UNITEL VIDEO INC/DE, 10-K, 1995-12-14

UNITEL VIDEO INC/DE
10-K, 1995-12-14
ALLIED TO MOTION PICTURE PRODUCTION

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
---------

X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--------- SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

For the Fiscal Year Ended August 31, 1995
------------------------------------

--------- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the transition period from to
---------- ----------
Commission file number 1-8654
------

UNITEL VIDEO, INC.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

Delaware 23-1713238
- --------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

510 West 57th Street, New York, New York 10019
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)

Registrant's telephone no., including area code: (212) 265-3600
--------------

Securities registered pursuant to Section 12 (b) of the Act:

Name of each exchange
Title of Each Class on which registered
------------------- -------------------
Common Stock, $.01 par value American Stock Exchange

Securities registered pursuant to Section 12 (g) of the Act: None

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

Yes X No
------ ------

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K ( ).
---

(Cover Page: 1 of 2 Pages)

<PAGE>

The aggregate market value of the voting stock (based on the closing price of
such stock on the American Stock Exchange) held by non-affiliates of the
Registrant at December 12, 1995 was approximately $11,760,705.

There were 2,625,565 shares of Common Stock outstanding at December 12, 1995.

DOCUMENTS INCORPORATED BY REFERENCE

PART III Certain portions of the Registrant's Proxy Statement
for the Registrant's 1995 Annual Meeting of Stockholders.

<PAGE>

PART I

ITEM 1. BUSINESS

GENERAL

Unitel Video, Inc. (the "COMPANY") provides a full range of services to the
video communications industry for the recording, editing and duplication of
television programs, commercials and corporate and other communications on
videotape. The Company's services are provided primarily in the following
areas: studio videotape recording, mobile videotape recording and live
telecasting, film to videotape transfer, editing, computer graphics and
videotape duplication. The Company also designs and produces custom CD-ROM, CD-
I, videodisc and networked multimedia presentations.

The Company's services are provided at facilities located in New York City,
Los Angeles and Chicago and through the Company's Mobile division based in
Pittsburgh. The Company's Mobile division provides "on-location" services,
including technical personnel, for videotape recording and live telecasting of
sports, cultural and other events throughout North America.

As the Company is in a service industry, it does not use raw materials. It
does, however, use videotape. Videotape is readily available from numerous
sources and the Company has not experienced, nor does it anticipate
experiencing, difficulty in obtaining videotape for its operations. In
addition, the Company has service contracts with its customers, generally for
facilities and personnel at specific times or on a project or job-by-job basis
(as more fully described below under the caption "Marketing") and, accordingly,
does not have backlog as such.

The Company's cost structure is such that depreciation, selling expenses
and general and administrative expenses do not generally fluctuate from quarter
to quarter during a fiscal year based on sales volume. Furthermore, a majority
of production costs are fixed. Accordingly, relatively small variations in
quarterly sales historically have resulted in disproportionately greater
variations in net earnings. In part due to the foregoing, during fiscal years
1995, 1994 and 1993, the Company recognized a significantly greater proportion
of net earnings in the first quarter as compared to the other quarters of the
fiscal year. See Note L to Notes to Consolidated Financial Statements.

SERVICES

STUDIO VIDEOTAPE RECORDING. The Company provides the studios, equipment
and skilled technical personnel needed to record television programs,
commercials and corporate and other videotape communications. The equipment
includes color television cameras, videotape recorders, sound monitoring and
mixing equipment and lighting equipment. The Company does not generally provide
program direction or other artistic or non-technical production services, such
as the preparation of scripts, the hiring of performers or the supplying of
special props or scenery. The Company operates nine studios in New York City.

Among the programs produced at the Company's studio facilities are "The Sally
Jessy Raphael Show", "Inside Edition", "The Rush Limbaugh Show", "The Rolonda
Watts Show", "American Journal", "The Gordon Elliot Show", "The Mark Walberg
Show" and "The Carnie Wilson Show". Studio recording accounted for
approximately 16%, 15% and 16% of the Company's revenues during the fiscal years
ended August 31, 1995, 1994 and 1993, respectively.

<PAGE>

MOBILE VIDEOTAPE RECORDING AND LIVE TELECASTING. The Company's Mobile
division provides videotape recording and live telecasting services "on-
location" by transporting videotape and other related equipment in its mobile
vehicles. These vehicles have been designed to serve as the production control
center for events in sports arenas, concert halls, theaters and other locations.
The Company also arranges for the skilled technical personnel required to
perform these services. The Company's ten mobile vehicles are equipped to
travel on a continuous basis throughout North America and can be maintained in
the field. The Company's Mobile division accounted for approximately 21%, 19%
and 18% of the Company's revenues during the fiscal years ended August 31, 1995,
1994 and 1993, respectively. In February 1995, the Company acquired the assets
of Burbank, California based GC & Co. which added three mobile units to the
Company's fleet of seven. Some of the events handled by the Company's mobile
production units include "Live from the Met", "Live from Lincoln Center", "The
Grammy Awards", "The Emmy Awards", "The Academy Awards", major golf and tennis
tournaments, broadcast of Pittsburgh Pirates, Montreal Expos and Toronto Blue
Jays major league baseball games, Major League Baseball's Allstar, Playoff and
World Series games and the international broadcast of the "Super Bowl".

FILM TO VIDEOTAPE TRANSFER. The Company provides the facilities and
technical personnel for transferring 16mm and 35mm motion picture positive and
negative film and slides to videotape. Through the use of computers, the color
of the picture may be corrected, altered or enhanced frame by frame to meet
client needs. Film to videotape transfer accounted for approximately 9%, 9% and
10% of the Company's revenues during the fiscal years ended August 31, 1995,
1994 and 1993, respectively. The Company has performed this service for major
theatrical motion pictures such as "Waterworld",
"Batman Forever" and "Congo", and television programs such as "Murder, She
Wrote" and "Homicide".

EDITING. The Company provides editing equipment and skilled personnel
required to perform the editing, special optical and audio effects, titling and
other technical work necessary to produce a master videotape suitable for
broadcast, cablecast, duplication or other distribution. Using computer-
controlled electronic editing equipment, video and audio tape recorders and
special effects and titling equipment, videotape recorded by the Company or
others is processed into a finished product. Additionally, the Company provides
creative editorial and editorial supervision through the post production process
and consultative storyboard services directly to advertising agencies. Editing
accounted for approximately 35%, 37% and 40% of the Company's revenues during
the fiscal years ended August 31, 1995, 1994 and 1993, respectively. Among the
programs edited at the Company's facilities are " Star Trek:Voyager", "Star
Trek: Deep Space Nine", "Grace Under Fire", "Cybill", "The Simpsons" and
"Homicide".

COMPUTER GRAPHICS. The Company offers creative consultation, technical
assistance and full-service facilities for the creation of computer-generated
graphics, special effects and animation in the digital format in both 2-D and 3-
D. These services accounted for approximately 9% of the Company's revenues in
fiscal 1995 and 10% during each of the fiscal years ended August 31, 1994 and
1993. The Company's projects in this area include various commercials for
Blockbuster Video, Sharp Electronics, Subway, McDonalds, Procter Gamble, General
Mills and Oldsmobile.

<PAGE>

VIDEOTAPE DUPLICATION. The Company furnishes videotape duplication
services in all formats, including formats available for broadcast and cablecast
in the United States as well as the multiple formats used abroad. Duplication
services accounted for approximately 4%, 5% and 6% of the Company's revenues
during the fiscal years ended August 31, 1995, 1994 and 1993, respectively.

INTERACTIVE MULTIMEDIA PRODUCTION. The Company designs and produces custom
CD-ROM, CD-I, videodisc and networked multimedia presentations for clients in
the publishing, financial services, pharmaceutical, entertainment, advertising,
retail, telecommunications and utility industries. Extensive use of other
Company resources are integrated into the productions, including video
compression, digital to video transfers, 3-D computer graphic creation and
studio and location recording. Interactive multimedia production accounted for
approximately 1% of the Company's revenues during each of the fiscal years ended
August 31, 1995, 1994 and 1993.

MARKETING

The Company markets its services principally to cable television program
suppliers, independent producers, national television networks, local television
stations, motion picture studios, advertising agencies, program syndicators and
distributors through the direct efforts of its internal sales personnel and
through advertising in certain trade publications. The Company has no material
patents. The Company markets its services through the use of the Unitel, Editel
and Windsor names.

Customers for editing services, film-to-tape transfer, computer graphics
and videotape recording of television commercials generally make arrangements
for the Company's services without significant advance notice, on a project or
job-by-job basis. Customers for studio and "on-location" videotape recording or
live telecasting of programs generally make arrangements longer in advance of
the time when the facilities and services are required. The Company has entered
into arrangements with several customers for periods ranging up to three years
to provide editing, mobile videotape recording and/or studio videotape recording
services. No customer accounted for more than 10% of the Company's total sales
for the fiscal year ended August 31, 1995.

COMPETITION

The video services industry is highly competitive. Certain videotape
service businesses (both independent companies and divisions of diversified
companies) provide most of the same services provided by the Company, while
others specialize in one or several of these services. Editing and videotape
recording services are also subject to competition from the film industry.
While the Company provides the facilities for the transfer of film to videotape,
it does not perform any services directly on film.

Many competitors of the Company, some with greater financial resources, are
located in the New York City, Los Angeles and Chicago areas, the principal
markets for the Company's services other than "on-location" video services.
"On-location" video services provided by the Company compete on a nationwide
basis with companies located throughout North America.

<PAGE>

The Company competes on the basis of the overall quality of the services it
provides, state-of-the-art equipment, breadth of services, reputation in the
industry and location. The Company also competes on the basis of its ability to
attract and retain qualified, highly skilled personnel. The Company believes
that prices for its services are competitive within its industry, although some
competitors may offer certain of their services at lower rates than the Company.
The video services industry has been and is likely to continue to be subject to
technological change to which the Company must respond in order to remain
competitive.

EMPLOYEES

At August 31, 1995, the Company had 474 full-time employees. The Company's
Unitel-New York division post-production personnel (22 employees) are members of
the National Association of Broadcast Employees and Technicians, AFL-CIO, under
a contract with the Company which expires in April 1997.

The technical personnel of the Company's Editel-Los Angeles division
(44 employees) are represented by the International Alliance of Theatrical Stage
Employees ("IATSE"), under a contract which expires in November 1997. A portion
of the Company's Editel-New York technical personnel (44 employees) are
represented by IATSE under a three year contract which expired in May 1994.
Negotiations for a new contract, which are currently underway, have historically
been completed after the expiration of the previous contract. A portion of the
Company's Editel-New York administrative staff (8 employees) are also
represented by IATSE under a three year contract which expired in December 1994.
Negotiations for a new contract, which are currently underway have historically
been completed after the expiration of the previous contract.

The Company believes that its employee relations are generally
satisfactory.

DEVELOPMENTS

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of" which provides
guidance on when to assess and how to measure impairment of long-lived assets,
certain intangibles and goodwill related to those assets to be held and used,
and for long-lived assets and certain indentifiable intangibles to be disposed
of. The Company adopted this statement as of August 31, 1995.

The Company has decided to focus its resources toward providing services to
the entertainment and corporate communications areas, which represents the
Company's strength. As part of the strategy, the Company has decided to sell
its Editel New York, Editel Chicago and Editel Los Angeles divisions, which
specialize in the highly competitive commercial advertising portion of the
video facilities industry. During the 1995 fiscal year, the three Editel
divisions incurred a pretax loss of $3,682,000. As a result the Company
identified property, plant and equipment associated with these divisions with
a carrying value of approximately $24,000,000 that it no longer needed for
its current and future operations, and during the fourth quarter of fiscal
1995 committed to a plan to dispose of them. Accordingly, the Company began
marketing these divisions to potential buyers and plans to sell them.
Although the Company intends to sell these assets within one year there is no
assurance that it will be able to do so, accordingly these assets are
classified in the balance sheet as long-term. The Company estimated the
revised value to be approximately $19,300,000. Accordingly, the Company
recorded an impairment charge of approximately $4,700,000 in 1995 on these
assets, which was included in

<PAGE>

impairment charges. The Company intends to operate these divisions until a sale
is consummated.

The Company reevaluated its investment in its Windsor division in the
fourth quarter of fiscal 1995 and determined that based upon it's operating
results, the goodwill associated with the purchase of this division and certain
property, plant and equipment that will not provide any future benefits to the
Company were impaired. The Company recognized an impairment charge of
approximately $3,000,000 included in impairment charges during the fourth
quarter which represents the remaining balance of these assets.

In May of 1995, the Company adopted a plan to downsize the operations of
its Editel Chicago division and reorganize and reduce its corporate management
which resulted in recording a restructuring charge of $400,000 which is
comprised of severance and early retirement expense. In fiscal 1995 the
restructuring liability was reduced by approximately $127,000 as a result of
severance and retirement payments made during fiscal 1995. As of August 31,
1995, the balance of the restructuring liability was approximately $273,000 and
is included in accrued payroll.

In February 1995 the Company acquired the business and assets of GC & Co.,
a Burbank, California based provider of mobile videotape production services.
The purchase price of $6,750,000 was financed with $6,000,000 of cash from the
proceeds of a $6,500,000 equipment financing from an insurance company lender
and a $750,000 subordinated convertible note from the sellers. The subordinated
note is convertible into 75,000 of the Company's common shares at a stated
conversion price of ten dollars per share.

<PAGE>

ITEM 2. PROPERTIES.

The following table sets forth, as of August 31, 1995, certain information
concerning the Company's facilities. The lease expiration dates exclude option
extension periods which exist in certain leases.

<TABLE>
<CAPTION>
Lease
Approximate Expiration
Location Square Feet Primary Use Date
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
515 West 57 Street 40,000 Television studios and post- Owned
New York, New York production facilities.

508-510 West 57 Street 15,000 Television studio and March 1999
New York, New York support space.

841 Ninth Avenue 21,000 Television studio and August 2003
New York, New York support space.

503 West 33 Street 8,000 Television studio and April 2001
New York, New York support space.

402 East 76 Street 30,000 Television studio and June 1998
New York, New York support space.

8 West 38 Street 20,000 Television studio and March 2001
New York, New York support space, post-
production, administrative
offices and production offices.

222 East 44 Street 43,000 Post-production, film Dec 1999
New York, New York transfer and computer
graphics facilities, and
administrative offices.

433-435 West 53 Street 14,000 Television studio and Owned
New York, New York support space.

4100 Steubenville Pike 18,000 Mobile production Sept 1997
Pittsburgh, Pennsylvania headquarters.

301 East Erie Street 31,000 Television studio, post- Dec 2004
Chicago, Illinois production, film-to-tape
transfer and computer graphics
facilities, and administrative
offices.

729 North Highland 26,000 Television studio, post- Owned
Los Angeles, California production, film-to-tape
transfer and computer graphics
facilities, and administrative
offices.

3330 Cahuenga Blvd. W. 30,000 Post-production, film- Dec 1998
Los Angeles, California to-tape transfer and
computer graphics facilities,
and administrative offices.

1101 Isabel Street 15,000 Mobile field shop and August 1996
Burbank, California garage.

<PAGE>

855 10th Avenue 5,000 Office space Dec 1995
New York, New York
</TABLE>

All of the Company's facilities are well maintained structures, in good
physical condition and are adequate to meet the Company's current and reasonably
foreseeable needs.

<PAGE>

ITEM 3. LEGAL PROCEEDINGS.

(a) There are no material pending legal proceedings to which the Company
or any of its subsidiaries is a party or of which any of their property is the
subject.

(b) No material pending legal proceeding was terminated during the fourth
quarter of the Company's fiscal year ended August 31, 1995.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not Applicable.

EXECUTIVE OFFICERS OF THE REGISTRANT

Officer
Name Age Since Positions with the Company
- -------------------------------------------------------------------------------
David Micciulla 40 1994 President, Chief Executive
Officer and Director

Barry Knepper 45 1982 Senior Vice President-
Finance & Administration,
Chief Financial Officer,
Treasurer and Director

Richard L. Clouser 55 1982 President of Mobile
Division

Mark Miller 47 1995 President of Unitel -
Hollywood Division

Jill Debin Cohen 43 1995 President of Windsor
Video Division

Albert Walton 50 1995 President of Editel-Los
Angeles Division

D.L. Bean 42 1995 President of Editel-Chicago
Division

Tom Eyring 43 1995 Chief Technology Officer

<PAGE>

CERTAIN INFORMATION CONCERNING THE EXECUTIVE OFFICERS OF THE COMPANY

Mr. Micciulla has been President, CEO and Director of the Company since May,
1995. He was President of the Unitel-New York and Windsor Video divisions from
April 1994 to May 1995. From June 1992 to April 1994 Mr. Micciulla was the
General Manager of Unitel-New York. From March 1987 to May 1992 he was Vice
President Finance/Controller of Editel-New York.

Mr. Knepper has been Senior Vice President-Finance and Administration and
Director since May 1995, Chief Financial Officer of the Company since 1982 and
has served as its Treasurer since 1983.

Mr. Clouser has been President of the Mobile Division of the Company since 1982.

Mr. Miller has been President of the Unitel Hollywood division since April 1995.
From 1990 through April 1995 he was Vice President of Engineering and Operations
of Unitel Hollywood. From 1984 through 1990 he was Vice President of
Engineering of Unitel Hollywood.

Ms. Debin Cohen has been President of Windsor Video since June 1995. From
November 1993 to June 1995 she was the Vice President/General Manager of Windsor
Video. Ms. Debin Cohen was the Vice President of Operations for Editel New York
from 1988 through November 1993.

Mr. Walton has been President of Editel-Los Angeles since July 1995. From May
1994 through July 1995 he was the Director of New Business Development for
Editel-Los Angeles. He served as Vice President of CIS from 1988 through 1984,
a Hollywood based specialized visual effects company.

Ms. Bean has been the President of Editel-Chicago since September 1995. She was
the General Manager of Editel-Chicago from March 1992 to September 1995 during
which time she was promoted to Vice President in June 1995. From 1983 through
February 1992, Ms. Bean was the Vice President/General Manager of IPA, the
Editing House, a video post production and graphics facility in Chicago.

Mr. Eyring has been Chief Technology Officer since June 1995. From 1991 to June
1995 he was Vice President of Engineering of Editel-New York and from 1982
through 1991 he was Director of Engineering Services for Editel-New York.

The term of office of each executive director of the Company expires as
specified by the Board of Directors of the Company and when his or her
respective successor is elected and has qualified.

<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.

The Company's Common Stock is traded on the American Stock Exchange under
the symbol UNV. The following table sets forth, for fiscal years 1995 and 1994,
the high and low sales prices of the Common Stock as furnished by the American
Stock Exchange:

Fiscal Year 1995: Low High
--- ----
<S> <C> <C>
First Quarter....................... 4 7/8 6 1/2
Second Quarter...................... 4 7/8 7 3/4
Third Quarter....................... 7 1/2 5 7/8
Fourth Quarter...................... 8 1/2 5 3/4

Fiscal Year 1994: Low High
--- ----
First Quarter....................... 6 8-1/4
Second Quarter...................... 6-7/8 9-3/8
Third Quarter....................... 5-3/4 8-1/8
Fourth Quarter...................... 5-7/8 7-1/8
</TABLE>

As of December 11, 1995 there were approximately 387 holders of the
Company's Common Stock.

Since its inception in 1969, the Company has not declared or paid cash
dividends on its Common Stock, and it does not anticipate declaring or paying
cash dividends in the foreseeable future. The declaration, payment and amount
of future dividends will be determined by the Board of Directors in light of
conditions then existing, including the Company's earnings, financial condition,
capital requirements and other factors. In connection with certain of its
financing arrangements, the Company is subject to certain restrictions which
prohibit the payment of cash dividends. (See Note B to Notes to Consolidated
Financial Statements, and Management's Discussion and Analysis of Financial
Condition and Results of Operations).

<PAGE>

ITEM 6. Selected Financial Data

<TABLE>
<CAPTION>
1995 1994 1993 1992(b) 1991
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Sales $83,285,000 $80,498,000 $79,390,000 $63,000,000 $45,998,000
Cost of sales (c) $69,219,000 $64,391,000 $62,418,000 $48,382,000 $36,901,000
Interest expense, net $ 3,649,000 $ 2,388,000 $ 2,815,000 $ 2,072,000 $ 1,848,000
Earnings(loss)before
income taxes $(9,341,000) $ 1,519,000 $ 924,000 $ 3,097,000 $ 1,994,000
Net earnings(loss)(a) $(6,547,000) $ 859,000 $ 711,000 $ 1,728,000 $ 1,043,000

FINANCIAL POSITION:
Total assets $74,186,000 $73,245,000 $69,052,000 $62,269,000 $39,208,000
Working capital
(deficiency) $(3,467,000)(e) $(8,055,000)(d) $ (705,000) $ 2,577,000 $ 889,000
Current ratio .82 to 1 (e) .64 to 1 (d) .95 to 1 1.22 to 1 1.15 to 1
Property & equipment-net $34,491,000 (f) $55,425,000 $51,166,000 $43,679,000 $29,541,000
Long-term debt, less
current maturities $19,936,000(d) $14,142,000(d) $21,835,000 $27,904,000 $17,988,000
Stockholders'equity $22,526,000 $28,828,000 $27,673,000 $17,727,000 $12,760,000

DATA PER COMMON SHARE:
Net earnings(loss)per
common share $ (2.53) $ .33 $ .30 $ 1.07 $ .67

Weighted average number of
common and common equivalent
shares outstanding 2,582,000 2,617,000 2,066,000 1,580,000 1,552,000
</TABLE>

(a) Federal and state tax credits of approximately $28,000 in 1995, $58,000 in
1994, $30,000 in 1993, $211,000 in 1992,and $60,000 in 1991 have been
applied as a reduction of the provision for income taxes.

(b) Includes the results of Editel-New York, Chicago and Los Angeles since
March 1, 1992.

(c) Gain on sale or disposal of equipment and amortization of goodwill have
been reclassified to depreciation expense to conform with fiscal 1994 and
1995 presentation. (See Note I to Notes to Consolidated Financial
Statements).

(d) The revolving credit portion of the long-term debt which expired in May
1995, was included in current liabilities. In December 1995, the Company
refinanced its revolving credit and term loans outstanding with its bank
lenders.

(e) The working capital deficiency is due to the inclusion of $3,750,000 of
Term Loan B in current liabilities which the Company intends to repay from
the sale of the Editel divisions

(f) The decrease in property and equipment is due to the reclassification of
the Editel divisions' net assets to assets held for sale, a separate
line in the long-term asset section of the balance sheet.

13
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.

LIQUIDITY AND CAPITAL RESOURCES.

The Company is committed to keeping pace with technological developments as
well as taking advantage of new business opportunities in the video
communications industry. Capital expenditures were $9,738,000 during fiscal
1995 (exclusive of the acquisition of GC & Co. described below) as compared to
$15,002,000 and $13,246,000 during fiscal years 1994 and 1993, respectively.
Expenditures made during fiscal 1995 were for equipment used in the studio
production, post production and computer graphics service areas throughout the
Company.

The net change in cash in the fiscal years ended August 31, 1995, 1994 and
1993 was $(1,132,000), $285,000 and $469,000, respectively. The decrease in
fiscal 1995 was the result of cash provided by operating activities of
$8,044,000 and financing activities of $1,510,000 less cash used in investing
activities of $10,686,000. The net cash decrease in fiscal 1995 is primarily
due to the Company's fixed asset expenditures for the year exceeding the cash
generated by operations. The increase in fiscal 1994 was the result of cash
provided by operating activities of $10,994,000 and financing activities of
$2,602,000 in excess of cash used in investing activities of $13,311,000. The
net cash increase in fiscal 1994 is primarily due to the cash generated by the
Company's operations and net loan proceeds exceeding the net cash used to
purchase capital assets.

The $15 million dollar term loan portion of the facility is payable in 59
monthly principal payments of $89,000 through November 2000 and in payments of
$3,750,000 at August 31, 1996, $3,750,000 at December 31, 1996 and $2,249,000 at
December 2000. The revolving credit portion of the facility is due in full in
December 2000.

Additionally, in December 1995, the Company obtained a $4,000,000 mortgage on
its property located on West 57th Street in New York City, from a bank. The
mortgage is payable in equal monthly installments of $22,000 through November
2002, with a final payment of $2,152,000 due in December 2002.

The proceeds of the $15 million term loan, the $4 million mortgage and
$860,000 from the new revolving credit facility, were used to refinance the
term loan ($9,571,000) and revolving credit facility ($9,975,000) and to
repay the City of New York Industrial Revenue Bond obligation ($314,000), all
then outstanding to the Company's bank lenders. As such, the $9,975,000
outstanding on the revolving credit at August 31, 1995 has been reclassified
as long term debt on the accompanying balance sheet to reflect the
refinancing of this obligation. The terms of the agreement provide that the
lender receive a first lien on all property, equipment and accounts
receivable that are not encumbered by another lender.

<PAGE>

anticipates annual cash savings of approximately $1,000,000 in fiscal 1996
related to the downsizing. In fiscal 1995 the restructuring liability was
reduced by approximately $127,000 as a result of severance and retirement
payments made during fiscal 1995.

In February 1995, the Company purchased the business and assets of GC & Co.
(formerly known as Greene, Crowe & Company), a Burbank, California based
supplier of "on-location" services for the videotaping and live telecasting of
concerts, cultural and other events, including the "Academy Awards", the "Grammy
Awards" and "The American Music Awards". The purchase price was $6,750,000,
consisting of $6,000,000 in cash and $750,000 of convertible subordinated
promissory notes. The notes bear interest at 1% over prime and are due in full
in August 1997 and are also convertible into the Company's common stock at
$10.00 per share. The cash portion of the purchase price was financed by a
$4,700,000 five year capital lease with a fixed rate of interest of 8.2%,
payable in sixty equal monthly payments of principal and interest of $82,000 and
a balloon payment at the end of the lease period of $940,000. Additionally, the
Company obtained a $1,800,000 loan with a fixed interest rate of 9.3% payable in
sixty equal monthly payments of principal and interest of $33,000 and a balloon
payment at the end of the five year period of $360,000. The $500,000 available
to the Company from these two financings after the payment of the cash portion
of the GC & Co. acquisition price was used to repay a $500,000 note payable to
Banta Corporation from the purchase of the Editel Los Angeles building.

In October 1993, the Company purchased a building located on West 53rd
Street in New York City for a purchase price of $2,800,000. The Company is
utilizing the building, which contains approximately 14,000 square feet, as a
videotape recording studio. The Company also entered into a $2,700,000
equipment financing agreement with a leasing company in October 1993. The
proceeds of this financing were used towards payment of the purchase price of
the 53rd Street property. The equipment financing is repayable in 60 monthly
installments of $53,000, including principal and interest, at a fixed rate of
7%. The Company obtained a $1,875,000 mortgage financing on this property in
June 1994 with a fixed rate of interest of 8.6%. The mortgage principal is
payable in equal monthly payments through June, 2004 with options to extend the
maturity date through June, 2019.

In February 1993, the Company entered into an agreement to purchase from
Scanline the building that its Editel-Los Angeles division occupies. The
Company therefore has treated the building as owned since February 1993,
recording the purchase at the present value of the $3,500,000 purchase price
less accrued rent. The Company purchased the building in June 1994 for
$3,500,000 with the proceeds of a long term mortgage in the amount of
$2,175,000, a $500,000 note due to Scanline and the balance from working
capital. The note payable to Scanline was paid in full in February 1995. The
mortgage financing is payable monthly over a 15 year period with interest at a
rate of 8.9%.

On April 8, 1993, the Company sold in an underwritten public offering,
777,273 shares of its Common Stock at a price, net of underwriting commissions,
of $13.025 per share. The net proceeds to the Company after underwriting
discounts and offering expenses was $9,389,000. In addition to the 777,273
shares sold by the Company were 272,727 shares owned by Scanline which were
issued through the conversion of Scanline's 100,000 shares of Series $1.80
Convertible Class A Preferred Stock. The conversion of the preferred shares
into common shares was done immediately prior to the closing of the public
offering.

<PAGE>

In connection with certain of its financings, the Company must adhere to
particular financial ratios and restrictions including restrictions on future
payment of dividends. The Company anticipates that the restrictions will not
impair its ability to keep pace with technological developments.

The enactment of the Tax Reform Act of 1986 has limited the Company's
ability to defer the payment of taxes due to the imposition of an alternative
minimum tax which effectively results in the treatment of certain timing
differences as tax preference items.

RESULTS OF OPERATIONS

Sales were $83,285,000, $80,498,000 and $79,390,000 for the fiscal years
ended August 31, 1995, 1994 and 1993, respectively. The fiscal year 1995 sales
increase of $2,787,000 was primarily due to revenues generated by the Company's
studio production and mobile facilities as a result of the addition of a studio
in New York City and the acquisition of the GC & Co. mobile units, which was
offset by declines in sales at the company's Editel divisions. In fiscal year
1994, sales increased $1,108,000 which was mostly due to a higher demand for the
Company's mobile services. Sales remained flat for the Company's Editel-Chicago
and both Los Angeles divisions due to severe price competition in these markets.
In 1993, sales increased $16,390,000, of which $14,409,000 was due to the Editel
divisions which were included in the Company's operating results for a full year
in fiscal 1993.

The Company recorded a net loss of $6,547,000 in the fiscal year ended
August 31, 1995 and net income of $859,000 and $711,000 in the fiscal years
ended August 31, 1994 and 1993, respectively, including pre-tax income of
$229,000 in 1994 as royalty income or earnings from the Company's interest in
Time Logic Systems. The net loss of $6,547,000 for the current fiscal year is
due primarily to the pretax charge of $7,681,000 taken for the impairment of
assets of the Editel New York, Editel Chicago, Editel Los Angeles and Windsor
Video divisions and the pretax charge of $400,000 for the restructuring of the
Editel Chicago division. In August 1994, the Company received a piece of
equipment with a value of $189,000 in lieu of all future income from its
interest in Time Logic Systems.

The fiscal 1993 results include a $252,000 increase to income due to the
cumulative effect of adopting FASB Statement No. 109, "Accounting for Income
Taxes" as of September 1, 1992.

Production costs, the main component of cost of sales, consist primarily of
direct labor, equipment maintenance expenses and occupancy costs. The Company's
production costs, as a percentage of sales, were 71.1%, 68.4% and 67.6%, for the
fiscal years ended August 31, 1995, 1994 and 1993, respectively. The increase
in production costs for fiscal 1995 as compared with the prior years, is due
primarily to an increase in studio and mobile production revenues which incur
variable expense at a higher rate than the Company's other services. Production
costs increased as a percentage of sales in fiscal 1994 because production costs
increased during that year while sales remained flat with the prior year. The
increase in production costs as a percentage of sales in fiscal 1993 is
similarly due to sales in fiscal 1993 remaining flat with sales in fiscal 1992,
on a proforma basis. Since most of the Company's costs are fixed and a large
portion of the costs are subject to price increases, flat sales from year to
year result in production costs which are an increased percentage of sales.
This same dynamic applies for both selling expenses and general and
administrative expenses.

<PAGE>

Depreciation, as a percentage of sales, was 12.1%, 11.5% and 11.0% in
fiscal 1995, 1994 and 1993, respectively. Depreciation expense increased in
1995 as a result of the $4,750,000 equipment portion of the GC & Co. acquisition
and capital expenditures made during the year totaling $9,738,000. Depreciation
expense increased as a percentage of sales in 1994 due to the purchase of
$15,002,000 in fixed assets during the year. Depreciation expense, during
fiscal 1995, 1994 and 1993 was offset by gain on disposal of assets of $352,000,
$817,000 and $274,000, respectively. Had the gain on disposal of assets been
excluded from depreciation expense, depreciation as a percentage of sales for
1995 and 1994 would have been 12.5%, and for 1993 would have been 11.3%. The
issue of reclassification is fully addressed in Note I to Notes to Consolidated
Financial Statements.

Selling expenses, as a percentage of sales, during fiscal years 1995, 1994
and 1993 were 3.4%, 3.5% and 3.9%, respectively. In 1995 and 1994, selling
expenses as a percentage of sales decreased due to significant cost reductions
which became effective in 1993.

General and administrative expenses as a percentage of sales during fiscal
years 1995, 1994 and 1993 were 10.6%, 11.8% and 12.8%, respectively. Cost
reductions put into effect in 1994, including the addition of in-house counsel
and a resulting reduction in professional fee expense, were reflected in fiscal
years 1995 and 1994 by a decrease of approximately 1% from each of the prior
years.

Interest expense, as a percentage of sales, during fiscal years 1995, 1994,
and 1993 was 4.4%, 3.0% and 3.5%, respectively. The increase in interest
expense in fiscal 1995 was due to additional interest incurred relating to the
mortgage financings for the Editel-Los Angeles building purchased by the Company
in June 1994 and financing obtained for the acquisition of GC & Co. in February
1995. During fiscal 1995 the Company wrote off $214,000 of deferred financing
costs related to its bank debt which was refinanced in December 1995.
Additionally, interest rates were significantly higher in 1995 as compared with
the prior year resulting in higher interest payments on the floating rate
portion of the Company's debt. The decrease in interest expense in 1994 is due
to the renegotiation of the rate payable on the Company's indebtedness to its
primary bank lenders, a reduction in the amortization of deferred financing
costs charged to interest expense and the capitalization of approximately
$300,000 of interest relating to construction on the Editel-Los Angeles and 53rd
Street, New York City locations.

In September 1993 the Company entered into a partnership arrangement with a
computer graphics design firm. During fiscal years 1995 and 1994 the Company's
50% share of losses were $29,000 and $65,000, respectively. Additionally, the
Company had an outstanding loan to the partnership of $118,000 at August 31,
1995.

The Company's effective tax rates were (30%), 43.4% and 50.3% in fiscal
years 1995, 1994 and 1993, respectively. The effective tax rate in 1995 differs
from prior years primarily due to the impact of the nondeductible goodwill write
off and the impairment of assets charge. (See Note F to Notes to Consolidated
Financial Statements.) During those years, the effective rate exceeded the
Federal statutory rate of 34.0% due to state and local income taxes, and the
effect of certain non-deductible expenses.

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

UNITEL VIDEO, INC.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

PAGE

REPORT OF GRANT THORNTON LLP INDEPENDENT AUDITORS.......... 19

CONSOLIDATED FINANCIAL STATEMENTS:
BALANCE SHEETS - AUGUST 31, 1995 AND 1994............. 20-21
STATEMENTS OF OPERATIONS - YEARS ENDED
AUGUST 31, 1995, 1994 AND 1993................... 22-23
STATEMENT OF STOCKHOLDERS' EQUITY - YEARS ENDED
AUGUST 31, 1995, 1994 AND 1993................... 24
STATEMENTS OF CASH FLOWS - YEARS ENDED
AUGUST 31, 1995, 1994 AND 1993................... 25-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS............ 28-39

SUPPLEMENTARY FINANCIAL SCHEDULES.......................... 46

Selected Quarterly Financial Data is set forth in
Note L to Notes to the Consolidated Financial Statements.

<PAGE>

REPORT OF INDEPENDENT
CERTIFIED PUBLIC AUDITORS

Board of Directors and Shareholders
Unitel Video, Inc.

We have audited the accompanying consolidated balance sheets of Unitel Video,
Inc. (a Delaware corporation) at August 31, 1995 and 1994 and the related
consolidated statements of operations, stockholder's equity, and cash flows for
each of the three years in the period ended August 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Unitel Video, Inc. as of August
31, 1995 and 1994, and the results of its operations and its cashflows for each
of the three years in the period ended August 31, 1995, in conformity with
generally accepted accounting principles.

As discussed in Note K to the consolidated financial statements, the Company
adopted the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to Be Disposed Of."

We have also audited Schedule II of Unitel Video, Inc. for each of the three
years in the period ended August 31, 1995. In our opinion, the schedule
presents fairly, in all material respects, the information required to be set
forth therein.

/S/GRANT THORNTON LLP
- -----------------------------------

New York, New York
November 28, 1995 (except for Note B, as to which the date is
December 12, 1995)

<PAGE>

UNITEL VIDEO, INC.

CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

August 31,

ASSETS 1995 1994
- ------ ---- ----
<S> <C> <C>
Current assets:
Cash $161,000 $ 1,293,000
Accounts receivable, less
allowance for doubtful accounts
of $686,000 in 1995 and
$690,000 in 1994 12,700,000 10,772,000
Other receivables 362,000 382,000
Prepaid income taxes 567,000 81,000
Prepaid expenses 1,340,000 1,553,000
Deferred tax asset 760,000 732,000
---------- ----------
Total current assets 15,890,000 14,813,000

Property and equipment - at cost
Land, buildings &
improvements 13,541,000 22,787,000
Video equipment 78,145,000 92,301,000
Automobiles 50,000 50,000
Furniture and fixtures 2,736,000 3,362,000
---------- ----------
94,472,000 118,500,000

Less accumulated depreciation
and amortization 59,981,000 63,075,000
---------- ----------
34,491,000 55,425,000

Net assets held for sale 19,270,000 --
Deferred tax asset 1,745,000 --
Goodwill 1,997,000 1,839,000
Other assets 793,000 1,168,000
---------- ----------
$74,186,000 $73,245,000
---------- ----------
---------- ----------
</TABLE>

See accompanying notes.

<PAGE>

UNITEL VIDEO, INC.

CONSOLIDATED BALANCE SHEETS
(Continued)

<TABLE>
<CAPTION>
August 31,

LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
- ------------------------------------ ---- ----
<S> <C> <C>
Current liabilities:
Accounts payable $7,339,000 $ 6,504,000
Accrued expenses 1,620,000 1,061,000
Payroll and related taxes 2,931,000 2,982,000
Current maturities of long-term
debt 5,492,000 11,662,000
Current maturities of subordinated
debt 104,000 --
Current maturities of ESOP loan 186,000 168,000
Current maturities of capital lease
obligations 1,685,000 491,000
----------- -----------
Total current liabilities 19,357,000 22,868,000

Deferred rent 864,000 987,000
Deferred gain on sale of building -- 117,000
Long-term debt, less current maturities 19,936,000 14,142,000
Subordinated debt, less current
maturities 3,146,000 2,500,000
ESOP loan, less current maturities 152,000 338,000
Long-term leases, less current
maturities 7,064,000 1,749,000
Accrued retirement 1,141,000 969,000
Deferred income taxes -- 747,000

Stockholders' equity:
Common stock, par value $.01 per
share:
Authorized-5,000,000 shares
Issued 3,491,454 shares in 1995
and 3,482,754 shares in 1994,
and outstanding 2,625,165 shares
in 1995 and 2,616,465 shares in
1994 26,000 26,000
Additional paid-in capital 27,351,000 27,386,000
Retained earnings 3,532,000 10,079,000
Common stock held in treasury, at cost
(866,289 shares in 1995 and 1994)
(7,974,000) (7,974,000)
----------- -----------
22,935,000 29,517,000
Unearned employee benefit expense (409,000) (689,000)
----------- -----------

Total stockholders' equity 22,526,000 28,828,000
----------- -----------
$74,186,000 $73,245,000
----------- -----------
----------- -----------
</TABLE>

See accompanying notes.

<PAGE>

UNITEL VIDEO, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Year ended August 31,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Sales $83,285,000 $80,498,000 $79,390,000
----------- ----------- -----------

Cost of sales:
Production costs 59,174,000 55,097,000 53,660,000
Depreciation and
amortization 10,045,000 9,294,000 8,758,000
----------- ----------- -----------
69,219,000 64,391,000 62,418,000
----------- ----------- -----------
Gross profit 14,066,000 16,107,000 16,972,000

Operating expenses:
Selling 2,843,000 2,852,000 3,081,000
General and
administrative 8,832,000 9,512,000 10,152,000
Interest 3,649,000 2,388,000 2,815,000
Restructuring charge 400,000 -- --
Impairment charge 7,681,000 -- -- .
----------- ----------- -----------
23,405,000 14,752,000 16,048,000
----------- ----------- -----------

Earnings(loss)from
operations (9,339,000) 1,355,000 924,000

Other income (loss) (2,000) 164,000 --
----------- ----------- -----------
Earnings(loss)before
income taxes and
cumulative effect of
change in accounting
for taxes (9,341,000) 1,519,000 924,000
Income taxes (benefit) (2,794,000) 660,000 465,000
----------- ----------- -----------
Net earnings(loss)before
cumulative effect of
change in accounting
for income taxes (6,547,000) 859,000 459,000
Cumulative effect of
change in accounting
for income taxes -- -- 252,000
----------- ----------- -----------
Net earnings (loss) (6,547,000) 859,000 711,000
Dividends on preferred
stock -- -- 90,000
----------- ----------- -----------
Net earnings (loss)
applicable to common
stock $(6,547,000) $ 859,000 $ 621,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

<PAGE>

UNITEL VIDEO, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(Continued)

<TABLE>
<CAPTION>
Year ended August 31,

1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Earnings Per Common Share
Net earnings (loss) before
cumulative effect of change $ (2.53) $ .33 $ .18
Cumulative effect of change -- -- .12
----------- ----------- -----------
Net earnings (loss) $ (2.53) .33 $ .30
----------- ----------- -----------
----------- ----------- -----------

Weighted average number of common
and common equivalent shares
outstanding 2,582,000 2,617,000 2,066,000
--------- --------- ---------
--------- --------- ---------
</TABLE>

See accompanying notes.

