
BY JURY IN ANY ACTION OR  PROCEEDING  TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS
AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT, ANY OF THE OTHER OBLIGATIONS,  THE
COLLATERAL,  OR ANY AMENDMENT,  INSTRUMENT,  DOCUMENT OR AGREEMENT  DELIVERED OR
WHICH MAY IN THE FUTURE BE  DELIVERED  IN  CONNECTION  HEREWITH OR  THEREWITH OR
ARISING FROM ANY LENDING  RELATIONSHIP  EXISTING IN  CONNECTION  WITH ANY OF THE
FOREGOING, OR ANY COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE LENDER AND
THE  BORROWERS  ARE  ADVERSE  PARTIES,  AND EACH  AGREES THAT ANY SUCH ACTION OR
PROCEEDING  SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.  THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE LENDER GRANTING ANY FINANCIAL  ACCOMMODATION TO
THE BORROWERS.

     13.8  Assignability.  The Lender may at any time assign the Lender's rights
           -------------
in this  Agreement,  the other  Loan  Documents,  the  Obligations,  or any part
thereof and transfer the Lender's  rights in any or all of the  Collateral,  and
the Lender  thereafter shall be relieved from all liability with respect to such
Collateral;  provided, that, at any time prior to the occurrence and continuance
of an Event of Default, the Lender shall obtain the prior written consent of the
Borrowers,  which consent shall not be unreasonably withheld or delayed, to such
assignment  or  transfer.  In  addition,  the Lender may at any time without the
consent of the Borrowers sell a  participation  in the Loans to one other party;
provided,  that such participation  shall only transfer voting rights limited to
changes in  principal  amounts,  rates,  fees and term.  The Lender may with the
prior written consent of the Borrowers sell  participations in the Loans to more
than one other party.  The Borrowers may not sell or assign this  Agreement,  or
any other agreement with the Lender or any portion thereof,  either  voluntarily
or by operation of law,  without the prior written  consent of the Lender.  This
Agreement  shall  be  binding  upon  the  Lender  and the  Borrowers  and  their
respective legal  representatives  and successors.  All references herein to the
Borrowers  shall be deemed to  include  any  successors,  whether  immediate  or
remote.  In the case of a joint  venture or  partnership,  the term  "Borrowers"
shall be deemed to include all joint venturers or partners thereof, who shall be
jointly and severally liable hereunder.



                                       69
<PAGE>

     13.9  Confirmations.  The Borrowers and the Lender agree from time to time,
           -------------
upon written  request  received by it from the other, to confirm to the other in
writing the aggregate unpaid principal amount of each of the Loans.

     13.10  Confidentiality.  The Lender agrees to use  commercially  reasonable
            ---------------
efforts   (equivalent  to  the  efforts  the  Lender  applies  to  maintain  the
confidentiality of its own confidential information) to maintain as confidential
all   information   provided  to  them  by  the  Borrowers  and   designated  as
confidential,  except  that the  Lender may  disclose  such  information  (a) to
Persons employed or engaged by the Lender in evaluating, approving, structuring,
enforcing or administering the Loans who agree to maintain confidentiality;  (b)
to any permitted  assignee or participant  or potential  assignee or participant
that has agreed to comply with the covenant contained in this Section 13.10 (and
                                                              -------------
any such  assignee or  participant  or  potential  assignee or  participant  may
disclose such information to Persons employed or engaged by them as described in
clause  (a)  above);  (c) as  required  or  requested  by any  federal  or state
regulatory authority or examiner, or any insurance industry  association,  or as
reasonably believed by the Lender to be compelled by any court decree,  subpoena
or legal or  administrative  order or  process  but in such case,  Lender  shall
endeavor to give the Borrowers prior written notice of such disclosure;  (d) as,
on the advice of the Lender's  counsel,  is required by law;  (e) in  connection
with the  exercise  of any  right or  remedy  under  the  Loan  Documents  or in
connection  with any  litigation  to which the  Lender and the  Borrowers  are a
party;  (f) to any nationally  recognized  rating agency that requires access to
information about the Lender's  investment  portfolio in connection with ratings
issued with respect to the Lender; or (g) that ceases to be confidential through
no fault of the Lender.