<PAGE>

UNITEL VIDEO, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED AUGUST 31, 1995, 1994 AND 1993

Common Stock Additional Common Stock
------------------- Paid-In Retained Held in Preferred Unearned Employee
Shares Amount Capital Earnings Treasury Stock Benefit Expense
------ ------ ------- -------- -------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, August 31, 1992 1,541,597 15,000 14,643,000 8,599,000 (7,519,000) $3,000,000 $(1,011,000)

Net earnings 711,000
Exercise of stock
options 26,331 1,000 172,000
Employee stock
purchase plan 9,542 65,000
Repurchase of shares (31,591) (455,000)
Public offering 777,273 7,000 9,382,000
Conversion of preferred
stock 272,727 3,000 2,997,000 (3,000,000)
Dividends (90,000)
Repayment of loan to ESOP 153,000
--------------------------------------------------------------------------------------------------

BALANCE, August 31, 1993 2,595,879 26,000 27,259,000 9,220,000 (7,974,000) 0 (858,000)

Net earnings 859,000
Exercise of stock
options 250 1,000
Employee stock
purchase plan 20,336 106,000
Repayment of loan to ESOP 169,000
Public offering expense
reimbursement 20,000
--------------------------------------------------------------------------------------------------

BALANCE, August 31, 1994 2,616,465 $26,000 $27,386,000 10,079,000 (7,974,000) 0 (689,000)
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------

Net loss (6,547,000)
Exercise of stock
options 5,000 32,000
Employee stock
purchase plan 3,700 20,000
Allocation of ESOP shares (87,000) 280,000
--------------------------------------------------------------------------------------------------
BALANCE, August 31, 1995 2,625,165 $26,000 $27,351,000 $ 3,532,000 $(7,974,000) $0 $(409,000)
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes.

<PAGE>

UNITEL VIDEO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,

1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash Flows From Operating
Activities:

Net earnings (loss) $(6,547,000) $ 859,000 $ 711,000
---------- ---------- ----------
Adjustments to reconcile
net earnings to net cash
provided by operating
activities:
Cumulative effect of
change in accounting
for income taxes -- -- (252,000)
Depreciation and
amortization 10,397,000 10,111,000 9,032,000
Net gain on disposal of
assets (352,000) (817,000) (274,000)
Impairment charge 7,681,000 -- --
Amortization of deferred
financing costs 603,000 500,000 661,000
Accretion of subordinated
debt -- 317,000 308,000
Recognition of
deferred gain (117,000) (200,000) (201,000)
Deferred financing costs (90,000) (122,000) --
Royalties received in
equipment -- (189,000) --
Payments made on accrued
acquisition costs -- (75,000) (89,000)
Deferred rent (123,000) (44,000) 100,000
Accrued retirement
expense 172,000 206,000 190,000
Accrued restructuring 273,000 -- --
Deferred income taxes (2,520,000) 140,000 (265,000)
Decrease (increase), net
of acquired assets and
liabilities, in:
Accounts receivable, net (1,928,000) 720,000 687,000
Other receivables 20,000 (336,000) 34,000
Prepaid expenses 213,000 (309,000) (137,000)
Prepaid taxes (486,000) 438,000 (328,000)
Other assets (222,000) 14,000 (73,000)
Increase (decrease), net
of acquired assets and
liabilities, in:
Accounts payable 835,000 (1,486,000) 2,812,000
Accrued expenses 559,000 533,000 (383,000)
Payroll and related
taxes (324,000) 734,000 479,000
---------- ---------- ----------
14,591,000 10,135,000 12,301,000
---------- ---------- ----------

Net cash provided by operating
activities 8,044,000 10,994,000 13,012,000
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

<PAGE>

UNITEL VIDEO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

YEAR ENDED AUGUST 31,

1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash Flows From Investing
Activities:
Capital expenditures $(9,738,000) $(15,002,000) $(13,246,000)
Acquisition of GC & Co.
assets (1,300,000) -- --
Proceeds from disposal
of assets 352,000 1,691,000 274,000
Profit distribution from
affiliate -- -- 16,000
----------- ------------ ----------

Net cash used in investing
activities (10,686,000) (13,311,000) (12,956,000)
----------- ------------ ----------

Cash Flows From Financing
Activities:
Proceeds from public
offering -- -- 9,389,000
Reimbursement of public
offering expenses -- 20,000 --
Proceeds from long-term
financing 6,120,000 9,518,000 2,000,000
Principal repayments (4,187,000) (7,060,000) (11,085,000)
Repayment of note to
Banta (500,000) -- --
Proceeds from issuance of
common stock 52,000 107,000 238,000
Purchases of treasury
stock -- -- (455,000)
Repayment of loan to
ESOP 25,000 17,000 15,000
Repayment of amount due
from officers -- -- 401,000
Payment of dividends -- -- ( 90,000)
----------- ------------ ----------

Net cash provided by
financing activities 1,510,000 2,602,000 413,000
----------- ------------ ----------

Net Increase(decrease) in
Cash (1,132,000) 285,000 469,000
Cash, Beginning of Year 1,293,000 1,008,000 539,000
----------- ------------ ----------

Cash, End of Year $ 161,000 $ 1,293,000 $1,008,000
----------- ------------ ----------
----------- ------------ ----------

Schedule of income taxes and
interest paid:

Income Taxes Paid $ 162,000 $ 155,000 $1,014,000
Interest Paid 3,256,000 1,713,000 1,690,000
----------- ------------ ----------

$ 3,418,000 $ 1,868,000 $2,704,000
----------- ------------ ----------
----------- ------------ ----------
</TABLE>

<PAGE>

UNITEL VIDEO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
<TABLE>
<CAPTION>

YEAR ENDED AUGUST 31,

1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Supplemental schedule of non-
cash investing and financing
activities:

Purchase of Editel-Los Angeles
building:
Land $ 2,100,000
Building 1,286,000
Accrued rent (186,000)
-----------
Present value of purchase 3,200,000
Accreted interest 140,000
-----------
Liability to seller $ 3,340,000
-----------
-----------

Capital lease obligations: $ 2,622,000 $ 2,690,000
----------- -----------
----------- -----------

Detail of acquisition of GC & Co.:
Fair value of assets acquired $ 6,750,000
Subordinated note to seller (750,000)
Capital lease obligation (4,700,000)
-----------
Net cash paid for acquisition $ 1,300,000
-----------
-----------
</TABLE>

See accompanying notes.

<PAGE>

UNITEL VIDEO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED AUGUST 31, 1995, 1994 AND 1993

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

(1) Business -- The Company provides facilities for studio production, videotape
editing, mobile production, computer graphics, film-to-tape transfer and
duplication of videotape in all formats, to the entire video communications
industry. The Company's facilities are used to produce television programs,
corporate communications and commercials on videotape. The Company's mobile
division provides "on-location" services for the videotape recording and live
telecasting of sports, cultural and other events throughout the United States.
The Company also designs and produces custom CD-ROM, CD-I, videodisc and
networked multimedia presentations. Customers for the Company's services
include cable television program suppliers, independent producers, national
television networks, local television stations and advertising agencies.

(2) Consolidation -- The consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiary.

(3) Depreciation -- Depreciation is provided on a straight-line basis over the
estimated useful lives of assets which are: 30-40 years for buildings; 15-30
years for building improvements; length of lease for leasehold improvements; 5-7
years for video equipment; 5-7 years for furniture and fixtures; and 3 years for
automobiles. Gain on disposal of assets was reclassified to depreciation and
amortization expense in 1993. Also, amortization of goodwill was reclassified
to depreciation and amortization expense from general and administrative
expenses for the same periods. (See Note I to Notes to Consolidated Financial
Statements).

(4) Goodwill -- Goodwill relating to acquisitions represents the excess of cost
over the fair value of net assets acquired and is amortized over 15 years.
Accumulated amortization at August 31, 1995 totaled $69,000. (See Note K to
Notes to Consolidated Financial Statements).

(5) Deferred Financing Costs -- Costs incurred in obtaining long-term debt
financing are included in other assets. These costs are being amortized using
the interest method over the term of the related obligations.

(6) Investment in Affiliate -- Investment in an affiliation in which there is a
50% ownership interest is recorded at cost plus equity in its undistributed
earnings.

(7) Interest Cost -- The Company had capitalized construction period interest
costs of $303,000 in 1994.

(8) Income Taxes -- Deferred income taxes arise primarily from the use of
different depreciation methods and lives for tax and financial statement
purposes, differences in the timing of the deduction for the impairment
charge and net operating loss and alternative minimum tax credit
carryforwards.

(9) Receivables -- The Company grants credit to customers, substantially all of
whom are in the entertainment, advertising or corporate communications
industries.

<PAGE>

(10) Reclassification -- In 1993 gain on disposal of assets and amortization of
goodwill were reclassified to conform with the current year presentation. (See
Note I in Notes to Consolidated Financial Statements.)

(11) Earnings per common share were determined by dividing net earnings, by
weighted average of common and common equivalent shares outstanding. For the
year ended August 31, 1993, the effect of assumed conversion of preferred stock
was antidilutive, thus the primary earnings per share are also the fully diluted
earnings per share.

<PAGE>

B. LONG-TERM DEBT:

<TABLE>
<CAPTION>
August 31,
----------

1995 1994
---- ----
<S> <C> <C>
Notes payable to financial institution:
Term portion payable in monthly $7,500,000 --
installments of $89,000 through November
2000 plus interest on the declining
balance at Prime plus 1.00% or LIBOR
plus 2.75% and final payment of
$2,249,000 due December 2000.

Term portion payable in two installments 7,500,000 --
of $3,750,000 due August 1996 and December
1996 with interest payable monthly at
Prime plus 1.25% or LIBOR plus 3.00%

Revolving portion payable in full in
December 2000 with interest payable monthly 860,000 --
at Prime plus .75% or LIBOR plus 2.50%

Mortgage payable to a bank, due in monthly 4,000,000 --
installments of principal of $22,000
through November 2002, plus interest on
the declining balance at Prime plus .75%
or LIBOR plus 2.50% with a final payment
of $2,152,000 due December 2002.

Notes payable to banks-term portion. -- 12,420,000

Notes payable to banks-revolving portion. -- 8,277,000

City of New York Industrial Revenue Bond. -- 458,000

City of Los Angeles Industrial Revenue -- 117,000
Bond.

Note payable to Seller. -- 500,000

Mortgage payable to a bank, at a fixed
interest rate of 8.6%, due in monthly
installments of principal of $6,250, plus
interest on the declining balance,
through June 2019.
(See note below.) 1,794,000 1,869,000

Mortgage payable to an insurance company, at a
fixed interest rate of 8.9%, due in monthly
installments of $22,000 through July 2009.
(See note below.) 2,090,000 2,163,000

Note payable to an insurance company, at a
fixed rate of 9.3%, due in monthly
installments of $33,000 through
February 2000. 1,684,000 --
----------- -----------
25,428,000 25,804,000

Less current maturities 5,492,000 11,662,000
----------- -----------
$19,936,000 $14,142,000
----------- -----------
----------- -----------
</TABLE>

<PAGE>

In December 1995, subsequent to year end, the Company entered into a $26
million revolving credit and term loan agreement with a financial
institution, consisting of a $15 million term loan facility and an $11
million revolving credit facility. The term loan portion of the facility is
payable in 59 monthly principal payments of $89,000 through November 2000 and
in payments of $3,750,000 at August 31, 1996, $3,750,000 at December 31, 1996
and $2,249,000 at December 2000. The revolving credit portion of the
facility is due in full in December 2000. If certain assets which
collateralize the debt are sold, a portion of the debt must be repaid from
the proceeds.

Additionally, in November 1995, the Company obtained a $4,000,000 mortgage on
its property located on West 57th Street in New York City, from the Company's
bank lender. The mortgage is payable in equal monthly installments of $22,000
through November 2002, with a final payment of $2,152,000 due in December 2002.

The proceeds of the $15 million term loan, the $4 million mortgage and
$860,000 from the new revolving credit facility, were used to refinance the
term loan ($9,571,000) and revolving credit facility ($9,975,000) and to repay
the City of New York Industrial Revenue Bond obligation ($314,000), all then
outstanding to the Company's bank lenders. As such, the $9,975,000
outstanding on the revolving credit at August 31, 1995 has been reclassified
as long term debt on the accompanying balance sheet to reflect the
refinancing of this obligation. The terms of the agreement provide that the
lender receive a first lien on all property, equipment and accounts
receivable that are not encumbered by another lender.

In June 1994, the Company purchased for $3,500,000 from Scanline the
building occupied by the Editel-Los Angeles division. Financing for the
purchase consisted of a $2,175,000, 25-year mortgage payable to an insurance
company lender, a $500,000 note payable to the seller, Scanline Communications,
and the balance from working capital. The note was paid in full in February
1995.

In October 1993, the Company purchased for $2,800,000 land and a building
located on West 53rd Street, New York City, which has been converted into a
videotape recording studio. Financing for the purchase was obtained from a
capital lease obligation to an equipment leasing company for $2,700,000. In
June 1994, the Company also obtained a mortgage on the West 53rd Street property
in the amount of $1,875,000 from a bank. The mortgage loan is payable in equal
monthly principal payments through June, 2004 with options to extend the
maturity date through June, 2019. Proceeds from this mortgage were used for
working capital purposes.

Property, equipment and accounts receivable with a carrying value of
$66,461,000 at August 31, 1995 are pledged as collateral for all long-term debt
outstanding.

The agreements relating to certain of these long-term obligations include
covenants which, among other terms, place restrictions on the Company as to
capital expenditures and the maintenance of certain financial ratios (including
minimum levels of net worth and debt-to-equity restrictions, all as defined in
the agreements).

<PAGE>

At August 31, 1995, maturities of long-term debt for the next 5 years after
the December refinancing are as follows:

YEAR ENDED AUGUST 31,
---------------------
<S> <C>
1996 $ 5,492,000
1997 5,523,000
1998 1,807,000
1999 1,846,000
2000 5,066,000
2001 and thereafter 5,694,000
-----------
$25,428,000
-----------
-----------
</TABLE>

NOTE C - OBLIGATIONS UNDER CAPITAL LEASE AGREEMENTS

The Company has entered into various capital lease agreements for video
equipment. The leases expire at various times through 2000.

Property recorded under capital leases includes the following:

August 31,
1995 1994
<S> <C> <C>
Video equipment $10,012,000 $2,690,000
Accumulated depreciation ($1,240,000) ($386,000)
----------- ----------
$ 8,772,000 $2,304,000
----------- ----------
----------- ----------
</TABLE>

Future minimum lease payments, as of August 31, 1995 are as follows:

<TABLE>
<CAPTION>
Year Ended Capital
August 31, leases
- ---------- ------
<S> <C>
1996 $ 2,327,000
1997 2,274,000
1998 2,237,000
1999 1,707,000
2000 2,049,000
-----------
Net minimum lease payments 10,594,000
Amount representing interest (1,845,000)
-----------
Obligation under capital
lease agreements $ 8,749,000
-----------
-----------

Current portion $ 1,685,000
Long-term portion 7,064,000
-----------

$ 8,749,000
-----------
-----------
</TABLE>

<PAGE>

D. STOCK OPTION PLANS

In January 1983, the Company's shareholders approved adoption of an
Incentive Stock Option Plan (the "Incentive Plan") to grant as many as 181,500
shares primarily to key employees. At August 31, 1995 there were 22,700 options
outstanding. As of October 1992, options were no longer granted under this
plan.

In January 1986, the Company's Board of Directors approved a Non-Statutory
Stock Option Plan (the "Non-Statutory Plan") to grant as many as 50,000 shares
to the Company's non-employee directors. Under the Non-Statutory Plan options
to purchase 30,000 shares were outstanding at August 31, 1995.

In July 1988, the Company's Board of Directors approved a Non-Qualified
Stock Option Plan (the "Non-Qualified Plan") to grant as many as 125,000 shares
primarily to key employees. Options to purchase 105,000 shares granted to
several officers under the Non-Qualified Plan were outstanding at August 31,
1995.

In July 1992, the Company's shareholders approved adoption of the 1992
Stock Option Plan (the "1992 Plan") to grant as many as 350,000 shares primarily
to key employees and non-employee directors. Prior to July 1992, the Company
granted options under the plans described above. All future grants will be
granted under the 1992 Plan. Options to purchase 187,000 shares were
outstanding to key employees and non-employee directors under the 1992 Plan at
August 31, 1995.

Under all plans, options have generally been granted to purchase stock at
the fair market value of the shares at the date of grant as determined by the
Board of Directors. Under the Non-Qualified Plan, the options expire five years
after the date of grant and under the Incentive Plan and Non-Statutory Plan,
options expire ten years after the date of grant.

The status of stock options under the Company's stock option plans is
summarized below:

<TABLE>
<CAPTION>
Number of Option Price
Shares Per Share
------ ---------
<S> <C> <C>
Options Outstanding August 31, 1993 326,950 $5.75 - $13.18

Granted 5,000 $6.00
Exercised (250) $5.75
Expired and canceled (92,000) $5.875 - $10.81
-------

Options Outstanding August 31, 1994 239,700 $5.75 - $13.18
-------
-------

Granted 34,000 $6.625 - $7.25
Exercised (5,000) $6.50
Expired and canceled (43,000) $5.875 - $13.18
-------

Options Outstanding August 31, 1995 225,700 $5.75 - $13.18
-------
-------
</TABLE>

At August 31, 1995 a total of 322,000 shares were reserved for future
option grants for all plans and options to purchase 225,700 shares were
outstanding.

<PAGE>

E. EMPLOYEE STOCK OWNERSHIP PLAN

In June 1987, the Employee Stock Ownership Plan (the "ESOP") obtained
financing from a bank amounting to $1,250,000, which was used in acquiring
115,849 shares of newly issued Company stock. The bank loan bears interest at a
fixed rate of 10% and is guaranteed by the Company. The ESOP is funded by
Company contributions as required to provide the ESOP with the funds necessary
to meet its debt service requirements.

The loan obligation of the ESOP is considered unearned employee benefit
expense and is recorded as a separate reduction of the Company's
shareholders' equity. Both the loan obligation and the unearned benefit expense
are reduced by the amount of any loan repayments made by the ESOP. The loan
requires monthly payments of principal and interest of $17,600 through June 1997
at a fixed rate of 10%. The aggregate principal maturities of the ESOP
obligation subsequent to August 31, 1995 are as follows:

1996.............................. $186,000
1997.............................. $152,000

In fiscal 1991, the ESOP purchased 25,810 shares of the Company's Common
Stock. These purchases have been financed by a ten-year loan from the Company
for $229,193. The loan requires monthly payments of principal and interest at
10%. The Company's related receivable from the ESOP has been classified as a
reduction of shareholders' equity.

401(k) EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN

Effective July 1, 1992, the ESOP merged into the Unitel Video, Inc.
Retirement Investment Plan (a 401(k) Plan), which became the Unitel Video, Inc.
401(k) Employee Savings and Stock Ownership Plan (the "Plan"). The Plan
requires the Company to match employee contributions to the 401(k) portion of
the Plan in shares of the Company's Common Stock up to the maximum amount set
forth in the Plan. The minimum contribution required to be made each year by
the Company is the amount necessary to meet its debt service requirements. The
Plan combines a 401(k) plan with certain features of an employee stock ownership
plan.

Total contributions to the ESOP and the Plan for each of the years ended
August 31 are as follows:

1995 ............................. $336,000
1994 ............................. $253,000
1993 ............................. $271,000

The Company adopted Statement of Position 93-6 (SOP 93-6), "Employers'
Accounting for Employee Stock Ownership Plans" during 1995. In accordance with
SOP 93-6, compensation cost and liabilities associated with providing the
employer's 401(k) match are recognized the way they would be if an ESOP had not
been used to fund the benefit.

<PAGE>

The Plan's compensation expense was $191,000 for the year ended August 31, 1995.
A summary of the Plan's shares as of August 31, 1995 is as follows:

<TABLE>
<CAPTION>
<S> <C>
Allocated shares 75,095
Shares released for allocation 19,234
Unreleased shares 42,939
-------
137,268
-------
Fair value of unreleased shares
at August 31, 1995 $274,000
-------
-------
</TABLE>

Prior to adoption of SOP 93-6, the unreleased shares were considered outstanding
for the earnings per share computation. Accordingly, for the year ended August
31, 1995, shares were no longer considered outstanding. The effect of adopting
SOP 93-6 was not material on the net loss, and resulted in a decrease of
approximately 1% on the net loss per share for the twelve months ended August
31, 1995.

F. INCOME TAXES:

Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and the amounts used for income tax purposes. Significant components of the
Company's deferred tax liabilities and assets are as follows:

<TABLE>
<CAPTION>
August 31,

1995 1994
---- ----

Current portion of deferred tax assets (liabilities)
<S> <C> <C>
Employee medical benefits $ 308,000 $ 278,000
Bad debt reserves 452,000 454,000
---------- ----------
760,000 732,000
---------- ----------

Long term portion of deferred
tax assets (liabilities)

Accrued rent 371,000 425,000
Accrued retirement 491,000 417,000
Net assets held for sale 2,534,000 --
Net operating loss
carryforwards 330,000 127,000
ITC carryforwards-Federal
and State (net of valuation
allowance) 386,000 330,000
AMT credit carryforwards 2,570,000 2,565,000
Other - net 211,000 419,000
Tax over book depreciation (5,148,000) (5,030,000)
---------- ----------
1,745,000 (747,000)
---------- ----------
Net deferred tax asset
(liability) $2,505,000 $ (15,000)
---------- ----------
---------- ----------
</TABLE>

<PAGE>

The provision for income taxes is comprised of the following:

<TABLE>
<CAPTION>
Year Ended August 31,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Currently payable:
Federal $(270,000) $454,000 $552,000
State 36,000 215,000 158,000
----------- -------- --------
(234,000) 669,000 710,000

Deferred:
Federal (1,610,000) 3,000 (328,000)
State (950,000) (12,000) 83,000
----------- -------- --------
(2,560,000) (9,000) (245,000)
----------- -------- --------
$(2,794,000) $660,000 $465,000
----------- -------- --------
----------- -------- --------
</TABLE>

The Company's effective tax rate was (30%) in 1995 43.4% in 1994 and 50.3% in
1993. The components of the reconciliation of the Company's effective tax rate
to the U.S. statutory rate of 34% are as follows:

<TABLE>
<CAPTION>
Year Ended August 31,

1995 1994 1993
---- ---- ----

<S> <C> <C> <C>
Tax expense computed
at statutory rate $(3,176,000) $ 516,000 $ 314,000

State income tax, net of
Federal income tax
benefit (607,000) 157,000 160,000

Goodwill 649,000 17,000 17,000
Other 340,000 (30,000) (26,000)
----------- --------- ---------

Actual tax expense $(2,794,000) $ 660,000 $ 465,000
----------- --------- ---------
----------- --------- ---------
</TABLE>

<PAGE>

The Company's total alternative minimum tax credit carryforward is
approximately $2,570,000, which can be used against the Company's future regular
tax liability.

At August 31, 1995, the Company had available for tax purposes in excess of
$2,000,000 of State of New York tax credits that will expire from August 31,
1996 through August 31, 2002. The State of New York limits the use of these
credits on an annual basis. For financial reporting purposes, a valuation
allowance of $1,900,000 has been recognized to offset the deferred tax assets
related to those carryforwards for fiscal year ended August 31, 1995.

The deferred tax asset relating to the net operating loss carryforward is
attributable to the unused portion of a federal net operating loss generated in
fiscal 1993 of $515,000 which is scheduled to expire in 2008, as well as state
net operating losses generated in fiscal 1995 of various amounts scheduled to
expire at various times through 2008.

Internal Revenue Code Section 382 places a limitation on the utilization of
Federal net operating loss and other credit carryforwards when an ownership
change, as defined by the tax law, occurs. Generally, this occurs when a
greater than 50 percentage point change in ownership occurs. Accordingly, the
actual utilization of the alternative minimum tax credit carryforwards and other
deferred tax assets for tax purposes may be limited annually to the percentage
(about 6%) of the fair market value of the Company at the time of any such
ownership changes.

G. COMMITMENTS AND CONTINGENCIES:

Operating Leases -- The following is a schedule by years of future minimum
rental payments under operating leases that have an initial non-cancelable lease
term in excess of one year:

<TABLE>
<CAPTION>
<S> <C>
1996 $ 4,807,000
1997 4,531,000
1998 4,489,000
1999 3,310,000
2000 2,317,000
2001 and thereafter 5,626,000
-----------
$25,080,000
-----------
-----------
</TABLE>

The aggregate rental expense for the years ended August 31, 1995, 1994,
and 1993 was $3,867,000, $3,381,000 and $3,627,000, respectively.

The Company maintains cash balances at financial institutions located in
New York, New York, Pittsburgh, Pennsylvania, and Los Angeles, California.
These balances are insured by the Federal Deposit Insurance Corporation up to
$100,000. At August 31, 1995, uninsured amounts held at these financial
institutions were approximately $674,000.

There are various lawsuits claiming amounts against the Company. It is the
opinion of the Company's management that the ultimate liabilities, if any, in
these cases will not have a material effect on the Company's financial
statements.

<PAGE>

H. INVESTMENT IN AND ADVANCES TO AFFILIATES:

TIME LOGIC SYSTEMS

The Company had a 50% interest in a partnership known as Time Logic Systems
which marketed a device which serves as an editing and synchronization system
during the film-to-tape transfer process. In August 1994, the Company received
a piece of equipment with a value of $189,000 in lieu of all future income from
Time Logic Systems.

COMPUTER GRAPHICS DESIGN

In September 1993, the Company entered into a partnership arrangement with
a computer graphics design firm. During fiscal years 1995 and 1994
respectively, the Company's 50% share of losses were $29,000 and $65,000.
Additionally, the Company had an outstanding loan to the partnership of
$118,000 at August 31, 1995.

I. NET GAIN ON DISPOSITION OF FIXED ASSETS

In June 1990, the Company sold to CBS Inc. a building it owned at 508-510
West 57th Street, New York, New York. The sale price of the property was
$4,650,000 payable in cash at the closing. As part of the transaction, the
Company entered into an Indenture of Lease with CBS, pursuant to which the
Company, as tenant, leased back the premises. The Company recognized a net gain
on the disposition of $2,277,000. In addition, under the provisions of
Financial Accounting Standard No. 98, the Company deferred $922,000 of
additional gain from the sale, representing the present value of the future
minimum rental payment under the portion of the lease which was not subject to
early termination. The balance of the deferred gain of $117,000 was recognized
in the year ended August 31, 1995 as a reduction of rent expense.

The Company has accelerated its efforts to sell equipment which is not
fully utilized. In order to properly reflect the sale of equipment as part of
the Company's operations, in 1995 and 1994, $352,000 and $817,000 of gain on
disposal of assets were included in depreciation expense. Gain on disposal of
assets of $274,000 was reclassified to depreciation expense during August 31,
1993 to conform with the current year presentation.

J. ACCRUED RETIREMENT

Under the terms of employment agreements with two former officers of the
Company, retirement payments are due commencing September 1, 1996. At August
31, 1995, a liability of approximately $1,141,000 has been recorded, based upon
the present value of these payments. Approximately $172,000, $206,000 and
$190,000 has been charged to operations for the years ended August 31, 1995,
1994 and 1993, respectively.

K. IMPAIRMENT AND RESTRUCTURING CHARGES

In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" which provides
guidance on when to assess and how to measure impairment of long-lived
assets, certain intangibles and goodwill related to those assets to be held
and used, and for long-lived assets and certain identifiable intangibles to
be disposed of. The Company adopted this statement as of August 31, 1995.

<PAGE>

The Company has decided to focus its resources toward providing services to
the entertainment and corporate communications areas, which represents the
Company's strength. As part of this strategy, the Company has decided to
sell its Editel New York, Editel Chicago and Editel Los Angeles divisions,
which specialize in the highly competitive commercial advertising portion of
the video facilities industry. During the 1995 fiscal year, the three Editel
divisions incurred a pretax loss of $3,682,000. As a result the Company
identified property, plant and equipment associated with these divisions with
a carrying value of approximately $24,000,000 that it no longer needed for
its current and future operations, and during the fourth quarter of fiscal
1995 committed to a plan to dispose of them. Accordingly, the Company began
marketing these divisions to potential buyers and plans to sell them.
Although the Company intends to sell these assets within one year there is
no assurance that it will be able to do so, accordingly these assets are
classified in the balance sheet as long-term. The Company estimated the
revised value to be approximately $19,300,000. Accordingly, the Company
recorded an impairment charge of approximately $4,700,000 in 1995 on these
assets, which was included in impairment charges. The Company intends to
operate these divisions until a sale is consummated.

In May of 1995, the Company adopted a plan to downsize the operations of its
Editel Chicago division and reorganize and reduce its corporate management which
resulted in recording a restructuring charge of $400,000 for severance and early
retirement expense. In fiscal 1995, the restructuring liability was reduced by
approximately $127,000 as a result of retirement and severance payments made
during the year. As of August 31, 1995, the balance of the restructuring
liability was approximately $273,000 and is included in accrued payroll.

L. QUARTERLY FINANCIAL DATA (UNAUDITED)

Year Ended Primary Net
August 31, Gross Net Earnings(Loss)
1995 Sales Profit Earnings(Loss) Per Share
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>

1st quarter $21,233,000 $4,548,000 $439,000 $ .17
2nd quarter 20,581,000 3,560,000 50,000 .02
3rd quarter 20,831,000 3,345,000 (798,000) (.31)
4th quarter 20,640,000 2,613,000 (6,238,000) (2.41)

Year Ended Primary Net
August 31, Gross Net Earnings Loss
1994 Sales Profit(1) Earnings(Loss) Per Share
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>

1st quarter $21,557,000 $ 5,080,000 $ 735,000 $ .28
2nd quarter 18,806,000 3,144,000 (451,000) (.17)
3rd quarter 20,486,000(1) 4,017,000 230,000 .09
4th quarter 19,649,000 3,866,000 345,000 .13

</TABLE>

<PAGE>

(1) In fiscal 1995 and the fourth quarter of fiscal 1994, gain on sale of
equipment and amortization expense were included in depreciation expense while
in previous years gain on sale and amortization were included in operating
expenses. Since this reclassification was effective in the fourth quarter of
1994, all previous quarters in 1994 have been adjusted to reflect this
reclassification. (See Note I in Notes to Consolidated Financial Statements).

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.

Not Applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT.

The information required by this item is incorporated herein by
reference to the Company's definitive Proxy Statement relating to the
Registrant's 1996 Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.

ITEM 11. EXECUTIVE COMPENSATION.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT.

ITEM 13. CERTAIN RELATIONSHIPS
AND RELATED TRANSACTION.

The information required by this item is incorporated herein by
reference to the Company's definitive Proxy Statement relating to the
Registrant's 1996 Annual Meeting of Stockholders to by filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.

<PAGE>

PART IV

ITEM 14. Exhibits, Financial Statement Schedules and Reports on
FORM 8-K

(a) 1. The following financial statements of the Company are
included in Part II, Item 8:

Page

Report of Grant Thornton LLP Independent Auditors.......................19
Consolidated Balance Sheets - August 31, 1995 and 1994...............20-21
Consolidated Statements of Operations - Years Ended
August 31, 1995, 1994, and 1993....................................22-23
Consolidated Statement of Stockholders' Equity - Years
Ended August 31, 1995, 1994 and 1993...............................24
Consolidated Statements of Cash Flows -
Years Ended August 31, 1995, 1994 and 1993.........................25-27
Notes to Consolidated Financial Statements...........................28-39

2. The following schedules are included
in Part IV:

Consolidated Financial Statement
Schedules

Schedule II - Valuation and Qualifying Accounts and Reserves...46

All other schedules are omitted because they are not applicable, not
required or the required information is included in the consolidated financial
statements or notes thereto.

(b) Reports on Form 8-K. No reports on Form 8-K were filed by
the Company during the three months ended August 31, 1995.

1. Exhibit 3(A). Certificate of Incorporation, as amended
(incorporated by reference to Exhibit 3(A) of the Registrant's Annual Report on
Form 10-K filed November 24, 1992 (File No. 1-8654)).

2. Exhibit 3(B). Amended and Restated By-laws.

3. Exhibit 4(A). Specimen of Stock Certificate (incorporated by
reference to Exhibit 4 of the Registrant's Annual Report on form 10-K filed
November 29, 1984 (File No. 1-8654)).

4. Exhibit 4(B). Amended and Restated Loan and Security
Agreement dated as of December 12, 1995 among Unitel Video, Inc., R Squared
Inc., and Heller Financial, Inc. as agent and lender.

5. Exhibit 4(c). Second Amended and Restated Credit
Agreement dated as of December 12, 1995 between Unitel Video, Inc. and The
Chase Manhattan Bank, N.A.

6. Exhibit 10. Material Contracts:

<PAGE>

10(A) Non-Qualified Stock Option Plan of Unitel Video, Inc.
(incorporated by reference to Exhibit 10(A) of the Registrant's Annual Report on
form 10K filed November 26, 1990 (File No. 1-8654)).*

10(B) Lease Agreement between Unitel Video, Inc. and Educational
Broadcasting Corporation dated July 16, 1993 (incorporated by reference to
Exhibit 10(B) of the Registrant's Annual Report on Form 10-K filed November 26,
1993 (File No. 1-8654)).

10(C) Non-Statutory Stock Purchase Plan of Unitel Video, Inc.
(incorporated by reference to Exhibit 4.3 of the Registrant's Registration
Statement on Form S-8 filed July 15, 1986 (File No. 33-7306)).*

10(D) Employee Stock Purchase Plan of Unitel Video, Inc.
(incorporated by reference to Exhibit 4 of the Registrant's Registration
Statement on Form S-8 filed April 20, 1987 (File No. 33-13660)).*

10(E) Incentive Stock Option Plan of Unitel Video, Inc. adopted
by shareholders on January 17, 1983 (incorporated by reference to Item
16(a)10(g) of the Registrant's Registration Statement on Form S-1 filed on May
6, 1983 (File No. 2-83568)).*

10(F) Employment & Consulting Agreement between Unitel Video,
Inc. and Herbert Bass, dated as of May 26, 1988 (incorporated by reference to
Exhibit 10(R) of Registrant's Annual Report on Form 10-K filed December 13, 1989
(File No. 1-8654)).*

10(G) Employment & Consulting Agreement between Unitel Video,
Inc. and Alex Geisler, dated as of May 26, 1988 (incorporated by reference to
Item 14(C)4(S) of the Registrant's Annual Report on form 10K filed December 13,
1989 (File No. 1-8654)).*

10(H) Lease Agreement between UNV, Inc., and HBWC Limited
Partnership, dated as of August 12, 1988 (incorporated by reference to Exhibit
10(U) of the Registrant's Annual Report on Form 10-K filed December 13, 1989
(File No. 1-8654)).

10(I) Lease Agreements between Windsor Video, Inc. and Time
Equities Inc., dated as of September 4, 1986 (incorporated by reference to
Exhibit 10(V) of the Registrant's Annual Report on form 10-K filed December 13,
1989 (File No. 1-8654)).

10(J) Amendment to each Lease Agreement between Windsor Video,
Inc. and Time Equities Inc., dated as of July 13, 1994 and July 18, 1994.
(incorporated by reference to Exhibit 10(K) of the Registrant's Annual Report on
form 10-K filed November 28, 1994. (File No. 1-8654)).

10(K) Lease Agreement between Unitel Video, Inc. and CBS, Inc.
dated as of June 15, 1990 (incorporated by reference to Exhibit 10(Y) of the
Registrant's Annual Report on Form 10-K filed November 26, 1990 (File No. 1-
8654)).

10(L) Assumption and Assignment of Lease between Unitel Video,
Inc. and VCA/Teletronics Inc. dated May 19, 1990 (incorporated by reference to
Exhibit 10(AA) of the Registrant's Annual Report on Form 10-K filed November 26,
1990 (File No. 1-8654)).

<PAGE>

10(M) Amendment to Lease between Unitel Video, Inc. and Stage 57
Co. dated May 14, 1990 (incorporated by reference to Exhibit 10(BB) of the
Registrant's Annual Report on Form 10-K filed November 26, 1990 (File No. 1-
8654)).

10(N) Second Amendment to Lease between Unitel Video, Inc. and
Stage 57 Co. dated as of May 1, 1994. (incorporated by referencce to Exhibit
10(O) of the Registrant's Annual Report on Form 10-K filed November 28, 1994.
(File No. 1-8654)).

10(O) 1992 Stock Option Plan (incorporated by reference to
Exhibit 10(R) of the Registrant's Annual Report on Form 10-K filed November 24,
1992 (File No. 1-8654)).*

10(P) Indenture dated April 16, 1987 between La Salle National
Bank, as Trustee under Trust No. 52082, as Lessor and Scanline Communications as
Lessee (incorporated by reference to Exhibit 10(T) of the Registrant's Annual
Report on Form 10-K filed November 24, 1992 (File No. 1-8654)).

10(Q) Amendment to Lease & Extension Agreement dated as of March
15, 1991 between La Salle National Trust, N.A., as successor trustee to LaSalle
National Bank, under Trust No. 52082, as Lessor, and Scanline Communications, as
Lessee (incorporated by reference to Exhibit 10(U) of the Registrant's Annual
Report on Form 10-K filed November 24, 1992 (File No. 1-8654)).

10(R) Assignment, Assumption and Acceptance of Lease between
Scanline Communications and Unitel Video, Inc. (incorporated by reference to
Exhibit 10(V) of the Registrant's Annual Report on Form 10-K filed November 24,
1992 (File No. 1-8654)).

10(S) Asset Purchase Agreement dated as of May 5, 1992 between
Unitel Video, Inc. and Scanline Communications (incorporated by reference to
Exhibit 2.1 of the Registrant's Current Report on Form 8-K dated May 15, 1992
(File No. 1-8654)).

10(T) Amendment dated as of October 29, 1992 to Asset Purchase
Agreement dated as of May 5, 1992 between Unitel Video, Inc. and Scanline
Communications (incorporated by reference to Exhibit 10(X) of the Registrant's
Annual Report on Form 10-K filed November 24, 1992 (File No. 1-8654)).

10(U) Lease Agreement between First East Associates and Unitel
Video, Inc. dated May 26, 1993 and Sublease dated May 26, 1993 between Unitel
Video, Inc. and KIngWorld Productions, Inc.(incorporated by reference to Exhibit
10(U) of the Registrant's Annual Report on Form 10-K filed November 26, 1993
(File No. 1-8654)).

10(V) Sublease Agreement dated April 1, 1987 between R.E.
Graphics, Inc. (f/k/a Micor, Inc.) and Scanline Communications, together with
Modification dated February 1989 of Sublease Agreement (incorporated by
reference to Exhibit 10(AA) of the Registrant's Annual Report on Form 10-K filed
November 24, 1992(File No. 1-8654)).

<PAGE>

10(W) Sublease Agreement dated January 1, 1982 between Columbia
Pictures Industries, Inc. and Bell & Howell/Columbia Pictures Video Services,
together with letter dated April 3, 1989 from Columbia Pictures to Scanline
Communications and undated Letter from Columbia Pictures to 43rd Street Estates
Corp. (incorporated by reference to Exhibit 10(BB) of the Registrant's Annual
Report on Form 10-K filed November 24, 1992 (File No. 1-8654)).

10(X) 401K Employee Savings and Stock Ownership Plan of Unitel
Video, Inc. effective 7/1/92 (incorporated by reference to Exhibit 10(X) of the
Registrant's Annual Report on Form 10-K filed November 26, 1993 (File No. 1-
8654)).*

10(Y) Asset Purchase Agreement dated as of February 24, 1995
between Jee See & Co., Inc. and Unitel Video, Inc. (incorporated by reference to
Exhibit 2-1 of the Registrant's Current Report on Fgorm 8-K dated February 24,
1995 (File No. 1-8654)).

10(Z) Lease Amendment dated as of January 26, 1995 between
Putnam Publishing Company and Unitel Video, Inc.

10(A)(A) Employment and Consulting Agreement dated as of July
19, 1995 between Unitel Video, Inc. and John Hoffman*

8. Exhibit 23. Accountant's consent.

9. Exhibit 24. Power of Attorney from officers and directors to
David Micciulla and Barry Knepper (included on signature page).

10. Exhibit 27. Financial Data Schedule.

* Management contract or compensatory plan or arrangement required to be noted
as provided in Item 14(a)(3).

<PAGE>

UNDERTAKING

The Company hereby undertakes to furnish to the Securities and Exchange
Commission, upon request, all constituent instruments defining the rights of
holders of long-term debt of the Company and its consolidated subsidiaries not
filed herewith. Such instruments have not been filed since none are, nor are
being, registered under Section 12 of the Securities and Exchange Act of 1934
and the total amount of securities authorized under any of such instruments does
not exceed 10% of the total assets of the Company and its subsidiary on a
consolidated basis.

<PAGE>

UNITEL VIDEO, INC.

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

COLUMN A COLUMN B COLUMN C1 COLUMN D COLUMN E
-------- -------- --------- -------- --------
Balance at Charged to Balance
Beginning Costs and at End
Description of Period Expenses Deductions of Period
----------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C>
YEAR ENDED AUGUST 31, 1995
Allowance for doubtful
accounts $690,000 $125,000 $129,000 $686,000
-------- -------- -------- --------
-------- -------- -------- --------

YEAR ENDED AUGUST 31, 1994
Allowance for doubtful
accounts $676,000 $386,000 $372,000 $690,000
-------- -------- -------- --------
-------- -------- -------- --------

YEAR ENDED AUGUST 31, 1993
Allowance for doubtful
accounts $786,000 $418,000 $528,000 $676,000
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>

Column D
- --------

Uncollectible accounts written off.

Column E
- ---------

Deducted in balance sheet from accounts receivable.

<PAGE>

For the purposes of complying with the amendments to the rules governing Form S-
8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned
Registrant hereby undertakes as follows, which undertaking shall be incorporated
by reference into registrant's Registration Statement on form S-8 Nos. 33-7306
(filed July 15, 1986), 33-13660 (filed April 20, 1987) and 33-14654 (filed May
28, 1987).

Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding ) is asserted by such directors, officers or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1993 and will be governed by the final adjudication of such issue.

<PAGE>

SIGNATURE AND POWER OF ATTORNEY

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

UNITEL VIDEO, INC.

December 14, 1995 By: /s/ David Micciulla
--------------------------
David Micciulla
Chief Executive Officer

<PAGE>

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David Micciulla and Barry Knepper and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this report, and to
file the same, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes he might or could do in person,
hereby ratifying and confirming all that said attorneys-in fact and agents, or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.

<PAGE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.

Signature Title Date
- --------- ----- ----
/s/ David Micciulla Chief Executive Officer, December 14, 1995
- -------------------------
David Micciulla President and Director

/s/ Barry Knepper Senior Vice President - December 14, 1995
- -------------------------
Barry Knepper Finance and Administration,
Treasurer (Principal
Financial and Accounting
Officer), and Director

/s/ Herbert Bass Director December 14, 1995
- -------------------------
Herbert Bass

/s/ Alex Geisler Director December 14, 1995
- -------------------------
Alex Geisler

/s/ Walter G. Arader Director December 14, 1995
- -------------------------
Walter G. Arader

/s/ Philip Birsh Director December 14, 1995
- -------------------------
Philip Birsh

/s/ Director December 14, 1995
- -------------------------
John Hoffman

50
<PAGE>

COMMISSION FILE NO. 1-8654

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

EXHIBITS

FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED AUGUST 31, 1995

UNITEL VIDEO, INC.

<PAGE>

UNITEL VIDEO, INC.
INDEX TO EXHIBITS

EXHIBIT NUMBER DESCRIPTION PAGE

3(A) Certificate of Incorporation, as
amended(incorporated by reference
to Exhibit 3(A) of the Registrant's
Annual Report on Form 10-K filed
November 24, 1992 (File No. 1-8654)).

3(B)+ Amended and Restated By-laws.

4(A) Specimen of Stock Certificate
(incorporated by reference to Exhibit
4 of the Registrant's Annual Report on
form 10-K filed November 29, 1984
(File No. 1-8654)).

4(B)+ Amended and Restated Loan and
Security Agreement dated as of
December 12, 1995 among Unitel
Video, Inc., R Squared, Inc. and
Heller Financial Inc. as agent
and lender.

4(C)+ Second Amended and Restated
Credit Agreement dated as of
December 12,1995 between Unitel
Video, Inc. and The Chase
Manhattan Bank, N.A.

10(A) Non-Qualified Stock Option Plan
of Unitel Video, Inc.
(incorporated by reference to
Exhibit 10(A) of the Registrant's
Annual Report on form 10K filed
November 26, 1990
(File No. 1-8654)).*

10(B) Lease Agreement between Unitel
Video, Inc. and Educational
Broadcasting Corporation dated
July 16, 1993 (incorporated by
reference to Exhibit 10(B) of the
Registrant's Annual Report on
Form 10-K filed November 26, 1993
(File No. 1-8654)).

10(C) Non-Statutory Stock Purchase
Plan of Unitel Video, Inc.
(incorporated by reference to

<PAGE>

Exhibit 4.3 of the Registrant's
Registration Statement on Form
S-8 filed July 15, 1986
(File No. 33-7306)).*

10(D) Employee Stock Purchase Plan of
Unitel Video, Inc. (incorporated
by reference to Exhibit 4 of the
Registrant's Registration Statement
on Form S-8 filed April 20, 1987
(File No. 33-13660)).*

10(E) Incentive Stock Option Plan of
Unitel Video, Inc. adopted by
shareholders on January 17, 1983
(incorporated by reference to Item
16(a)10(g) of the Registrant's
Registration Statement on Form S-1
filed on May 6, 1983
(File No. 2-83568)).*

10(F) Employment & Consulting Agreement
between Unitel Video, Inc. and
Herbert Bass, dated as of May 26,
1988 (incorporated by reference to
Exhibit 10(R) of Registrant's
Annual Report on Form 10-K filed
December 13, 1989
(File No. 1-8654)).*

10(G) Employment & Consulting Agreement
between Unitel Video, Inc. and
Alex Geisler, dated as of May 26,
1988 (incorporated by reference to
Item 14(C)4(S) of the Registrant's
Annual Report on form 10K filed
December 13, 1989
(File No. 1-8654)).*

10(H) Lease Agreement between UNV, Inc.,
and HBWC Limited Partnership,
dated as of August 12, 1988
(incorporated by reference to
Exhibit 10(U) of the Registrant's
Annual Report on Form 10-K filed
December 13, 1989 (File No.
1-8654)).

10(I) Lease Agreements between Windsor
Video, Inc. and Time Equities
Inc., dated as of September 4,
1986 (incorporated by reference

<PAGE>

to Exhibit 10(V) of the
Registrant's Annual Report on
form 10-K filed December 13, 1989
(File No. 1-8654)).

10(J) Amendment to each Lease Agreement
between Windsor Video, Inc. and
Time Equities Inc., dated as of
July 13, 1994 and July 18, 1994.
(incorporated by reference to
Exhibit 10(K) of the Registrant's
Annual Report on form 10-K filed
November 28, 1994. (File No. 1-8654)).

10(K) Lease Agreement between Unitel
Video, Inc. and CBS, Inc. dated
as of June 15, 1990 (incorporated
by reference to Exhibit 10(Y)
of the Registrant's Annual Report
on Form 10-K filed November 26,
1990 (File No. 1-8654)).

10(L) Assumption and Assignment of
Lease between Unitel Video, Inc.
and VCA/Teletronics Inc. dated
May 19, 1990 (incorporated by
reference to Exhibit 10(AA) of the
Registrant's Annual Report on
Form 10-K filed November 26, 1990
(File No. 1-8654)).

10(M) Amendment to Lease between Unitel
Video, Inc. and Stage 57 Co. dated
May 14, 1990 (incorporated by
reference to Exhibit 10(BB) of the
Registrant's Annual Report on
Form 10-K filed November 26, 1990
(File No. 1-8654)).

10(N) Second Amendment to Lease between
Unitel Video, Inc. and Stage 57 Co.
dated as of May 1, 1994.
(incorporated by reference to
Exhibit 10(O) of the Registrant's
Annual Report on Form 10-K filed
November 28, 1994.
(File No. 1-8654)).

10(O) 1992 Stock Option Plan
(incorporated by reference to
Exhibit 10(R) of the Registrant's

<PAGE>

Annual Report on Form 10-K filed
November 24, 1992
(File No. 1-8654)).*

10(P) Indenture dated April 16, 1987
between La Salle National Bank,
as Trustee under Trust No. 52082,
as Lessor and Scanline
Communications as Lessee
(incorporated by reference to
Exhibit 10(T) of the Registrant's
Annual Report on Form 10-K filed
November 24, 1992
(File No. 1-8654)).

10(Q) Amendment to Lease & Extension
Agreement dated as of March 15,
1991 between La Salle National
Trust, N.A., as successor trustee
to LaSalle National Bank, under
Trust No. 52082, as Lessor, and
Scanline Communications, as Lessee
(incorporated by reference to
Exhibit 10(U) of the Registrant's
Annual Report on Form 10-K filed
November 24, 1992
(File No. 1-8654)).

10(R) Assignment, Assumption and
Acceptance of Lease between
Scanline Communications and Unitel
Video, Inc. (incorporated by
reference to Exhibit 10(V) of the
Registrant's Annual Report on Form
10-K filed November 24, 1992
(File No. 1-8654)).

10(S) Asset Purchase Agreement dated as
of May 5, 1992 between Unitel Video,
Inc. and Scanline Communications
(incorporated by reference to
Exhibit 2.1 of the Registrant's
Current Report on Form 8-K dated
May 15, 1992 (File No. 1-8654)).

10(T) Amendment dated as of October 29,
1992 to Asset Purchase Agreement
dated as of May 5, 1992 between

<PAGE>

Unitel Video, Inc. and Scanline
Communications (incorporated by
reference to Exhibit 10(X) of the
Registrant's Annual Report on Form
10-K filed November 24, 1992
(File No. 1-8654)).

10(U) Lease Agreement between First East
Associates and Unitel Video, Inc.
dated may 26, 1993 and Sublease
dated May 26, 1993 between Unitel
Video, Inc. and KingWorld
Productions, Inc.(incorporated by
reference to Exhibit 10(U) of the
Registrant's Annual Report on Form
10-K filed November 26, 1993
(File No. 1-8654)).

10(V) Sublease Agreement dated April 1,
1987 between R.E. Graphics, Inc.
(f/k/a Micor, Inc.) and Scanline
Communications, together with
Modification dated February 1989 of
Sublease Agreement (incorporated by
reference to Exhibit 10(AA) of the
Registrant's Annual Report on Form
10-K filed November 24, 1992
(File No. 1-8654)).

10(W) Sublease Agreement dated January 1,
1982 between Columbia Pictures
Industries, Inc. and Bell &
Howell/Columbia Pictures Video
Services, together with letter
dated April 3, 1989 from Columbia
Pictures to Scanline Communications
and undated Letter from Columbia
Pictures to 43rd Street Estates
Corp. (incorporated by reference to
Exhibit 10(BB) of the Registrant's
Annual Report on Form 10-K filed
November 24, 1992
(File No. 1-8654)).

10(X) 401K Employee Savings and Stock
Ownership Plan of Unitel Video,
Inc. effective 7/1/92 (incorporated
by reference to Exhibit 10(X) of
the Registrant's Annual Report on
Form 10-K filed November 26, 1993
(File No. 1-8654)).*

10(Y) Asset Purchase Agreement dated as
of February 24, 1995 between
Jee See & Co., Inc. and Unitel

<PAGE>

Video, Inc. (incorporated by
reference to Exhibit 2-1 of the
Registrant's Current Report on
Form 8-K dated February 24, 1995
(File No. 1-8654)).

10(Z) Lease Amendment dated as of
January 26, 1995 between Putnam
Publishing Company and Unitel
Video, Inc.

10(A)(A)+ Employment and Consulting Agreement
dated as of July 19, 1995 between
Unitel Video, Inc. and John Hoffman*

23+ Accountant's consent.

24 Power of Attorney from officers and
directors to David Micciulla and
Barry Knepper (included on signature
page).

27+ Financial Data Schedule.

+ Filed herewith. All other exhibits are incorporated herein by reference to
the document listed in the parenthetical reference.

* Management contract or compensatory plan or arrangement required to be noted
as provided in Item 14(a)(3).

<PAGE>

ADOPTED January 14, 1987
AMENDED THROUGH: May 8, 1995

AMENDED AND RESTATED

BY-LAWS OF

UNITEL VIDEO, INC.

ARTICLE I - OFFICES

SECTION 1-1. REGISTERED OFFICE AND REGISTERED AGENT. The
Corporation shall maintain a registered office and registered agent within the
State of Delaware, which may be changed by the Board of Directors from time to
time.

SECTION 1-2. OTHER OFFICES. The Corporation may also have offices at
such other places, within or without the State of Delaware, as the Board of
Directors may from time to time determine.

ARTICLE II - STOCKHOLDERS' MEETINGS

SECTION 2-1. PLACE OF STOCKHOLDERS' MEETINGS. All meetings of
stockholders shall be held at such place within or without the State of Delaware
as may be designated by the board of Directors from time to time. If no such
place is designated by the Board of Directors, meetings of the stockholders
shall be held at the registered office of the Corporation in the State of
Delaware.

SECTION 2-2. ANNUAL MEETING. A meeting of the stockholders of the
Corporation shall be held in each calendar year, commencing with the year 1987,
at a date, time and place fixed by the Board of Directors.

At such annual meeting, there shall be held an election for a Board of
Directors to serve for the ensuing year and until their respective successors
are elected and qualified, or until their earlier resignation or removal.

Unless the Board of Directors shall deem it advisable, financial
reports of the Corporation's business need not be sent to the stockholders and
need not be presented at the annual meeting. If any report is deemed advisable
by the Board of Directors, such report may contain such information as the Board
of Directors shall determine and need not be certified by a Certified Public
Accountant unless the Board of Directors shall so direct.

<PAGE>

SECTION 2-3. SPECIAL MEETINGS. Except as otherwise specifically
provided by law, special meetings of the stockholders may be called at any time:

(a) By the President of the Corporation; or

(b) By a majority of the Board of Directors; or

Upon the written request of any person entitled to call a special
meeting, which request shall set forth the purpose for which the meeting is
desired. It shall be the duty of the Secretary to give prompt written notice of
such meeting to be held at such time as the Secretary may fix, subject to the
provisions of Section 2-4 hereof. If the Secretary shall fail to fix such date
and give such notice within ten (10) days after receipt of such request, the
person or persons making such request may do so.

This Section 2-3 may be replaced or amended only by an affirmative
vote or written consent of at least 80% of the outstanding shares entitled to
vote thereon.

SECTION 2-4. NOTICE OF STOCKHOLDERS' MEETINGS. Written notice
stating the place, date, hour and purpose of any meeting shall be given not less
than ten (10) nor more than fifty (50) days before the date of the meeting to
each stockholder entitled to vote at such meeting. If mailed, notice is given
when deposited in the United States Mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation.
Such notice may be given in the name of the Board of Directors, President, Vice
President, Secretary or Assistant Secretary.

SECTION 2-5. QUORUM. Unless the Certificate of Incorporation
provides otherwise, the presence, in person or by proxy, of the holders of a
majority of the outstanding shares entitled to vote shall constitute a quorum.
The stockholders present at a duly organized meeting can continue to do business
until adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum. If a meeting cannot be organized because of the
absence of a quorum, those present may, except as otherwise provided by law,
adjourn the meeting to such time and place as they may determine. In the case
of any meeting for the election of Directors, those stockholders who attend the
second of such adjourned meetings, although less than a quorum as fixed in this
Section, shall nevertheless constitute a quorum for the purpose of electing
Directors.

<PAGE>

SECTION 2-6. VOTING. The officer who has charge of the stock ledger
of the Corporation shall prepare and make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder for any purpose
ermane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where said meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. Upon the willful neglect or refusal of the Directors to produce such a
list at any meeting for the election of Directors, they shall be ineligible to
any office at such meeting.

At all stockholders' meetings, stockholders entitled to vote may
attend and vote either in person or by proxy. All proxies shall be executed in
writing and shall be filed with the Secretary of the Corporation not later than
the day on which exercised. No proxy shall be voted or acted upon after three
(3) years from its date, unless the proxy provides for a longer period.

Except as otherwise specifically provided by law, all matters coming
before the meeting shall be determined by a vote by shares. All elections of
Directors shall be by written ballot unless otherwise provided in the
Certificate of Incorporation. Except as otherwise specifically provided by law,
all other votes may be taken by voice unless a stockholder demands that it be
taken by ballot, in which latter event the vote shall be taken by written
ballot.

SECTION 2-7. INFORMAL ACTION BY STOCKHOLDERS. Unless otherwise
provided by the Certificate of Incorporation, whenever the vote of stockholders
at a meeting thereof is required or permitted to be taken in connection with any
corporate action, the meeting and vote of stockholders may be dispensed with on
the written consent of the stockholders having not less than the minimum number
of votes that would be necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were present and voted, and
provided that prompt notice of the taking of corporate action shall be given to
those stockholders who have not consented in writing.

SECTION 2-8. NOTIFICATION OF NOMINATIONS. Nominations for the
election of Directors may be made by the Board of Directors or a nominating or
proxy committee appointed by the Board of Directors or by any stockholder
entitled to vote in the election of Directors generally. However, any
stockholder entitled to vote in the election of Directors generally may nominate
one or more persons for election as Directors at a meeting only if written
notice of such stockholder's intent to make such nomination or nominations has
been given, either by personal

<PAGE>

delivery or by United States mail, postage prepaid, to the Secretary of the
Corporation not later than (i) with respect to an election to be held at an
annual meeting of stockholders, 90 days in advance of such meeting, and (ii)
with respect to an election to be held at a special meeting of stockholders for
the election of Directors, the close of business on the seventh day following
the date on which notice of such meeting is first given to stockholders. Each
such notice shall set forth: (a) the name and address of the stockholder who
intends to make the nomination and of the person or persons to be nominated; (b)
a representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; (c) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the stockholder or pursuant to which votes shall be cast or other actions taken
at any usual or special meeting of the stockholders of the Corporation; (d) such
other information regarding each nominee proposed by such stockholder as would
have been required to be included in a proxy statement filed pursuant to the
proxy rules of the Securities and xchange Commission had the nominee been
nominated, or intended to be nominated, by the Board of Directors; and (e) the
written consent of each nominee to serve as a Director of the Corporation if so
elected. The chairman of the meeting may refuse to acknowledge the nomination of
any person not made in compliance with the foregoing procedure.

SECTION 2-9. ORGANIZATION OF MEETING. Prior to or at the
commencement of each meeting of stockholders, a chairman to preside at such
meeting may be chosen by a majority vote of the Board of Directors. In the
absence of such action of the Board of Directors, the President of the
Corporation shall serve as chairman. If such chairman is unable to fulfill his
duties as chairman, the Board of Directors shall, by majority vote, appoint a
successor. The chairman of the meeting shall appoint a person to act as
secretary of the meeting and such person shall keep a record of the proceedings
thereof. The Board of Directors of the Corporation shall be entitled to make
such rules and regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including
without limitation, regulating the commencement, postponement, if any, and
adjournment of the meeting, establishing an agenda or order of business for the
meeting, rules and procedures for maintaining order at the meeting and the
safety of those present, limitations of participation in such meeting to
stockholders of record of the Corporation and their duly authorized and
onstituted proxies, and such other persons as the chairman shall permit,
estrictions on entry to the meeting after the time fixed for the commencement

<PAGE>

thereof, limitations on the time allotted to questions or comments by
participants and regulation of the opening and closing of the polls for
balloting on matters which are to be voted on by ballot. The failure of the
Board of Directors or the chairman of the meeting to formally establish rules,
regulations or procedures for the conduct of the meeting in advance of the
meeting shall not limit the authority of the chairman of the meeting to conduct
the meeting in an orderly fashion. Unless, and to the extent, determined by the
Board of Directors or the chairman of the meeting, meetings of stockholders
shall not be required to be held in accordance with rules or parliamentary
procedure or other specified rules of order.

ARTICLE III - BOARD OF DIRECTORS

SECTION 3-1. NUMBER. The business and affairs of the Corporation
shall be managed by a Board of seven (7) Directors. This Section 3-1 may be
replaced or amended only by the affirmative vote or written consent of 80% of
the outstanding shares entitled to vote thereon or by an affirmative vote of at
least 80% of the Board of Directors.

SECTION 3-1A. CLASSIFICATION. Commencing with the directors elected
at the Annual Meeting of Shareholders in 1985, the directors of the Company
shall be divided into three classes: Class I, Class II and Class III. There
shall be two Directors in Class I, one Director in Class II and two Directors in
Class III. The initial classification of Directors shall be made by the Board
of Directors. The term of office of the initial Class I Directors shall expire
at the Annual Meeting of Shareholders in 1986. The term of office of the initial
Class II Director shall expire at the Annual Meeting of Shareholders in 1987,
and the term of the office of the initial Class III Directors shall expire at
the Annual Meeting of Shareholders in 1988. At each annual election of
Directors held after 1985, the Directors chosen to succeed those whose terms
then expire shall be identified as being of the same class as the Directors they
succeed and shall be elected for a term expiring at the third succeeding annual
election of Directors. Each Director shall serve and hold office until his
successor is elected and qualified, or until his earlier resignation or
emoval.

In the event the number of Directors of the Company is increased by
appropriate corporate action, the number of Directors in each class shall be
adjusted to make each Class as equal in number as possible.

This Section 3-1A may be replaced or amended only by the affirmative
vote or written consent of the holders of at least 80% of the outstanding shares
entitles to vote thereon.

<PAGE>

SECTION 3-2. PLACE OF MEETING. Meetings of the Board of Directors
may be held at such place within the State of Delaware or elsewhere as a
majority of the Directors may from time to time designate or as may be
designated in the notice calling the meeting.

SECTION 3-3. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held annually, immediately following the annual meeting of
stockholders at the place were such meeting of the stockholders is held or at
such other place, date and hour as a majority of the newly elected Directors may
designate. At such meeting the Board of Directors shall elect officers of the
orporation. In addition to such regular meeting, the Board of Directors shall
have the power to fix by resolution the place, date and hour of other regular
eetings of the Board.

SECTION 3-4. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be held whenever ordered by the President, by a majority of the
members of the executive committee, if any, or by a majority of the Directors in
office.

SECTION 3-5. NOTICES OF MEETINGS OF BOARD OF DIRECTORS.

(a) REGULAR MEETINGS. No notice shall be required to be given
of any regular meeting, unless the same be held at other than the time or place
for holding such meetings as fixed in accordance with Section 3-3 of these By-
laws, in which event one (1) day's notice shall be given of the time and place
of such meeting.

(b) SPECIAL MEETINGS. At least one (1) day's notice shall be
given of the time when, place where, and purpose for which any special meeting
of the Board of Directors is to be held.

SECTION 3-6. QUORUM. One-half of the Directors in office shall be
necessary to constitute a quorum for the transaction of business, and the vote
of a majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. If there be less than a quorum
present, a majority of those present may adjourn the meeting from time to time
and place to place and shall cause notice of each such adjourned meeting to be
given to all absent Directors.

SECTION 3-7. INFORMAL ACTION BY THE BOARD OF DIRECTORS. Any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting, if all members of the
Board of Directors or committee, as the case may be, consent thereto in writing,
and the writing or writings are filed with the minutes of proceedings of the
Board of Directors or committee.

<PAGE>

SECTION 3-8. POWERS.

(a) GENERAL POWERS. The Board of Directors shall have all powers
necessary or appropriate to the management of the business and affairs of the
Corporation, and, in addition to the power and authority conferred by these By-
laws, may exercise all powers of the Corporation and do all such lawful acts and
things as are not by statute, these By-laws or the Certificate of Incorporation
directed or required to be exercised or done by he stockholders.

(b) SPECIFIC POWERS. Without limiting the general powers
conferred by the last preceding clause and the powers conferred by the
Certificate of Incorporation and By-laws of the Corporation, it is hereby
expressly declared that the Board of Directors shall have the following powers:

(i) To confer upon any officer or officers of the
Corporation the power to choose, remove or suspend assistant officers, agents or
servants.

(ii) To appoint any person, firm or corporation to accept
and hold in trust for the Corporation any property belonging to the Corporation
or in which it is interested, and to authorize any such person, firm or
corporation to execute any documents and perform any duties that may be
requisite in relation to any such trust.

(iii) To appoint a person or persons to vote shares of
another corporation held and owned by the Corporation.

(iv) By resolution passed by a majority of the whole Board
of Directors, to designate two (2) or more of its number to constitute an
executive committee which, to the extent provided in such resolution, shall have
and may exercise the power of the Board of Directors in the management of the
business and affairs of the Corporation and may authorize the seal of the
Corporation to be affixed.

(v) By resolution passed by a majority of the whole Board
of Directors, to designate one (1) or more additional committees, each to
consist of two (2) or more Directors, to have such duties, powers and authority
as the Board of Directors shall determine. All committees of the Board of
Directors, including the executive committee, shall have the authority to adopt
their own rules of procedure. Absent the adoption of specific procedures, the
procedures applicable to the Board of Directors shall also apply to committees
thereof.

(vi) To fix the place, time and purpose of meetings of
stockholders.

<PAGE>

(vii) To purchase or otherwise acquire for the Corporation
any property, rights or privileges which the Corporation is authorized to
acquire, at such prices, on such terms and conditions and for such consideration
as it shall from time to time see fit, and, at its discretion, to pay for any
property or rights acquired by the Corporation, either wholly or partly in money
or in stocks, bonds, debentures or other securities of the Corporation.

(viii) To create, make and issue mortgages, bonds, deeds of
trust, trust agreements and negotiable or transferable instruments and
securities, secured by mortgage or otherwise, and to do every other act and
thing necessary to effectuate the same.

(ix) To appoint and remove or suspend such subordinate
officers, agents or servants, permanently or temporarily, as it may from time to
time to think fit, and to determine their duties, and fix, and from time to time
change, their salaries or emoluments, and to require security in such instances
and in such amounts as it thinks fit.

(x) To determine who shall be authorized on the
Corporation's behalf to sign bills, notes, receipts, acceptances, endorsements,
checks, releases, contracts and documents.

SECTION 3-9. COMPENSATION OF DIRECTORS. Compensation of Directors
and reimbursement of their expenses incurred in connection with the business of
the Corporation, if any, shall be as determined from time to time by resolution
of the Board of Directors.

SECTION 3-10. REMOVAL OF DIRECTORS BY STOCKHOLDERS. The entire Board
of Directors or any individual Director may be removed from office only with an
assignment of cause by a majority vote of the holders of the outstanding shares
entitled to vote. In case the Board of Directors or any one or more Directors
be so removed, new Directors may be elected at the same time.

SECTION 3-11. RESIGNATIONS. Any Director may resign at any time by
submitting his written resignation to the Corporation. Such resignation shall
take effect at the time if its receipt by the Corporation unless another time be
fixed in the resignation, in which case it shall become effective at the time so
fixed. The acceptance of a resignation shall not be required to make it
effective.

SECTION 3-12. VACANCIES. Vacancies in the Board of Directors,
including vacancies resulting from an increase in the number of Directors, shall
be filled by a majority of the Directors then in office, although less than a
quorum, or by a sole remaining Director, and each person so elected shall be a
Director until his successor is elected and qualified or until his earlier
resignation or removal.

<PAGE>

SECTION 3-13. PARTICIPATION BY CONFERENCE TELEPHONE. Directors may
participate in regular or special meetings of the Board by telephone or similar
communications equipment by means of which all other persons at the meeting can
hear each other, and such participation shall constitute presence at the
meeting.

ARTICLE IV - OFFICERS

SECTION 4-1. ELECTION AND OFFICE. The Corporation shall have a
President, a Secretary and a Treasurer who shall be elected by the Board of
Directors. The Board of Directors may elect such additional officers as it may
deem proper, including a Chairman and a Vice Chairman of the Board of
irectors, one (1) or more Vice Presidents, and one (1) or more assistant or
honorary officers. Any number of offices may be held by the same person.

SECTION 4-2. TERM. The President, the Secretary and the Treasurer
shall each serve for a term of one (1) year and until their respective
successors are chosen and qualified, unless removed from office by the Board of
Directors during their respective tenures. The term of office of any other
officer shall be as specified by the Board of Directors.

SECTION 4-3. POWERS AND DUTIES OF THE PRESIDENT. Unless otherwise
determined by the Board of Directors the President shall have the usual duties
of an executive officer with general supervision over and direction of the
affairs of the Corporation. In the exercise of these duties and subject to the
limitations of the laws of the State of Delaware, these By-laws, and the actions
of the Board of Directors, he may appoint, suspend and discharge employees and
agents, shall preside at all meetings of the stockholders at which he shall be
present; and, unless there is a Chairman of the Board of Directors, shall
preside at all meetings of the Board of Directors and, unless otherwise
specified by the Board of Directors, shall be a member of all committees. He
shall also do and perform such other duties as from time to time may be assigned
to him by the Board of Directors.

Unless otherwise determined by the Board of Directors, the President
shall have full power and authority on behalf of the Corporation to attend and
to act and to vote at any meeting of the stockholders of any corporation in
which the Corporation may hold stock, and, at any such meeting, shall possess
and may exercise any and all the rights and powers incident to the ownership of
such stock and which, as the owner thereof, the Corporation might have possessed
and exercised.

<PAGE>

SECTION 4-4. POWERS AND DUTIES OF THE SECRETARY. Unless otherwise
determined by the Board of Directors, the Secretary shall record all proceedings
of the meetings of the Corporation, the Board of Directors and all committees,
in books to be kept for that purpose, and shall attend to the giving and serving
of all notices for the Corporation. He shall have charge of the corporation
seal, the certificate book, transfer books and stock ledgers, and such other
books and papers as the Board of Directors may direct. He shall perform all
other duties ordinarily incident to the office of Secretary and shall have such
other powers and perform such other duties as may be assigned to him by the
Board of Directors.

SECTION 4-5. POWERS AND DUTIES OF THE TREASURER. Unless otherwise
determined by the Board of Directors, the Treasurer shall have the charge of all
the funds and securities of the Corporation which may come into his hands. When
necessary or proper, unless otherwise ordered by the Board of Directors, he
shall endorse for collection on behalf of the Corporation checks, notes and
other obligations, and shall deposit the same to the credit of the Corporation
in such banks or depositories as the Board of Directors may designate and shall
sign all receipts and vouchers for payments made to the Corporation. He shall
sign all checks made by the Corporation, except when the Board of Directors
shall otherwise direct. He shall enter regularly, in books of the Corporation
to be kept by him for the purpose, full and accurate account of all moneys
received and paid by him on account of the Corporation. Whenever required by
the Board of Directors, he shall render a statement of the financial condition
of the Corporation. He shall at all reasonable times exhibit his books and
accounts to any Director of the Corporation, upon application at the office of
the Corporation during business hours. He shall have such other powers and
shall perform such other duties as may be assigned to him from time to time by
the Board of Directors. He shall give such bond, if any, for the faithful
performance of his duties as shall be required by the Board of Directors and any
such bond shall remain in the custody of the President.

SECTION 4-6. POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD OF
DIRECTORS. Unless otherwise determined by the Board of Directors, the Chairman
of the Board of Directors, if any, shall preside at all meetings of Directors
and shall serve ex officio as a member of every committee of the Board of
Directors. He shall have such other powers and perform such further duties as
may be assigned to him by the Board of Directors.

SECTION 4-7. POWERS AND DUTIES OF VICE PRESIDENTS AND ASSISTANT
OFFICERS. Unless otherwise determined by the Board of Directors, each Vice
President and each assistant officer shall have the powers and perform the
duties of his respective superior officer. Vice Presidents and assistant
officers shall have such rank as shall be designated by the Board of Directors
and each, in the order of rank, shall act for such superior officer in his
absence, or upon his disability or when so directed by such superior officer or
by the Board of Directors. Vice

<PAGE>

Presidents may be designated as having responsibility for a specific aspect of
the Corporation's affairs, in which event each such Vice President shall be
superior to the other Vice Presidents in relation to matters within his aspect.
The President shall be the superior officer of the Vice Presidents. The
treasurer and the Secretary shall be the superior officers of the assistant
treasurers and assistant secretaries, respectively.

SECTION 4-8. DELEGATION OF OFFICE. The Board of Directors may
delegate the powers or duties of any officer of the Corporation to any other
officer or to any Director from time to time.

SECTION 4-9. VACANCIES. The Board of Directors shall have the power
to fill any vacancies in any office occurring from whatever reason.

SECTION 4-10. RESIGNATIONS. Any officer may resign at any time by
submitting his written resignation to the Corporation. Such resignation shall
take effect at the time of its receipt by the Corporation, unless another time
be fixed in the resignation, in which case it shall become effective at the time
so fixed. The acceptance of a resignation shall not be required to make it
effective.

ARTICLE V - CAPITAL STOCK

SECTION 5-1. STOCK CERTIFICATES. Every holder of stock of the
Corporation shall be entitled to have a certificate signed by, or in the name of
the Corporation by (1) the Chairman or Vice Chairman of the Board of Directors,
or the President or a Vice President, and (2) the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary, certifying the number of
shares owned by him in the Corporation. If such certificate is countersigned
(1) by a transfer agent other than the Corporation or its employee, or (2) by a
registrar other than the Corporation or its employee, the signatures of the
officers of the Corporation may be facsimiles. In case any officer who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer at the
date of issue.

SECTION 5-2. DETERMINATION OF STOCKHOLDERS OF RECORD. The Board of
Directors may fix in advance a record date to determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend, or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action. Such date shall be not more than sixty (60) nor less than
ten (10) days before the date of any such meeting, nor more than sixty (60) days
prior to any other action. If no record date is fixed, the record date for
determining stockholders entitled to notice of or to vote at a

<PAGE>

meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held, and the record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjournment meeting.

SECTION 5-3. TRANSFER OF SHARES. Transfer of shares shall be made
on the books of the Corporation only upon surrender of the share certificate,
duly endorsed and otherwise in proper form for transfer, which certificate shall
be canceled at the time of the transfer. No transfer of shares shall be made on
the books of this Corporation if such transfer is in violation of a lawful
restriction noted conspicuously on the certificate.

SECTION 5-4. LOST SHARE CERTIFICATES. Unless waived in whole or in
part by the Board of Directors from time to time, any person requesting the
issuance of a new certificate in lieu of an alleged lost, destroyed, mislaid or
wrongfully taken certificate, shall (1) make an affidavit or affirmation of the
facts and circumstances surrounding the same; (2) advertise such facts to the
extent and in the manner the Board of Directors may require; and (3) give to the
Corporation his bond of indemnity with an acceptable surety. Thereupon a new
share certificate shall be issued in lieu of the alleged lost, destroyed,
mislaid or wrongfully taken certificate, provided that the request therefor has
been made before the Corporation has notice that such shares have been acquired
by a bona fide purchaser.

ARTICLE VI - NOTICES

SECTION 6-1. CONTENTS OF NOTICE. Whenever any notice of a meeting
is required to be given pursuant to these By-laws or the Certificate of
ncorporation or otherwise, the notice shall specify the place, date and hour of
the meeting and, in the case of a special meeting or where otherwise required by
law, the general nature of the business to be transacted at such meeting.

SECTION 6-2. METHOD OF NOTICE. All notices shall be given to each
person entitled thereto, either personally or by sending a copy thereof through
the mail or by telegraph, charges prepaid, to his address as it appears on the
records of the Corporation, or supplied by him to the Corporation for the
purpose of notice. If notice is sent by mail or telegraph, it shall be deemed
to have been given to the person entitled thereto when deposited in the United
States Mail or with the telegraph office for transmission. If no address for a
stockholder appears on the books of the Corporation and such stockholder has not
supplied the Corporation with an address for the purpose of notice, notice
deposited in the United States

<PAGE>

Mail addressed to such stockholder care of General Delivery in the city in which
the principal office of the Corporation is located shall be sufficient.

SECTION 6-3. WAIVER OF NOTICE. Whenever notice is required to be
given under any provision of law or of the Certificate of Incorporation or By-
laws of the Corporation, a written waiver thereof, signed by the person entitled
to notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting of stockholders or
Directors shall constitute a waiver of notice of such meeting, except when the
stockholder or Director attends a meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
stockholders or Directors need be specified in any written waiver of notice
unless so required by the Certificate of Incorporation.

ARTICLE VII - INDEMNIFICATION OF DIRECTORS AND
OFFICERS AND OTHER PERSONS

SECTION 7-1. INDEMNIFICATION. The Corporation shall indemnify any
Director or officer of the Corporation against expenses (including legal fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him, to the fullest extent now or hereafter permitted by law in connection
with any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, brought or threatened to be
brought against him by reason of his performance as a Director or officer of the
Corporation, its parent or any of its subsidiaries, or in any other capacity on
behalf of the Corporation, its parent or any of its subsidiaries.

The Board of Directors by resolution adopted in each specific instance
may similarly indemnify any person other than a Director or officer of the
Corporation for liabilities incurred by him in connection with services rendered
by him for or at the request of the Corporation, its parent or any of its
subsidiaries.

The provisions of this section shall be applicable to all actions, suits or
proceedings commenced after its adoption, whether such arise out of acts or
omissions which occurred prior to subsequent to such adoption and shall continue
as to a person who has ceased to be a Director or officer or to render services
for or at the request of the Corporation and shall inure to the benefit of the
heirs, executors and administrators of such a person. The rights of
indemnification provided for herein shall not be deemed the exclusive rights to
which any Director, officer, employee or agent of the Corporation may be
entitled.

<PAGE>

SECTION 7-2. ADVANCES. The Corporation may pay the expenses
incurred by any person entitled to be indemnified by the Corporation in
defending a civil or criminal action, suit or proceeding in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking,
by or on behalf of such person, to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized by law.

SECTION 7-3. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a Director or officer, employee
or agent, of the Corporation or who is or was serving in any capacity in any
other corporation or organization at the request of the Corporation against any
liability asserted against him or incurred by him in any such capacity or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under law.

ARTICLE VIII - SEAL

SECTION 8-1. The form of the seal of the Corporation,
called the corporate seal of the Corporation, shall be as [Form of seal]
impressed adjacent hereto.

ARTICLE IX - FISCAL YEAR

SECTION 9-1. The board of Directors shall have the power by
resolution to fix the fiscal year of the Corporation. If the board of Directors
shall fail to do so, the President shall fix the fiscal year.

ARTICLE X - AMENDMENTS

SECTION 10-1. Unless otherwise expressly provided in these By-laws,
these By-laws may be altered or repealed or new By-laws adopted (a) by the
stockholders entitled to vote thereon, by a majority of those voting, at any
regular or special meeting, or (b) if the Certificate of Incorporation so
provides, by the Board of Directors, by a majority of those voting, at any
regular or special meeting.

ARTICLE XI - INTERPRETATION OF BY-LAW

SECTION 11-1. All words, terms and provisions of these By-laws shall
be interpreted and defined by and in accordance with the General Corporation Law
of the State of Delaware, as amended, and as amended from time to time
hereafter.

<PAGE>

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

DATED AS OF DECEMBER 12, 1995

BETWEEN

UNITEL VIDEO, INC.,

AS BORROWER,

AND

R SQUARED, INC.,

AS CORPORATE GUARANTOR

AND

HELLER FINANCIAL, INC.,

AS AGENT AND AS LENDER

<PAGE>

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is dated as of
December 12, 1995 and entered into among UNITEL VIDEO, INC., a Delaware
corporation ("Borrower"), with its principal place of business at 515 West 57
Street, New York, New York 10019, R SQUARED, INC., a California corporation ("R
Squared") with its principal place of business at 3330 Cahuenga Boulevard West,
Los Angeles, California 90068, the financial institutions listed on the
signature pages hereof and their respective successors and assigns (each
individually a "Lender" and collectively "Lenders") and HELLER FINANCIAL, INC.,
a Delaware corporation (in its individual capacity, "Heller"), with offices at
500 West Monroe, Chicago, Illinois 60661, for itself as a Lender and as Agent.
All capitalized terms used herein are defined in Section 1 of this Agreement.

WHEREAS, pursuant to an Assignment of Loans, Liens and Loan Documents
dated the date hereof (the "Assignment Agreement") among each Loan Party, The
Chase Manhattan Bank, N.A. ("Chase"), Chemical Bank ("Chemical") and Heller
(the "Assignment Agreement"), each of Chase and Chemical (each, a "Bank" and
collectively, "Banks") sold and assigned to Heller its rights and obligations
under an Amended and Restated Credit Agreement and Guaranty dated May 6, 1992
among Borrower, R Squared, each Bank, Chase as collateral agent for Banks and
Chemical as revolving credit agent for Banks, the Amended and Restated
Security Agreement dated May 6, 1992 made by Borrower to Banks (each as
previously amended and supplemented from time to time, the "Prior Credit
Agreements") and all other documents, instruments and agreements executed in
connection therewith and all rights appurtenant thereto (other than any
mortgage related indebtedness owed to each Bank under the Prior Credit
Agreements) (the "Assigned Documents"); and

WHEREAS, Chase shall retain mortgage related indebtedness under the Prior
Credit Agreement of Four Million Dollars ($4,000,000)(the "Chase Indebtedness");
and

WHEREAS, the Prior Credit Agreements shall be bifurcated on the Closing
Date such that the rights and obligations of the Loan Parties, Agent and Lenders
(each as defined herein) with respect to the Assigned Documents shall be
governed by the terms and provisions of this Agreement and the Chase
Indebtedness shall be governed by the terms and provisions of a Second Amended
and Restated Credit Agreement dated the date hereof between Borrower and Chase;
and

WHEREAS, Borrower desires that Lenders extend a credit facility to (i)
refinance Borrower's existing senior debt, (ii) provide working capital
financing and (iii) provide funds for other general corporate purposes; and

WHEREAS, Borrower desires to secure its obligations under the Loan
Documents by granting to Agent, for the benefit of Lenders, a security interest
in and lien upon certain of Borrower's property; and

-1-

<PAGE>

WHEREAS, R Squared (the "Corporate Guarantor") is willing to guaranty all
of the obligations of Borrower to Agent and Lenders under the Loan Documents and
to grant to Agent, for the benefit of Lenders, a security interest in certain of
its property to secure its guaranty;

NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Borrower, Corporate Guarantor, Agent
and Lenders agree as follows:

SECTION 1. DEFINITIONS.