     13.11 Binding Effect.  This Agreement shall become effective upon execution
           --------------
by the Borrowers and the Lender.  If this Agreement is not dated or contains any
blanks when executed by the Borrowers, the Lender is hereby authorized,  without
notice  to the  Borrowers,  to date  this  Agreement  as of the date when it was
executed by the  Borrowers,  and to complete  any such blanks  according  to the
terms upon which this Agreement is executed.

     13.12 Governing Law. This Agreement,  the Loan Documents and any Note shall
           -------------
be delivered and accepted in and shall be deemed to be contracts  made under and
governed by the  internal  laws of the State of Illinois  (but giving  effect to
federal laws applicable to national  banks)  applicable to contracts made and to
be  performed  entirely  within such state,  without  regard to conflict of laws
principles.

     13.13 Enforceability.  Wherever possible,  each provision of this Agreement
           --------------
shall  be  interpreted  in  such  manner  as to be  effective  and  valid  under
applicable  law, but if any provision of this Agreement  shall be prohibited by,
unenforceable or invalid under any jurisdiction, such provision shall as to such
jurisdiction,  be severable and be ineffective to the extent of such prohibition
or invalidity,  without  invalidating the remaining provisions of this Agreement
or  affecting  the  validity or  enforceability  of such  provision in any other
jurisdiction.

     13.14  Survival of Borrower  Representations.  All  covenants,  agreements,
            -------------------------------------
representations   and   warranties   made  by  the   Borrowers   herein   shall,


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<PAGE>

notwithstanding  any  investigation by the Lender, be deemed material and relied
upon by the Lender and shall survive the making and execution of this  Agreement
and the Loan  Documents and the issuance of any Note,  and shall be deemed to be
continuing  representations and warranties until such time as the Borrowers have
fulfilled all of their applicable  Obligations to the Lender, and the Lender has
been  indefeasibly  paid in full in cash.  The Lender,  in  extending  financial
accommodations  to  the  Borrowers,  is  expressly  acting  and  relying  on the
aforesaid representations and warranties.

     13.15  Extensions of Lender's  Commitment.  This Agreement shall secure and
            ----------------------------------
govern the terms of (i) any  extensions  or renewals of the Lender's  commitment
hereunder,  and (ii) any replacement note executed by the Borrowers and accepted
by the Lender in its sole and absolute discretion in substitution for any Note.

     13.16 Time of  Essence.  Time is of the  essence in making  payments of all
           ----------------
amounts  due  the  Lender  under  this  Agreement  and  in the  performance  and
observance by the Borrowers of each covenant, agreement, provision and
term of this Agreement.

     13.17 Counterparts; Facsimile Signatures. This Agreement may be executed in
           ----------------------------------
any number of  counterparts  and by the  different  parties  hereto on  separate
counterparts  and each such counterpart  shall be deemed to be an original,  but
all such counterparts shall together  constitute but one and the same Agreement.
Receipt of an executed  signature  page to this  Agreement by facsimile or other
electronic transmission shall constitute effective delivery thereof.  Electronic
records of executed Loan  Documents  maintained by the Lender shall be deemed to
be originals thereof.

     13.18 Notices.  Except as otherwise  provided herein,  the Borrowers waives
           -------
all notices and  demands in  connection  with the  enforcement  of the  Lender's
rights  hereunder.  All  notices,  requests,  demands  and other  communications
provided for hereunder shall be in writing and addressed as follows:


             If to the Borrowers:      Kable Media Services, Inc.
                                       Kable News Company, Inc.,
                                       Kable Distribution Services, Inc.,
                                       Kable News Export, Ltd.
                                       Kable News International, Inc.
                                       Kable Fulfillment Services, Inc.,
                                       Kable Fulfillment Services of Ohio, Inc.
                                       Palm Coast Data Holdco, Inc.
                                       Palm Coast Data, LLC
                                       Kable Square
                                       Mount Morris, Illinois  61054-1473
                                       Attention: Bruce Obendorf
                                       Telephone No.: (815) 734-5232
                                       Facsimile No.:  (815) 734-5233



                                       71
<PAGE>

             with a courtesy copy to:  Amrep Corporation
                                       300 Alexander Park, Suite 204
                                       Princeton, NJ 08540
                                       Attention: Irving Needleman
                                       Telephone No.:  (609) 716-8211
                                       Facsimile No.:    (609) 716-8255

             with a courtesy copy to:  Drinker Biddle & Reath LLP
                                       One Logan Square
                                       18th and Cherry Streets
                                       Philadelphia, PA  19103-6996
                                       Attention: F. Douglas Raymond, III, Esq.
                                       Telephone No.:  (215) 988-2458
                                       Facsimile No.  (215) 988-2757