1.1 CERTAIN DEFINED TERMS. The following terms used in this Agreement
shall have the following meanings:

"Accounts" means, all "accounts" (as defined in the UCC), accounts
receivable, contract rights and general intangibles relating thereto, notes,
drafts and other forms of obligations owed to or owned by the applicable Loan
Party arising or resulting from the sale of goods or the rendering of services.

"Affiliate" means any Person (other than Agent or Lender): (a) directly or
indirectly controlling, controlled by, or under common control with, Borrower;
(b) directly or indirectly owning or holding five percent (5%) or more of any
equity interest in Borrower; or (c) five percent (5%) or more of whose voting
stock or other equity interest is directly or indirectly owned or held by
Borrower. For purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with") means the possession directly or indirectly of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities or by contract or otherwise.

"Agent" means Heller in its capacity as agent for the Lenders under the
Loan Documents and any successor in such capacity appointed pursuant to
subsection 9.1.

"Agent's Account" means ABA No. 0710-0001-3, Account No. 55-35158 at First
National Bank of Chicago, One First National Plaza, Chicago, IL 60670,
Reference: Heller Business Credit for the benefit of Unitel Video, Inc.

"Agent's Depository Account" has the meaning assigned to that term in
subsection 5.6.

"Agreement" means this Loan and Security Agreement as it may be amended,
supplemented or otherwise modified from time to time.

"Amended and Restated Revolving Note" means the promissory note of
Borrower in substantially the form of Exhibit 2.1(E), issued pursuant to
subsection 2.1(E).

"Amended and Restated Term Note" or "Amended and Restated Term Notes" means
each promissory note of Borrower in substantially the form of Exhibits 2.1(A)(1)
and (A)(2), issued pursuant to subsection 2.1(A).

"Appraised Assets" means Borrower's fixed assets as identified in the Fixed
Asset Appraisal.

<PAGE>

"Asset Disposition" means the disposition, whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise, of any or all of
the assets of Borrower or any of its Subsidiaries.

"Assignment Agreement" has the meaning assigned to that term in the
preamble to this Agreement.

"Assigned Documents" has the meaning assigned to that term in the Preamble
to this Agreement.

"Assigned Financing Statements" means the UCC-3 Assignments identified on
Schedule 1.1(D).

"Assigned Landlord Waivers" means the landlord waivers identified on
Schedule 1.1(E).

"Assigned Motor Vehicle Title Certificates" means the motor vehicle title
certificates identified on Schedule 1.1(F).

"Assigned Notes" means the Amended and Restated Revolving Credit Note
dated March 14, 1994 made by Borrower to Chemical in the original principal
amount of $5,000,000, the Amended and Restated Term Loan Note dated May 18,
1992 made by Borrower in favor of Chemical in the original principal amount
of $7,203,899.70, the Substitution and Replacement Note dated December 12,
1995 made by Borrower in favor of Chemical in the original principal amount of
$3,691,666.70, the Amended and Restated Revolving Credit Note dated March 14,
1994 made by Borrower in favor of Chase in the original principal amount of
$5,000,000 and the Amended and Restated Term Loan Note dated May 18, 1992
made by Borrower in favor of Chase in the original principal amount of
$8,307,648.27.

"Bank Letters of Credit" means letters of credit issued by a bank for the
account of Borrower and supported by a Risk Participation Agreement.

"Banks" has the meaning assigned to that term in the preamble to this
Agreement.

"Base Rate" means a variable rate of interest per annum equal to the higher
of (a) the rate of interest from time to time published by the Board of
Governors of the Federal Reserve System as the "Bank Prime Loan" rate in Federal
Reserve Statistical Release H.15(519) entitled "Selected Interest Rates" or any
successor publication of the Federal Reserve System reporting the Bank Prime
Loan rate or its equivalent, or (b) the Federal Funds Effective Rate. The
statistical release generally sets forth a Bank Prime Loan rate for each
Business Day. In the event the Board of Governors of the Federal Reserve
System ceases to publish a Bank Prime Loan rate or its equivalent, the term
"Base Rate" shall mean a variable rate of interest per annum equal to the
highest of the "prime rate", "reference rate", "base rate", or other similar
rate announced from time to time by any of Bankers Trust Company, The Chase
Manhattan Bank, National Association or Chemical Bank, or their successors
(with the understanding that any such rate may merely be a reference rate and
may not necessarily represent the lowest or best rate actually charged to any
customer by any such bank).

"Base Rate Loans" means Loans bearing interest at rates determined by
reference to the Base Rate.

"Borrower" has the meaning assigned to that term in the preamble to this
Agreement.

"Borrowing Base" has the meaning assigned to that term in subsection
2.1(B).

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<PAGE>

"Borrowing Base Certificate" means a certificate and assignment schedule
duly executed by an officer of Borrower appropriately completed and in
substantially the form of Exhibit 1.1(A).

"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of Illinois, New York or
Pennsylvania or for the purposes of LIBOR Rate Loans only, London, England or is
a day on which banking institutions located in any such state or city are
closed.

"Capital Expenditures" means all expenditures (including deposits) for, or
contracts for expenditures (excluding contracts for expenditures under or with
respect to Capital Leases, but including cash down payments for assets acquired
under Capital Leases) with respect to any fixed assets or improvements, or for
replacements, substitutions or additions thereto, which have a useful life of
more than one year, including the direct or indirect acquisition of such assets
by way of increased product or service charges, offset items or otherwise.

"Capital Lease" means any lease of any property (whether real, personal or
mixed) that, in conformity with GAAP, should be accounted for as a capital
lease.

"Cash Equivalents" means: (a) marketable direct obligations issued or
unconditionally guarantied by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within six (6) months from the date of acquisition thereof;
(b) commercial paper maturing no more than six (6) months from the date issued
and, at the time of acquisition, having a rating of at least A-1 from Standard &
Poor's Corporation or at least P-1 from Moody's Investors Service, Inc.; and (c)
certificates of deposit or bankers' acceptances maturing within six (6) months
from the date of issuance thereof issued by, or overnight reverse repurchase
agreements from, any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $250,000,000 and not subject to
setoff rights in favor of such bank.

"Change of Control" means any person or group of persons acting in concert
(in each case excluding officers or directors of Borrower on the Closing Date)
holds more than fifty percent (50%) of the outstanding common stock of Borrower.

"Chase" means The Chase Manhattan Bank, N.A. or its successor.

"Chase Mortgage Documentation" means the Mortgage Consolidation and
Modification Agreement dated the Closing Date between Borrower and Chase, the
Second Amended and Restated Credit Agreement dated the Closing Date between
Borrower and Chase, the Consolidated Term Loan Mortgage dated the Closing Date
between Borrower and Chase and the Note Consolidation and Modification Agreement
dated the Closing Date between Borrower and Chase.

"Chicago Lease" means the Indenture dated April 16, 1987 between La Salle
National Trust, N.A. (as successor trustee to La Salle National Bank), as
trustee under Trust No. 52082, as landlord and Borrower (as assignee of Scanline
Communications), as tenant, related to the premises

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<PAGE>

located at 301 East Erie Street, Chicago, Illinois, as amended, modified,
restated or supplemented from time to time.

"Closing Certificate" means a certificate duly executed by the chief
executive officer or chief financial officer of Borrower appropriately completed
and in substantially the form of Exhibit 1.1(B).

"Closing Date" means December 12, 1995.

"Closing Date Fee Letter" means the letter agreement by and between
Borrower and Heller dated the Closing Date pursuant to which Borrower agrees to
pay to Heller certain fees on the Closing Date in connection with the
transactions contemplated by this Agreement.

"Collateral" has the meaning assigned to that term in subsection 2.7.

"Commitment" or "Commitments" means the commitment or commitments of
Lenders to make Loans as set forth in subsections 2.1(A) and/or 2.1(B) and to
provide Lender Letters of Credit as set forth in Subsection 2.1(G).

"Compliance Certificate" means a certificate duly executed by the chief
executive officer or chief financial officer of Borrower appropriately completed
and in substantially the form of Exhibit 1.1(C).

"Consulting Agreements" means (a) the Consulting Agreement dated as of
November 13, 1995 between Borrower and Joseph DiBuono, (b) the Employment and
Consulting Agreement dated September 1, 1998 between Borrower and Herbert Bass,
(c) the Employment and Consulting Agreement dated July 19, 1995 between Borrower
and John Hoffman and (d) the Employment and Consulting Agreement dated September
1, 1998 between Borrower and Alex Geisler, each as in effect on the Closing
Date.

"Corporate Guarantor" has the meaning assigned to that term in the preamble
to this Agreement.

"Corporate Guaranty" means the continuing guaranty made by the Corporate
Guarantor in favor of Agent in substantially the form of Exhibit 1.1(D), as such
agreement may hereafter be amended, restated, supplemented or otherwise modified
from time to time.

"Default" means a condition or event that, after notice or lapse of time or
both, would constitute an Event of Default if that condition or event were not
waived in writing, cured or removed within any applicable grace or cure period.

"Default Rate" has the meaning assigned to that term in
subsection 2.2(A)(iv).

"EBITDA" means, for any period, without duplication, the total of the
following for Borrower and its Subsidiaries on a consolidated basis, each
calculated for such period: (1) net income determined in accordance with GAAP;
PLUS, to the extent included in the calculation of net

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<PAGE>

income, (2) the sum of (a) income and franchise taxes paid or accrued; (b)
Interest Expenses, net of interest income, paid or accrued; (c) interest paid in
kind; (d) amortization (including, without limitation, amortization of fees and
costs with respect to transactions contemplated hereunder on the Closing Date
which have been capitalized as transaction costs) and depreciation and (e) other
non-cash charges (excluding accruals for cash expenses made in the ordinary
course of business); LESS, to the extent included in the calculation of net
income, (3) the sum of (a) the income of any Person (other than wholly-owned
Subsidiaries of Borrower) in which Borrower or a wholly owned Subsidiary of
Borrower has an ownership interest unless such income is received by Borrower or
such wholly owned Subsidiary in a cash distribution; (b) gains or losses from
sales or other dispositions of assets; and (c) extraordinary or non-recurring
gains, but not net of extraordinary or non-recurring "cash" losses; PROVIDED,
HOWEVER, for purposes of calculating Borrower's compliance with the financial
covenants set forth in Section 6 solely as respects Borrower's 1996 Fiscal Year,
the Impairment Add Back Amount shall be included as a positive addition in the
calculation of EBITDA.

"Eligible Accounts" has the meaning assigned to that term in subsection
2.1(C).

"Employee Benefit Plan" means any employee benefit plan within the meaning
of Section 3(3) of ERISA which (a) is maintained for employees of any Loan Party
or any ERISA Affiliate or (b) has at any time within the preceding six (6) years
been maintained for the employees of any Loan Party or any current or former
ERISA Affiliate.

"Environmental Claims" means claims, liabilities, investigations,
litigation, administrative proceedings, judgments or orders relating to
Hazardous Materials.

"Environmental Laws" means any applicable present or future federal, state
or local law, rule, regulation or order relating to pollution, waste, disposal
or the protection of human health or safety, plant life or animal life, natural
resources or the environment.

"Equipment" means all "equipment" (as defined in the UCC), including,
without limitation, all machinery, motor vehicles, trucks, trailers, vessels,
fixtures, aircraft and rolling stock and all parts thereof and all additions and
accessions thereto and replacements therefor.

"Equipment Report" means a report duly certified by an officer of Borrower
appropriately completed and in substantially the form of Exhibit 1.1(E).

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute and all rules and
regulations promulgated thereunder.

"ERISA Affiliate", as applied to any Loan Party, means any Person who is a
member of a group which is under common control with any Loan Party, who
together with any Loan Party is treated as a single employer within the meaning
of Section 414(b) and (c) of the IRC.

"ESOP Agreements" means the Unitel Video, Inc. Employee Stock Ownership
Trust Agreement, dated as of May 8, 1987 between Borrower and the trustees named
therein, the ESOP

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<PAGE>

Guaranty, the ESOP Loan Agreement, as amended, dated as of May 13, 1987 between
the trustees named therein and Chase, and the ESOP Mortgage.

"ESOP Guaranty" means the Guarantee and Contingent Purchase Agreement dated
as of May 13, 1987, as amended, between Borrower and Chase.

"ESOP Mortgage" means the Mortgage dated as of June 5, 1987 of the New York
City Industrial Development Agency and Borrower to Chase, as amended, relating
to the ESOP Obligations.

"ESOP Obligations" means any and all amounts payable to Chase pursuant to
the ESOP Agreements.

"Event of Default" means each of the events set forth in subsection 8.1.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Federal Funds Effective Rate" means, for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the
immediately following Business Day by the Federal Reserve Bank of New York or,
if such rate is not published for any Business Day, the average of the
quotations for the day of the requested Loan received by Agent from three
Federal funds brokers of recognized standing selected by Agent.

"Fiscal Year" means each twelve month period ending on the last day of
August in each year.

"Fixed Asset Appraisal" means the appraisal of Borrower's fixed assets
dated August 1995, prepared by Philip Pollack and Company, Inc.

"Fixed Charge Coverage" means, for any period, Operating Cash Flow divided
by Fixed Charges.

"Fixed Charges" means, for any period, and each calculated for such period
(without duplication), (a) Interest Expenses paid or accrued by Borrower and its
Subsidiaries; PLUS (b) scheduled payments of principal with respect to all
Indebtedness of Borrower and its Subsidiaries (other than scheduled principal
payments under Term Loan B); PLUS (c) any provision for (to the extent it is
greater than zero) income or franchise taxes included in the determination of
net income, excluding any provision for deferred taxes; PLUS (d) Restricted
Junior Payments made in cash to the extent permitted under subsection 7.5(b)
plus (e) payment of deferred taxes accrued in any prior period.

"Fixed Rate Loan" means at any time that portion of the Loans other than
LIBOR Rate Loans bearing interest at a fixed rate.

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<PAGE>

"Funding Date" means the date of each funding of a Loan or issuance of a
Lender Letter of Credit.

"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination.

"Good Faith Contest" means the contest of an item if: (1) the item is
contested in good faith and diligently pursued, including, if required, by
appropriate proceedings timely instituted and (2) adequate reserves against
availability are established under the Revolving Loan with respect to the
contested item.

"Hazardous Material" means all or any of the following: (a) substances that
are regulated or governed by or pursuant to any Environmental Laws or
regulations; (b) oil, petroleum or petroleum derived substances, natural gas,
natural gas liquids or synthetic gas and drilling fluids, produced waters and
other wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources; (c) any flammable substances or
explosives or any radioactive materials; and (d) asbestos in any form or
electrical equipment which contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty parts per million.

"Heller" has the meaning assigned to that term in the preamble to this
Agreement.

"Impairment Add Back Amount" means an amount equal to the sum of (1) the
lesser of (a) $1,000,000 and (b) the actual cost incurred by Borrower in
connection with its buy-out of the Chicago Lease, (2) the lesser of (a) $200,000
and (b) the actual employee severance pay costs incurred by Borrower in
connection with its permanent cessation of its Editel-Chicago division and (3)
the lesser of (a) $500,000 and (b) the actual employee severance pay costs
incurred by Borrower in connection with its permanent cessation of its Editel
New York division.

"Indebtedness", as applied to any Person, means without duplication: (a)
all indebtedness for borrowed money; (b) obligations under leases which in
accordance with GAAP constitute Capital Leases; (c) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money; (d) any obligation owed for all or any part of
the deferred purchase price of property or services if the purchase price is due
more than six months from the date the obligation is incurred or is evidenced by
a note or similar written instrument; and (e) all indebtedness secured by any
Lien on any property or asset owned or held by that Person regardless of whether
the indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person.

"Intangible Assets" means all intangible assets (determined in conformity
with GAAP) including, without limitation, goodwill, trademarks, tradenames,
licenses, organizational costs, deferred amounts, covenants not to compete,
unearned income and restricted funds.

"Intellectual Property" means all present and future designs, patents,
patent rights and applications therefor, trademarks and registrations or
applications therefor, trade names, inventions,

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<PAGE>

copyrights and all applications and registrations therefor, software or computer
programs, license rights, trade secrets, methods, processes, know-how, drawings,
specifications, descriptions, and all memoranda, notes and records with respect
to any research and development, whether now owned or hereafter acquired, all
goodwill associated with any of the foregoing, and proceeds of all of the
foregoing, including, without limitation, proceeds of insurance policies
thereon.

"Interest Expenses" means, without duplication, for any period, the
following, for Borrower and its Subsidiaries each calculated for such period:
interest expenses deducted in the determination of net income (excluding (i) the
amortization of fees and costs with respect to the transactions contemplated
hereunder on the Closing Date which have been capitalized as transaction costs;
and (ii) interest paid in kind).

"Interest Period" has the meaning assigned to that term in subsection
2.2(B).

"Interest Rate" has the meaning assigned to that term in subsection 2.2(A).

"Inventory" means all "inventory" (as defined in the UCC), including,
without limitation, finished goods, raw materials, work in process and other
materials and supplies used or consumed in a Person's business, and goods which
are returned or repossessed.

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

"Lender" or "Lenders" has the meaning assigned to that term in the preamble
to this Agreement.

"Lender Addition Agreement" means an agreement among Agent, a Lender and
such Lender's assignee regarding their respective rights and obligations with
respect to assignments of the Loans, the Commitments and other interests under
this Agreement and the other Loan Documents substantially in the form of Exhibit
1.1(F).

"Lender Letter of Credit" has the meaning assigned to that term in
subsection 2.1(G).

"Letter of Credit Liability" means, all reimbursement and other liabilities
of Borrower or any of its Subsidiaries with respect to each Lender Letter of
Credit, whether contingent or otherwise, including, without duplication (a) the
amount available to be drawn or which may become available to be drawn; (b) all
amounts which have been paid or made available by the issuing bank to the extent
not reimbursed; and (c) all unpaid interest, fees and expenses.

"Letter of Credit Reserve" means, at any time, an amount equal to (a) the
aggregate amount of Letter of Credit Liability with respect to all Lender
Letters of Credit outstanding at such time plus, without duplication (b) the
aggregate amount theretofore paid by Agent or any Lender under Lender Letters of
Credit and not debited to the Loan Account pursuant to subsection 2.1(G)(2) or
otherwise reimbursed by Borrower.

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<PAGE>

"Leverage Ratio" means for any period: the ratio of (a) Indebtedness for
borrowed money for Borrower and its Subsidiaries (exclusive of the then
outstanding Revolving Loan amount) to (b) EBITDA.

"Liabilities" shall have the meaning given that term in accordance with
GAAP and shall include Indebtedness.

"LIBOR Rate" means, for each Interest Period, a rate of interest equal to:

(a) the rate of interest determined by Agent at which deposits in Dollars
for the relevant Interest Period are offered based on information presented on
the Reuters Screen LIBOR Page as of 11:00 A.M. (London time) on the day which is
two (2) Business Days prior to the first day of such Interest Period; provided
that if at least two such offered rates appear on the Reuters Screen LIBOR Page
in respect of such Interest Period, the arithmetic mean of all such rates (as
determined by Agent) will be the rate used; provided further that if Reuters
ceases to provide LIBOR quotations, such rate shall be the average rate of
interest determined by Agent at which deposits in Dollars are offered for the
relevant Interest Period by Bankers Trust Company, Chase Manhattan Bank, N.A.
and Chemical Bank, or their successors, (or their respective successors) to
prime banks in the London interbank market as of 11:00 A.M. (London time) on the
applicable interest rate determination date, divided by

(b) a number equal to 1.0 minus the aggregate (but without duplication) of
the rates (expressed as a decimal fraction) of reserve requirements in effect on
the day which is two (2) Business Days prior to the beginning of such Interest
Period (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other governmental authority having jurisdiction with
respect thereto, as now and from time to time in effect) for Eurocurrency
funding (currently referred to as "Eurocurrency liabilities" in Regulation D of
such Board) which are required to be maintained by a member bank of the Federal
Reserve System:

(such rate to be adjusted to the nearest one sixteenth of one percent (1/16 of
1%) or, if there is not a nearest one sixteenth of one percent (1/16 of 1%), to
the next higher one sixteenth of one percent (1/16 of 1%).

"LIBOR Rate Loan" means at any time that portion of the Loans bearing
interest at rates determined by reference to the LIBOR Rate.

"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).

"Loan" or "Loans" means an advance or advances under the Term Loan
Commitment or the Revolving Loan Commitment.

"Loan Documents" means this Agreement, the Notes, the Corporate Guaranty,
the Subordinated Notes and all other instruments, documents and agreements
executed by or on behalf

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<PAGE>

of Borrower or any Loan Party and delivered concurrently herewith or at any time
hereafter to or for the benefit of Agent or any Lender in connection with the
Loans and other transactions contemplated by this Agreement, all as amended,
restated, supplemented or modified from time to time.

"Loan Party" means, collectively, Borrower and Corporate Guarantor.

"Loan Year" means each period of twelve (12) consecutive months commencing
on the Closing Date and on each anniversary thereof.

"Material Adverse Effect" means a material adverse effect upon (a) the
business, operations, prospects, properties, assets or condition (financial or
otherwise) of Borrower and Corporate Guarantor taken as a whole or (b) the
ability of any Loan Party to perform its obligations under any Loan Document to
which it is a party or of Agent or any Lender to enforce or collect any of the
Obligations.

"Maximum Revolving Loan Amount" has the meaning assigned to that term in
subsection 2.1(B).

"Mobile Units" means Borrower's mobile units described on Schedule 1.1(A).

"Net Worth" means, as of any date, the sum of the capital stock and
additional paid-in capital plus retained earnings (or minus accumulated deficit)
less unearned employee benefit expense and common stock held in treasury
calculated in conformity with GAAP.

"Notes" means the Amended and Restated Revolving Note and the Amended and
Restated Term Notes.

"Notice of Borrowing" has the meaning assigned to that term in subsection
2.1(D).

"Notice of Conversion/Continuation" has the meaning assigned to that term
in subsection 2.2(E).

"Obligations" means all obligations, liabilities and indebtedness of every
nature of each Loan Party from time to time owed to Agent or to any Lender under
the Loan Documents including the principal amount of all debts, claims and
indebtedness (whether incurred before or after the Termination Date), accrued
and unpaid interest and all fees, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from
time to time hereafter owing, due or payable.

"Operating Cash Flow" means, for any period, (a) EBITDA; LESS (b) Capital
Expenditures (exclusive of any portion of any Capital Expenditures (a) financed
by a Person other than Lenders as permitted hereby, (b) made from the cash
proceeds of an Asset Disposition not required herein to pay down any Term Loan
or (c) that consist of commitments or contracts to make Capital Expenditures
which have not created a cash obligation so long as such amount does not exceed
$500,000 in the aggregate at any time outstanding).

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<PAGE>

"Orderly Liquidation Value" means the orderly liquidation value of the
Appraised Assets as set forth in the Fixed Asset Appraisal, or Borrower's cost
of any fixed asset of Borrower or any of its Subsidiaries acquired after the
Closing Date, as applicable.

"Permitted Encumbrances" means the following types of Liens: (a) Liens
(other than Liens relating to Environmental Claims) for taxes, assessments or
other governmental charges not yet due and payable, or, if due and payable,
which are the subject of a Good Faith Contest; (b) statutory Liens of landlords,
carriers, warehousemen, mechanics, materialmen and other similar liens imposed
by law, which are incurred in the ordinary course of business for sums not more
than thirty (30) days delinquent or which are the subject of a Good Faith
Contest; (c) judgment and other similar Liens arising in connection with court
proceedings, provided the execution or enforcement of such Liens is effectively
stayed to the satisfaction of Agent and the claims secured thereby are the
subject of a Good Faith Contest; (d) Liens incurred or deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security, statutory
obligations, surety and appeal bonds, bids, leases, government contracts, trade
contracts, performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money); (e) easements,
rights-of-way, restrictions, and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the business of
any Loan Party or any of its Subsidiaries; (f) Liens for purchase money
obligations or a Lien incurred in connection with any conditional sale or other
title retention agreement, PROVIDED that (i) the purchase of the asset subject
to any such Lien is permitted under subsection 6.2, (ii) the Indebtedness
secured by any such Lien is permitted under subsection 7.1, and (iii) such Lien
encumbers only the asset so purchased; (g) Liens in favor of Agent, on behalf of
Lenders, and (h) Liens set forth on Schedule 1.1(B).

"Permitted Term Loan B Repayment Source" means Specified Fixed Asset
Dispositions, PROVIDED, HOWEVER, the aggregate Orderly Liquidation Value of
Appraised Assets sold or otherwise disposed of in such Specified Fixed Asset
Dispositions may not exceed the Threshold Amount.

"Permitted Subsidiaries" means Corporate Guarantor.

"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.

"Pro Forma" means the unaudited consolidated and consolidating balance
sheet of Borrower and its Subsidiaries as of the Closing Date after giving
effect to the transactions contemplated by this Agreement. The Pro Forma is
annexed hereto as Schedule 1.1(C).

"Pro Rata Share" means (a) with respect to matters relating to a particular
Commitment of a Lender, the percentage obtained by dividing (i) such Commitment
of that Lender by (ii) all such Commitments of all Lenders and (b) with respect
to all other matters, the percentage obtained by dividing (i) the Total Loan
Commitment of a Lender by (ii) the Total Loan Commitments of all Lenders, in
either case as such percentage may be adjusted by assignments permitted pursuant
to subsection 9.1; provided, however, for the purpose hereof, the amount of the
Commitment shall

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<PAGE>

be deemed to be the outstanding balance of the respective Loan after the
Commitment has been terminated.

"Projections" means Borrower's forecasted consolidated and consolidating:
(a) balance sheets; (b) profit and loss statements; (c) cash flow statements;
and (d) capitalization statements, all prepared on a division by division and
Subsidiary by Subsidiary basis and otherwise consistent with Borrower's
historical financial statements, together with appropriate supporting details
and a statement of underlying assumptions.

"Qualified Assets" means (a) until such time as Term Loan B shall have been
paid in full, Equipment used or usable in any of Borrower's divisions other than
the Specified Divisions, exclusive of costs which may be capitalized relative to
planning, installation, set up and similar costs, and (b) upon payment in full
of Term Loan B, Equipment used or usable in any of Borrower's divisions,
exclusive of costs which may be capitalized relative to planning, installation,
setup and similar costs, which such Qualified Assets in each case (i) have been
acquired by Borrower absent financing other than under this Agreement and (ii)
shall not be encumbered by any Liens other than those in favor of Agent.

"Requisite Lenders" means Lenders holding or being responsible for sixty
six and two thirds percent (66 2/3%) or more of the sum of (a) outstanding
Loans, (b) outstanding Letter of Credit Liability and (c) unutilized
Commitments.

"Restricted Junior Payment" means: (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Borrower
or any of its Subsidiaries now or hereafter outstanding, except a stock
dividend; (b) any payment or prepayment of principal of, premium, if any, or
interest on, or any redemption, conversion, exchange, retirement, defeasance,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any Subordinated Debt or any shares of any class of stock of
Borrower or any of its Subsidiaries now or hereafter outstanding; (c) any
payment made to retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire shares of any class of stock of Borrower or
any of its Subsidiaries now or hereafter outstanding; and (d) any payment by
Borrower or any of its Subsidiaries of any management fees or similar fees to
any Affiliate, whether pursuant to a management agreement or otherwise.

"Revolving Loan" means all advances made by Lenders pursuant to subsection
2.1(B) and any amounts added to the principal balance of the Revolving Loan
pursuant to this Agreement.

"Revolving Loan Commitment" means (a) as to any Lender, the commitment of
such Lender to make a portion of the Revolving Loan and to purchase
participations in Lender Letters of Credit pursuant to subsection 2.1(G) as set
forth on the signature page of this Agreement opposite such Lender's signature
or in the most recent Lender Addition Agreement, if any, executed by such Lender
and (b) as to all Lenders, the aggregate commitment of all Lenders to make the
Revolving Loan and to purchase participations in Lender Letters of Credit
pursuant to subsection 2.1(G).

"Risk Participation Agreement" has the meaning assigned to that term in
subsection 2.1(G).

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"Scheduled Installment of Term Loan A" has the meaning assigned to that
term in subsection 2.1(A)(1).

"Scheduled Installment of Term Loan B" has the meaning assigned to that
term in subsection 2.1(A)(2).

"Settlement Date" has the meanings assigned to that term in subsection
9.6(A)(2).

"Specified Divisions" means each of Borrower's Editel-Chicago division,
Editel-New York division, Editel-Los Angeles division and Windsor Video
division.

"Specified Fixed Asset Disposition" means the disposition, whether by sale,
lease, transfer, loss, damage, destruction, condemnation or otherwise, of any or
all of the fixed assets of a Specified Division, excluding any assets included
in such disposition which were not assets of such Specified Division as of
September 1, 1995.

"Subordinated Debt" means all Indebtedness owing by Borrower under the
Subordinated Notes.

"Subordinated Notes" means (1) the Non-Negotiable Promissory Note dated May
6, 1992 in the original principal amount of $2,500,000 made by Borrower in favor
of Scanline Communications (2) the Promissory Note dated February 24, 1995 in
the original principal amount of $87,900 made by Borrower in favor of Edward J.
Greene (assignee of Jee See and Co., Inc.), (3) the Promissory Note dated
February 24, 1995 in the original principal amount of $11,625 made by Borrower
in favor of Dwight A. Hemion (assignee of Jee See and Co., Inc.), (4) the
Promissory Note dated February 24, 1995 in the original principal amount of
$87,900 made by Borrower in favor of Sam Lovollo and Grace Lovollo (assignee of
Jee See and Co., Inc.), (5) Promissory Note dated February 24, 1995 in the
original principal amount of $35,175 made by Borrower in favor of David Nash and
Gertrude Nash (assignee of Jee See and Co., Inc.), (6) the Promissory Note dated
February 24, 1995 in the original principal amount of $21,975 made by Borrower
in favor of Stan Porter and Yvonne Porter (assignee of Jee See and Co., Inc.),
(7) the Promissory Note dated February 24, 1995 in the original principal amount
of $96,675 made by Borrower in favor of Nicholas E. Vanoff (assignee of Jee See
and Co., Inc.), (8) the Promissory Note dated February 24, 1995 in the original
principal amount of $121,575 made by Borrower in favor of Phyllis C. Vanoff,
Trustee of the Felissa Vanoff Revocable Trust (assignee of Jee See and Co.,
Inc.), (9) the Promissory Note dated February 24, 1995 in the original principal
amount of $3,525 made by Borrower in favor of Phyllis C. Vanoff, Trustee of the
Felissa Vanoff Revocable Trust (assignee of Jee See and Co., Inc.), (10) the
Promissory Note dated February 24, 1995 in the original principal amount of
$118,200 made by Borrower in favor of Phyllis C. Vanoff, Trustee of Marital
Trust B under The Vanoff Family Trust (assignee of Jee See and Co., Inc.), (11)
the Promissory Note dated February 24, 1995 in the original principal amount of
$65,925 made by Borrower in favor of Phyllis C. Vanoff, Trustee of the Flavio
Vanoff Irrevocable Trust (assignee of Jee See and Co., Inc.), (12) the
Promissory Note dated February 24, 1995 in the original principal amount of
$87,900 made by Borrower in favor of Keith Winikoff (assignee of Jee See and
Co., Inc.) and (13) the Promissory Note dated February 24, 1995 in the original
principal amount of $11,625 made by Borrower in favor of Gary Smith (assignee of
Jee See and Co., Inc.).

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"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than fifty percent (50%) of
the total voting power of shares of stock (or equivalent ownership or
controlling interest) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other subsidiaries of that Person or a combination thereof.

"Tangible Net Worth" means an amount equal to: (a) Net Worth; LESS (b)
Intangible Assets (excluding deferred tax assets); LESS (c) prepaid expenses;
LESS (d) all obligations owed to such Person by any Affiliate of such Person or
any of its Subsidiaries; and LESS (e) all loans by such Person to its officers,
stockholders or employees.

"Term Loans" means the advances made pursuant to subsections 2.1(A)(1) and
(A)(2).

"Term Loan A" means the advance made pursuant to subsection 2.1(A)(1).

"Term Loan B" means the advance made pursuant to subsection 2.1(A)(2).

"Term Loan Commitment" means (a) as to any Lender, the commitment of such
Lender to make a portion of the Term Loans in the amount set forth on the
signature page of this Agreement opposite such Lender's signature or in the most
recent Lender Addition Agreement, if any, executed by such Lender and (b) as to
all Lenders, the aggregate commitment of all Lenders to make the Term Loans.

"Termination Date" means the date this Agreement is terminated as set forth
in subsection 2.5.

"Threshold Amount" means $10,300,000.

"Total Loan Commitment" means the aggregate commitments of any Lender with
respect to the Revolving Loan Commitment and the Term Loan Commitment.

"UCC" means the Uniform Commercial Code as in effect on the date hereof in
the State of New York, as amended from time to time, and any successor statute.

"Undrawn Availability" means an amount equal to (a) the Maximum Revolving
Loan Amount MINUS (b) the outstanding Revolving Loans.

1.2 ACCOUNTING TERMS. For purposes of this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to such
terms in conformity with GAAP. Financial statements and other information
furnished to Agent or any Lender pursuant to subsection 5.1 shall be prepared in
accordance with GAAP (as in effect at the time of such preparation) on a
consistent basis. In the event any "Accounting Changes" (as defined below)
shall occur and such changes affect financial covenants, standards or terms in
this Agreement, then Borrower and Lenders agree to enter into negotiations in
order to amend such provisions of this Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for

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evaluating the financial condition of Borrower shall be the same after such
Accounting Changes as if such Accounting Changes had not been made, and until
such time as such an amendment shall have been executed and delivered by
Borrower and Requisite Lenders, (A) all financial covenants, standards and terms
in this Agreement shall be calculated and/or construed as if such Accounting
Changes had not been made, and (B) Borrower shall prepare footnotes to each
Compliance Certificate and the financial statements required to be delivered
hereunder that show the differences between the financial statements delivered
(which reflect such Accounting Changes) and the basis for calculating financial
covenant compliance (without reflecting such Accounting Changes). "Accounting
Changes" means: (a) changes in accounting principles required by GAAP and
implemented by Borrower; (b) changes in accounting principles recommended by
Borrower's certified public accountants; and (c) changes in carrying value of
Borrower's or any of its Subsidiaries' assets, liabilities or equity accounts
resulting from (i) the application of purchase accounting principles (A.P.B. 16
and/or 17 and EITF 88-16 and FASB 109) to the transactions contemplated by this
Agreement or (ii) any other adjustments that, in each case, were applicable to,
but not included in, the Pro Forma. All such adjustments resulting from
expenditures made subsequent to the Closing Date (including, but not limited to,
capitalization of costs and expenses or payment of pre-Closing Date liabilities)
shall be treated as expenses in the period the expenditures are made and
deducted as part of the calculation of EBITDA in such period.

1.3 OTHER DEFINITIONAL PROVISIONS. References to "Sections",
"subsections", "Exhibits" and "Schedules" shall be to Sections, subsections,
Exhibits and Schedules, respectively, of this Agreement unless otherwise
specifically provided. Any of the terms defined in subsection 1.1 may, unless
the context otherwise requires, be used in the singular or the plural depending
on the reference. In this Agreement, words importing any gender include the
other genders; the words "including," "includes" and "include" shall be deemed
to be followed by the words "without limitation"; references to agreements and
other contractual instruments shall be deemed to include subsequent amendments,
assignments, and other modifications thereto, but only to the extent such
amendments, assignments and other modifications are not prohibited by the terms
of this Agreement or any other Loan Document; references to Persons include
their respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include
any amendments of same and any successor statutes and regulations.

SECTION 2. LOANS AND COLLATERAL.

2.1 LOANS.

(A)(1) TERM LOAN A. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Borrower
herein set forth, each Lender, severally, agrees to lend to Borrower, on the
Closing Date, its Pro Rata Share of Term Loan A which is in the amount of
$7,500,000. Term Loan A shall be funded in one drawing. Amounts borrowed under
this subsection 2.1(A)(1) and repaid may not be reborrowed. Borrower shall make
principal payments in the amount of the applicable Scheduled Installment of Term
Loan A (or such lesser principal amount of Term Loan A as shall then be
outstanding) on the dates and in the amounts set forth below.

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"Scheduled Installment of Term Loan A" means each of the sixty (60)
consecutive monthly principal installments commencing on January 1, 1996 and
continuing on the first day of each month thereafter, the first fifty-nine (59)
of which shall, subject to the provisions of subsection 2.4(B), be in an amount
equal to $89,286 and the final installment due on December 12, 2000, or the
earlier to occur of (a) the Termination Date or (b) acceleration of the
Obligations in accordance with the provisions of subsection 8.3, in an amount
equal to the unpaid principal amount thereof plus accrued interest thereon.

(A)(2) TERM LOAN B. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Borrower
herein set forth, each Lender, severally, agrees to lend to Borrower on the
Closing Date its Pro Rata Share of Term Loan B which is in the amount of
$7,500,000. Term Loan B shall be funded in one drawing. Amounts borrowed under
this subsection 2.1(A)(2) and repaid may not be reborrowed. Borrower shall make
principal payments in the amounts of the applicable Scheduled Installments of
Term Loan B (or such lesser principal amount of Term Loan B as shall then be
outstanding) on the dates and in the amounts set forth below; PROVIDED, HOWEVER,
Borrower, unless Agent otherwise consents in writing, may only make principal
payments on Term Loan B from a Permitted Term Loan B Repayment Source.

"Scheduled Installment of Term Loan B" means each of the two (2) principal
installments each in an amount equal to $3,750,000, payable, subject to the
provisions of subsection 2.4(B), on or before August 31, 1996 and December 31,
1996, or the earlier to occur of (a) the Termination Date or (b) acceleration of
the Obligations in accordance with the provisions of subsection 8.3, in an
amount equal to the unpaid principal amount thereof plus accrued interest
thereon.

(B) REVOLVING LOAN. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Borrower
herein set forth, each Lender, severally, agrees to lend to Borrower from time
to time its Pro Rata Share of the Revolving Loan. The aggregate amount of all
Revolving Loan Commitments shall not exceed at any time $11,000,000. Amounts
borrowed under this subsection 2.1(B) may be repaid and reborrowed at any time
prior to the earlier of (i) the termination of the Revolving Loan Commitment
pursuant to subsection 8.3 or (ii) the Termination Date. Except as otherwise
provided herein, no Lender shall have any obligation to make advances under this
subsection 2.1(B) to the extent any requested advance would cause the balance of
the Revolving Loan then outstanding (after giving effect to any immediate
application of the proceeds thereof) to exceed the Maximum Revolving Loan
Amount.

(1) "Maximum Revolving Loan Amount" means, as of any date of
determination, the lesser of (a) the Revolving Loan Commitment minus the Letter
of Credit Reserve and (b) the Borrowing Base minus the Letter of Credit Reserve.

(2) "Borrowing Base" means, as of any date of determination, an
amount equal to (a) eighty-five percent (85%) of Eligible Accounts less (b) such
reserves as Agent in its reasonable discretion elects to establish.

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"Eligible Accounts" means, as at any date of determination, the
aggregate of all of Borrower's Accounts that Agent, in its reasonable judgment,
deems to be eligible for borrowing purposes. Without limiting the generality of
the foregoing, unless otherwise agreed by Agent, the following Accounts of
Borrower are not Eligible Accounts:

(1) Accounts which, at the date of issuance of the respective
invoice therefor, were payable more than sixty (60) days after the date of
issuance of such invoice;

(2) Accounts which remain unpaid for more than sixty (60) days
after the due date specified in the original invoice or for more than
ninety (90) days after invoice date if no due date was specified;

(3) Accounts which are otherwise eligible with respect to which
the account debtor is owed a credit by Borrower, but only to the extent of such
credit;

(4) Accounts due from a customer whose principal place of
business is located outside the United States of America or Canada unless such
Account is backed by a letter of credit, in form and substance acceptable to
Agent and issued or confirmed by a bank that is organized under the laws of the
United States of America or a State thereof, that is acceptable to Agent;
provided that such letter of credit has been delivered to Agent as additional
collateral;

(5) Accounts due from a customer which Agent has notified
Borrower does not have a satisfactory credit standing;

(6) Accounts with respect to which the customer is the United
States of America, any state or any municipality, or any department, agency or
instrumentality thereof unless Borrower has, with respect to such Accounts,
complied with the Federal Assignment of Claims Act (31 U.S.C. Section 3727) or
any applicable statute or municipal ordinance of similar purpose and effect;

(7) Accounts with respect to which the customer is an Affiliate
of Borrower or a director, officer, agent, stockholder or employee of Borrower
or any of its Affiliates;
(8) Accounts due from a customer if more than fifty percent
(50%) of the aggregate amount of Accounts of such customer have at the time
remained unpaid for more than sixty (60) days after due date or ninety (90) days
after the invoice date if no due date was specified;

(9) Accounts with respect to which there is any unresolved
dispute with the respective customer (but only to the extent of such dispute);

(10) Accounts evidenced by an "instrument" or "chattel paper" (as
defined in the UCC) not in the possession of Agent, on behalf of Lenders;

(11) Accounts with respect to which Agent, on behalf of Lenders,
does not have a valid, first priority and fully perfected security interest;

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(12) Accounts subject to any Lien except those in favor of Agent,
on behalf of Lenders;

(13) Accounts with respect to which the customer is the subject
of any bankruptcy or other insolvency proceeding;

(14) Accounts due from a customer to the extent that such
Accounts exceed in the aggregate an amount equal to twenty percent (20%) of the
aggregate of all Accounts at said date;

(15) Accounts with respect to which the customer's obligation to
pay is conditional or subject to a repurchase obligation or right to return or
with respect to which the goods or services giving rise to such Account have not
been delivered (or performed, as applicable) and accepted by such account
debtor, including progress billings, bill and hold sales, guarantied sales, sale
or return transactions, sales on approval or consignment sales;

(16) Accounts with respect to which the customer is located in
Indiana, New Jersey, Minnesota, or any other state denying creditors access to
its courts in the absence of a Notice of Business Activities Report or other
similar filing, unless Borrower has either qualified as a foreign corporation
authorized to transact business in such state or has filed a Notice of Business
Activities Report or similar filing with the applicable state agency for the
then current year; and

(17) Accounts with respect to which the customer is a creditor of
Borrower, PROVIDED, HOWEVER, that any such Account shall only be ineligible as
to that portion of such Account which is less than or equal to the amount owed
by Borrower to such Person.

(D) BORROWING MECHANICS. (1) LIBOR Rate Loans or Fixed Rate Loans
made on any Funding Date shall be in an aggregate minimum amount of $500,000 and
integral multiples of $100,000 in excess of such amount. (2) On any day when
Borrower desires to borrow under this subsection 2.1, Borrower shall give Agent
telephonic notice of the proposed borrowing by 11:00 a.m. Central time on the
Funding Date of a Base Rate Loan and two (2) Business Days in advance of the
Funding Date of a LIBOR Rate Loan or a Fixed Rate Loan, which notice (a "Notice
of Borrowing") must also specify the proposed Funding Date (which shall be a
Business Day), whether such Loans shall consist of Base Rate Loans, LIBOR Rate
Loans or Fixed Rate Loans and for LIBOR Rate Loans or Fixed Rate Loans the
Interest Period applicable thereto. Any such telephonic notice shall be
confirmed in writing on the same day. Neither Agent nor any Lender shall incur
any liability to Borrower for acting upon any telephonic notice Agent believes
in good faith to have been given by a duly authorized officer or other person
authorized to borrow on behalf of Borrower or for otherwise acting in good faith
under this subsection 2.1(D). Neither Agent nor any Lender will make any
advance pursuant to any telephonic notice unless Agent has also received the
most recent Borrowing Base Certificate and all other documents required under
subsection 5.1(F) by 11:00 a.m. Central time. Each advance made to Borrower
under the Revolving Loan shall be deposited by wire transfer in immediately
available funds in such account as Borrower may from time to time designate to
Agent in writing. Unless payment is otherwise timely made by Borrower, the
becoming due of any amount required to be paid under this Agreement or any of
the other Loan

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Documents as principal, accrued interest and fees shall be deemed irrevocably to
be a request by Borrower for a Base Rate Revolving Loan on the due date of, and
in the amount required to pay, such principal, accrued interest and fees, and
the proceeds of each such Revolving Loan if made by Agent or any Lender shall be
disbursed by Agent or such Lender by way of direct payment of the relevant
obligation.

(E) NOTES. Borrower shall execute and deliver to each Lender (i) an
Amended and Restated Term Note A and Amended and Restated Term Note B to
evidence such Lender's portion of the Term Loans, such Amended and Restated Term
Notes to be in the principal amount of the respective Term Loan Commitments of
such Lender and with other appropriate insertions and (ii) an Amended and
Restated Revolving Note to evidence such Lender's portion of the Revolving Loan,
such Amended and Restated Revolving Note to be in the principal amount of the
Revolving Loan Commitment of such Lender and with other appropriate insertions.
In the event of an assignment under subsection 9.1, Borrower shall, upon
surrender of the assigning Lender's Notes, issue new Notes to reflect the new
Commitments of the assigning Lender and its assignee (or in the case of the
Amended and Restated Term Notes, the outstanding principal amount of the
assigning Lender's and its assignee's portions of the Term Loans).

(F) EVIDENCE OF REVOLVING LOAN OBLIGATIONS. The advances
constituting the Revolving Loan shall be evidenced by this Agreement, the
Amended and Restated Revolving Note, and notations made from time to time by
Agent in its books and records, including computer records. Agent shall record
in its books and records, including computer records, the principal amount of
the Revolving Loans owing to each Lender from time to time. Agent's books and
records shall constitute presumptive evidence, absent manifest error, of the
accuracy of the information contained therein. Failure by Agent to make any
such notation or record shall not affect the obligations of Borrower to Lenders
with respect to the Revolving Loans.

(G) LETTERS OF CREDIT. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Borrower
herein set forth, the Revolving Loan Commitments may, in addition to advances
under the Revolving Loan, be utilized, upon the request of Borrower, for (i) the
issuance of letters of credit by Agent; or with Agent's consent any Lender, or
(ii) the issuance by Agent of risk participations (a "Risk Participation
Agreement") to banks to induce such banks to issue letters of credit for the
account of Borrower (each of (i) and (ii) above a "Lender Letter of Credit").
Each Lender shall be deemed to have purchased a participation in each Lender
Letter of Credit issued on behalf of Borrower in an amount equal to its Pro Rata
Share thereof. In no event shall any Lender Letter of Credit be issued to the
extent that the issuance of such Lender Letter of Credit would cause the sum of
the Letter of Credit Reserve (after giving effect to such issuance) plus the
outstanding principal balance of the Revolving Loan to exceed the lesser of (x)
the Borrowing Base and (y) the Revolving Loan Commitment.

(1) MAXIMUM AMOUNT. The aggregate amount of Letter of Credit
Liability with respect to all Lender Letters of Credit outstanding at any time
shall not exceed $2,000,000.

(2) REIMBURSEMENT. Borrower shall be irrevocably and
unconditionally obligated forthwith without presentment, demand, protest or
other formalities of any kind, to reimburse Agent or the issuer for any amounts
paid with respect to a Lender Letter of Credit including all fees, costs

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and expenses paid to any bank that issues Bank Letters of Credit. Borrower
hereby authorizes and directs Agent, at Agent's option, to debit Borrower's
account (by increasing the principal balance of the Revolving Loan) in the
amount of any payment made with respect to any Lender Letter of Credit. All
amounts paid with respect to any Lender Letter of Credit that are not
immediately repaid by Borrower with the proceeds of a Revolving Loan or
otherwise shall bear interest at the Default Rate applicable to Revolving Loans.
In the event that Borrower shall fail to reimburse Agent on the date of any
payment under a Lender Letter of Credit in an amount equal to the amount of such
payment, Agent shall promptly notify each Lender of the unreimbursed amount of
such payment together with accrued interest thereon and each Lender, on the next
Business Day, shall deliver to Agent an amount equal to its respective
participation in same day funds. The obligation of each Lender to deliver to
Agent an amount equal to its respective participation pursuant to the foregoing
sentence shall be absolute and unconditional and such remittance shall be made
notwithstanding the occurrence or continuation of an Event of Default or Default
or the failure to satisfy any condition set forth in Section 3. In the event any
Lender fails to make available to Agent the amount of such Lender's
participation in such Lender Letter of Credit, Agent shall be entitled to
recover such amount on demand from such Lender together with interest at the
Base Rate.

(3) CONDITIONS OF ISSUANCE. In addition to all other terms and
conditions set forth in this Agreement, the issuance of any Lender Letter of
Credit shall be subject to the conditions precedent that the letter of credit
which Borrower requests be in such form, be for such amount, contain such terms
and support such transactions as are reasonably satisfactory to Agent. The
expiration date of each Lender Letter of Credit shall be on a date which is at
least thirty (30) days prior to the Termination Date.

(4) REQUEST FOR LETTERS OF CREDIT. Borrower shall give Agent at
least three (3) Business Days prior notice specifying the date a Lender Letter
of Credit is to be issued, identifying the beneficiary and describing the nature
of the transactions proposed to be supported thereby. The notice shall be
accompanied by the form of the letter of credit being requested.

(H) OTHER LETTER OF CREDIT PROVISIONS.

(1) OBLIGATIONS ABSOLUTE. The obligation of Borrower to reimburse
Agent or any Lender for payments made under any Lender Letter of Credit shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances including the following
circumstances:

(a) any lack of validity or enforceability of any Lender Letter
of Credit or any other agreement;

(b) the existence of any claim, set-off, defense or other right
which Borrower, any of its Affiliates, Agent or any Lender, on the one hand, may
at any time have against any beneficiary or transferee of any Lender Letter of
Credit or Bank Letter of Credit (or any Persons for whom any such transferee may
be acting), Agent, any Lender or any other Person, on the other hand, whether in
connection with this Agreement, the transactions contemplated herein or any

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unrelated transaction (including any underlying transaction between Borrower or
any of its Affiliates and the beneficiary of the letter of credit);

(c) any draft, demand, certificate or any other document
presented under any Lender Letter of Credit or Bank Letter of Credit which is
forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;

(d) payment under any Lender Letter of Credit against
presentation of a demand, draft or certificate or other document which does not
comply with the terms of such letter of credit; provided that, in the case of
any payment by Lender under any Lender Letter of Credit, Lender has not acted
with gross negligence or willful misconduct (as determined by a court of
competent jurisdiction) in determining that the demand for payment under such
Lender Letter of Credit complies on its face with any applicable requirements
for a demand for payment under such Lender Letter of Credit;

(e) any other circumstance or happening whatsoever, which is
similar to any of the foregoing; or

(f) the fact that a Default or an Event of Default shall have
occurred and be continuing.

(2) NATURE OF LENDER'S DUTIES. As between Agent and Lenders, on the
one hand, and Borrower, on the other hand, Borrower assumes all risks of the
acts and omissions of, or misuse of any Lender Letter of Credit by the
beneficiary thereof. In furtherance and not in limitation of the foregoing,
neither Agent nor any Lender shall be responsible: (a) for the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document by any party
in connection with the application for and issuance of any Lender Letter of
Credit, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (b) for the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any Lender Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (c) for failure of the beneficiary of any
Lender Letter of Credit to comply fully with conditions required in order to
demand payment thereunder; provided that, in the case of any payment by Agent or
any Lender under any Lender Letter of Credit, Agent or Lender has not acted with
gross negligence or willful misconduct (as determined by a court of competent
jurisdiction) in determining that the demand for payment under such Lender
Letter of Credit complies on its face with any applicable requirements for a
demand for payment thereunder; (d) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (e) for errors in
interpretation of technical terms; (f) for any loss or delay in the transmission
or otherwise of any document required in order to make a payment under any
Lender Letter of Credit; (g) for the credit of the proceeds of any drawing under
any Lender Letter of Credit; and (h) for any consequences arising from causes
beyond the control of Agent or any Lender as the case may be. None of the above
shall affect, impair, or prevent the vesting of any of Agent's or any Lender's
rights or powers hereunder.

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(3) LIABILITY. In furtherance and extension of and not in limitation
of, the specific provisions herein above set forth, any action taken or omitted
by Agent or any Lender under or in connection with any Lender Letter of Credit,
if taken or omitted in good faith, shall not put Agent or any Lender under any
resulting liability to Borrower.

2.2 INTEREST.

(A) RATE OF INTEREST. (i) Subject to the provisions of subsections
(ii) and (iii) below, the Loans and all other Obligations shall bear interest
from the date such Loans are made or such other Obligations become due to the
date paid at a rate per annum equal to (x) in the case of Base Rate Loans, the
Base Rate plus (a) three-quarters of one percent (.75%) with respect to the
Revolving Loan, (b) one percent (1.00%) with respect to Term Loan A and (c) one
and one-quarter percent (1.25%) with respect to Term Loan B, (y) in the case of
LIBOR Rate Loans, the LIBOR Rate plus (a) two and one-half percent (2.50%) with
respect to the Revolving Loan, (b) two and three-quarters percent (2.75%) with
respect to Term Loan A and (c) three percent (3.00%) with respect to Term Loan B
and (z) a fixed rate determined in accordance with subsection (iii) below. (the
"Interest Rate"). The applicable basis for determining the rate of interest
shall be selected by Borrower initially at the time a notice of borrowing is
given pursuant to subsection 2.1(D). The basis for determining the interest
rate with respect to any Loan or a portion of any Loan may be changed from time
to time pursuant to subsection 2.2(E). If on any day a Loan or a portion of any
Loan is outstanding with respect to which notice has not been delivered to Agent
in accordance with the terms of this Agreement specifying the basis for
determining the rate of interest, then for that day that Loan or portion thereof
shall bear interest determined by reference to the Base Rate.

(ii) Notwithstanding the provisions of the foregoing subsection "(i)", so
long as no Default or Event of Default shall then be in existence, in the event
(a) Borrower's August 31, 1996 fiscal year-end audited financial statements (the
"1996 Year-End Financial Statements"), delivered to Agent in accordance with the
provisions of subsection 5.1(B) hereof, reflect an EBITDA of greater than
$16,000,000 and/or (b) Borrower's August 31, 1997 fiscal year-end audited
financial statements (the "1997 Year-End Financial Statements" and together with
the 1996 Year-End Financial Statements, collectively, the "Year-End Financial
Statements"), delivered to Agent in accordance with the provisions of subsection
5.1(B) hereof, reflect an EBITDA of greater than $20,000,000, then in each such
case, as applicable, Agent shall reduce the Interest Rates other than for any
Fixed Rate Loan by one-quarter of one percent (.25%) commencing on the fifth
(5th) Business Day following Agent's receipt of the applicable Year-End
Financial Statements (each, an "Adjustment Date"); PROVIDED, HOWEVER, in the
case of LIBOR Rate Loans, such adjusted rate shall only be effective for LIBOR
Rate Loans with Interest Periods commencing on or after the applicable
Adjustment Date.

(iii) So long as no Default or Event of Default shall then be in
existence, within ten (10) Business Days following Borrower's request therefor
to Agent, Agent on behalf of Lenders shall provide Borrower with a fixed rate of
interest quote in writing for, subject to the restrictions set forth in
Subsection 2.1(D), all or any part of the outstanding Loans (the "Quote"). The
Quote shall be determined by Lenders in good faith. In the event Borrower
elects to convert all or any portion of the Loans to a Fixed Rate Loan, it shall
provide Agent such election in writing by delivering to Agent a Notice of
Conversion/Continuation as defined in subsection 2.2(E) no later than 11:00 a.m.

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Central time on the Business Day following Borrower's receipt from Agent of the
Quote, which such written election shall be deemed Borrower's acceptance of the
Quote.

(iv) After the occurrence and during the continuance of an Event of Default
and notice thereof by Agent to Borrower (except that no notice shall be required
upon the occurrence of an Event of Default under subsection 8.1(G) or 8.1(H))
(i) the Loans and all other Obligations shall, at the option of Requisite
Lenders, bear interest at a rate per annum equal to two percent (2%) plus the
applicable Interest Rate (the "Default Rate"), (ii) each LIBOR Rate Loan shall
automatically convert to a Base Rate Loan at the end of any applicable Interest
Period and (iii) no Loans may be converted to LIBOR Rate Loans.

(B) INTEREST PERIODS. In connection with each LIBOR Rate Loan or
Fixed Rate Loan, Borrower shall elect an interest period (each an "Interest
Period") to be applicable to such Loan, which Interest Period for LIBOR Rate
Loans shall be either a one, two, three or six month period and for Fixed Rate
Loans shall be one month or any whole multiple thereof; provided that:

(1) the initial Interest Period for any Loan shall commence on
the Funding Date of such Loan;

(2) in the case of successive Interest Periods, each successive
Interest Period shall commence on the day on which the immediately preceding
Interest Period expires;

(3) if an Interest Period expiration date is not a Business Day,
such Interest Period shall expire on the next succeeding Business Day; provided
that if any Interest Period expiration date is not a Business Day but is a day
of the month after which no further Business Day occurs in such month, such
Interest Period shall expire on the immediately preceding Business Day;

(4) any Interest Period that begins on the last Business Day of
a calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall, subject to
part (5), below, end on the last Business Day of a calendar month;

(5) no Interest Period shall extend beyond the Termination Date;

(6) no Interest Period may extend beyond a scheduled principal
payout date unless the sum of (a) the aggregate principal amount of Loans that
are Base Rate Loans or that have Interest Periods expiring on or before such
date and (b) the available, unused Revolving Loan Commitment or Borrowing Base
equals or exceeds the principal amount required to be paid on the Loans on such
date; and

(7) there shall be no more than five (5) Interest Periods
relating to LIBOR Rate Loans or Fixed Rate Loans outstanding at any time.

(C) COMPUTATION AND PAYMENT OF INTEREST. Interest on the Loans and
all other Obligations shall be computed on the daily principal balance on the
basis of a 360 day year for the

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actual number of days elapsed in the period during which it accrues. In
computing interest on any Loan, the date of funding of the Loan or the first
day of an Interest Period applicable to such Loan or, with respect to a Base
Rate Loan being converted from a LIBOR Rate Loan or a Fixed Rate Loan, the date
of conversion of such LIBOR Rate Loan or such Fixed Rate Loan to such Base Rate
Loan, shall be included and the date of payment of such Loan or the expiration
date of an Interest Period applicable to such Loan, or with respect to a Base
Rate Loan being converted to a LIBOR Rate Loan or a Fixed Rate Loan, the date of
conversion of such Base Rate Loan to such LIBOR Rate Loan or such Fixed Rate
Loan, shall be excluded; provided that if a Loan is repaid on the same day on
which it is made, one day's interest shall be paid on that Loan. Interest on
Base Rate Loans and all other Obligations other than LIBOR Rate Loans shall be
payable to Agent for the benefit of Lenders monthly in arrears on the first day
of each month, on the date of any prepayment of Loans and at maturity, whether
by acceleration or otherwise. Interest on LIBOR Rate Loans shall be payable to
Agent for the benefit of Lenders on the last day of the applicable Interest
Period for such Loan, on the date of any prepayment of the Loans, and at
maturity, whether by acceleration or otherwise. In addition, for each LIBOR
Rate Loan having an Interest Period longer than three (3) months, interest
accrued on such Loan shall also be payable on the last day of each three (3)
month interval during such Interest Period.

(D) INTEREST LAWS. Notwithstanding any provision to the contrary
contained in this Agreement or any other Loan Document, Borrower shall not be
required to pay, and neither Agent nor any Lender shall be permitted to collect,
any amount of interest in excess of the maximum amount of interest permitted by
law ("Excess Interest"). If any Excess Interest is provided for or determined
by a court of competent jurisdiction to have been provided for in this Agreement
or in any other Loan Document, then in such event: (1) the provisions of this
subsection shall govern and control; (2) neither Borrower nor any Loan Party
shall be obligated to pay any Excess Interest; (3) any Excess Interest that
Agent or any Lender may have received hereunder shall be, at such Lender's
option, (a) applied as a credit against the outstanding principal balance of the
Obligations or accrued and unpaid interest (not to exceed the maximum amount
permitted by law), (b) refunded to the payor thereof, or (c) any combination of
the foregoing; (4) the interest rate(s) provided for herein shall be
automatically reduced to the maximum lawful rate allowed from time to time under
applicable law (the "Maximum Rate"), and this Agreement and the other Loan
Documents shall be deemed to have been and shall be, reformed and modified to
reflect such reduction; and (5) neither Borrower nor any Loan Party shall have
any action against Agent or any Lender for any damages arising out of the
payment or collection of any Excess Interest. Notwithstanding the foregoing, if
for any period of time interest on any Obligations is calculated at the Maximum
Rate rather than the applicable rate under this Agreement, and thereafter such
applicable rate becomes less than the Maximum Rate, the rate of interest payable
on such Obligations shall remain at the Maximum Rate until each Lender shall
have received the amount of interest which such Lender would have received
during such period on such Obligations had the rate of interest not been limited
to the Maximum Rate during such period.

CONVERSION OR CONTINUATION. Subject to the provisions of
subsection 2.2(A) Borrower shall have the option to (1) convert at any time all
or any part of outstanding Loans equal to $500,000 and integral multiples of
$100,000 in excess of that amount from Base Rate Loans to LIBOR Rate Loans or
Fixed Rate Loans or (2) upon the expiration of any Interest Period applicable to
a LIBOR Rate Loan or a Fixed Rate Loan to (a) continue or convert all or any
portion of such

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Loan equal to $500,000 and integral multiplies of $100,000 in excess of that
amount as a LIBOR Rate Loan or a Fixed Rate Loan or (b) convert all or any
portion of such Loan to a Base Rate Loan. The succeeding Interest Period(s) of
such continued or converted Loan commence on the last day of the Interest Period
of the Loan to be continued or converted; provided that no outstanding Loan may
be continued as, or be converted into, a LIBOR Rate Loan or a Fixed Rate Loan,
when any Event of Default or Default has occurred and is continuing.

Borrower shall deliver a notice of conversion/continuation to Agent no
later than noon (Central time) at least two (2) Business Days in advance of the
proposed conversion/ continuation date ("Notice of Conversion/Continuation"). A
Notice of Conversion/Continuation shall certify: (1) the proposed
conversion/continuation date (which shall be a Business Day); (2) the amount of
the Loan to be converted/continued; (3) the nature of the proposed
conversion/continuation; (4) in the case of conversion to, or a continuation
of, a LIBOR Rate Loan or a Fixed Rate Loan the requested Interest Period; and
(5) that no Default or Event of Default has occurred and is continuing or would
result from the proposed conversion/continuation.

In lieu of delivering the Notice of Conversion/Continuation, Borrower
may give Agent telephonic notice by the required time of any proposed
conversion/continuation under this subsection 2.2(E); provided that such notice
shall be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to Agent on or before the proposed
conversion/continuation date.

Neither Agent nor any Lender shall incur any liability to Borrower in
acting upon any telephonic notice referred to above that Agent believes in good
faith to have been given by a duly authorized officer or other person authorized
to act on behalf of Borrower or for otherwise acting in good faith under this
subsection 2.2(E) and upon conversion/continuation by Lenders in accordance with
this Agreement pursuant to any telephonic notice, Borrower shall have effected
such conversion or continuation, as the case may be, hereunder.

2.3 FEES.

(A) UNUSED LINE FEE. Borrower shall pay to Agent, for the benefit of
Lenders, a fee in an amount equal to the Revolving Loan Commitment less the sum
of the average daily balance of the Revolving Loan plus the average daily face
amount of the Lender Letter of Credit Reserve during the preceding month
multiplied by one-half of one percent (.5%) per annum, such fee to be calculated
on the basis of a 360 day year for the actual number of days elapsed and to be
payable monthly in arrears on the first day of the first month following the
Closing Date and the first day of each month thereafter.

(B) LETTER OF CREDIT FEES. Borrower shall pay to Agent for the
account of Lenders, a fee with respect to the Lender Letters of Credit in the
amount of the average daily amount of Letter of Credit Liability outstanding
during such month multiplied by two and one half percent (2.5%) per annum. Such
fees will be calculated on the basis of a 360 day year for the actual number of
days elapsed and will be payable monthly in arrears on the first day of each
month. Borrower shall also reimburse Agent for any and all fees and expenses, if
any, paid by Agent or any Lender to the issuer of Bank Letters of Credit.

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(C) PREPAYMENT FEES. If Borrower voluntarily prepays (a) the
Obligations in full (other than voluntary prepayments of the Revolving Loan
which do not terminate the Revolving Loan Commitment) or (b) Term Loan A in
whole or in part, Borrower at the time of prepayment shall pay to Agent, for the
benefit of Lenders, as compensation for the costs of being prepared to make
funds available to Borrower under this Agreement, and not as a penalty, an
amount determined by multiplying the percentage set forth below by (1) in the
case of a prepayment in full of the Obligations, the amount of the Revolving
Loan Commitment plus the amount of the then outstanding Term Loans, or (2) in
the case of a prepayment of Term Loan A only, in whole or in part, the amount of
such prepayment: two percent (2%) upon a prepayment during the first Loan Year
and one percent (1%) upon a prepayment during the second Loan Year. No
prepayment fees shall be payable for any prepayments made (i) after the second
Loan Year (ii) in the event Borrower prepays the Obligations in full in cash at
any time during which Heller's Total Loan Commitment does not exceed fifty
percent (50%) of the aggregate Total Loan Commitments for all Lenders, (iii)
solely with the proceeds of Borrower's internally generated funds or (iv)
pursuant to a mandatory prepayment in accordance with the provisions of
subsection 2.4(B) or optional prepayment in accordance with the provisions of
subsection 2.11(B).

(D) COLLATERAL MONITORING FEE. On the Closing Date and on the first
day of each December (other than December 1, 1995), March, June and September
thereafter, Borrower shall pay to Agent, for its own account, a nonrefundable
collateral monitoring fee of $3,750.

(E) AUDIT FEES. Borrower shall pay to Agent for its own account an
audit fee for each inspection equal to $650 per auditor per day or any portion
thereof, together with out of pocket expenses.

(F) OTHER FEES AND EXPENSES. Borrower shall pay to Agent, for its
own account, all charges for returned items and all other bank charges incurred
by Agent, as well as Agent's standard wire transfer charges for each wire
transfer made under this Agreement.

2.4 PAYMENTS AND PREPAYMENTS.

(A) MANNER AND TIME OF PAYMENT. In its sole discretion, Agent may
charge interest and other amounts payable hereunder to the Revolving Loan, all
as set forth on Agent's books and records. If Agent elects to bill Borrower for
any amount due hereunder, such amount shall be immediately due and payable with
interest thereon as provided herein. All payments made by Borrower with respect
to the Obligations shall be made without deduction, defense, setoff or
counterclaim. All payments to Agent hereunder shall, unless otherwise directed
by Agent, be made to Agent's Account or in accordance with subsection 5.6.
Proceeds remitted to Agent's Depository Account in accordance with subsection
5.6 shall be credited to the Obligations on the first Business Day following the
day such proceeds were received; provided, however, for the purpose of
calculating interest on the Obligations, such funds shall be deemed received on
the first Business Day thereafter. Proceeds remitted to Agent's Account by wire
transfer shall be credited to the Obligations on the Business Day received.

(B) MANDATORY PREPAYMENTS.

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OVERADVANCE. At any time that the principal balance of the
Revolving Loan exceeds the Maximum Revolving Loan Amount, Borrower shall, upon
demand by Agent, immediately repay the Revolving Loan to the extent necessary to
reduce the principal balance to an amount that is equal to or less than the
Maximum Revolving Loan Amount.

(2) PROCEEDS OF ASSET DISPOSITIONS. (i) Immediately upon
receipt by Borrower or any of its Subsidiaries of the net proceeds of any Asset
Disposition, Borrower shall prepay the Obligations in an amount equal to such
proceeds. So long as no Default or Event of Default shall exist and Borrower
reasonably expects the proceeds of any Asset Disposition to be reinvested within
180 days to repair or replace such assets with like assets, Borrower shall
deliver the proceeds to Agent to be applied to the Revolving Loan, and Borrower
may, so long as no Default or Event of Default shall have occurred and be
continuing, reborrow such proceeds only for such repair or replacement. If
Borrower fails to reinvest such proceeds within 180 days, such proceeds shall be
applied as set forth below. Provided, however, proceeds from Specified Fixed
Asset Dispositions shall not be eligible for such reinvestment option.
Notwithstanding anything contained in this subsection 2.4(B)(2) to the contrary,
Borrower shall be permitted to retain the net proceeds of any Asset Disposition
so long as such net proceeds do not exceed $200,000 in the aggregate in any
Fiscal Year for all such Asset Dispositions. Should such proceeds exceed such
minimum, the entire amount and not just the portion above the minimum shall be
subject to this subsection 2.4(B)(2). Borrower shall remit, or cause its
Subsidiaries to remit, all such net proceeds to Agent's Account for application
to the Obligations in accordance with the provisions of this subsection
2.4(B)(2).

(ii) In the event any such net proceeds arise out of an Asset Disposition
which is not a Specified Fixed Asset Disposition, Agent shall apply such net
proceeds to repay Term Loan A (x) in the inverse order of maturity thereof, to
the extent such proceeds are less than or equal to $500,000 and (y) on a pro
rata basis to the extent such net proceeds are greater than $500,000, then to
Term Loan B in the inverse order of maturity thereof and then to the remaining
Obligations in such order as Agent shall elect.

(iii) Until such time as Term Loan B has been repaid in full in cash,
Agent shall apply the net proceeds of each Specified Fixed Asset Disposition to
repay the installments of Term Loan B in the order in which they mature.

(iv) In the event Term Loan B has been repaid in full in cash and the
Orderly Liquidation Value of the Appraised Assets sold or otherwise disposed of
in all Specified Fixed Asset Dispositions through such date is:

(a) less than the Threshold Amount, then, until such time as the
Orderly Liquidation Value of the Appraised Assets so disposed of exceeds
the Threshold Amount, all net proceeds of Specified Fixed Asset
Dispositions of Appraised Assets shall be applied by Agent to the Revolving
Loan and all net proceeds of Specified Fixed Asset Dispositions other than
those applicable to Appraised Assets shall be applied by Agent to repay
installments of Term Loan A, in the inverse order of maturity and then to
the remaining Obligations in such order as Agent shall elect; and

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(b) greater than the Threshold Amount, then all net proceeds arising
out of a Specified Fixed Asset Disposition occurring after reaching the
Threshold Amount, shall be applied by Agent to repay installments of Term
Loan A, in the inverse order of maturity to the extent such proceeds are
less than or equal to $500,000 and on a pro rata basis to the extent such
net proceeds are greater than $500,000 and then to the remaining
Obligations in such order as Agent shall elect.

(v) During the existence of a Default or an Event of Default, all net
proceeds of any Asset Disposition shall be applied by Agent first to all fees,
costs and expenses then owing to Agent and Lender under subsection 10.1, second
to repay Term Loan A in the inverse order of maturity thereof, third to repay
Term Loan B in the inverse order of maturity thereof and fourth to the remaining
Obligations.

(3) PREPAYMENTS OF TERM LOAN A. In the event any of Borrower's
Compliance Certificates delivered to Agent in accordance with the provisions of
subsection 5.1(E) with respect to any applicable four fiscal quarter period of
Borrower discloses that Borrower shall have failed to purchase Qualified Assets
("Qualified Asset Purchases") in an aggregate amount of at least $3,200,000 for
such applicable four fiscal quarter period, Borrower shall repay the remaining
installments of Term Loan A in the inverse order of maturity thereof on the
first Business Day after delivery of the appropriate Compliance Certificate as
required in accordance with the provisions of subsection 5.1(E) in an amount
equal to seventy-five percent (75%) of the difference between (i) $3,200,000 and
(ii) the aggregate amount of expenditures made by Borrower for Qualified Asset
Purchases during such applicable four fiscal quarter period.

(C) VOLUNTARY PREPAYMENTS AND REPAYMENTS. Except as provided in
subsections 2.1(B), 2.3(C) and 2.4(B), Borrower's Obligations may only be
prepaid or repaid in full and not in part. Borrower may, at any time upon not
less than three Business Days' prior notice to Agent, prepay Term Loan A or
terminate the Revolving Loan Commitment; provided Borrower pays to Agent for the
benefit of Lenders the applicable prepayment fees set forth in subsection
2.3(C); provided, further the Revolving Loan Commitment may not be terminated by
Borrower until the Term Loans are paid in full. Upon termination of the
Revolving Loan Commitment, Borrower shall cause Agent and each Lender to be
released from all liability under any Lender Letters of Credit or, at Agent's
option, Borrower will deposit cash collateral with Agent in an amount equal to
105% of the Letter of Credit Liability that will remain outstanding after
prepayment or repayment.

(D) PAYMENTS ON BUSINESS DAYS. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day, the
payment may be made on the next succeeding Business Day and such extension of
time shall be included in the computation of the amount of interest or fees due
hereunder.

2.5 TERM OF THIS AGREEMENT. This Agreement shall be effective until
December 12, 2000 (the "Termination Date"). The Commitments shall (unless
earlier terminated) terminate upon the earlier of (i) the occurrence of an event
specified in subsection 8.3 or (ii) the Termination Date. Upon termination in
accordance with subsection 8.3 or on the Termination Date, all Obligations shall
become immediately due and payable without notice or demand. Notwithstanding
any

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termination, until all Obligations have been fully paid and satisfied, Agent, on
behalf of Lenders, shall be entitled to retain security interests in and liens
upon all Collateral, and even after payment of all Obligations hereunder,
Borrower's obligation to indemnify Agent and each Lender in accordance with the
terms hereof shall continue. Notwithstanding the foregoing, Agent, on behalf of
Lenders, shall release the security interest in and liens upon all Collateral
upon payment in full of all Obligations hereunder and termination of the
Commitments.

2.6 STATEMENTS. Agent shall render a monthly statement of account to
Borrower within twenty (20) days after the end of each month. Such statement of
account shall constitute an account stated unless Borrower makes written
objection thereto within sixty (60) days from the date such statement is mailed
to Borrower. Borrower promises to pay all of its Obligations as such amounts
become due or are declared due pursuant to the terms of this Agreement.

2.7 GRANT OF SECURITY INTEREST. To secure the payment and performance of
the Obligations, including all renewals, extensions, restructurings and
refinancings of any or all of the Obligations, each Loan Party hereby grants to
Agent, on behalf of Lenders, a continuing security interest and lien in and to
all right, title and interest of such Loan Party in the following property of
such Loan Party, whether now owned or existing or hereafter acquired or arising
and regardless of where located (all being collectively referred to as the
"Collateral"): (A) Accounts, and all guaranties and security therefor, and all
goods and rights represented thereby or arising therefrom including the right of
stoppage in transit, replevin and reclamation; (B) Inventory; (C) general
intangibles (as defined in the UCC); (D) documents (as defined in the UCC) or
other receipts covering, evidencing or representing goods; (E) instruments (as
defined in the UCC); (F) chattel paper (as defined in the UCC); (G) Equipment;
(H) Intellectual Property; (I) all deposit accounts of such Loan Party
maintained with any bank or financial institution; (J) all cash and other monies
and property of such Loan Party in the possession or under the control of Agent,
any Lender or any participant; (K) all books, records, ledger cards, files,
correspondence, computer programs, tapes, disks and related data processing
software that at any time evidence or contain information relating to any of the
property described above or are otherwise necessary or helpful in the collection
thereof or realization thereon; and (L) proceeds of all or any of the property
described above, including, without limitation, the proceeds of any insurance
policies covering any of the above described property; PROVIDED, HOWEVER,
Agent's security interest in Collateral owned by Borrower on the Closing Date
subject to a Permitted Encumbrance under subsections "(f)" and "(h)" of the
defined term "Permitted Encumbrances" (the "Excluded Collateral") shall not
arise with respect to the Excluded Collateral if and to the extent that (a) the
terms of the agreement or agreements creating or evidencing the Excluded
Collateral prohibit such grant and (b) the term prohibiting such grant is
effective as a matter of law and has not been waived or the consent of the
necessary party to the grant to Agent has not been obtained; PROVIDED, FURTHER,
if any such prohibition is subsequently lifted, terminated or is otherwise no
longer effective as a matter of law or is waived or consent of the necessary
party is obtained, a security interest therein shall automatically arise
hereunder without any further action on the part of Borrower or Agent.

2.8 CAPITAL ADEQUACY AND OTHER ADJUSTMENTS. In the event Agent or any
Lender shall have determined that the adoption after the date hereof of any law,
treaty, governmental (or quasi-governmental) rule, regulation, guideline or
order regarding capital adequacy, reserve requirements or similar requirements
or compliance by Agent or such Lender or any corporation controlling

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Agent or such Lender with any request or directive regarding capital adequacy,
reserve requirements or similar requirements (whether or not having the force of
law and whether or not failure to comply therewith would be unlawful) from any
central bank or governmental agency or body having jurisdiction does or shall
have the effect of increasing the amount of capital, reserves or other funds
required to be maintained by Agent or such Lender or any corporation controlling
Agent or such Lender and thereby reducing the rate of return on Agent's or such
Lender's or such corporation's capital as a consequence of its obligations
hereunder, then Borrower shall from time to time within fifteen (15) days after
notice and demand from such Lender (with a copy to Agent) or Agent (together
with the certificate referred to in the next sentence) pay to Agent or such
Lender additional amounts sufficient to compensate Agent or such Lender for such
reduction. A certificate as to the amount of such cost and showing the basis of
the computation of such cost submitted by Agent or any Lender to Borrower shall,
absent manifest error, be final, conclusive and binding for all purposes.

2.9 TAXES.

(A) NO DEDUCTIONS. Any and all payments or reimbursements made
hereunder or under any Note shall be made free and clear of and without
deduction for any and all taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto; excluding, however, the
following: taxes imposed on the net income of any Lender or Agent and franchise
taxes to the extent based on net income imposed on any Lender or Agent by the
jurisdiction under the laws of which Agent or such Lender is organized or doing
business or any political subdivision thereof and taxes imposed on its net
income or franchise taxes to the extent based on net income by the jurisdiction
of Agent's or such Lender's applicable lending office or any political
subdivision thereof (all such taxes, levies, imposts, deductions, charges or
withholdings and all liabilities with respect thereto excluding such taxes
imposed on net income and franchise taxes to the extent based on net income,
herein "Tax Liabilities"). If Borrower shall be required by law to deduct any
such Tax Liabilities from or in respect of any sum payable hereunder to Agent or
any Lender, then the sum payable hereunder shall be increased as may be
necessary so that, after making all required deductions, Agent or such Lender
receives an amount equal to the sum it would have received had no such
deductions been made.

(B) CHANGES IN TAX LAWS. In the event that, subsequent to the
Closing Date, (i) any changes in any existing law, regulation, treaty or
directive or in the interpretation or application thereof, (ii) any new law,
regulation, treaty or directive enacted or any interpretation or application
thereof, or (iii) compliance by Lender with any request or directive (whether or
not having the force of law) from any governmental authority, agency or
instrumentality:

(1) does or shall subject Agent or any Lender to any tax of any
kind whatsoever with respect to this Agreement, the other Loan Documents or any
Loans made or Lender Letters of Credit issued hereunder, or change the basis of
taxation of payments to Agent or such Lender of principal, fees, interest or any
other amount payable hereunder (except for net income taxes, or franchise taxes
imposed in lieu of net income taxes, imposed generally by federal, state or
local taxing authorities with respect to interest or commitment or other fees
payable hereunder or changes in the rate of tax on the overall net income of
Agent or such Lender); or

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(2) does or shall impose on Agent or any Lender any other
condition or increased cost in connection with the transactions contemplated
hereby or participations herein; and the result of any of the foregoing is to
increase the cost to Agent or such Lender of issuing any Lender Letter of Credit
or making or continuing any Loan hereunder, as the case may be, or to reduce any
amount receivable hereunder,

then, in any such case, Borrower shall promptly pay to Agent or such Lender,
upon its demand, any additional amounts necessary to compensate Agent or such
Lender, on an after-tax basis, for such additional cost or reduced amount
receivable, as determined by Agent or such Lender with respect to this Agreement
or the other Loan Documents. If Agent or any Lender becomes entitled to claim
any additional amounts pursuant to this subsection, it shall promptly notify
Borrower of the event by reason of which Agent or such Lender has become so
entitled. A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by Agent or any Lender to Borrower shall, absent
manifest error, be final, conclusive and binding for all purposes.

(C) FOREIGN LENDERS. Each Lender organized under the laws of a
jurisdiction outside the United States (a "Foreign Lender") as to which payments
to be made under this Agreement or under any Note are exempt from United States
withholding tax or are subject to United States withholding tax at a reduced
rate under an applicable statute or tax treaty shall provide to Borrower and
Agent (i) a properly completed and executed Internal Revenue Service Form 4224
or Form 1001 or other applicable form, certificate or document prescribed by the
Internal Revenue Service of the United States certifying as to such Foreign
Lender's entitlement to such exemption or reduced rate of withholding with
respect to payments to be made to such Foreign Lender under this Agreement and
under the Note (a "Certificate of Exemption") or (ii) a letter from any such
Foreign Lender stating that it is not entitled to any such exemption or reduced
rate of withholding (a "Letter of Non-Exemption"). Prior to becoming a Lender
under this Agreement and within fifteen (15) days after a reasonable written
request of Borrower or Agent from time to time thereafter, each Foreign Lender
that becomes a Lender under this Agreement shall provide a Certificate of
Exemption or a Letter of Non-Exemption to Borrower and Agent.

If a Foreign Lender is entitled to an exemption with respect to
payments to be made to such Foreign Lender under this Agreement (or to a reduced
rate of withholding) and does not provide a Certificate of Exemption to Borrower
and Agent within the time periods set forth in the preceding paragraph, Borrower
shall withhold taxes from payments to such Foreign Lender at the applicable
statutory rates and Borrower shall not be required to pay any additional amounts
as a result of such withholding; PROVIDED, however, that all such withholding
shall cease upon delivery by such Foreign Lender of a Certificate of Exemption
to Borrower and Agent.