             If to the Lender:         LaSalle Bank National Association
                                       6958 Spring Creek Road
                                       Rockford, Illinois 61114
                                       Attention: Mr. Kent N. Kohlbacher
                                       Telephone No.: (815) 636-3965
                                       Facsimile No.:    (815) 636-7621

             with a courtesy copy to:  Scott & Kraus, LLC
                                       150 South Wacker Drive
                                       Suite 2900
                                       Chicago, Illinois 60606
                                       Attention: Drew J. Scott, Esq.
                                       Telephone No.: (312) 327-1055
                                       Facsimile No.:   (312) 327-1051


or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party  complying as to delivery with the terms
of this subsection.  All notices addressed as above shall be deemed to have been
properly given (i) if served in person,  upon acceptance or refusal of delivery;
(ii) if mailed by  certified  or  registered  mail,  return  receipt  requested,
postage  prepaid,  on the  third  (3rd)  day  following  the day such  notice is
deposited  in any  post  office  station  or  letter  box;  or  (iii) if sent by
recognized  overnight  courier,  on the first (1st) day  following  the day such
notice is delivered to such carrier.  No notice to or demand on the Borrowers in
any case shall entitle the Borrowers to any other or further notice or demand in
similar or other circumstances.

     13.19 Release of Claims  Against  Lender.  In  consideration  of the Lender
           ----------------------------------
making the Loans,  the Borrowers and all other  Obligors do each hereby  release
and  discharge  the Lender of and from any and all  claims,  harm,  injury,  and
damage of any and every kind,  known or unknown,  legal or equitable,  which any
Obligor  may have  against the Lender  from the date of their  respective  first


                                       72
<PAGE>

contact  with the Lender  until the date of this  Agreement  including,  but not
limited to, any claim arising from any reports (environmental reports,  surveys,
appraisals,  etc.)  prepared by any parties hired or  recommended by the Lender.
The Borrowers and all other  Obligors  confirm to Lender that they have reviewed
the effect of this release with competent legal counsel of their choice, or have
been afforded the opportunity to do so, prior to execution of this Agreement and
the Loan Documents and do each  acknowledge and agree that the Lender is relying
upon this release in extending the Loans to the Borrowers.

     13.20 Costs,  Fees and Expenses.  The Borrowers  shall pay or reimburse the
           -------------------------
Lender for all reasonable costs, fees and expenses incurred by the Lender or for
which  the  Lender  becomes   obligated  in  connection  with  the  negotiation,
preparation,  consummation, collection of the Obligations or enforcement of this
Agreement,  the other Loan Documents and all other documents provided for herein
or delivered or to be delivered  hereunder or in connection  herewith (including
any  amendment,  supplement  or waiver  to any Loan  Document),  or  during  any
workout,  restructuring or negotiations in respect thereof,  including,  without
limitation, reasonable consultants' fees and attorneys' fees and time charges of
counsel to the Lender, which shall also include attorneys' fees and time charges
of attorneys  who may be employees of the Lender or any Affiliate of the Lender,
plus costs and expenses of such attorneys or of the Lender;  search fees,  costs
and expenses;  and all taxes payable in  connection  with this  Agreement or the
other Loan Documents,  whether or not the transaction  contemplated hereby shall
be consummated. In furtherance of the foregoing, the Borrowers shall pay any and
all stamp and other  taxes,  UCC search  fees,  filing  fees and other costs and
expenses in connection  with the execution and delivery of this  Agreement,  any
Note and the other Loan Documents to be delivered  hereunder,  and agree to save
and hold the Lender  harmless  from and  against  any and all  liabilities  with
respect to or  resulting  from any delay in paying or omission to pay such costs
and expenses.  That portion of the Obligations  consisting of costs, expenses or
advances  to be  reimbursed  by the  Borrowers  to the Lender  pursuant  to this
Agreement or the other Loan Documents which are not paid on or prior to the date
hereof shall be payable by the Borrowers to the Lender on demand. If at any time
or  times  hereafter  the  Lender:  (a) employs  counsel  for  advice  or  other
representation  (i) with  respect to this Agreement or the other Loan Documents,
(ii) to  represent  the  Lender in any  litigation,  contest,  dispute,  suit or
proceeding or to commence,  defend,  or intervene or to take any other action in
or with  respect  to any  litigation,  contest,  dispute,  suit,  or  proceeding
(whether  instituted by the Lender,  the Borrowers,  or any other Person) in any
way or respect  relating  to this  Agreement,  the other Loan  Documents  or the
Borrower's  business  or affairs,  or (iii) to  enforce any rights of the Lender
against the Borrowers or any other Person that may be obligated to the Lender by
virtue of this  Agreement or the other Loan  Documents;  (b) takes any action to
protect,   collect,  sell,  liquidate,  or  otherwise  dispose  of  any  of  the
Collateral;  and/or  (c) attempts  to or enforces any of the Lender's  rights or
remedies under the Agreement or the other Loan Documents, the costs and expenses
incurred by the Lender in any manner or way with respect to the foregoing, shall
be part of the Obligations, payable by the Borrowers to the Lender on demand.

     13.21  Indemnification.   The  Borrowers  agree  to  defend  (with  counsel
            ---------------
reasonably satisfactory to the Lender), protect,  indemnify,  exonerate and hold
harmless  each  Indemnified  Party  from and  against  any and all  liabilities,
obligations,  losses, damages,  penalties,  actions,  judgments,  suits, claims,


                                       73
<PAGE>

costs,  expenses and  distributions  of any kind or nature  (including,  without
limitation,  the  disbursements  and the  reasonable  fees of  counsel  for each
Indemnified  Party  thereto,  which  shall  also  include,  without  limitation,
reasonable attorneys' fees and time charges of attorneys who may be employees of
any  Indemnified  Party),  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,  Environmental  Laws,  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 of the Loan
Documents,  or any act, event or transaction  related or attendant thereto,  the
preparation,  execution and delivery of this  Agreement and the Loan  Documents,
including,  but not  limited to, the making or issuance  and  management  of the
Loans,  the use or intended use of the proceeds of the Loans, the enforcement of
the Lender's rights and remedies under this Agreement,  the Loan Documents,  any
Note, any other  instruments  and documents  delivered  hereunder,  or under any
other agreement between the Borrowers and the Lender;  provided,  however,  that
the Borrowers shall not have any obligations  hereunder to any Indemnified Party
with respect to matters determined by a court of competent jurisdiction by final
and nonappealable  judgment to have been caused by or resulting from the willful
misconduct or gross negligence of such Indemnified Party. To the extent that the
undertaking   to  indemnify  set  forth  in  the   preceding   sentence  may  be
unenforceable  because it violates 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,  together  with  interest  thereon  at the  Default  Rate from the date
incurred by each Indemnified  Party until paid by the Borrowers,  shall be added
to the  Obligations  of the  Borrowers  and be  secured by the  Collateral.  The
provisions  of this Section shall  survive the  satisfaction  and payment of the
other Obligations and the termination of this Agreement.

     13.22  Revival and  Reinstatement  of  Obligations.  If the  incurrence  or
            -------------------------------------------
payment of the  Obligations  by any Obligor or the transfer to the Lender of any
property  should for any reason  subsequently be declared to be void or voidable
under  any  state or  federal  law  relating  to  creditors'  rights,  including
provisions  of  the   Bankruptcy   Code  relating  to  fraudulent   conveyances,
preferences,  or other voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfer"), and if the Lender is required to
repay or restore, in whole or in part, any such Voidable Transfer,  or elects to
do so upon the reasonable  advice of its counsel,  then, as to any such Voidable
Transfer,  or the amount  thereof that the Lender is required or elects to repay
or restore, and as to all reasonable costs,  expenses, and attorneys fees of the
Lender, the Obligations shall  automatically shall be revived,  reinstated,  and
restored and shall exist as though such Voidable Transfer had never been made.

     13.23 Customer  Identification - USA Patriot Act Notice.  The Lender hereby
           -------------------------------------------------
notifies the Borrowers that pursuant to the  requirements of the USA Patriot Act
(Title III of Pub. L. 107-56, signed into law October 26, 2001) (the "Act"), and
the Lender's  policies and practices,  the Lender is required to obtain,  verify
and record certain  information and documentation that identifies the Borrowers,


                                       74
<PAGE>

which information  includes the name and address of the Borrowers and such other
information  that will allow the Lender to identify the  Borrowers in accordance
with the Act.