2.10 REQUIRED TERMINATION AND PREPAYMENT. If on any date any Lender shall
have reasonably determined (which determination shall be final and conclusive
and binding upon all parties) that the making or continuation of its LIBOR Rate
Loans has become unlawful or impossible by compliance by Lender in good faith
with any law, governmental rule, regulation or order (whether or not having the
force of law and whether or not failure to comply therewith would be unlawful),
then, and in any such event, that Lender shall promptly give notice (by
telephone confirmed in writing) to Borrower and Agent of that determination.
Subject to prior withdrawal of a Notice of Borrowing or a Notice of
Conversion/Continuation or prepayment of the LIBOR

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Rate Loans as contemplated by subsection 2.11, the obligation of Lender to make
or maintain its LIBOR Rate Loans during any such period shall be terminated at
the earlier of the termination of the Interest Period then in effect or when
required by law and Borrower shall no later than the termination of the Interest
Period in effect at the time any such determination pursuant to this subsection
2.10 is made or, earlier, when required by law, repay or prepay the LIBOR Rate
Loans together with all interest accrued thereon or convert the LIBOR Rate Loans
to Base Rate Loans or Fixed Rate Loans.

2.11 OPTIONAL PREPAYMENT/REPLACEMENT OF AGENT OR LENDERS IN RESPECT OF
INCREASED COSTS. Within fifteen (15) days after receipt by Borrower of written
notice and demand from Agent or any Lender (an "Affected Lender") for payment of
additional costs as provided in subsections 2.8 and 2.9, Borrower may, at its
option, notify Agent and such Affected Lender of its intention to do one of the
following:

(A) Borrower may obtain, at Borrower's expense, a replacement Lender
("Replacement Lender") for such Affected Lender, which Replacement Lender shall
be reasonably satisfactory to Agent. In the event Borrower obtains a
Replacement Lender within ninety (90) days following notice of its intention to
do so, the Affected Lender shall sell and assign its Loans and Commitments to
such Replacement Lender PROVIDED, that Borrower has reimbursed such Affected
Lender for its increased costs for which it is entitled to reimbursement under
this Agreement through the date of such sale and assignment.

(B) Borrower may, without penalty, prepay in full all outstanding
Obligations owed to such Affected Lender and terminate such Affected Lender's
Commitments. Borrower shall, within ninety (90) days following notice of its
intention to do so, prepay in full all outstanding Obligations owed to such
Affected Lender (including such Affected Lender's increased costs for which it
is entitled to reimbursement under this Agreement through the date of such
prepayment) and terminate such Affected Lender's Commitments.

2.12 COMPENSATION. Borrower shall compensate Lender, upon written request
by Lender (which request shall set forth in reasonable detail the basis for
requesting such amounts and which shall, absent manifest error, be conclusive
and binding upon all parties hereto), for all reasonable losses, expenses and
liabilities (including, without limitation, any loss (including interest paid)
sustained by Lender in connection with the re-employment of such funds), Lender
may sustain: (i) if for any reason (other than a default by Lender) a borrowing
of any LIBOR Rate Loan or Fixed Rate Loan does not occur on a date specified
therefor in a Notice of Borrowing, a Notice of Conversion/Continuation or a
telephonic request for borrowing or Conversion/Continuation; (ii) if any
prepayment of any of its LIBOR Rate Loans or Fixed Rate Loans occurs on a date
that is not the last day of an Interest Period applicable to that Loan; (iii) if
any prepayment of any of its LIBOR Rate Loans or Fixed Rate Loans is not made on
any date specified in a notice of prepayment given by Borrower; or (iv) as a
consequence of any other default by Borrower to repay its LIBOR Rate Loans or
Fixed Rate Loans when required by the terms of this Agreement; provided that
during the period while any such amounts have not been paid, Lender shall
reserve an equal amount from amounts otherwise available to be borrowed under
the Revolving Loan.

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2.13 BOOKING OF LIBOR RATE LOANS. Lender may make, carry or transfer LIBOR
Rate Loans or Fixed Rate Loans at, to, or for the account of, any of its branch
offices or the office of an Affiliate of Lender.

2.14 ASSUMPTIONS CONCERNING FUNDING OF LIBOR RATE LOANS OR FIXED RATE
LOANS. Calculation of all amounts payable to Lender under subsection 2.12 shall
be made as though Lender had actually match funded its relevant LIBOR Rate Loan
or Fixed Rate Loan; provided, however, that Lender may fund each of its LIBOR
Rate Loans or Fixed Rate Loans in any manner it sees fit and the foregoing
assumption shall be utilized only for the calculation of amounts payable under
subsection 2.12.

SECTION 3. CONDITIONS TO LOANS

3.1 CONDITIONS TO LOANS. The obligations of Agent and each Lender to make
Loans and the obligation of Agent or any Lender to issue Lender Letters of
Credit on the Closing Date and on each Funding Date are subject to satisfaction
of all of the conditions set forth below.

(A) CLOSING DELIVERIES. On the Closing Date, Agent shall have
received, in form and substance satisfactory to Agent, all documents,
instruments and information identified on Schedule 3.1(A) and all other
agreements, notes, certificates, orders, authorizations, financing statements,
mortgages and other documents which Agent may at any time reasonably request.

(B) SECURITY INTERESTS. Agent shall have received satisfactory
evidence that all security interests and liens granted to Agent for the benefit
of Lenders pursuant to this Agreement or the other Loan Documents have been duly
perfected and constitute first priority liens on the Collateral, subject only to
Permitted Encumbrances.

(C) CLOSING DATE AVAILABILITY. On the Closing Date, after giving
effect to the consummation of the transactions contemplated hereunder on the
Closing Date and the payment by Borrower of all costs, fees and expenses
relating thereto, Undrawn Availability shall be no less than $7,000,000.

(D) REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained herein and in the Loan Documents shall be true, correct and
complete in all material respects on and as of that Funding Date to the same
extent as though made on and as of that date, except for any representation or
warranty limited by its terms to a specific date and taking into account any
amendments to the Schedules or Exhibits as a result of any disclosures made by
Borrower to Agent after the Closing Date and approved by Agent.

(E) FEES. Borrower shall have paid the fees payable on the Closing
Date under subsection 2.3 and as referred to in the Closing Date Fee Letter.

(F) NO DEFAULT. No event shall have occurred and be continuing or
would result from the consummation of the requested borrowing or notice
requesting issuance of a Lender Letter of Credit that would constitute an Event
of Default or a Default.

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(G) PERFORMANCE OF AGREEMENTS. Each Loan Party shall have performed
in all material respects all agreements and satisfied all conditions which any
Loan Document provides shall be performed by it on or before that Funding Date.

(H) NO PROHIBITION. No order, judgment or decree of any court,
arbitrator or governmental authority shall purport to enjoin or restrain Agent
or any Lender from making any Loans or issuing any Lender Letters of Credit.

(I) NO LITIGATION. On the Closing Date, except as set forth on
Schedule 3.1(I), there shall not be pending or, to the knowledge of Borrower,
threatened, any action, charge, claim, demand, suit, proceeding, petition,
governmental investigation or arbitration by, against or affecting any Loan
Party or any of its Subsidiaries or any property of any Loan Party or any of its
Subsidiaries that has not been disclosed by Borrower in writing, and there shall
have occurred no development in any such action, charge, claim, demand, suit,
proceeding, petition, governmental investigation or arbitration that, in the
opinion of Agent, would reasonably be expected to have a Material Adverse
Effect. Nothing contained in this subsection 3.1(I) shall derogate in any
manner whatsoever from Borrower's obligation to Agent under subsection 5.1(O).

(J) AUDIT. On the Closing Date, Agent shall have completed the
updated audits of the business and assets of Borrower including, but not limited
to, audits of the billing and collection procedures and controls of each of
Borrower's divisions and Borrower's accrual and advance billing practices as the
same relate to the determination of Eligible Accounts, the results of which
shall be satisfactory to Agent in all respects.

(K) NO MATERIAL ADVERSE CHANGE. On the Closing Date, since August
31, 1995, there shall not have occurred and on each subsequent Funding Date
there shall not have occurred (x) any material adverse change in the business,
operations, prospects, properties, assets or condition (financial or otherwise)
of any Loan Party and (y) any material damage or destruction to any material
portion of the Collateral nor any material depreciation in the value thereof.

(L) SECURITY INTERESTS. Agent shall have received evidence
satisfactory to Agent in all respects that all UCC-1 financing statements
relating to each Loan Party shall have been duly filed and recorded with the
appropriate state and county offices.

(M) SUBORDINATED DEBT DOCUMENTS. Agent shall have received final
executed copies of the Subordinated Notes which shall contain subordination
provisions satisfactory to Lender in all respects.

(N) AUDITED FINANCIAL STATEMENTS. On the Closing Date, Agent shall
have received a draft of Borrower's audited financial statements for Borrower's
Fiscal Year ending August 31, 1995 (the "August 31 Financials"), which shall
reflect no material adverse change from Borrower's financial statements for the
period ending May 31, 1995 (other than the impairment charge set forth in the
August 31 Financials) previously delivered to Agent and Agent shall have
received the final audited financial statements of Borrower for such period
within five (5) business days of the Closing Date.

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(O) CHASE MORTGAGE DOCUMENTATION. On the Closing Date, Agent shall
have received final executed copies of the Chase Mortgage Documentation, which
shall be satisfactory to Agent in all respects.

(P) PROCEEDS OF CHASE FINANCING. On the Closing Date, Agent shall
have received evidence, satisfactory to Agent in all respects, of Borrower's
receipt of no less than $4,000,000 from The Chase Manhattan Bank, N.A. secured
solely by the Chase Mortgage Documentation.

(Q) CONSENTS. On the Closing Date, Agent shall have received any and
all consents necessary to permit the effectuation of the transactions
contemplated by this Agreement, including without limitation consents and
waivers of such third parties as might assert claims with respect to the
Collateral, all of which shall be satisfactory to Agent in all respects.

(R) FINANCIAL CONDITION CERTIFICATE. On the Closing Date, Agent
shall have received an executed financial condition certificate in the form of
Exhibit 3.1(R) hereto.

(S) LANDLORD AND MORTGAGEE AGREEMENTS. Agent shall have received
landlord and mortgagee agreements with respect to all premises leased by
Borrower (other than with respect to Borrower's leased premises located at 508-
51 West 57th Street, New York, New York and 301 East Erie Street, Chicago,
Illinois and all premises owned by Borrower which are subject to a mortgage
lien.

(T) CONTRACT REVIEW. On the Closing Date, Agent shall have reviewed
all material contracts of Borrower, including without limitation agreements
relating to Borrower's indebtedness to third parties, leases, union contracts,
labor contracts, vendor supply contracts, license agreements and distributorship
agreements and such contracts and agreements shall be satisfactory to Agent in
all respects.

(U) CASH MANAGEMENT. Agent shall be satisfied in all material
respects with Borrower's cash management system and controls.

(V) TAX ASSUMPTIONS; STRUCTURE. On the Closing Date, Agent shall be
satisfied in all respects with (a) each Loan Party's tax assumptions and
capital, organizational, ownership and legal structure and (b) Agent's ability
to enforce its claims against the Collateral.

SECTION 4. REPRESENTATIONS AND WARRANTIES

To induce Agent and each Lender to enter into this Agreement, to make
Loans, and to issue Lender Letters of Credit, each Loan Party represents and
warrants to Agent and each Lender that the following statements are and will be
true, correct and complete:

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4.1 ORGANIZATION, POWERS, CAPITALIZATION.

(A) ORGANIZATION AND POWERS. Each of the Loan Parties is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and qualified to do business in all states
where such qualification is required except where failure to be so qualified
could not be reasonably expected to have a Material Adverse Effect. Each of the
Loan Parties has all requisite corporate power and authority to own and operate
its properties, to carry on its business as now conducted and proposed to be
conducted and to enter into each Loan Document.

(B) CAPITALIZATION. All issued and outstanding shares of capital
stock of each of the Loan Parties are duly authorized and validly issued, fully
paid, nonassessable, free and clear of all Liens and such shares were issued in
compliance with all applicable state and federal laws concerning the issuance of
securities. All of the issued and outstanding capital stock of Corporate
Guarantor is owned by Borrower. No shares of the capital stock of Corporate
Guarantor, other than those described above, are issued and outstanding. There
are no preemptive or other outstanding rights, options, warrants, conversion
rights or similar agreements or understandings for the purchase or acquisition
from Corporate Guarantor, of any shares of capital stock or other securities of
Corporate Guarantor.

4.2 AUTHORIZATION OF BORROWING, NO CONFLICT. Each Loan Party has the
corporate power and authority to incur the Obligations and to grant security
interests in the Collateral of such Loan Party. On the Closing Date, the
execution, delivery and performance of the Loan Documents by each Loan Party
signatory thereto will have been duly authorized by all necessary corporate
action. The execution, delivery and performance by each Loan Party of each Loan
Document to which it is a party and the consummation of the transactions
contemplated by this Agreement and the other Loan Documents by each Loan Party
do not contravene and will not be in contravention of any applicable law, the
corporate charter or bylaws of any Loan Party or any agreement or order by which
any Loan Party or any Loan Party's property is bound. This Agreement is, and
the other Loan Documents, when executed and delivered will be, the legally valid
and binding obligations of the applicable Loan Parties respectively, each
enforceable against the Loan Parties, as applicable, in accordance with their
respective terms.

4.3 FINANCIAL CONDITION. All financial statements concerning Borrower and
its Subsidiaries which have been or will hereafter be furnished by Borrower to
Agent or any Lender pursuant to this Agreement have been or will be prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as disclosed therein) and do or will present fairly the financial
condition of the corporations covered thereby as at the dates thereof and the
results of its operations for the periods then ended. The Pro Forma was
prepared by Borrower based on the draft of the audited consolidated balance
sheet of Borrower dated August 31, 1995 and the unaudited consolidated balance
sheet of Borrower dated October 31, 1995. The Projections delivered and to be
delivered have been and will be prepared by Borrower in light of the past
operations of the business of Borrower and its Subsidiaries, and such
Projections represent and will represent the good faith estimate of Borrower and
its senior management concerning the most probable course of its business for
the period covered thereby as of the date such Projections are prepared and
delivered.

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4.4 INDEBTEDNESS AND LIABILITIES. As of the Closing Date, neither
Borrower nor any of its Subsidiaries has (a) any Indebtedness except as
reflected on the Pro Forma; or (b) to the best of Borrower's knowledge any
Liabilities other than as reflected on the Pro Forma or as incurred in the
ordinary course of business following the date of the Pro Forma.

4.5 ACCOUNT WARRANTIES. Each Loan Party represents, warrants and
covenants as to each Account of such Loan Party that, at the time of its
creation, the Account is a valid, bona fide account, representing an undisputed
indebtedness incurred by the named account debtor for goods actually sold and
delivered or for services completely rendered; to the best of such Loan Party's
knowledge, there are no setoffs, offsets or counterclaims, genuine or otherwise,
against the Account; the Account does not represent a sale to an Affiliate or a
consignment, sale or return or a bill and hold transaction; no agreement exists
permitting any deduction or discount (other than the discount stated on the
invoice); such Loan Party is the lawful owner of the Account and has the right
to assign the same to Agent, for the benefit of Lenders; the Account is free of
all security interests, liens and encumbrances other than those in favor of
Agent, on behalf of Lenders, and the Account is due and payable in accordance
with its terms.

4.6 NAMES. Schedule 4.6 sets forth all names, trade names, fictitious
names and business names under which each Loan Party currently conducts business
or has at any time during the past five years conducted business.

4.7 LOCATIONS; FEIN. Schedule 4.7 sets forth the location of each Loan
Party's principal place of business, the location of each Loan Party's books and
records, the location of all other offices of each Loan Party and all Collateral
locations, and such locations are such Loan Party's sole locations for its
business and the Collateral. Each Loan Party's federal employer identification
number is set forth on the signature page hereof.

4.8 TITLE TO PROPERTIES; LIENS. Each Loan Party and each of its
Subsidiaries has good, and legal title to, or valid leasehold interests in,
subject to Permitted Encumbrances, all its respective material properties and
assets. Except for Permitted Encumbrances, all such properties and assets are
free and clear of Liens. To the best knowledge of each Loan Party after due
inquiry, there are no actual, threatened or alleged defaults with respect to any
leases of real property under which such Loan Party or any of its Subsidiaries
is lessee or lessor which would have a Material Adverse Effect.

4.9 LITIGATION; ADVERSE FACTS. Except as set forth on Schedule 4.9, there
are no judgments outstanding against any Loan Party or affecting any property of
any Loan Party nor is there any action, charge, claim, demand, suit, proceeding,
petition, governmental investigation or arbitration now pending or, to the best
knowledge of Borrower after due inquiry, threatened against or affecting any
Loan Party or any property of any Loan Party which could reasonably be expected
to result in any Material Adverse Effect. No Loan Party has received any
opinion or memorandum or legal advice from legal counsel to the effect that it
is exposed to any liability which could reasonably be expected to result in any
Material Adverse Effect.

4.10 PAYMENT OF TAXES. All material tax returns and reports of each Loan
Party and each of its Subsidiaries required to be filed by any of them have been
timely filed, and all taxes,

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assessments, fees and other governmental charges upon such Persons and upon
their respective properties, assets, income and franchises which are shown on
such returns as due and payable have been paid when due and payable. As of the
Closing Date, none of the United States income tax returns of each Loan Party or
any of its Subsidiaries are under audit. Except as set forth on Schedule 4.10,
no tax liens have been filed and no claims (except as otherwise permitted by
Section 5.9) are being asserted with respect to any such taxes. The charges,
accruals and reserves on the books of each Loan Party and each of its
Subsidiaries in respect of any taxes or other governmental charges are in
accordance with GAAP.

4.11 PERFORMANCE OF AGREEMENTS. None of the Loan Parties and none of its
Subsidiaries is in default in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in any contractual
obligation of any such Person which could have a Material Adverse Effect and no
condition exists that, with the giving of notice or the lapse of time or both,
would constitute such a default.

4.12 EMPLOYEE BENEFIT PLANS. Each Loan Party, each of its Subsidiaries and
each ERISA Affiliate is in compliance in all material respects with all
applicable provisions of ERISA, the IRC and all other applicable laws and the
regulations and interpretations thereof with respect to all Employee Benefit
Plans, except any Employee Benefit Plan set forth on Schedule 4.12. No material
liability has been incurred by any Loan Party, any of its Subsidiaries or any
ERISA Affiliate which remains unsatisfied for any funding obligation, taxes or
penalties with respect to any Employee Benefit Plan.

4.13 INTELLECTUAL PROPERTY. Except as set forth on Schedule 4.13, each
Loan Party and each of its Subsidiaries owns, is licensed to use or otherwise
has the right to use, all Intellectual Property used in or necessary for the
conduct of its business as currently conducted none of which, other than GC&Co.,
is a registered trademark.

4.14 BROKER'S FEES. No broker's or finder's fee or commission will be
payable with respect to any of the transactions contemplated hereby.

4.15 ENVIRONMENTAL COMPLIANCE. Each Loan Party has been and is currently
in compliance with all applicable Environmental Laws except to the extent that
any non compliance could result in a Liability or penalty of less than $100,000,
including obtaining and maintaining in effect all permits, licenses or other
authorizations required by applicable Environmental Laws. There are no
Environmental Claims asserted or, to the best knowledge of the applicable Loan
Party, threatened against any Loan Party or relating to any real property
currently or, to the best knowledge of the applicable Loan Party, formerly
owned, leased or operated by any Loan Party.

4.16 SOLVENCY. As of and from and after the date of this Agreement, each
Loan Party: (a) owns and will own assets the fair salable value of which are (i)
greater than the total amount of its liabilities (including contingent
liabilities) and (ii) greater than the amount that will be required to pay the
probable liabilities of such Loan Party as they mature; (b) has capital that is
not unreasonably small in relation to its business as presently conducted or any
contemplated or undertaken transaction; and (c) does not intend to incur and
does not believe that it will incur debts beyond its ability to pay such debts
as they become due. There is no material fact known to any

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Loan Party that has or could have a Material Adverse Effect and that has not
been fully disclosed herein or in such other documents, certificates and
statements furnished to Agent or Lenders for use in connection with the
transactions contemplated hereby.

4.17 DISCLOSURE. No representation or warranty of Borrower, any of its
Subsidiaries or any other Loan Party contained in this Agreement, the financial
statements, the other Loan Documents, or any other document, certificate or
written statement furnished to Agent or any Lender by or on behalf of any such
Person for use in connection with the Loan Documents contains any untrue
statement of a material fact or omitted, omits or will omit to state a material
fact necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. The
Projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by such Persons to be
reasonable at the time made, it being recognized by Agent and Lenders that such
projections as to future events are not to be viewed as facts and that actual
results during the period or periods covered by any such projections may differ
from the projected results. There is no material fact known to Borrower that
has had or will have a Material Adverse Effect and that has not been disclosed
herein or in such other documents, certificates and statements furnished to
Agent or any Lender for use in connection with the transactions contemplated
hereby.

4.18 INSURANCE. Each Loan Party and each of its Subsidiaries maintains
adequate insurance policies for public liability, property damage for its
business and properties, product liability, and business interruption, no notice
of cancellation has been received with respect to such policies and each Loan
Party and each of its Subsidiaries is in compliance with all conditions
contained in such policies.

4.19 COMPLIANCE WITH LAWS. Neither Loan Party nor any of its Subsidiaries
is in violation of any law, ordinance, rule, regulation, order, policy,
guideline or other requirement of any domestic or foreign government or any
instrumentality or agency thereof, having jurisdiction over the conduct of its
business or the ownership of its properties, including, without limitation, any
violation relating to any use, release, storage, transport or disposal of any
Hazardous Material, which violation would subject any Loan Party or any of its
Subsidiaries or any of their officers to criminal liability or could reasonably
be expected to have a Material Adverse Effect and no such violation has been
alleged.

4.20 BANK ACCOUNTS; LOCKBOXES. Schedule 4.20 sets forth the account
numbers and locations of all bank accounts, post office boxes and lockboxes of
each Loan Party and its Subsidiaries.

4.21 SUBSIDIARIES. Borrower has no Subsidiaries other than the Permitted
Subsidiaries. Corporate Guarantor has no Subsidiaries.

4.22 EMPLOYEE MATTERS. Except as set forth on Schedule 4.22, (a) no Loan
Party nor any of such Loan Party's employees is subject to any collective
bargaining agreement, (b) to the best of such Loan Party's knowledge, no
petition for certification or union election is pending with respect to the
employees of any Loan Party and no union or collective bargaining unit has
sought such certification or recognition with respect to the employees of any
Loan Party and (c) there are

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no strikes, slowdowns, work stoppages or controversies pending or, to the best
knowledge of Borrower after due inquiry, threatened between any Loan Party and
its respective employees, other than employee grievances arising in the ordinary
course of business which could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. There are no
employment contracts (other than collective bargaining agreements) which could
have a Material Adverse Effect.

4.23 GOVERNMENTAL REGULATION. None of the Loan Parties is, or after giving
effect to any loan will be, subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act 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.

Any Loan Party may, at any time and from time to time (and subject to
subsection 5.13), amend any one or more of the Schedules referred in this
Section 4 and any representation or warranty contained herein which refers to
any such Schedule shall from and after the date of any such amendment refer to
such Schedule as so amended, provided, however, that in no event may any Loan
Party amend any such Schedule if the existence of the information contained in
such amendment would reflect or evidence a Default or Event of Default.

SECTION 5. AFFIRMATIVE COVENANTS

Each Loan Party covenants and agrees that, so long as any of the
Commitments hereunder shall be in effect and until payment in full of all
Obligations and termination of all Lender Letters of Credit, unless Requisite
Lenders shall otherwise give their prior written consent, such Loan Party shall
perform all covenants in this Section 5 applicable to such Person.

5.1 FINANCIAL STATEMENTS AND OTHER REPORTS. Each Loan Party will
maintain, and cause each of its Subsidiaries to maintain, a system of accounting
established and administered in accordance with sound business practices to
permit preparation of financial statements in conformity with GAAP. Borrower
will deliver to Agent and each Lender (unless specified to be delivered solely
to Agent) the financial statements and other reports described below.

(A) MONTHLY FINANCIALS. As soon as available and in any event within
thirty (30) days after the end of each month, Borrower will deliver (1) the
consolidated and consolidating balance sheet of Borrower and its Subsidiaries on
a division by division basis as at the end of such month and the related
consolidated and consolidating statements of income on a division by division
basis and a statement of Capital Expenditures and an itemization of all non-cash
expenditures for such month and for the period from the beginning of the then
current Fiscal Year to the end of such month, and (2) a schedule of the
outstanding Indebtedness for borrowed money of Borrower and its Subsidiaries
describing in reasonable detail each such debt issue or loan outstanding and the
principal amount thereof with respect to each such debt issue or loan.

(B) YEAR-END FINANCIALS. As soon as available and in any event
within ninety (90) days after the end of each Fiscal Year, Borrower will
deliver: (1) the consolidated balance sheet of Borrower and its Subsidiaries as
at the end of such year and the related consolidated statements of income,
stockholders' equity and cash flow for such Fiscal Year; (2) a schedule of

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the outstanding Indebtedness of Borrower and its Subsidiaries describing in
reasonable detail each such debt issue or loan outstanding and the principal
amount and amount of accrued and unpaid interest with respect to each such debt
issue or loan; (3) a report with respect to the financial statements from Grant
Thornton or another firm of independent certified public accountants selected by
Borrower, and acceptable to Agent, which report shall be unqualified as to going
concern and scope of audit of Borrower and its Subsidiaries and shall state that
(a) such consolidated financial statements present fairly the consolidated
financial position of Borrower and its Subsidiaries as at the dates indicated
and the results of their operations and cash flow for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years and (b) the
examination by such accountants in connection with such consolidated financial
statements has been made in accordance with generally accepted auditing
standards; and (4) copies of the consolidating financial statements of Borrower
and its Subsidiaries, including (a) consolidating balance sheets of Borrower and
its Subsidiaries as at the end of such Fiscal Year showing intercompany
eliminations and (b) related consolidating statements of earnings of Borrower
and its Subsidiaries showing intercompany eliminations.

(C) OTHER REPORTS. As soon as available, Borrower shall deliver to
Agent copies of all such financial statements, reports and returns as Borrower
shall deliver to its stockholders or the Securities and Exchange Commission, as
applicable.

(D) MANAGEMENT LETTERS. Promptly upon receipt thereof, Borrower will
deliver copies of all management letters submitted to Borrower by independent
public accountants in connection with each annual, interim or special audit of
the financial statements of Borrower made by such accountants.

(E) COMPLIANCE CERTIFICATE. Borrower will deliver a Compliance
Certificate quarterly, together with copies of the calculations and work-up
employed to determine Borrower's compliance or noncompliance with the financial
covenants set forth in Section 6 and subsection 7.1, for its first three (3)
fiscal quarters of each Fiscal Year together with Borrower's 10-Q report to the
Securities and Exchange Commission but not later than forty-five (45) days after
the end of such fiscal quarter and for Borrower's Fiscal Year not later than
ninety (90) days after the last day of such Fiscal Year.

(F) BORROWING BASE CERTIFICATES. Within fifteen (15) days after the
last day of each month, Borrower shall deliver to Agent a Borrowing Base
Certificate updated to reflect the most recent sales and collections of Borrower
and an assignment schedule of all Accounts created by Borrower for the prior
month. In the event (a) Undrawn Availability shall at any time be less than
$2,500,000 or (b) a Default or Event of Default shall then be in existence,
Agent in its sole discretion may require Borrower to deliver to Agent the
Borrowing Base Certificates on a more frequent basis.

(G) EQUIPMENT REPORTS AND LISTINGS AND AGINGS. On the Closing Date
and within fifteen (15) days after the last day of each month and from time to
time upon the request of Agent, Borrower will deliver to Agent an aged trial
balance of all then existing Accounts as of the last day of such period together
with a schedule detailing Borrower's calculation of the amount of Accounts which
are not Eligible Accounts. As soon as available and in any event within fifteen
(15) days

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after the last day of each fiscal quarter of Borrower, and from time to time
upon the request of Agent, Borrower shall deliver to Agent (1) a division by
division Equipment Report and (2) a division by division aged trial balance of
all then existing accounts payable for the immediately preceding fiscal quarter
of Borrower. All such reports shall be in form and substance satisfactory to
Agent.

(H) MANAGEMENT REPORT. Together with each delivery of financial
statements of Borrower and its Subsidiaries pursuant to subdivisions (A), (B)
and (C) of this subsection 5.1, Borrower will deliver a management report: (1)
describing the operations and financial condition of Borrower and its
Subsidiaries for the month then ended and the portion of the current Fiscal Year
then elapsed (or for the Fiscal Year then ended in the case of year-end
financials); (2) setting forth in comparative form the corresponding figures for
the corresponding periods of the previous Fiscal Year and the corresponding
figures from the most recent Projections for the current Fiscal Year delivered
to Lenders pursuant to 5.1(P); and (3) discussing the reasons for any
significant variations. The information above shall be presented in reasonable
detail and shall be certified by the chief financial officer of Borrower to the
effect that such information fairly presents the results of operations and
financial condition of Borrower and its Subsidiaries as at the dates and for the
periods indicated.

(I) APPRAISALS. From time to time, Agent, at Borrower's expense,
shall employ an appraiser to determine the then current fair market and orderly
liquidation values of all or any portion of the Collateral; provided, however,
so long as no Event of Default is continuing, Agent shall not employ any such
appraiser (a) as respects all Collateral more than once every other Loan Year at
Borrower's expense, except for any appraisals required by Agent to monitor Asset
Dispositions and (b) as respects Specified Asset Dispositions on or before
December 31, 1996. Notwithstanding anything contained in this subsection 5.2(I)
to the contrary, Borrower shall pay to Agent on the Closing Date, all costs and
expenses incurred by Agent relating to the Fixed Asset Appraisal.

(J) GOVERNMENT NOTICES. Each Loan Party will deliver to Agent
promptly after receipt copies of all notices, requests, subpoenas, inquiries or
other writings received from any governmental agency concerning potential
liabilities under any Employee Benefit Plan, the violation or alleged violation
of any Environmental Laws, the violation or alleged violation of the Fair Labor
Standards Act or such Loan Party's payment or non-payment of any taxes including
any tax audit.

(K) EVENTS OF DEFAULT, ETC. Promptly upon any officer of any Loan
Party obtaining knowledge of any of the following events or conditions, such
Loan Party shall deliver a certificate of such Loan Party's chief financial
officer specifying the nature and period of existence of such condition or event
and what action such Loan Party has taken, is taking and proposes to take with
respect thereto: (1) any condition or event that constitutes an Event of Default
or Default; (2) any notice of default that any Person has given to such Loan
Party or any other action taken with respect to a claimed default; or (3) any
Material Adverse Effect.

(L) TRADE NAMES. Each Loan Party will give Agent at least thirty
(30) days advance written notice of any change of name or of any new trade name
or fictitious business

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name. Each Loan Party's use of any trade name or fictitious business name will
be in compliance with all laws regarding the use of such names.

(M) LOCATIONS. Each Loan Party will give Agent at least thirty (30)
days advance written notice of any change in any Loan Party's principal place of
business or any change in the location of its books and records or the
Collateral or of any new location for its books and records or the Collateral.

(N) BANK ACCOUNTS. Each Loan Party will give Agent prompt notice of
any new bank accounts, post office boxes or lockboxes such Loan Party or any of
its Subsidiaries intends to establish prior to its opening same.

(O) LITIGATION. Promptly upon any officer of any Loan Party
obtaining knowledge of (1) the institution of any action, suit, proceeding,
governmental investigation or arbitration against or affecting any Loan Party or
any property of any Loan Party not previously disclosed by such Loan Party to
Agent and which could reasonably be expected to have a Material Adverse Effect
or (2) any material development in any action, suit, proceeding, governmental
investigation or arbitration at any time pending against or affecting any Loan
Party or any property of any Loan Party which is reasonably likely to have a
Material Adverse Effect, such Loan Party will promptly give notice thereof to
Agent and provide such other information as may be reasonably available to them
to enable Agent and its counsel to evaluate such matter.

(P) PROJECTIONS. As soon as available and in any event no later
than the end of each Fiscal Year of Borrower, Borrower will deliver consolidated
and consolidating Projections of Borrower and its Subsidiaries for the
forthcoming three (3) Fiscal Years, year by year, and for the forthcoming Fiscal
Year, month by month.

(Q) SUBORDINATED DEBT AND OTHER INDEBTEDNESS NOTICES. Borrower shall
promptly deliver copies of all notices given or received by Borrower and any of
its Subsidiaries with respect to noncompliance with any term or condition
related to any Subordinated Debt and shall promptly notify Lenders and Agent of
any event of default with respect to any Subordinated Debt or other
Indebtedness.

(R) OTHER INFORMATION. With reasonable promptness, each Loan Party
will deliver such other information and data with respect to any Loan Party, any
Subsidiary of any Loan Party or the Collateral as Agent or any Lender may
reasonably request from time to time.

5.2 ACCESS TO ACCOUNTANTS. Each Loan Party authorizes Agent and Lenders
to discuss the financial condition and financial statements of each Loan Party
and its Subsidiaries with such Loan Party's independent public accountants upon
reasonable notice to such Loan Party of its intention to do so, and authorizes
such accountants to respond to all of Agent's and Lenders' inquiries.

5.3 INSPECTION. Each Loan Party shall permit Agent and any authorized
representatives designated by Agent to visit and inspect any of the properties
of such Loan Party or any of its Subsidiaries, including their respective
financial and accounting records, and to make copies and

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take extracts therefrom, and to discuss their respective affairs, finances and
business with their respective senior officers and independent public
accountants, at such reasonable times during normal business hours and as often
as may be reasonably requested. Each Loan Party acknowledges that Agent intends
to make such inspections on at least a quarterly basis. Each Lender may with
the consent of Agent, which will not be unreasonably denied, accompany Agent on
any such visit or inspection.

5.4 COLLATERAL RECORDS. Each Loan Party shall keep full and accurate
books and records relating to the Collateral and shall mark such books and
records to indicate Agent's security interests in the Collateral, for the
benefit of Lenders.

5.5 ACCOUNT COVENANTS; VERIFICATION. Each Loan Party shall, at its own
expense: (a) to the extent the provisions of subsection 5.6 shall be applicable,
cause all invoices evidencing Accounts and all copies thereof to bear a notice
that such invoices are payable to the lockboxes established in accordance with
subsection 5.6 and (b) use its best efforts to assure prompt payment of all
amounts due or to become due under the Accounts. No discounts, credits or
allowances will be issued, granted or allowed by any Loan Party with respect to
Accounts and no returns will be accepted without Agent's prior written consent;
PROVIDED, that until Agent notifies such Loan Party to the contrary, such Loan
Party may presume consent. Each Loan Party will immediately notify Agent in the
event that a customer alleges any dispute or claim with respect to an Account or
of any other circumstances known to such Loan Party that may impair the validity
or collectibility of an Account. Agent shall have the right, at any time or
times hereafter, to verify the validity, amount or any other matter relating to
an Account, by mail, telephone or in person. After the occurrence of a Default
or an Event of Default, no Loan Party shall, without the prior consent of Agent,
adjust, settle or compromise the amount or payment of any Account, or release
wholly or partly any customer or obligor thereof, or allow any credit or
discount thereon.

5.6 COLLECTION OF ACCOUNTS AND PAYMENTS. Upon and after the occurrence of
an Event of Default, at the direction of Agent, each Loan Party and Agent shall
establish lockboxes and depository accounts ("Agent's Depository Accounts") with
such banks as are acceptable to Agent to which all account debtors shall
directly remit all payments on Accounts and in which each Loan Party will
immediately deposit all payments made for Inventory, to the extent applicable,
or other payments constituting proceeds of Collateral in the identical form in
which such payment was made, whether by cash or check. Each Loan Party hereby
agrees that all payments received by Agent, whether by cash, check, wire
transfer or any other instrument, made to such Agent Depository Accounts or
otherwise received by Agent and whether on the Accounts or as proceeds of other
Collateral or otherwise will be the sole and exclusive property of Agent, for
the benefit of Lenders. Upon and after the occurrence of an Event of Default,
each Loan Party, and any of its Affiliates, employees, agents or other Persons
acting for or in concert with such Loan Party, shall, acting as trustee for
Agent, receive, as the sole and exclusive property of Agent, any monies, checks,
notes, drafts or any other payments relating to and/or proceeds of Accounts or
other Collateral which come into the possession or under the control of any Loan
Party or any of such Loan Party's Affiliates, employees, agents or other Persons
acting for or in concert with such Loan Party, and immediately upon receipt
thereof, such Loan Party or such Persons shall remit the same or cause the same
to be remitted, in kind, to the Agent Depository Account or to Agent at its
address set forth in subsection 10.4 below.

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5.7 ENDORSEMENT. Upon and after the occurrence of an Event of Default,
each Loan Party hereby constitutes and appoints Agent and all Persons designated
by Agent for that purpose as such Loan Party's true and lawful attorney-in-fact,
with power to endorse such Loan Party's name to any of the items of payment or
proceeds described in subsection 5.6 above and all proceeds of Collateral that
come into Agent's possession or under Agent's control. Both the appointment of
Agent as each Loan Party's attorney and Agent's rights and powers are coupled
with an interest and are irrevocable until payment in full and complete
performance of all of the Obligations.

5.8 CORPORATE EXISTENCE. Each Loan Party will, and will cause each of its
Subsidiaries to, at all times preserve and keep in full force and effect its
corporate existence and all rights and franchises material to its business.
Each Loan Party will promptly notify Agent of any change in its or any of its
Subsidiaries' corporate structure. Corporate Guarantor and Borrower, with
respect to its Subsidiaries, will promptly notify Agent of any change in
Corporate Guarantor's or any such Subsidiary's ownership. Borrower shall
promptly notify Agent of any notices, filings or other information (each, a
"Filing") received by Borrower from the Securities and Exchange Commission (the
"SEC") or otherwise relating to any change in Borrower's ownership which would
require a Filing with the SEC.

5.9 PAYMENT OF TAXES. Each Loan Party will, and will cause each of its
Subsidiaries to, pay all taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or with respect to any of its
franchises, business, income or property before any penalty accrues thereon
PROVIDED that no such tax need be paid if such Loan Party or one of its
Subsidiaries is contesting same in good faith by appropriate proceedings
promptly instituted and diligently conducted and if such Loan Party or such
Subsidiary has established appropriate reserves as shall be required in
conformity with GAAP.

5.10 MAINTENANCE OF PROPERTIES; INSURANCE. Each Loan Party will maintain
or cause to be maintained in good repair, working order and condition, ordinary
wear and tear excepted, all material properties used in the business of such
Loan Party and its Subsidiaries and will make or cause to be made all
appropriate repairs, renewals and replacements thereof. Each Loan Party will
maintain or cause to be maintained, with financially sound and reputable
insurers, public liability and property damage insurance with respect to its
business and properties and the business and properties of its Subsidiaries
against loss or damage of the kinds customarily carried or maintained by
corporations of established reputation engaged in similar businesses and in
amounts acceptable to Agent. Each Loan Party shall cause Agent, for the benefit
of Lenders, to be named as loss payee on all insurance policies relating to any
Collateral and as additional insured under all liability policies, in each case
pursuant to appropriate endorsements in form and substance satisfactory to Agent
and shall collaterally assign to Agent, for the benefit of Lenders, as security
for the payment of the Obligations all business interruption insurance of such
Loan Party. Each Loan Party shall apply any proceeds received from any policies
of insurance relating to any Collateral to the Obligations as set forth in
subsection 2.4(B). Notwithstanding anything contained herein to the contrary,
so long as no Event of Default shall be in existence (a) any proceeds of
business interruption insurance received by Agent hereunder shall be applied by
Agent to the Revolving Loan and (b) in the event there shall be no Revolving
Loans outstanding, Agent, upon Borrower's request therefor, shall remit such
business interruption proceeds to Borrower.

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5.11 COMPLIANCE WITH LAWS. Each Loan Party will, and will cause each of
its Subsidiaries to, comply with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority as now in effect and which
may be imposed in the future in all jurisdictions in which such Loan Party or
any of its Subsidiaries is now doing business or may hereafter be doing
business, other than those laws the noncompliance with which would not have a
Material Adverse Effect.

5.12 FURTHER ASSURANCES. Each Loan Party shall, and shall cause each of
its Subsidiaries to, from time to time, execute such guaranties, financing or
continuation statements, documents, security agreements, reports and other
documents or deliver to Agent such instruments, certificates of title or other
documents as Agent at any time may reasonably request to evidence, perfect or
otherwise implement the guaranties and security for repayment of the Obligations
provided for in the Loan Documents. At Agent's request, each Loan Party shall
cause any Subsidiaries of such Loan Party promptly to guaranty the Obligations
and to grant to Agent, on behalf of Lenders, security interests in the real,
personal and mixed property of such Subsidiary to secure the Obligations.

5.13 COLLATERAL LOCATIONS. Each Loan Party will keep the Collateral of
such Loan Party at the locations specified on Schedule 4.7 other than Mobile
Units and the Equipment installed therein which shall be based at such
locations. With respect to any new location (which in any event shall be within
the continental United States), the applicable Loan Party will execute such
documents and take such actions as Agent deems necessary to perfect and protect
the security interests of the Agent, on behalf of Lenders, in the Collateral
prior to the transfer or removal of any Collateral to such new location.