     13.24 Interpretation.  If any provision in this Agreement requires judicial
           --------------
interpretation,  the judicial body  interpreting  or construing  such  provision
shall not apply the  assumption  that the terms  hereof  shall be more  strictly
construed  against  one party  because  of the rule that an  instrument  must be
construed  more  strictly  against the party which  itself or through its agents
prepared the same; the parties hereby agreeing that all parties and their agents
have participated in the preparation hereof equally.

     13.25  Fraudulent  Transfer.  In order to avoid any  possibility  that this
            --------------------
Agreement  or any  other  Loan  Document  may be ruled  by a court of  competent
jurisdiction  to be a  fraudulent  transfer  or  conveyance  with  respect  to a
Borrower, each Borrower and Lender hereby agree that,  notwithstanding any other
provision of this  Agreement  or any other Loan  Document to the  contrary,  the
maximum liability of a Borrower hereunder shall be limited to the greater of (a)
the  proceeds  of the  credit  extended  by Lender to the  Borrowers  under this
Agreement and the other Loan Documents to the extent such proceeds are advanced,
transferred  or  applied  to or for  the  benefit  of  such  Borrower,  and  (b)
ninety-five  percent  (95.00%) of the  difference  between (i) the present  fair
salable value of such Borrower's assets as of the date of this Agreement or such
other  date as may be  applicable  under  law,  minus  (ii)  the  amount  of all
liabilities  of such Borrower,  including  probable  exposure  under  contingent
liabilities  (including  the amount under clause (a) above,  but  excluding  any
other probable exposure of such Borrower to Lender hereunder), as of such date.

                SECTION 14 CROSS-GUARANTY AND SURETYSHIP WAIVERS
                ------------------------------------------------

     14.1  Cross-Guaranty.  In addition  to, and without in any way limiting any
           --------------
Borrower's  primary,   direct,  joint  or  several  liability  for  any  of  the
Obligations but subject to section 13.25,  each Borrower (on a joint and several
basis  with  the  other  Borrowers)  hereby  absolutely,   unconditionally   and
irrevocably  guaranties  to  the  Lender  the  full  and  punctual  payment  and
satisfaction  of the  Obligations  of each and every other  Borrower as and when
due, whether at stated maturity, by acceleration or otherwise, and agrees to pay
and  satisfy in full any and all  expenses  that may be paid or  incurred by the
Lender  in  the  collection  of all or any  portion  of the  Obligations  or the
exercise  or  enforcement  of any  one or  more  of the  other  rights,  powers,
privileges,  remedies and  interests  of the Lender under this  Agreement or any
other  Loan  Document,  irrespective  of the  manner  or  success  of  any  such
collection, exercise or enforcement, and whether or not such expenses constitute
part of the Obligations (together with the balance of this Subsection, the other
Subsections  of this  Section  and the  general  terms  and  provisions  of this
Agreement, collectively, the "Cross-Guaranty").

     14.2  Continuing  Agreement,  Payment in Accordance  with Terms,  Etc. Each
           ---------------------------------------------------------------
Borrower  covenants and agrees that: (a) its joint and several liability for and
Cross-Guaranty  hereunder is a continuing liability for and guaranty of the full
and timely payment and satisfaction of the Obligations, and such Borrower is not
guarantying collectibility only, in each case whether the Obligations are now or
hereafter existing,  acquired or created, and irrespective of the fact that from


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<PAGE>

time to time under the terms and provisions of this Agreement and the other Loan
Documents  monies may be advanced,  repaid and  readvanced  and the  outstanding
balance of the Loan may be zero; (b) its  obligations  under its  Cross-Guaranty
are part of the  "Obligations"  under  this  Agreement  and are  secured  by the
Collateral;  (c) the  Cross-Guaranty  may not be  revoked or  terminated  by any
Borrower until such time as the monetary  Obligations shall have been fully paid
and satisfied  (other than any  contingent  indemnification,  defense or similar
obligation  that by its express terms extends beyond such payment);  (d) none of
the Obligations  shall be deemed to have been otherwise fully paid and satisfied
so long as the Lender shall have any remaining  commitment  under this Agreement
or any other Loan Documents;  and (e) the Obligations will be paid and satisfied
in full in accordance  with the terms and  provisions of this  Agreement and the
other Loan  Documents  without  regard to any applicable law now or hereafter in
effect  in any  jurisdiction  that  might  cause or  permit  to be  invoked  any
alteration by any guarantor,  pledgor or other surety (including any Borrower to
the extent a guarantor or otherwise determined to be a surety, each a "Surety"),
any Borrower or any other Person (other than the Lender) in the time,  amount or
manner of payment of any of their respective obligations to the Lender under any
of this Agreement and the other Loan Documents.

     14.3  Agreement  Absolute,  Survival of  Representations,  Etc. Each of the
           --------------------------------------------------------
payment obligations,  cross guaranties,  collateral grants,  representations and
warranties (as of the date(s) made or deemed made), covenants, waivers and other
agreements and obligations of each Borrower (whether individual,  joint, several
or otherwise) contained in this Agreement and the other Loan Documents:  (a) are
and shall be absolute,  irrevocable  and  unconditional,  and shall  survive and
remain and continue in full force and effect in accordance with their respective
terms and  provisions,  in each case without  regard to (among other things) any
invalidity,  illegality,  non-binding effect or unenforceability (in whole or in
part) for any reason  whatsoever of this Agreement or any other Loan  Documents,
or of any of the  other  terms  and  provisions  of  this  Agreement,  including
(without  limitation)  by  reason  of the  absence  (in whole or in part) of any
required   authentication,    authority,   capacity,   consent,   consideration,
disclosure, equivalent value, filing, notice, recordation, signature, writing or
other action, or the presence (in whole or in part) of any contractual conflict,
defense,  illegality,  misconduct,   misrepresentation,   mistake,  prohibition,
restriction or right of reimbursement,  recoupment or setoff;  (b) are and shall
be absolute, irrevocable and unconditional with regard to, and shall survive and
remain and continue in full force and effect in accordance with their respective
terms and  provisions  following  and without  regard to, each of the  following
(among other  things),  (i) the execution and delivery of this  Agreement or any
other Loan Documents and the performance or  non-performance  of any Obligations
or the  obligations  of any Surety  under the  Cross-Guaranty  or any other Loan
Documents  ("Surety's   Obligations"),   (ii)  any  advance,  accrual,  payment,
repayment  or  readvance  of any amount  under any other Loan  Document,  or any
request or notice with respect thereto, or the inception, creation, acquisition,
increase,  decrease,  satisfaction  or  existence  from  time  to  time  of  any
Obligations or Surety's Obligations under any other Loan Document,  in each case
irrespective of the fact that from time to time the  outstanding  balance of the
Loan and other monetary Obligations may be zero, (iii) any waiver, modification,
extension,  renewal,  consolidation,  spreading,  amendment or restatement of or
other change in any term or  provision  of (A) this  Agreement or any other Loan
Document or (B) any one or more of the Loan or other Obligations or any Surety's
Obligations, including (without limitation) any extension or other change in the