5.14 BAILEES. If any Collateral is at any time in the possession or control
of any warehouseman, bailee or any Loan Party's agents or processors, such Loan
Party shall, upon the request of Lenders, notify such warehouseman, bailee,
agent or processor of the security interests in favor of Agent, for the benefit
of Lenders, created hereby and shall instruct such Person to hold all such
Collateral for Agent's account subject to Agent's instructions.

5.15 USE OF PROCEEDS AND MARGIN SECURITY. Borrower shall use the proceeds
of all Loans for proper business purposes (as described in the recitals to this
Agreement consistent with all applicable laws, statutes, rules and regulations.
No portion of the proceeds of any Loan shall be used by Borrower or any of its
Subsidiaries for the purpose of purchasing or carrying margin stock within the
meaning of Regulation G or Regulation U, or in any manner that might cause the
borrowing or the application of such proceeds to violate Regulation T or
Regulation X or any other regulation of the Board of Governors of the Federal
Reserve System or to violate the Exchange Act.

5.16 REQUIRED QUALIFIED ASSET EXPENDITURES. Borrower shall make purchases
of Qualified Assets in an aggregate amount of no less than $3,200,000 during
each Loan Year, which such Qualified Assets shall not be subject to any Liens
other than in favor of Agent for the benefit of Lenders.

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5.17 CONSENT OF CERTAIN PERMITTED LIENORS. Borrower shall use its good
faith efforts to obtain as promptly as possible after the Closing Date from each
holder (a "Holder") of a Lien on the Excluded Collateral consents ("Excluded
Collateral Consents") to a grant by Borrower to Agent subsequent to the Closing
Date of a subordinate lien on the Excluded Collateral; provided, however, so
long as Borrower shall have used its good faith efforts to promptly obtain the
Consents, no Default or Event of Default shall occur for failure of any Holder
to provide an Excluded Collateral Consent.

SECTION 6. FINANCIAL COVENANTS

Each Loan Party covenants and agrees that so long as any of the Commitments
remain in effect and until payment in full of all Obligations and termination of
all Lender Letters of Credit, unless such Loan Party has received the prior
written consent of Requisite Lenders, each Loan Party shall comply with and
shall cause each of its Subsidiaries to comply with all covenants in this
Section 6 applicable to such Person.

6.1 TANGIBLE NET WORTH. Borrower shall at all times maintain Tangible Net
Worth plus Subordinated Debt of at least $22,500,000.

6.2 CAPITAL EXPENDITURE LIMITS. The aggregate amount of all Capital
Expenditures of Borrower and its Subsidiaries (excluding trade-ins, excluding
Capital Expenditures in respect of replacement assets to the extent funded with
casualty insurance proceeds and excluding Capital Expenditures that consist of
commitments or contracts to make Capital Expenditures which have not created a
cash obligation so long as such amount does not exceed $500,000 in the aggregate
at any time outstanding) will not exceed an amount equal to $10,000,000 in any
Fiscal Year of Borrower (the "Annual Amount"); PROVIDED, fifty percent (50%) of
the unused portion of any Annual Amount (the "Carryover Amount") may be used by
Borrower (in addition to the Annual Amount) in the calculation hereof in the
next succeeding Fiscal Year of Borrower and no subsequent Fiscal Years provided
no Default or Event of Default shall have occurred; and PROVIDED, FURTHER, any
Capital Expenditures in such succeeding Fiscal Year shall be allocated first to
the Annual Amount for such Fiscal Year and second, to the Carryover Amount from
such preceding Fiscal Year. In the event that Borrower or any of its
Subsidiaries enters into a Capital Lease or other contract with respect to fixed
assets, for purposes of calculating Capital Expenditures under this subsection
only, the amount of the Capital Lease or contract initially capitalized on
Borrower's or any Subsidiary's balance sheet prepared in accordance with GAAP
shall be considered expended in full on the date that Borrower or any of its
Subsidiaries enters into such Capital Lease or contract.

6.3 FIXED CHARGE COVERAGE. Borrower shall not permit its Fixed Charge
Coverage to be less than 1.00 to 1.00 (a) for the fiscal quarter ending February
29, 1996, (b) for the two fiscal quarters ending May 31, 1996, (c) for the three
fiscal quarters ending August 31, 1996, (d) for the four fiscal quarters ending
November 30, 1996 and (e) for each fiscal quarter thereafter, on a rolling four
quarter basis.

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6.4 LEVERAGE RATIO. Borrower shall not permit its Leverage Ratio at the
end of each fiscal quarter set forth below to be greater than the amount set
forth below for such fiscal quarter end.

RATIO FOR
FISCAL QUARTER FISCAL QUARTER ENDING

3.25 : 1.00 Closing Date and on
the last day of each fiscal quarter
thereafter through and including
November 30, 1996

2.75 : 1.00 February 28, 1997 and on the last day
of each fiscal quarter thereafter

SECTION 7. NEGATIVE COVENANTS

Each Loan Party covenants and agrees that so long as any of the Commitments
remain in effect and until payment in full of all Obligations and termination of
all Lender Letters of Credit unless such Loan Party has received the prior
written consent of Requisite Lenders, no Loan Party as applicable to such Person
shall:

7.1 INDEBTEDNESS AND LIABILITIES. (a) Until such time as Term Loan B
shall have been paid in full in cash, directly or indirectly create, incur,
assume, guaranty, or otherwise become or remain directly or indirectly liable,
on a fixed or contingent basis, with respect to any Indebtedness except: (i)
Indebtedness existing on the Closing Date and identified on Schedule 7.1 and any
refinancing or renewal thereof, provided that the principal amount of such
Indebtedness is not increased thereby or the terms made more onerous to
Borrower, Agent or Lenders, (ii) the Obligations and (iii) guarantees expressly
permitted by subsection 7.2; and (b) After such time as Term Loan B shall have
been paid in full in cash, directly or indirectly create, incur, assume,
guaranty, or otherwise become or remain directly or indirectly liable, on a
fixed or contingent basis, with respect to any Indebtedness except: (i) the
Obligations; (ii) Indebtedness (excluding Capital Leases) secured by purchase
money Liens; (iii) Indebtedness under Capital Leases; (iv) Indebtedness existing
on the Closing Date and identified on Schedule 7.1 and any refinancing or
renewal thereof, provided that the principal amount of such Indebtedness is not
increased thereby, or the terms made more onerous to Borrower, Agent or Lenders;
and (v) guarantees expressly permitted by subsection 7.2; PROVIDED, HOWEVER, the
maximum amount of Indebtedness which may be incurred by any Loan Party in any
rolling four fiscal quarters of such Loan Party under the foregoing subsections
(b)(ii) and (b)(iii) (excluding items under subsection (b)(iv)) shall not exceed
$3,000,000 in the aggregate outstanding at any time for all Loan Parties.
Except for Indebtedness permitted in the preceding sentence, no Loan Party will,
nor will it permit any of its Subsidiaries to, incur any Liabilities except for
trade payables and normal accruals in the ordinary course of business not yet
due and payable or with respect to which any Loan Party or any of its
Subsidiaries is contesting in good faith the amount or validity thereof by
appropriate proceedings and then only

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to the extent that such Loan Party or any of its Subsidiaries has established
adequate reserves therefor, if appropriate under GAAP.

7.2 GUARANTIES. Except (1) for endorsements of instruments or items of
payment for collection in the ordinary course of business, (2) guarantees
included in the Loan Documents, (3) the ESOP Guaranty and (4) the guaranty dated
February 28, 1994 of a Lease Agreement between Dean Goodhill and Charter
Financial, guaranty, endorse, or otherwise in any way become or be responsible
for any obligations of any other Person, whether directly or indirectly by
agreement to purchase the indebtedness of any other Person or through the
purchase of goods, supplies or services, or maintenance of working capital or
other balance sheet covenants or conditions, or by way of stock purchase,
capital contribution, advance or loan for the purpose of paying or discharging
any indebtedness or obligation of such other Person or otherwise.

7.3 TRANSFERS, LIENS AND RELATED MATTERS.

(A) TRANSFERS. Sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to any of the Collateral
or the assets of such Person, except that each Loan Party may (i) make Asset
Dispositions (other than Specified Fixed Asset Dispositions) if all of the
following conditions are met: (1) the market value of assets sold or otherwise
disposed of in any single transaction or series of related transactions does not
exceed $250,000 for all Loan Parties and the aggregate market value of assets
sold or otherwise disposed of does not exceed $500,000 for all Loan Parties; (2)
the consideration received is at least equal to the fair market value of such
assets; (3) the sole consideration received is cash; (4) the net proceeds of
such Asset Disposition are applied as required by subsection 2.4(B); (5) after
giving effect to the sale or other disposition of the assets included within the
Asset Disposition and application of the proceeds thereof as required by
subsection 2.4(B), each Loan Party is in compliance on a pro forma basis with
the covenants set forth in Section 6 recomputed for the most recently ended
month for which information is available and is in compliance with all other
terms and conditions contained in this Agreement; and (6) no Default or Event of
Default shall then be in existence or shall be in existence after giving effect
to such sale or other disposition; and (ii) make Specified Fixed Asset
Dispositions if all of the following conditions are met: (1) the net proceeds
of such Specified Fixed Asset Disposition are applied as required by subsection
2.4(B) and (2) no Default or Event of Default shall then be in existence or
shall exist after giving effect to such sale or other disposition.

(B) LIENS. Except for Permitted Encumbrances, directly or indirectly
create, incur, assume or permit to exist any Lien on or with respect to any of
the Collateral or any proceeds, income or profits therefrom.

(C) NO NEGATIVE PLEDGES. Enter into or assume any agreement (other
than the Loan Documents) prohibiting the creation or assumption of any Lien
upon such Loan Party's properties or assets, whether now owned or hereafter
acquired (a "Negative Pledge"), other than (a) any agreement which Borrower is
permitted to enter into under the terms of this Agreement so long as such
agreement expressly excludes Borrower's Liens in favor of Agent from the
restrictions of the Negative Pledge and (b) any lease agreement containing a
Negative Pledge of such lease agreement or the leasehold interests referred to
therein.

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(D) NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO BORROWER. Except
as provided herein, directly or indirectly create or otherwise cause or suffer
to exist or become effective any consensual encumbrance or restriction of any
kind on the ability of any Subsidiary of any Loan Party to: (1) pay dividends or
make any other distribution on any of such Subsidiary's capital stock owned by
Borrower or any Subsidiary of Borrower; (2) subject to subordination provisions,
pay any indebtedness owed to Borrower or any other Subsidiary; (3) make loans or
advances to Borrower or any other Subsidiary; or (4) transfer any of its
property or assets to Borrower or any other Subsidiary.

7.4 INVESTMENTS AND LOANS. Make or permit to exist investments in or
loans to any other Person, except: (a) Cash Equivalents; (b) loans and advances
to employees for moving, entertainment, travel and other similar expenses in the
ordinary course of business in an aggregate outstanding amount not in excess of
$50,000 for all Loan Parties at any time and (c) loans outstanding on the date
hereof to Permitted Subsidiary and Emedge Works, a California partnership as set
forth in Schedule 7.4.

7.5 RESTRICTED JUNIOR PAYMENTS. Directly or indirectly declare, order,
pay, make or set apart any sum for any Restricted Junior Payment, except that:
(a) Subsidiaries of Borrower may make Restricted Junior Payments with respect to
their common stock, (b) Borrower may make payments on the Subordinated Debt in
accordance with the terms of the Subordinated Notes and may prepay the
Subordinated Notes (other than the Subordinated Note referenced in subsection
"(1)" of the defined term "Subordinated Notes") in full provided that (1) Term
Loan B has been paid in full, (2) at the time of and immediately after giving
effect to such prepayment, no Event of Default shall exist or would have existed
if such payment were, on a pro forma basis (x) included in the calculation of
the prior quarterly covenant measuring period or (y) included in management's
written best good faith calculation for the next quarterly covenant measuring
period, and (3) immediately after giving effect to such prepayment, Undrawn
Availability shall equal or exceed $3,000,000, (c) Borrower may purchase its
common stock in any Fiscal Year for an amount equal to or less than $200,000 to
fund current employee benefit plan obligations provided that after giving effect
to such funding, no Event of Default shall exist and (d) Borrower may make
payments under and in accordance with the provisions of the Consulting
Agreements.

7.6 RESTRICTION ON FUNDAMENTAL CHANGES. (a) Enter into any transaction of
merger or consolidation; (b) liquidate, wind-up or dissolve itself (or suffer
any liquidation or dissolution); (c) convey, sell, lease, sublease, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or any
substantial part of its business or assets , or the capital stock of any of its
Subsidiaries, whether now owned or hereafter acquired; or (d) acquire by
purchase or otherwise all or any substantial part of the business or assets of,
or stock or other evidence of beneficial ownership of, any Person.

7.7 CHANGES RELATING TO SUBORDINATED DEBT. Change or amend the terms of
the Subordinated Debt if the effect of such amendment is to: (a) increase the
interest rate on such Indebtedness; (b) change the dates upon which payments of
principal or interest are due on such Indebtedness; (c) change any event of
default or add any covenant with respect to such Indebtedness; (d) change the
payment provisions of such Indebtedness; (e) change the subordination provisions
thereof; or (f) change or amend any other term if such change or amendment would

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materially increase the obligations of the obligor or confer additional material
rights on the holder of such Indebtedness in a manner adverse to any Loan Party,
any of its Subsidiaries, Agent or any Lender.

7.8 TRANSACTIONS WITH AFFILIATES. Directly or indirectly, enter into or
permit to exist any transaction (including the purchase, sale or exchange of
property or the rendering of any service) with any Affiliate or with any
officer, director or employee of any Loan Party, except for transactions in the
ordinary course of and pursuant to the reasonable requirements of such Loan
Party's business and upon fair and reasonable terms which, to the extent any
individual transaction exceeds $50,000 in the aggregate at any time outstanding
are fully disclosed to Agent and Lenders and which are no less favorable to such
Loan Party than it would obtain in a comparable arm's length transaction with an
unaffiliated Person, transactions permitted under the ESOP Agreements as
presently in effect and advances to Borrower under the ESOP Agreements to enable
Borrower to satisfy ESOP Obligations and the transactions contemplated by the
Consulting Agreements.

7.9 ENVIRONMENTAL LIABILITIES. (a) Violate any applicable Environmental
Law except to the extent that any violation could not result in a Liability or
penalty of more than $100,000; (b) dispose of any Hazardous Materials (except in
accordance with applicable law) into or onto or from, any real property owned,
leased or operated by any Loan Party; or (c) permit any Lien imposed pursuant to
any Environmental Law to be imposed or to remain on any real property owned,
leased or operated by any Loan Party.

7.10 CONDUCT OF BUSINESS. From and after the Closing Date, engage in any
business other than businesses of the type engaged in by such Loan Party or such
Subsidiary on the Closing Date.

7.11 COMPLIANCE WITH ERISA. Establish any new Employee Benefit Plan or
amend any existing Employee Benefit Plan if the liability or increased liability
resulting from such establishment or amendment is material. No Loan Party nor
any of its Subsidiary shall fail to establish, maintain and operate each
Employee Benefit Plan in compliance in all material respects with the provisions
of ERISA, the IRC and all other applicable laws and the regulations and
interpretations thereof.

7.12 TAX CONSOLIDATIONS. File or consent to the filing of any consolidated
income tax return with any Person other than Borrower, Corporate Guarantor, or
any of their respective Subsidiaries; provided that in the event Borrower files
a return with Corporate Guarantor, Borrower's contribution with respect to taxes
as a result of the filing of such consolidated return shall not be greater, nor
the receipt of tax benefits less, than they would have been had Borrower not
filed a consolidated return with Corporate Guarantor.

7.13 SUBSIDIARIES. Establish, create or acquire any Subsidiaries, other
than Permitted Subsidiaries.

7.14 FISCAL YEAR. Change its Fiscal Year.

7.15 PRESS RELEASE; PUBLIC OFFERING MATERIALS. Disclose the name of Agent
or any Lender in any press release or in any prospectus, proxy statement or
other materials filed with any

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governmental entity relating to a public offering of the capital stock of any
Loan Party except as may be required by law.

7.16 BANK ACCOUNTS. After the occurrence and during the continuance of an
Event of Default, establish any new bank accounts, or amend or terminate any
blocked account or lockbox agreement without Agent's prior written consent.

SECTION 8. DEFAULT, RIGHTS AND REMEDIES

8.1 EVENT OF DEFAULT. "Event of Default" shall mean the occurrence or
existence of any one or more of the following provided that any requirement for
the giving of notice, the lapse of time, or both, has been satisfied:

(A) PAYMENT. Failure to make payment of any of the Obligations when
due and in the case of interest, such failure shall not be cured within five
(5) days of the applicable due date; or

(B) DEFAULT IN OTHER AGREEMENTS. (1) Failure of any Loan Party or
any of its Subsidiaries to pay when due any principal or interest on any
Indebtedness (other than the Obligations) or (2) breach or default of any Loan
Party or any of its Subsidiaries with respect to any Indebtedness (other than
the Obligations); if such failure to pay, breach or default entitles the holder
to cause such Indebtedness having an individual principal amount in excess of
$250,000 or having an aggregate principal amount in excess of $500,000 to become
or be declared due prior to its stated maturity; or

(C) BREACH OF CERTAIN PROVISIONS. Failure of any Loan Party to
perform or comply with any term or condition contained in subsections 5.1 (A),
(B) or (C), 5.3, 5.5 or 5.6 or contained in Section 6 or Section 7; or

(D) BREACH OF WARRANTY. Any representation, warranty, certification
or other statement made by any Loan Party in any Loan Document or in any
statement or certificate at any time given by such Person in writing pursuant or
in connection with any Loan Document is false in any material respect on the
date made; or

(E) OTHER DEFAULTS UNDER LOAN DOCUMENTS. Any Loan Party defaults in
the performance of or compliance with any term contained in this Agreement or
the other Loan Documents and such default is not remedied or waived within ten
(10) days after receipt by Borrower of notice from Agent, or Requisite Lenders
of such default (other than occurrences described in other provisions of this
subsection 8.1 for which a different grace or cure period is specified or which
constitute immediate Events of Default); or

(F) CHANGE IN CONTROL. A Change of Control shall occur; or

(G) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (1) A
court enters a decree or order for relief with respect to any Loan Party or any
of its Subsidiaries in an

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involuntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, which decree or
order is not stayed or other similar relief is not granted under any applicable
federal or state law; or (2) the continuance of any of the following events for
sixty (60) days unless dismissed, stayed during the period of such stay, bonded
or discharged: (a) an involuntary case is commenced against any Loan Party or
any of its Subsidiaries, under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect; or (b) a decree or order of a court for
the appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over any Loan Party or any of its
Subsidiaries, or over all or a substantial part of their respective property, is
entered; or (c) an interim receiver, trustee or other custodian is appointed
without the consent of any Loan Party or any of its Subsidiaries, for all or a
substantial part of the property of any Loan Party or any such Subsidiary; or

(H) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (1) An order
for relief is entered with respect to any Loan Party or any of its Subsidiaries
or any of its Subsidiaries commences a voluntary case under the Bankruptcy Code
or any applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or consents to the entry of an order for relief in an involuntary
case or to the conversion of an involuntary case to a voluntary case under any
such law or consents to the appointment of or taking possession by a receiver,
trustee or other custodian for all or a substantial part of its property; or (2)
any Loan Party or any of its Subsidiaries makes any assignment for the benefit
of creditors; or (3) the board of directors of any Loan Party or any of its
Subsidiaries adopts any resolution or otherwise authorizes action to approve any
of the actions referred to in this subsection 8.1(H); or

(I) LIENS. Any lien, levy or assessment is filed or recorded with
respect to or otherwise imposed upon all or any part of the Collateral or the
assets of any Loan Party or of its Subsidiaries by the United States or any
department or instrumentality thereof or by any state, county, municipality or
other governmental agency (other than Permitted Encumbrances) and such lien,
levy or assessment is not stayed, vacated, paid or discharged within ten (10)
days; or

(J) JUDGMENT AND ATTACHMENTS. Any money judgment, writ or warrant of
attachment, or similar process involving (1) an amount in any individual case in
excess of $50,000 or (2) an amount in the aggregate at any time in excess of
$100,000 for all Loan Parties (in either case not adequately covered by
insurance as to which the insurance company has acknowledged coverage) is
entered or filed against any Loan Party or any of its Subsidiaries or any of
their respective assets and remains undischarged, unvacated, unbonded or
unstayed for a period of thirty (30) days or in any event later than five (5)
days prior to the date of any proposed sale thereunder; or

(K) DISSOLUTION. Any order, judgment or decree is entered against
any Loan Party or any of its Subsidiaries decreeing the dissolution or split up
of any Loan Party or that Subsidiary and such order remains undischarged or
unstayed for a period in excess of twenty (20) days; or

(L) SOLVENCY. Any Loan Party ceases to be solvent (as represented by
such Loan Party in subsection 4.16) or admits in writing its present or
prospective inability to pay its debts as they become due; or

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(M) INJUNCTION. Any Loan Party or any of its Subsidiaries is
enjoined, restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting all or any material part of
its business and such order continues unstayed for more than thirty (30) days;
or

(N) INVALIDITY OF LOAN DOCUMENTS. Any of the Loan Documents for any
reason, other than a partial or full release in accordance with the terms
thereof, ceases to be in full force and effect or is declared to be null and
void, or any Loan Party denies that it has any further liability under any Loan
Documents to which it is party, or gives notice to such effect; or

(O) FAILURE OF SECURITY. Agent, on behalf of Lenders, does not have
or ceases to have a valid and perfected first priority security interest in the
Collateral (subject to Permitted Encumbrances), in each case, for any reason
other than the failure of Agent or any Lender to take any action within its
control; or

(P) DAMAGE, STRIKE, CASUALTY. Any material damage to, or loss, theft
or destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy, or
other casualty which causes, for more than fifteen (15) consecutive days beyond
the coverage period of any applicable business interruption insurance, the
cessation or substantial curtailment of revenue producing activities at any
facility of any Loan Party or any of its Subsidiaries (other than in connection
with Specified Fixed Asset Dispositions) if any such event or circumstance could
reasonably be expected to have a Material Adverse Effect; or

(Q) LICENSES AND PERMITS. The loss, suspension or revocation of, or
failure to renew, any license or permit not held or hereafter acquired by any
Loan Party or any of its Subsidiaries if such loss, suspension, revocation or
failure to renew could have a Material Adverse Effect; or

(R) FORFEITURE. There is filed against any Loan Party or any of its
Subsidiaries any civil or criminal action, suit or proceeding under any federal
or state racketeering statute (including, without limitation, the Racketeer
Influenced and Corrupt Organization Act of 1970), which action, suit or
proceeding (1) is not dismissed within one hundred twenty (120) days; and (2)
could result in the confiscation or forfeiture of any material portion of the
Collateral; or

(S) CESSATION/SALE OF SPECIFIED DIVISIONS. Borrower fails to
permanently cease operations or sell substantially all the assets of at least
two of its Specified Divisions on or prior to December 31, 1996;

(T) REPAYMENTS OF TERM LOAN B. Failure of Borrower to repay Term
Loan B from a Permitted Term Loan B Repayment Source in accordance with the
provisions of subsections 2.1(A)(2) and 2.4(B)(2); or

(U) CHASE MORTGAGE DOCUMENTATION. A default shall occur under the
Chase Mortgage Documentation which is not cured within any applicable grace
period.

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8.2 SUSPENSION OF COMMITMENTS. Upon the occurrence of any Default or
Event of Default, notwithstanding any grace period or right to cure, Agent may
or upon demand by Requisite Lenders shall, without notice or demand, immediately
cease making additional Loans and the Commitments shall be suspended; PROVIDED
that, in the case of a Default, if the subject condition or event is waived or
cured within any applicable grace or cure period, the Commitments shall be
reinstated.

8.3 ACCELERATION. Upon the occurrence of any Event of Default described
in the foregoing subsections 8.1(G) or 8.1(H), all Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by each Loan Party, and the Commitments shall thereupon terminate. Upon
the occurrence and during the continuance of any other Event of Default, Agent
may, and upon demand by Requisite Lenders shall, by written notice to Borrower,
(a) declare all or any portion of the Obligations to be, and the same shall
forthwith become, immediately due and payable and the Commitments shall
thereupon terminate and (b) demand that Borrower immediately deposit with Agent
an amount equal to one hundred five percent (105%) of the Letter of Credit
Reserve to enable Lender to make payments under the Lender Letters of Credit
when required and such amount shall become immediately due and payable.

8.4 REMEDIES. If any Event of Default shall have occurred and be
continuing, in addition to and not in limitation of any other rights or remedies
available to Agent and Lenders at law or in equity, Agent may and shall upon the
request of Requisite Lenders exercise in respect of the Collateral, in addition
to all other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the UCC
(whether or not the UCC applies to the affected Collateral) and may also (a)
notify any or all obligors on the Accounts to make all payments directly to
Agent; (b) require each Loan Party to, and each Loan Party hereby agrees that it
will, at its expense and upon request of Agent forthwith, assemble all or part
of the Collateral of such Loan Party as directed by Agent and make it available
to Agent at a place to be designated by Agent which is reasonably convenient to
both parties; (c) withdraw all cash in the Agent's Depository Account and apply
such monies in payment of the Obligations in the manner provided in subsection
8.7; (d) without notice or demand or legal process, enter upon any premises of
any or all Loan Parties and take possession of the Collateral; and (e) without
notice except as specified below, sell the Collateral or any part thereof in one
or more parcels at public or private sale, at any of the Agent's offices or
elsewhere, at such time or times, for cash, on credit or for future delivery,
and at such price or prices and upon such other terms as Agent may deem
commercially reasonable. Each Loan Party agrees that, to the extent notice of
sale shall be required by law, at least ten (10) days notice to Borrower on
behalf of all Loan Parties of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. At any sale of the Collateral, if permitted by law, Agent or any
Lender may bid (which bid may be, in whole or in part, in the form of
cancellation of indebtedness) for the purchase of the Collateral or any portion
thereof for the account of Agent or such Lender. Agent shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
Each Loan Party shall remain liable for any deficiency. Agent may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned. To the extent permitted by law, each
Loan Party hereby specifically waives all rights of redemption, stay

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or appraisal which it has or may have under any law now existing or hereafter
enacted. Agent shall not be required to proceed against any Collateral but may
proceed against any or all Loan Parties directly.

8.5 APPOINTMENT OF ATTORNEY-IN-FACT. Each Loan Party hereby constitutes
and appoints Agent as such Loan Party's attorney-in-fact with full authority in
the place and stead of such Loan Party and in the name of such Loan Party, Agent
or otherwise, from time to time in Agent's discretion while an Event of Default
is continuing to take any action and to execute any instrument that Agent may
deem necessary or advisable to accomplish the purposes of this Agreement,
including: (a) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral; (b) to adjust, settle or compromise the amount
or payment of any Account, or release wholly or partly any customer or obligor
thereunder or allow any credit or discount thereon; (c) to receive, endorse, and
collect any drafts or other instruments, documents and chattel paper, in
connection with clause (a) above; (d) to file any claims or take any action or
institute any proceedings that Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of Agent
and Lenders with respect to any of the Collateral; and (e) to sign and endorse
any invoices, freight or express bills, bills of lading, storage or warehouse
receipts, assignments, verifications and notices in connection with Accounts and
other documents relating to the Collateral. The appointment of Agent as each
Loan Party's attorney and Agent's rights and powers are coupled with an interest
and are irrevocable until payment in full and complete performance of all of the
Obligations.

8.6 LIMITATION ON DUTY OF AGENT WITH RESPECT TO COLLATERAL. Beyond the
safe custody thereof, Agent and each Lender shall have no duty with respect to
any Collateral in its possession or control (or in the possession or control of
any agent or bailee) or with respect to any income thereon or the preservation
of rights against prior parties or any other rights pertaining thereto. Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which Agent accords its own property.
Neither Agent nor any Lender shall be liable or responsible for any loss or
damage to any of the Collateral, or for any diminution in the value thereof, by
reason of the act or omission of any warehouseman, carrier, forwarding agency,
consignee or other agent or bailee selected by Agent in good faith.

8.7 APPLICATION OF PROCEEDS. Upon the occurrence and during the
continuance of an Event of Default, (a) each Loan Party irrevocably waives the
right to direct the application of any and all payments at any time or times
thereafter received by Agent from or on behalf of such Loan Party, and each Loan
Party hereby irrevocably agrees that Agent shall have the continuing exclusive
right to apply and to reapply any and all payments received at any time or times
after the occurrence and during the continuance of an Event of Default against
the Obligations in such manner as Agent may deem advisable notwithstanding any
previous entry by Agent upon any books and records and (b) the proceeds of any
sale of, or other realization upon, all or any part of the Collateral shall be
applied: FIRST, to all fees, costs and expenses incurred by Agent or any Lender
with respect to this Agreement, the other Loan Documents or the Collateral;
SECOND, to all fees due and owing to Agent and Lenders; THIRD, to accrued and
unpaid interest on the Obligations; FOURTH, to the principal amounts of the
Obligations outstanding; FIFTH, to any other indebtedness or

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obligations of each Loan Party owing to Agent or any Lender and SIXTH to
Borrower, its successors or assigns, or as a court of competent jurisdiction may
direct.

8.8 LICENSE OF INTELLECTUAL PROPERTY. Each Loan Party hereby assigns,
transfers and conveys to Agent, for the benefit Lenders, effective upon the
occurrence of any Event of Default hereunder, the non-exclusive right and
license to use all Intellectual Property owned or used by such Loan Party
together with any goodwill associated therewith, but only to the extent
necessary to enable Agent to realize on the Collateral and any successor or
assign to enjoy the benefits of the Collateral. This right and license shall
inure to the benefit of all successors, assigns and transferees of Agent and its
successors, assigns and transferees, whether by voluntary conveyance, operation
of law, assignment, transfer, foreclosure, deed in lieu of foreclosure or
otherwise. Such right and license is granted free of charge, without
requirement that any monetary payment whatsoever be made to any Loan Party by
Agent.

8.9 WAIVERS, NON-EXCLUSIVE REMEDIES. No failure on the part of Agent or
any Lender to exercise, and no delay in exercising and no course of dealing with
respect to, any right under this Agreement or the other Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise by Agent
or any Lender of any right under this Agreement or any other Loan Document
preclude any other or further exercise thereof or the exercise of any other
right. The rights in this Agreement and the other Loan Documents are cumulative
and are not exclusive of any other remedies provided by law.

SECTION 9. ASSIGNMENT AND PARTICIPATION

9.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS.

(A) Each Lender may assign its rights and delegate its obligations
under this Agreement to another Person; PROVIDED, that (a) such Lender shall
first obtain the written consent of Agent, which shall not be unreasonably
withheld, (b) the amount of Commitments and Loans of the assigning Lender being
assigned shall in no event be less than the lesser of (i) $5,000,000 or (ii) the
entire amount of the Commitments and Loans of such assigning Lender and (c)(i)
each such assignment shall be of a pro rata portion of all such assigning
Lender's Loans and Commitments hereunder, and (ii) the parties to such
assignment shall execute and deliver to Agent for acceptance and recording a
Lender Addition Agreement together with (x) a processing and recording fee of
$2,500 payable to Agent and (y) the Notes originally delivered to the assigning
Lender. Upon receipt of all of the foregoing, Agent shall notify Borrower of
such assignment and Borrower shall comply with its obligations under the last
sentence of subsection 2.1(E). In the case of an assignment authorized under
this subsection 9.1, the assignee shall have, to the extent of such assignment,
the same rights, benefits and obligations as it would if it were a Lender
hereunder. The assigning Lender shall be relieved of its obligations hereunder
with respect to its Commitment or assigned portion thereof. Borrower hereby
acknowledges and agrees that any assignment will give rise to a direct
obligation of Borrower to the assignee and that the assignee shall be considered
to be a "Lender". No Lender will directly assign its rights to a Foreign Lender
unless such Foreign Lender has provided such Lender with a current Certificate
of Exemption.

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(B) Each Lender may sell participations in all or any part of any
Loans made by it to another Person (provided that such Lender shall remain
responsible for the performance of its obligations hereunder); PROVIDED, that
any such participation shall be in a minimum amount of $5,000,000, and PROVIDED,
FURTHER, that all amounts payable by Borrower hereunder shall be determined as
if that Lender had not sold such participation and the holder of any such
participation shall not be entitled to require such Lender to take or omit to
take any action hereunder except action directly effecting (a) any reduction in
the principal amount, interest rate or fees payable with respect to any Loan in
which such holder participates; (b) any extension of the Termination Date or the
date fixed for any payment of principal, interest or fees payable with respect
to any Loan in which such holder participates; and (c) any release of
substantially all of the Collateral (other than in accordance with the terms of
this Agreement or the Loan Documents). Borrower hereby acknowledges and agrees
that any participation will give rise to a direct obligation of Borrower to the
participant, and the participant shall for purposes of subsection 2.8, 2.9,
2.10, 9.4 and 10.2 be considered to be a "Lender".

(C) Except as otherwise provided in this subsection 9.1 no Lender
shall, as between Borrower and that Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the Loans or
other Obligations owed to such Lender. Each Lender may furnish any information
concerning any Loan Party and its Subsidiaries in the possession of that Lender
from time to time to assignees and participants (including prospective assignees
and participants) provided that the Persons obtaining such information agrees to
maintain the confidentiality of such information to the extent required by
subsection 10.21.

(D) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time create a security interest in all or any portion of
its rights under this Agreement (including, without limitation, the Loans owing
to it and the Note held by it in favor of any Federal Reserve Bank in accordance
with Regulation A of the Board of Governors of the Federal Reserve System).

9.2 AGENT.

(A) APPOINTMENT. Each Lender hereby designates and appoints Heller
as its agent under this Agreement and the Loan Documents, and each Lender hereby
irrevocably authorizes Agent to take such action or to refrain from taking such
action on its behalf under the provisions of this Agreement and the Loan
Documents and to exercise such powers as are set forth herein or therein,
together with such other powers as are reasonably incidental thereto. Agent is
authorized and empowered to amend, modify, or waive any provisions of this
Agreement or the other Loan Documents on behalf of Lenders subject to the
requirement that certain of Lenders' consent be obtained in certain instances as
provided in subsection 9.3. Agent agrees to act as such on the express
conditions contained in this subsection 9.2. The provisions of this subsection
9.2 are solely for the benefit of Agent and Lenders and neither Borrower nor any
Loan Party shall have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under this Agreement,
Agent shall act solely as an administrative representative of Lenders and does
not assume and shall not be deemed to have assumed any obligation toward or
relationship of

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agency or trust with or for Lenders, Borrower or any Loan Party. Agent may
perform any of its duties hereunder, or under the Loan Documents, by or through
its agents or employees.

(B) NATURE OF DUTIES. Agent shall have no duties, obligations or
responsibilities except those expressly set forth in this Agreement or in the
Loan Documents. The duties of Agent shall be mechanical and administrative in
nature. Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender. Each Lender shall make its own
independent investigation of the financial condition and affairs of Borrower in
connection with the extension of credit hereunder and shall make its own
appraisal of the credit worthiness of Borrower, and Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Lender
with any credit or other information with respect thereto, whether coming into
its possession before the Closing Date or at any time or times thereafter. If
Agent seeks the consent or approval of any Lenders to the taking or refraining
from taking any action hereunder, then Agent shall send notice thereof to each
Lender. Agent shall promptly notify each Lender any time that the applicable
percentage of Lenders have instructed Agent to act or refrain from acting
pursuant hereto.

(C) RIGHTS, EXCULPATION, ETC. Neither Agent nor any of its officers,
directors, employees or agents shall be liable to any Lender for any action
taken or omitted by them hereunder or under any of the Loan Documents, or in
connection herewith or therewith, except that Agent shall be obligated on the
terms set forth herein for performance of its express obligations hereunder, and
except that Agent shall be liable with respect to its own gross negligence or
willful misconduct. Agent shall not be liable for any apportionment or
distribution of payments made by it in good faith and if any such apportionment
or distribution is subsequently determined to have been made in error the sole
recourse of any Lender to whom payment was due but not made, shall be to recover
from other Lenders any payment in excess of the amount to which they are
determined to be entitled (and such other Lenders hereby agree to return to such
Lender any such erroneous payments received by them). In performing its
functions and duties hereunder, Agent shall exercise the same care which it
would in dealing with loans for its own account, but Agent shall not be
responsible to any Lender for any recitals, statements, representations or
warranties herein or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility, or sufficiency of this Agreement or any of the
Loan Documents or the transactions contemplated thereby, or for the financial
condition of any Loan Party. Agent shall not be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement or any of the Loan Documents or the financial
condition of any Loan Party, or the existence or possible existence of any
Default or Event of Default. Agent may at any time request instructions from
Lenders with respect to any actions or approvals which by the terms of this
Agreement or of any of the Loan Documents Agent is permitted or required to take
or to grant, and Agent shall be absolutely entitled to refrain from taking any
action or to withhold any approval and shall not be under any liability
whatsoever to any Person for refraining from any action or withholding any
approval under any of the Loan Documents until it shall have received such
instructions from the applicable percentage of the Lenders. Without limiting
the foregoing, no Lender shall have any right of action whatsoever against Agent
as a result of Agent acting or refraining from acting under this Agreement or
any of the other Loan Documents in accordance with the instructions of the
applicable percentage of the Lenders and notwithstanding the instructions of
Lenders, Agent shall have no obligation to take any action if it, in good faith
believes that such action exposes Agent to any liability.

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(D) RELIANCE. Agent shall be entitled to rely upon any written
notices, statements, certificates, orders or other documents or any telephone
message or other communication (including any writing, telex, telecopy or
telegram) believed by it in good faith to be genuine and correct and to have
been signed, sent or made by the proper Person, and with respect to all matters
pertaining to this Agreement or any of the Loan Documents and its duties
hereunder or thereunder, upon advice of counsel selected by it. Agent shall be
entitled to rely upon the advice of legal counsel, independent accountants, and
other experts selected by Agent in its sole discretion.

(E) INDEMNIFICATION. Each Lender, severally, agrees to reimburse and
indemnify Agent for and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, advances or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against Agent in any way relating to or arising out of this
Agreement or any of the Loan Documents or any action taken or omitted by Agent
under this Agreement for any of the Loan Documents, in proportion to each
Lender's Pro Rata Share; PROVIDED, HOWEVER, that no Lender shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses, advances or disbursements resulting
from Agent's gross negligence or willful misconduct. The obligations of Lenders
under this subsection 9.2(E) shall survive the payment in full of the
Obligations and the termination of this Agreement.

(F) HELLER INDIVIDUALLY. With respect to its Commitments and the
Loans made by it, and the Notes issued to it, Heller shall have and may exercise
the same rights and powers hereunder and is subject to the same obligations and
liabilities as and to the extent set forth herein for any other Lender. The
terms "Lenders" or "Requisite Lenders" or any similar terms shall, unless the
context clearly otherwise indicates, include Heller in its individual capacity
as a Lender or one of the Requisite Lenders. Heller may lend money to, and
generally engage in any kind of banking, trust or other business with any Loan
Party as if it were not acting as Agent pursuant hereto.

(G) SUCCESSOR AGENT.

(1) RESIGNATION. Agent may resign from the performance of all
its functions and duties hereunder at any time by giving at least thirty (30)
Business Days' prior written notice to Borrower and the Lenders. Such
resignation shall take effect upon the acceptance by a successor Agent of
appointment pursuant to clause (2) below or as otherwise provided below.

(2) APPOINTMENT OF SUCCESSOR. Upon any such notice of
resignation pursuant to clause (G)(1) above, Requisite Lenders shall, upon
receipt of Borrower's prior consent which shall not unreasonably be withheld,
appoint a successor Agent. If a successor Agent shall not have been so
appointed within said thirty (30) Business Day period, the retiring Agent, upon
notice to Borrower, shall then appoint a successor Agent who shall serve as
Agent until such time, as Requisite Lenders, upon receipt of Borrower's prior
written consent which shall not be unreasonably withheld, appoint a successor
Agent as provided above.

(3) SUCCESSOR AGENT. Upon the acceptance of any appointment as
Agent under the Loan Documents by a successor Agent, such successor Agent shall
thereupon succeed

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to and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations under the Loan Documents. After any retiring Agent's resignation as
Agent under the Loan Documents, the provisions of this subsection 9.2 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under the Loan Documents.

(H) COLLATERAL MATTERS.

(1) RELEASE OF COLLATERAL. Lenders hereby irrevocably authorize
Agent, at its option and in its discretion, to release any Lien granted to or
held by Agent upon any property covered by this Agreement or the Loan Documents
(i) upon termination of the Commitments and payment and satisfaction of all
Obligations; (ii) constituting property being sold or disposed of if Borrower on
behalf of each Loan Party certifies to Agent that the sale or disposition is
made in compliance with the provisions of this Agreement (and Agent may rely in
good faith conclusively on any such certificate, without further inquiry); or
(iii) constituting property leased to any Loan Party under a lease which has
expired or been terminated in a transaction permitted under this Agreement or is
about to expire and which has not been, and is not intended by such Loan Party
to be, renewed or extended. In addition during any Fiscal Year (x) Agent may
release Collateral having a book value of not more than 10% of the book value of
all Collateral, (y) Agent, with the consent of Requisite Lenders, may release
Collateral having a book value of not more than 25% of the book value of all
Collateral and (z) Agent, with the consent of Lenders having 90% of (i) the
Total Loan Commitments and (ii) Loans, may release all the Collateral.