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<PAGE>

time,  manner,  place or other  term of  payment  or  performance  of any of the
foregoing,  in each case except as and to the extent  expressly  modified by the
terms  and  provisions  of any such  extension,  change,  waiver,  modification,
renewal,  consolidation,  spreading,  amendment or  restatement,  (iv) any full,
partial or non-exercise of any of the rights, powers,  privileges,  remedies and
interests of the Lender under any other Loan Document or applicable law, against
the  Borrower,  any  Surety or any other  Person or with  respect  to any of the
Obligations,  any Surety's Obligations,  any other obligations or any collateral
or security  interest  therein,  which exercise or  enforcement  may be delayed,
discontinued  or  otherwise  not  pursued  or  exhausted  for  any or no  reason
whatsoever,  or which may be  waived,  omitted or  otherwise  not  exercised  or
enforced (whether intentionally or otherwise), (v) any surrender,  repossession,
sequestration,  foreclosure,  conveyance  or  assignment  (by  deed  in  lieu or
otherwise),   sale,  lease  or  other  realization,   dealing,   liquidation  or
disposition  respecting any collateral or setoff respecting any account or other
asset in accordance with this  Agreement,  any other Loan Document or applicable
law (except as and to the extent the Obligations have been  permanently  reduced
by the  application  of  the  net  proceeds  thereof),  (vi)  the  perfected  or
non-perfected  status or priority of any mortgage or other security  interest in
any such  collateral,  which may be held  without  recordation,  filing or other
perfection (whether intentionally or otherwise),  (vii) any release, settlement,
adjustment,  subordination  or impairment of all or any part of the Obligations,
any  Surety's  Obligations,  any  other  obligations  or any  collateral  or any
security  interest  therein under or with respect to this  Agreement,  any other
Loan Document or applicable law, whether  intentionally or otherwise  (except as
and to the extent  expressly  modified by the terms and  provisions  of any such
release,  settlement or adjustment),  (viii) any extension,  stay, moratorium or
statute of limitations or similar time constraint under any applicable law, (ix)
any investigation,  analysis or evaluation by the Lender or its designees of the
assets,  business,  cash  flow,  expenses,  income,   liabilities,   operations,
properties,  prospects,  reputation or condition (financial or otherwise) of any
Borrower,  any  Surety,  or  any  other  Person,  (x)  any  application  to  any
obligations of any Borrower or any Surety other than any Obligations or Surety's
Obligations of (A) any payments from such Person not specifically designated for
application to the  Obligations  or Surety's  Obligations or (B) any proceeds of
collateral  from such  Person  other  than from the  Collateral,  (xi) any sale,
conveyance, assignment,  participation or other transfer by the Lender (in whole
or in part) to any other  Person of any one or more of this  Agreement or any of
this  Agreement  and the other Loan  Documents or any one or more of the rights,
powers,  privileges,  remedies or interests of the Lender herein or therein,  or
(xii) any act or omission  on the part of the Lender or any other  Person or any
other act,  event or  circumstance  that otherwise  might  constitute a legal or
equitable  defense,  counterclaim  or  discharge  of  a  borrower,   co-obligor,
indemnitor, guarantor, pledgor or surety; in each case in such manner and order,
upon such terms and provisions and subject to such  conditions as the Lender may
deem necessary or desirable in its sole and absolute discretion,  without notice
to or further assent from any Borrower,  any Surety, or any other Person (except
for such  notices as may be  expressly  required to be given to such party under
this Agreement or applicable other Loan Document),  and without affecting any of
the rights, powers, privileges, remedies and other interests of the Lender under
this  Agreement,  the other Loan  Documents  and  applicable  law; and (c) shall
remain  and  continue  in full  force and  effect  without  regard to any of the
foregoing acts,  events or circumstances  until all of the Obligations have been


                                       77
<PAGE>

fully paid and satisfied (other than any contingent indemnification,  defense or
similar  obligation  that by its express  terms  extends  beyond such  payment);
provided, however, that each Borrower retains the defense of payment.

     14.4   Waivers  of  Notice,   Etc.   Each   Borrower   hereby   absolutely,
            --------------------------
unconditionally,  irrevocably  and expressly  waives forever each and all of the
following  except to the extent  notice  thereof is  expressly  required by this
Agreement,  any other Loan Document or applicable law: (a) acceptance and notice
of any acceptance of this  Agreement or any other Loan  Document;  (b) notice of
any action taken or omitted in reliance  hereon;  (c)  presentment and notice of
any  presentment;  (d) demand for  payment  and notice of any such  demand;  (e)
dishonor and notice of any dishonor;  (f) protest and notice of any protest; (g)
notice of any request for, any change in or any making, repayment or remaking of
any loan,  advance or other extension of credit at any time under this Agreement
or any other Loan  Document;  (h) notice of any  nonpayment  or other event that
constitutes, or with the giving of notice or the passage of time (or both) would
constitute, any nonpayment, nonperformance, misrepresentation or other breach or
default  under  this  Agreement  or any other Loan  Document;  (i) notice of any
material and adverse effect, whether individually or in the aggregate,  or other
information respecting (A) the assets,  business,  cash flow, expenses,  income,
liabilities,   operations,   properties,   prospects,  reputation  or  condition
(financial or otherwise)  of any Borrower,  any Surety or any other Person,  (B)
the ability of any of them to pay or otherwise  satisfy (as and when due) any of
their  respective  obligations  under any of this  Agreement  and the other Loan
Documents,  or (C) any collateral  securing the obligations of any of them under
this  Agreement  and the other  Loan  Documents  or its  value or the  validity,
enforceability,  perfection  or priority of any security  interest of the Lender
therein;  (j) notice of any act, event or  circumstance  described in subsection
(b) of the immediately preceding Section (i.e., Agreement Absolute,  Survival of
Representations,  Etc.) ; and (k) any other proof,  notice or demand of any kind
whatsoever with respect to any or all of the Obligations or Surety's Obligations
or  promptness  in making any claim or demand under this  Agreement or any other
Loan Document.

     14.5 No Personal Liability.  For the avoidance of doubt and notwithstanding
          ---------------------
anything in this Agreement to the contrary,  Nicholas G. Karabots, the directors
of the Principal  Shareholder  and the  directors of the Borrowers  ("Non-Liable
Parties")  shall have no personal  liability by reason of this Agreement for any
of the Obligations of any Borrower, including payment of principal,  interest or
any other  amounts due  Lender.  The Lender  shall have no recourse  against the
Non-Liable Parties, any entity controlling any Borrower (other than a Borrower),
or their respective partners, directors,  officers, members, managers, employees
or agents for failure to pay  principal  and interest  evidenced by the Notes or
other costs or expenses under this  Agreement or for the  Borrowers'  failure to
perform their  obligations  hereunder and under the Loan  Documents.  The Lender
shall never demand,  claim or institute  any suit,  claim or demand at law or in
equity  against  any  of the  Non-Liable  Parties.  Nothing  contained  in  this
paragraph  shall be deemed to release,  affect or impair the  Obligations of the
Borrowers or the Collateral or the Lender's rights to enforce its remedies under
this Agreement.


                            [SIGNATURE PAGES FOLLOW]




                                       78
<PAGE>

     IN WITNESS WHEREOF, the Borrowers and the Lender have executed this Amended
and Restated Loan and Security Agreement as of the date first above written.

<TABLE>
<S>                                                          <C>


---------------------------------------------------------------------------------------------------------------------
KABLE MEDIA SERVICES, INC.,                                  KABLE NEWS COMPANY, INC.,
a Delaware corporation                                       a Delaware corporation

By:      /s/ Bruce Obendorf                                  By:      /s/ Bruce Obendorf
         -----------------------------------------                    -----------------------------------------
         Bruce Obendorf,                                              Bruce Obendorf,
         Vice President                                               Senior Vice President

---------------------------------------------------------------------------------------------------------------------
KABLE NEWS EXPORT, LTD.,                                     KABLE NEWS INTERNATIONAL, INC., a Delaware corporation
a Delaware corporation
                                                             By:      /s/ Bruce Obendorf
                                                                      -----------------------------------------
By:      /s/ Bruce Obendorf                                           Bruce Obendorf,
         -----------------------------------------                    Treasurer
         Bruce Obendorf,
         Vice President

---------------------------------------------------------------------------------------------------------------------
KABLE FULFILLMENT SERVICES, INC., a Delaware corporation     KABLE  FULFILLMENT  SERVICES OF OHIO,  INC.,  a Delaware
                                                             corporation
By:      /s/ Bruce Obendorf
         -----------------------------------------
         Bruce Obendorf,                                     By:      /s/ Bruce Obendorf
         Vice President                                               -----------------------------------------
                                                                      Bruce Obendorf,
                                                                      Vice President

---------------------------------------------------------------------------------------------------------------------
KABLE DISTRIBUTION SERVICES, INC., a Delaware corporation    PALM  COAST  DATA,  LLC  a  Delaware  limited  liability
                                                             company
By:      /s/ Bruce Obendorf
         -----------------------------------------
         Bruce Obendorf,                                     By:      /s/ John Meneough
         Senior Vice President                                        -----------------------------------------
                                                                      John Meneough,
                                                                      President

---------------------------------------------------------------------------------------------------------------------
PALM COAST DATA HOLDCO, INC., a Delaware corporation

By:      /s/ John Meneough
         -----------------------------------------
         John Meneough,
         President


---------------------------------------------------------------------------------------------------------------------
</TABLE>



                                       79
<PAGE>

Agreed and accepted:

LASALLE BANK NATIONAL ASSOCIATION,
a national banking association


By:      /s/ Kent N. Kohlbacher
         -----------------------------------------
         Kent N. Kohlbacher, First Vice President





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</TEXT>
</DOCUMENT>