(2) CONFIRMATION OF AUTHORITY; EXECUTION OF RELEASES. Without
in any manner limiting Agent's authority to act without any specific or further
authorization or consent by Lenders (as set forth in subsection 9.2(H)(1)), each
Lender agrees to confirm in writing, upon request by Borrower on behalf of each
Loan Party, the authority to release any property covered by this Agreement or
the Loan Documents conferred upon Agent under subsection 9.2(H)(1). So long as
no Event of Default is then continuing, upon receipt by Agent of confirmation
from the requisite percentage of Lenders, of its authority to release any
particular item or types of property covered by this Agreement or the Loan
Documents, and upon at least five (5) Business Days prior written request by
Borrower on behalf of each Loan Party, Agent shall (and is hereby irrevocably
authorized by Lenders to) execute such documents as may be necessary to evidence
the release of the Liens granted to Agent for the benefit of Lenders herein or
pursuant hereto upon such Collateral; PROVIDED, HOWEVER, that (i) Agent shall
not be required to execute any such document on terms which, in Agent's opinion,
would expose Agent to liability or create any obligation or entail any
consequence other than the release of such Liens without recourse or warranty,
and (ii) such release shall not in any manner discharge, affect or impair the
Obligations or any Liens upon (or obligations of any Loan Party, in respect of),
all interests retained by any Loan Party, including, without limitation, the
proceeds of any sale, all of which shall continue to constitute part of the
property covered by this Agreement or the Loan Documents.

(3) ABSENCE OF DUTY. Agent shall have no obligation whatsoever
to any Lender or any other Person to assure that the property covered by this
Agreement or the Loan Documents exists or is owned by the applicable Loan Party
or is cared for, protected or insured or has been encumbered or that the Liens
granted to Agent on behalf of Lenders herein or pursuant

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hereto have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to exercise
at all or in any particular manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights, authorities and powers
granted or available to Agent in this subsection 9.2(H) or in any of the Loan
Documents, it being understood and agreed that in respect of the property
covered by this Agreement or the Loan Documents or any act, omission or event
related thereto, Agent may act in any manner it may deem appropriate, in its
discretion, given Agent's own interest in property covered by this Agreement or
the Loan Documents as one of the Lenders and that Agent shall have no duty or
liability whatsoever to any of the other Lenders; PROVIDED, that Agent shall
exercise the same care which it would in dealing with loans for its own account.

(I) AGENCY FOR PERFECTION. Each Lender hereby appoints each other
Lender as agent for the purpose of perfecting Lenders' security interest in
Collateral which, in accordance with ARTICLE 9 of the Uniform Commercial Code in
any applicable jurisdiction, can be perfected only by possession. Should any
Lender (other than Agent) obtain possession of any such Collateral, such Lender
shall notify Agent thereof, and, promptly upon Agent's request therefor, shall
deliver such Collateral to Agent or in accordance with Agent's instructions.

(J) EXERCISE OF REMEDIES. Each Lender agrees that it will not have
any right individually to enforce or seek to enforce this Agreement or any Loan
Document or to realize upon any collateral security for the Loans, it being
understood and agreed that such rights and remedies may be exercised only by
Agent.

9.3 CONSENTS.

(A) In the event Agent requests the consent of a Lender and does not
receive a written denial thereof within five (5) Business Days after such
Lender's receipt of such request, then such Lender will be deemed to have given
such consent.

(B) In the event Agent requests the consent of a Lender and such
consent is denied, then Heller may, at its option, require such Lender to assign
its interest in the Loans to Heller for a price equal to the then outstanding
principal amount thereof PLUS accrued and unpaid interest and fees due such
Lender, which interest and fees will be paid when collected from Borrower. In
the event that Heller elects to require any Lender to assign its interest to
Heller, Heller will so notify such Lender in writing within forty-five (45) days
following such Lender's denial, and such Lender will assign its interest to
Heller no later than five (5) days following receipt of such notice.

9.4 SET OFF AND SHARING OF PAYMENTS. In addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the occurrence and during the continuance of any Event of Default,
each Lender is hereby authorized by Borrower at any time or from time to time,
with reasonably prompt subsequent notice to Borrower on behalf of all Loan
Parties or to any other Person (any prior or contemporaneous notice being hereby
expressly waived) to set off and to appropriate and to apply any and all (A)
balances held by such Lender or such holder at any of its offices for the
account of any Loan Party or any of its Subsidiaries (regardless of whether such
balances are then due to any Loan Party or its Subsi-

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diaries), and (B) other property at any time held or owing by such Lender or
such holder to or for the credit or for the account of any Loan Party or any of
its Subsidiaries, against and on account of any of the Obligations which are not
paid when due; except that no Lender or any such holder shall exercise any such
right without the prior written consent of Agent. Any Lender which has
exercised its right to set off shall, to the extent the amount of any such set
off exceeds its Pro Rata Share of the Obligations, purchase for cash (and the
other Lenders or holders shall sell) participations in each such other Lender's
or holder's Pro Rata Share of the Obligations as would be necessary to cause
such Lender to share such excess with each other Lender or holder in accordance
with their respective Pro Rata Shares. Each Loan Party agrees, to the fullest
extent permitted by law, that (a) any Lender or holder may exercise its right to
set off with respect to amounts in excess of its Pro Rata Share of the
Obligations and may sell participations in such excess to other Lenders and
holders, and (b) any Lender or holder so purchasing a participation in the Loans
made or other Obligations held by other Lenders or holders may exercise all
rights of set-off, bankers' lien, counterclaim or similar rights with respect to
such participation as fully as if such Lender or holder were a direct holder of
Loans and other Obligations in the amount of such participation.

9.5 DISBURSEMENT OF FUNDS. Agent may, on behalf of Lenders, disburse
funds to Borrower for Loans requested. Each Lender shall reimburse Agent on
demand for all funds disbursed on its behalf by Agent, or if Agent so requests,
each Lender will remit to Agent its Pro Rata Share of any Loan before Agent
disburses same to Borrower. If Agent elects to require that funds be made
available prior to disbursement to Borrower, Agent shall advise each Lender by
telephone, telex or telecopy of the amount of such Lender's Pro Rata Share of
such requested Loan no later than (a) one (1) Business Day prior to the Funding
Date applicable thereto for LIBOR Rate Loans or Fixed Rate Loans and (b) by 1:00
p.m. Central time on the Funding Date for Base Rate Loans, and each such Lender
shall pay Agent such Lender's Pro Rata Share of such requested Loan, in same day
funds, by wire transfer to Agent's Account not later than 10:00 a.m. Central
time on such Funding Date for LIBOR Rate Loans or Fixed Rate Loans and 3:00 p.m.
Central time for Base Rate Loans. If any Lender fails to pay the amount of its
Pro Rata Share forthwith upon Agent's demand, Agent shall promptly notify
Borrower, and Borrower shall immediately repay such amount to Agent. Any
repayment required pursuant to this subsection 9.5 shall be without premium or
penalty. Nothing in this subsection 9.5 or elsewhere in this Agreement or the
other Loan Documents, including without limitation the provisions of subsection
9.6, shall be deemed to require Agent to advance funds on behalf of any Lender
or to relieve any Lender from its obligation to fulfill its Commitments
hereunder or to prejudice any rights that Agent or Borrower may have against any
Lender as a result of any default by such Lender hereunder.

9.6 SETTLEMENTS, PAYMENTS AND INFORMATION.

(A) REVOLVING LOAN ADVANCES AND PAYMENTS; FEE PAYMENTS.

(1) The Revolving Loan balance may fluctuate from day to day
through Agent's disbursement of funds to, and receipt of funds from, Borrower.
In order to minimize the frequency of transfers of funds between Agent and each
Lender notwithstanding terms to the contrary set forth in Section 2 and
subsection 9.5, Revolving Loan advances and payments may be settled according to
the procedures described in subsection 9.6(A)(2) and 9.6(A)(3) of this

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Agreement. Payments of principal, interest and fees in respect of the Term
Loans will be settled on the Business Day received in accordance with the
provisions of Section 2. Notwithstanding these procedures, each Lender's
obligation to fund its portion of any advances made by Agent to Borrower will
commence on the date such advances are made by Agent. Such payments will be
made by such Lender without set-off, counterclaim or reduction of any kind.

(2) Once each week, or more frequently (including daily), if
Agent so elects (each such day being a "Settlement Date"), Agent will advise
each Lender by 1 p.m. Central time by telephone, telex, or telecopy of the
amount of each such Lender's Pro Rata Share of the Revolving Loan balance. In
the event that payments are necessary to adjust the amount of such Lender's
share of the Revolving Loan balance to such Lender's Pro Rata Share of the
Revolving Loan, the party from which such payment is due will pay the other, in
same day funds, by wire transfer to the other's account not later than 3:00 p.m.
Central time on the Business Day following the Settlement Date.

(3) On the first Business Day of each month ("Interest
Settlement Date"), Agent will advise each Lender by telephone, telefax or
telecopy of the amount of interest and fees charged to and collected from
Borrower for the proceeding month. Provided that such Lender has made all
payments required to be made by it under this Agreement, Agent will pay to such
Lender, by wire transfer to such Lender's account (as specified by such Lender
on the signature page of this Agreement as amended by such Lender from time to
time after the date hereof pursuant to the notice provisions contained herein or
in the applicable Lender Addition Agreement) not later than 3 p.m. Central time
on the next Business Day following the Interest Settlement Date such Lender's
share of such interest and fees.

(B) AVAILABILITY OF LENDER'S PRO RATA SHARE.

(1) Unless Agent has been notified by a Lender prior to a
Funding Date of such Lender's intention not to fund its Pro Rata Share of the
Loan amount requested by Borrower, Agent may assume that such Lender will make
such amount available to Agent on the Funding Date or the Business Day following
the next Settlement Date, as applicable. If such amount is not, in fact, made
available to Agent by such Lender when due, Agent will be entitled to recover
such amount on demand from such Lender without set-off, counterclaim or
deduction of any kind.

(2) Nothing contained in this subsection 9.6(B) will be deemed
to relieve a Lender of its obligation to fulfill its Commitments or to prejudice
any rights Agent or Borrower may have against such Lender as a result of any
default by such Lender under this Agreement.

(3) Without limiting the generality of the foregoing, each
Lender shall be obligated to fund its Pro Rata Share of any Revolving Loan made
with respect to any draw on a Lender Letter of Credit.

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(1) If Agent pays an amount to a Lender under this Agreement in
the belief or expectation that a related payment has been or will be received by
Agent from Borrower and such related payment is not received by Agent, then
Agent will be entitled to recover such amount from such Lender without set-off,
counterclaim or deduction of any kind.

(2) If Agent determines at any time that any amount received by
Agent under this Agreement must be returned to Borrower or paid to any other
Person pursuant to any solvency law or otherwise, then, notwithstanding any
other term or condition of this Agreement, Agent will not be required to
distribute any portion thereof to any Lender. In addition, each Lender will
repay to Agent on demand any portion of such amount that Agent has distributed
to such Lender, together with interest at such rate, if any, as Agent is
required to pay to Borrower or such other Person, without set-off, counterclaim
or deduction of any kind.

9.7 DISSEMINATION OF INFORMATION. Agent will provide Lenders with any
information received by Agent from any Loan Party which is required to be
provided to a Lender hereunder; PROVIDED, HOWEVER, that Agent shall not be
liable to Lenders for any failure to do so, except to the extent that such
failure is attributable to Agent's gross negligence or willful misconduct.

9.8 DISCRETIONARY ADVANCES. Agent may, in its sole discretion, (i)
provided that no Event of Default exists, make Revolving Loans of up to 10% in
excess of the limitations set forth in subsection 2.1 (B)(1)(b) but not in
excess of the limitation set forth in subsection 2.1 (B)(1)(a) for a period of
not more than 30 consecutive days and (ii) during the continuance of an Event of
Default, make Revolving Loans in excess of the limitations set forth in
subsection 2.1 (B)(1) for the purpose of preserving or protecting the
Collateral.

SECTION 10. MISCELLANEOUS

10.1 EXPENSES AND ATTORNEYS' FEES. Whether or not the transactions
contemplated hereby shall be consummated, each Loan Party jointly and severally
agrees to promptly pay all fees, costs and expenses incurred by Agent in
connection with any matters contemplated by or arising out of this Agreement or
the other Loan Documents including the following, and all such fees, costs and
expenses shall be part of the Obligations, payable on demand and secured by the
Collateral: (a) fees, costs and expenses (including reasonable attorneys' fees,
allocated costs of internal counsel and fees of environmental consultants,
accountants and other professionals retained by Agent) incurred in connection
with the examination, review, due diligence investigation, documentation and
closing of the financing arrangements evidenced by the Loan Documents; (b) fees,
costs and expenses (including reasonable attorneys' fees, allocated costs of
internal counsel and fees of environmental consultants, accountants and other
professionals retained by Agent) incurred in connection with the review,
negotiation, preparation, documentation, execution and administration of the
Loan Documents, the Loans, and any amendments, waivers, consents, forbearances
and other modifications relating thereto or any subordination or intercreditor
agreements; (c) fees, costs and expenses incurred by Agent in creating,
perfecting and maintaining perfection of Liens in favor of Agent, on behalf of
Lenders; (d) fees, costs and expenses incurred by Agent in connection with

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forwarding to Borrower the proceeds of Loans including Agent's or any Lenders'
standard wire transfer fee; (e) fees, costs, expenses and bank charges,
including bank charges for returned checks, incurred by Agent or any Lender in
establishing, maintaining and handling lock box accounts, blocked accounts or
other accounts for collection of the Collateral; (f) fees, costs, expenses
(including reasonable attorneys' fees and allocated costs of internal counsel)
of Agent or any Lender and costs of settlement incurred in collecting upon or
enforcing rights against the Collateral or incurred in any action to enforce
this Agreement or the other Loan Documents or to collect any payments due from
Borrower or any other Loan Party under this Agreement or any other Loan Document
or incurred in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement, whether in the nature of a "workout"
or in connection with any insolvency or bankruptcy proceedings or otherwise
PROVIDED, HOWEVER, that nothing in this Section 10.1 shall obligate any Loan
Party with expenses arising solely from the relationship between Lenders INTER
SE or among participants.

10.2 INDEMNITY. In addition to the payment of expenses pursuant to
subsection 10.1, whether or not the transactions contemplated hereby shall be
consummated, each Loan Party agrees to indemnify, pay and hold Agent and each
Lender and any holder of any of the Notes, and the officers, directors,
employees, agents, consultants, auditors, persons engaged by Agent or any Lender
and any holder of any of the Notes to evaluate or monitor the Collateral,
affiliates and attorneys of Agent, Lender and such holders (collectively called
the "Indemnitees") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including
the reasonable fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto) that may be imposed on, incurred by, or asserted against that
Indemnitee, in any manner relating to or arising out of this Agreement or the
other Loan Documents, the consummation of the transactions contemplated by this
Agreement, the statements contained in the commitment letters, if any, delivered
by Agent or any Lender, Agent's and each Lender's agreement to make the Loans
hereunder, the use or intended use of the proceeds of any of the Loans or the
exercise of any right or remedy hereunder or under the other Loan Documents (the
"Indemnified Liabilities"); PROVIDED that no Loan Party shall have any
obligation to an Indemnitee hereunder with respect to Indemnified Liabilities
arising from the gross negligence or willful misconduct of that Indemnitee as
determined by a court of competent jurisdiction or arising solely out of the
relationship between Lenders INTER SE.

10.3 AMENDMENTS AND WAIVERS.

(A) Except as otherwise provided herein, no amendment, modification,
termination or waiver of any provision of this Agreement, the Notes or any other
Loan Document, or consent to any departure by any Loan Party therefrom, shall in
any event be effective unless the same shall be in writing and signed by
Requisite Lenders or Agent, as applicable; PROVIDED, that no amendment,
modification, termination or waiver shall, unless in writing and signed by all
Lenders, do any of the following: (i) increase the Commitment of any Lender;
(ii) reduce the principal of, rate of interest on or fees payable with respect
to any Loan; (iii) extend the scheduled due date of any installment of principal
of the Loans; (iv) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans, or the percentage of

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Lenders which shall be required for Lenders or any of them to take any action
hereunder; (v) amend or waive this subsection 10.3 or the definitions of the
terms used in this subsection 10.3 insofar as the definitions affect the
substance of this subsection 10.3; (vi) consent to the assignment or other
transfer by any Loan Party of any of its rights and obligations under any Loan
Document; and (vii) increase the percentages contained in the definition of
Borrowing Base and PROVIDED, FURTHER, that no amendment, modification,
termination or waiver affecting the rights or duties of Agent under any Loan
Document shall in any event be effective, unless in writing and signed by Agent,
in addition to the Lenders required herein above to take such action.

(B) Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given. No amendment, modification, termination or waiver shall be
required for Agent to take additional Collateral pursuant to any Loan Document.

(C) No amendment, modification or waiver of any provision of any
Lender Letter of Credit shall be applicable without the written concurrence of
the issuer of such Lender Letter of Credit. No notice to or demand on Borrower
or any other Loan Party in any case shall entitle Borrower or any other Loan
Party to any other or further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this subsection 10.3 shall be binding upon each
holder of the Notes at the time outstanding, each future holder of the Notes,
and, if signed by a Loan Party, on such Loan Party.

(D) In the event Agent waives (1) any Default arising under
subsection 8.1(E) as a result of the breach of any of the provisions of Section
5 of this Agreement (other than any such breach which constitutes an Event of
Default) or (2) any Default constituting a condition to the funding of any
Revolving Loan or issuance of any Lender Letter of Credit, such waiver shall
expire on the date upon which the Default which was the subject of such waiver
matures into an Event of Default pursuant to the terms of this Agreement.

10.4 NOTICES. Unless otherwise specifically provided herein, all notices
shall be in writing addressed to the respective party as set forth below and may
be personally served, telecopied or sent by overnight courier service or United
States mail and shall be deemed to have been given: (a) if delivered in person,
when delivered; (b) if delivered by telecopy, on the date of transmission if
transmitted on a Business Day before 4:00 p.m. Central time or, if not, on the
next succeeding Business Day; (c) if delivered by overnight courier, two (2)
days after delivery to such courier properly addressed; or (d) if by U.S. Mail,
four (4) Business Days after depositing in the United States mail, with postage
prepaid in each case properly addressed to the applicable party at its address
set forth below or at such other address as the party addressed shall have
previously designated by written notice to the serving party, given in
accordance with this subsection 10.4.

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If to Borrower or
any other Loan Party: UNITEL VIDEO, INC.
515 West 57th Street
New York, New York 10019
Attn: Barry Knepper, Senior Vice
President Finance & Administration
Telecopy No.: (212) 581-7748

With a copy to: Karen Ceil Lapidus
General Counsel
Unitel Video, Inc.
515 West 57th Street
New York, New York 10019
Telecopy No.: (212) 581-7748

If to Agent or to Heller: HELLER FINANCIAL, INC.
500 West Monroe
Chicago, Illinois 60661
Attn: HBC Portfolio Manager
Telecopy No.: (312) 441-7026

With a copy to: HELLER FINANCIAL, INC.
500 West Monroe
Chicago, Illinois 60661
Attn: Legal Department
Telecopy No.: (312) 441-7652

If to any Lender: Its address indicated on the signature page hereto,
in a Lender Addition Agreement or in a notice to Agent and Borrower.

10.5 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the making of the Loans hereunder.
Notwithstanding anything in this Agreement or implied by law to the contrary,
the agreements of each Loan Party set forth in subsections 10.1 and 10.2 shall
survive the payment of the Loans and the termination of this Agreement.

10.6 INDULGENCE NOT WAIVER. No failure or delay on the part of Agent, any
Lender or any holder of any Notes in the exercise of any power, right or
privilege hereunder or under the Notes shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege.

10.7 MARSHALING; PAYMENTS SET ASIDE. Neither Agent nor any Lender shall be
under any obligation to marshal any assets in favor of any Loan Party or any
other party or against or in payment of any or all of the Obligations. To the
extent that any Loan Party makes a payment or payments to Agent and/or any
Lender or Agent and/or any Lender enforces its security interests

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or exercise its rights of setoff, and such payment or payments or the proceeds
of such enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, state
or federal law, common law or equitable cause, then to the extent of such
recovery, the Obligations or part thereof originally intended to be satisfied,
and all Liens, rights and remedies therefor, shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.

10.8 ENTIRE AGREEMENT. This Agreement, the Notes, and the other Loan
Documents referred to herein embody the final, entire agreement among the
parties hereto and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof and may not be contradicted or varied by evidence of
prior, contemporaneous, or subsequent oral agreements or discussions of the
parties hereto. There are no oral agreements among the parties hereto.

10.9 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a Default or an Event of Default if such action is taken or
condition exists.

10.10 SEVERABILITY. The invalidity, illegality or unenforceability in any
jurisdiction of any provision in or obligation under this Agreement or the other
Loan Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement,
or the other Loan Documents or of such provision or obligation in any other
jurisdiction.

10.11 LENDERS' OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS.
The obligation of each Lender hereunder is several and not joint and neither
Agent nor any Lender shall be responsible for the obligation or commitment of
any other Lender hereunder. In the event that any Lender at any time should
fail to make a Loan as herein provided, the Lenders, or any of them, at their
sole option, may make the Loan that was to have been made by the Lender so
failing to make such Loan. Nothing contained in any Loan Document and no action
taken by Agent or any Lender pursuant hereto or thereto shall be deemed to
constitute Lenders to be a partnership, an association, a joint venture or any
other kind of entity. The amounts payable at any time hereunder to each Lender
shall be a separate and independent debt, and, provided Agent fails or refuses
to exercise any remedies against any Loan Party after receiving the direction of
the Requisite Lenders, each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.

10.12 HEADINGS. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.

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10.13 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

10.14 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns except that no Loan Party may assign its rights or obligations hereunder
without the written consent of Lenders.

10.15 NO FIDUCIARY RELATIONSHIP; LIMITATION OF LIABILITIES.

(A) No provision in this Agreement or in any of the other Loan
Documents and no course of dealing between the parties shall be deemed to create
any fiduciary duty by Agent or any Lender to any Loan Party.

(B) Neither Agent nor any Lender, nor any affiliate, officer,
director, shareholder, employee, attorney, or agent of Agent or any Lender shall
have any liability with respect to, and each Loan Party hereby waives, releases,
and agrees not to sue any of them upon, any claim for any special, indirect,
incidental, or consequential damages suffered or incurred by any Loan Party in
connection with, arising out of, or in any way related to, this Agreement or any
of the other Loan Documents, or any of the transactions contemplated by this
Agreement or any of the other Loan Documents. Each Loan Party hereby waives,
releases, and agrees not to sue Agent or any Lender or any of Agent's or any
Lender's affiliates, officers, directors, employees, attorneys, or agents for
punitive damages in respect of any claim in connection with, arising out of, or
in any way related to, this Agreement or any of the other Loan Documents, or any
of the transactions contemplated by this Agreement or any of the transactions
contemplated hereby.

10.16 CONSENT TO JURISDICTION. EACH LOAN PARTY HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK
STATE OF NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT'S ELECTION, ALL
ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES
OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH LOAN PARTY
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND
BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE NOTES,
THE OTHER LOAN DOCUMENTS OR THE OBLIGATIONS.

10.17 WAIVER OF JURY TRIAL. EACH LOAN PARTY, AGENT AND EACH LENDER HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE NOTES OR THE OTHER LOAN
DOCUMENTS. EACH LOAN PARTY, AGENT AND EACH LENDER ACKNOWLEDGE THAT THIS WAIVER
IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT

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EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT, THE NOTES
AND THE OTHER LOAN DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER
IN THEIR RELATED FUTURE DEALINGS. EACH LOAN PARTY, AGENT AND EACH LENDER
FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

10.18 CONSTRUCTION. Each Loan Party, Agent and each Lender each
acknowledges that it has had the benefit of legal counsel of its own choice and
has been afforded an opportunity to review this Agreement and the other Loan
Documents with its legal counsel and that this Agreement and the other Loan
Documents shall be construed as if jointly drafted by each Loan Party, Agent and
each Lender.

10.19 COUNTERPARTS; EFFECTIVENESS. This Agreement and any amendments,
waivers, consents, or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute but one and the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto.

10.20 NO DUTY. All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by Agent or any Lender shall have
the right to act exclusively in the interest of Agent or such Lender and shall
have no duty of disclosure, duty of loyalty, duty of care, or other duty or
obligation of any type or nature whatsoever to any Loan Party or any
shareholders of any Loan Party or any other Person.

10.21 CONFIDENTIALITY. Agent and Lenders shall hold all nonpublic
information obtained pursuant to the requirements hereof and identified as such
by any Loan Party in accordance with such Person's customary procedures for
handling confidential information of this nature and in accordance with safe and
sound business practices and in any event may make disclosure reasonably
required by a bona fide offeree or assignee (or participation), or as required
or requested by any Governmental Authority or representative thereof, or
pursuant to legal process, or to its accountants, lawyers and other advisors,
and shall require any such offeree or assignee (or participant) to agree (and
require any of its offerees, assignees or participants to agree) to comply with
this Section 10.21. In no event shall the Agent or any Lender be obligated or
required to return any materials furnished by any Loan Party; provided, however,
each offeree shall be required to agree that if it does not become a assignee
(or participant) it shall return all materials furnished to it by any Loan Party
in connection herewith.

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10.22 AMENDED AND RESTATED LOAN AGREEMENT. This Agreement and the Notes
amend, restate and supersede in their entirety the Prior Credit Agreements and
the Assigned Notes, for which this Agreement and the Notes are given in
substitution but not satisfaction. Nothing contained herein shall (a)
constitute or be deemed to constitute an amendment or restatement of or affect
the rights and benefits of Lenders as assignee of the Assigned Financing
Statements, the Assigned Landlord Waivers or the Assigned Motor Vehicle Title
Certificates nor (b) affect in any manner whatsoever the rights and benefits of
Lenders as assignees under the Subordinated Notes. Each Loan Party acknowledges
that notwithstanding anything contained in the Assignment Agreement to the
contrary, including without limitation the provisions of Section 7 thereof,
neither Agent or any Lender shall have any obligation to any Loan Party under
the terms of the Assigned Documents except as such Assigned Documents have been
amended, restated and superseded as aforesaid.

Witness the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.

UNITEL VIDEO, INC.

By: /s/ Barry Knepper
-------------------------------
Title: SVP - Finance and Administration
----------------------------
FEIN: 23-1713238

R SQUARED, INC.

By: /s/ Barry Knepper
--------------------------------
Title: President
-----------------------------
FEIN: 95-4447505

HELLER FINANCIAL, INC., as Agent
and Lender

By: /s/ Jerome Sepich
-----------------------------
Title: Vice-President
----------------------------

Revolving Loan Commitment:
$11,000,000

Term Loan A Commitment:
$7,500,000

Term Loan B Commitment:
$7,500,000

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SCHEDULES

1.1(A) - Mobile Units
1.1(B) - Other Liens
1.1(C) - Pro Forma
1.1(D) - UCC-3 Assignments
1.1(E) - Assigned Landlord Waivers
1.1(F) - Assigned Motor Vehicle Title Certificates
3.1(A) - List of Closing Documents
3.1(I) - Litigation
4.6 - Trade Names (Present and Past Five Years)
4.7 - Location of Principal Place of Business, Books and Records
and Collateral
4.9 - Judgment Liens
4.10 - Tax Liens
4.12 - Employee Benefit Plans
4.13 - Intellectual Property
4.20 - Bank Accounts
4.22 - Employee Matters
7.1 - Indebtedness
7.4 - Investments and Loans

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EXHIBITS

1.1(A) - Form of Borrowing Base Certificate
1.1(B) - Form of Closing Certificate
1.1(C) - Form of Compliance Certificate
1.1(D) - Form of Corporate Guaranty
1.1(E) - Form Equipment Report
1.1(F) - Form of Lender Addition Agreement
2.1(A)(1) - Form of Amended and Restated Term Note A
2.1(A)(2) - Form of Amended and Restated Term Note B
2.1(E) - Form of Amended and Restated Revolving Note
3.1(S) - Form of Financial Condition Certificate

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TABLE OF CONTENTS

SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Certain Defined Terms. . . . . . . . . . . . . . . . . . . . 2
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . 15
1.3 Other Definitional Provisions. . . . . . . . . . . . . . . . 16

SECTION 2. LOANS AND COLLATERAL. . . . . . . . . . . . . . . . . . . . 16
2.1 Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(A)(1) Term Loan A . . . . . . . . . . . . . . . . . . . . 16
(A)(2) Term Loan B . . . . . . . . . . . . . . . . . . . . 17
(B) Revolving Loan. . . . . . . . . . . . . . . . . . . 17
(C) Eligible Accounts . . . . . . . . . . . . . . . . . 18
(D) Borrowing Mechanics . . . . . . . . . . . . . . . . 19
(E) Notes . . . . . . . . . . . . . . . . . . . . . . . 20
(F) Evidence of Revolving Loan Obligations. . . . . . . 20
2.2 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(A) Rate of Interest. . . . . . . . . . . . . . . . . . 23
(B) Interest Periods. . . . . . . . . . . . . . . . . . 24
(C) Computation and Payment of Interest . . . . . . . . 24
(D) Interest Laws . . . . . . . . . . . . . . . . . . . 25
(E) Conversion or Continuation. . . . . . . . . . . . . 25
2.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(A) Unused Line Fee . . . . . . . . . . . . . . . . . . 26
(B) Letter of Credit Fees . . . . . . . . . . . . . . . 26
(D) Collateral Monitoring Fee . . . . . . . . . . . . . 27
(E) Audit Fees. . . . . . . . . . . . . . . . . . . . . 27
(F) Other Fees and Expenses . . . . . . . . . . . . . . 27
2.4 Payments and Prepayments . . . . . . . . . . . . . . . . . . 27
(A) Manner and Time of Payment. . . . . . . . . . . . . 27
(B) Mandatory Prepayments . . . . . . . . . . . . . . . 27
(1) Overadvance. . . . . . . . . . . . . . . . . . 28
(2) Proceeds of Asset Dispositions . . . . . . . . 28
(3) Prepayments of Term Loan A . . . . . . . . . . 29
(C) Voluntary Prepayments and Repayments. . . . . . . . 29
(D) Payments on Business Days . . . . . . . . . . . . . 29
2.5 Term of this Agreement . . . . . . . . . . . . . . . . . . . 29
2.6 Statements . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.7 Grant of Security Interest . . . . . . . . . . . . . . . . . 30
2.8 Capital Adequacy and Other Adjustments . . . . . . . . . . . 30
2.9 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(A) No Deductions . . . . . . . . . . . . . . . . . . . 31
(B) Changes in Tax Laws . . . . . . . . . . . . . . . . 31

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(C) Foreign Lenders . . . . . . . . . . . . . . . . . . 32
2.10 Required Termination and Prepayment. . . . . . . . . . . . . 32
2.11 Optional Prepayment/Replacement of Agent or Lenders in
Respect of Increased Costs . . . . . . . . . . . . . . . . . 33
2.12 Compensation . . . . . . . . . . . . . . . . . . . . . . . . 33
2.13 Booking of LIBOR Rate Loans. . . . . . . . . . . . . . . . . 34
2.14 Assumptions Concerning Funding of LIBOR Rate Loans or
Fixed Rate Loans . . . . . . . . . . . . . . . . . . . . . . 34

SECTION 3. CONDITIONS TO LOANS . . . . . . . . . . . . . . . . . . . . 34
3.1 Conditions to Loans. . . . . . . . . . . . . . . . . . . . . 34
(A) Closing Deliveries. . . . . . . . . . . . . . . . . 34
(B) Security Interests. . . . . . . . . . . . . . . . . 34
(C) Closing Date Availability . . . . . . . . . . . . . 34
(D) Representations and Warranties. . . . . . . . . . . 34
(E) Fees. . . . . . . . . . . . . . . . . . . . . . . . 34
(G) Performance of Agreements . . . . . . . . . . . . . 35
(H) No Prohibition. . . . . . . . . . . . . . . . . . . 35
(I) No Litigation . . . . . . . . . . . . . . . . . . . 35
(J) Audit . . . . . . . . . . . . . . . . . . . . . . . 35
(K) No Material Adverse Change. . . . . . . . . . . . . 35
(L) Security Interests. . . . . . . . . . . . . . . . . 35
(M) Subordinated Debt Documents . . . . . . . . . . . . 35
(N) Audited Financial Statements. . . . . . . . . . . . 35
(O) Chase Mortgage Documentation. . . . . . . . . . . . 36
(P) Proceeds of Chase Financing . . . . . . . . . . . . 36
(Q) Consents. . . . . . . . . . . . . . . . . . . . . . 36
(R) Financial Condition Certificate . . . . . . . . . . 36
(S) Landlord and Mortgagee Agreements . . . . . . . . . 36
(T) Contract Review . . . . . . . . . . . . . . . . . . 36
(U) Cash Management . . . . . . . . . . . . . . . . . . 36
(V) Tax Assumptions; Structure. . . . . . . . . . . . . 36

SECTION 4. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . 36
4.1 Organization, Powers, Capitalization . . . . . . . . . . . . 37
(A) Organization and Powers . . . . . . . . . . . . . . 37
(B) Capitalization. . . . . . . . . . . . . . . . . . . 37
4.2 Authorization of Borrowing, No Conflict. . . . . . . . . . . 37
4.3 Financial Condition. . . . . . . . . . . . . . . . . . . . . 37
4.4 Indebtedness and Liabilities . . . . . . . . . . . . . . . . 38
4.5 Account Warranties . . . . . . . . . . . . . . . . . . . . . 38
4.6 Names. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.7 Locations; FEIN. . . . . . . . . . . . . . . . . . . . . . . 38
4.8 Title to Properties; Liens . . . . . . . . . . . . . . . . . 38
4.9 Litigation; Adverse Facts. . . . . . . . . . . . . . . . . . 38
4.10 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . 38
4.11 Performance of Agreements. . . . . . . . . . . . . . . . . . 39

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4.12 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . 39
4.13 Intellectual Property. . . . . . . . . . . . . . . . . . . . 39
4.14 Broker's Fees. . . . . . . . . . . . . . . . . . . . . . . . 39
4.15 Environmental Compliance . . . . . . . . . . . . . . . . . . 39
4.16 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.17 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.18 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.19 Compliance with Laws . . . . . . . . . . . . . . . . . . . . 40
4.20 Bank Accounts; Lockboxes . . . . . . . . . . . . . . . . . . 40
4.21 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 40
4.22 Employee Matters . . . . . . . . . . . . . . . . . . . . . . 40
4.23 Governmental Regulation. . . . . . . . . . . . . . . . . . . 41

SECTION 5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . 41
5.1 Financial Statements and Other Reports . . . . . . . . . . . 41
(A) Monthly Financials. . . . . . . . . . . . . . . . . 41
(B) Year-End Financials . . . . . . . . . . . . . . . . 41
(D) Management Letters. . . . . . . . . . . . . . . . . 42
(E) Compliance Certificate. . . . . . . . . . . . . . . 42
(F) Borrowing Base Certificates. . . . . . . . . . . . 42
(G) Equipment Reports and Listings and Agings . . . . . 42
(H) Management Report . . . . . . . . . . . . . . . . . 43
(I) Appraisals. . . . . . . . . . . . . . . . . . . . . 43
(J) Government Notices. . . . . . . . . . . . . . . . . 43
(K) Events of Default, etc. . . . . . . . . . . . . . . 43
(L) Trade Names . . . . . . . . . . . . . . . . . . . . 43
(M) Locations . . . . . . . . . . . . . . . . . . . . . 44
(N) Bank Accounts . . . . . . . . . . . . . . . . . . . 44
(O) Litigation. . . . . . . . . . . . . . . . . . . . . 44
(P) Projections . . . . . . . . . . . . . . . . . . . . 44
(Q) Subordinated Debt and Other Indebtedness Notices. . 44
(R) Other Information . . . . . . . . . . . . . . . . . 44
5.2 Access to Accountants. . . . . . . . . . . . . . . . . . . . 44
5.3 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.4 Collateral Records . . . . . . . . . . . . . . . . . . . . . 45
5.5 Account Covenants; Verification. . . . . . . . . . . . . . . 45
5.6 Collection of Accounts and Payments. . . . . . . . . . . . . 45
5.7 Endorsement. . . . . . . . . . . . . . . . . . . . . . . . . 46
5.8 Corporate Existence. . . . . . . . . . . . . . . . . . . . . 46
5.9 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . 46
5.10 Maintenance of Properties; Insurance . . . . . . . . . . . . 46
5.11 Compliance with Laws . . . . . . . . . . . . . . . . . . . . 47
5.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . 47
5.13 Collateral Locations . . . . . . . . . . . . . . . . . . . . 47
5.14 Bailees. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.15 Use of Proceeds and Margin Security. . . . . . . . . . . . . 47

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5.16 Required Qualified Asset Expenditures. . . . . . . . . . . . 47

SECTION 6. FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . . 48
6.1 Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . 48
6.2 Capital Expenditure Limits . . . . . . . . . . . . . . . . . 48
6.3 Fixed Charge Coverage. . . . . . . . . . . . . . . . . . . . 48
6.4 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . 49

SECTION 7. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . 49
7.1 Indebtedness and Liabilities . . . . . . . . . . . . . . . . 49
7.2 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.3 Transfers, Liens and Related Matters.. . . . . . . . . . . . 50
(A) Transfers . . . . . . . . . . . . . . . . . . . . . 50
(B) Liens . . . . . . . . . . . . . . . . . . . . . . . 50
(C) No Negative Pledges . . . . . . . . . . . . . . . . 50
7.4 Investments and Loans. . . . . . . . . . . . . . . . . . . . 51
7.5 Restricted Junior Payments . . . . . . . . . . . . . . . . . 51
7.6 Restriction on Fundamental Changes . . . . . . . . . . . . . 51
7.7 Changes Relating to Subordinated Debt. . . . . . . . . . . . 51
7.8 Transactions with Affiliates . . . . . . . . . . . . . . . . 52
7.9 Environmental Liabilities. . . . . . . . . . . . . . . . . . 52
7.10 Conduct of Business. . . . . . . . . . . . . . . . . . . . . 52
7.11 Compliance with ERISA. . . . . . . . . . . . . . . . . . . . 52
7.12 Tax Consolidations . . . . . . . . . . . . . . . . . . . . . 52
7.13 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 52
7.14 Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . 52
7.15 Press Release; Public Offering Materials . . . . . . . . . . 52
7.16 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . 53

SECTION 8. DEFAULT, RIGHTS AND REMEDIES. . . . . . . . . . . . . . . . 53
8.1 Event of Default . . . . . . . . . . . . . . . . . . . . . . 53
(A) Payment . . . . . . . . . . . . . . . . . . . . . . 53
(B) Default in Other Agreements . . . . . . . . . . . . 53
(C) Breach of Certain Provisions. . . . . . . . . . . . 53
(D) Breach of Warranty. . . . . . . . . . . . . . . . . 53
(E) Other Defaults Under Loan Documents . . . . . . . . 53
(F) Change in Control . . . . . . . . . . . . . . . . . 53
(G) Involuntary Bankruptcy; Appointment of Receiver,
etc.. . . . . . . . . . . . . . . . . . . . . . . 53
(H) Voluntary Bankruptcy; Appointment of Receiver,
etc.. . . . . . . . . . . . . . . . . . . . . . . 54
(I) Liens.. . . . . . . . . . . . . . . . . . . . . . . 54
(J) Judgment and Attachments. . . . . . . . . . . . . . 54
(K) Dissolution . . . . . . . . . . . . . . . . . . . . 54
(L) Solvency. . . . . . . . . . . . . . . . . . . . . . 54
(M) Injunction. . . . . . . . . . . . . . . . . . . . . 55
(N) Invalidity of Loan Documents. . . . . . . . . . . . 55
(O) Failure of Security . . . . . . . . . . . . . . . . 55

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(P) Damage, Strike, Casualty. . . . . . . . . . . . . . 55
(Q) Licenses and Permits. . . . . . . . . . . . . . . . 55
(R) Forfeiture. . . . . . . . . . . . . . . . . . . . . 55
(S) Cessation/Sale of Specified Divisions . . . . . . . 55
8.2 Suspension of Commitments. . . . . . . . . . . . . . . . . . 56
8.3 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . 56
8.4 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 56
8.5 Appointment of Attorney-in-Fact. . . . . . . . . . . . . . . 57
8.6 Limitation on Duty of Agent with Respect to Collateral . . . 57
8.7 Application of Proceeds. . . . . . . . . . . . . . . . . . . 57
8.8 License of Intellectual Property . . . . . . . . . . . . . . 58
8.9 Waivers, Non-Exclusive Remedies. . . . . . . . . . . . . . . 58

SECTION 9. ASSIGNMENT AND PARTICIPATION. . . . . . . . . . . . . . . . 58
9.1 Assignments and Participations in Loans. . . . . . . . . . . 58
9.2 Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(A) Appointment . . . . . . . . . . . . . . . . . . . . 59
(B) Nature of Duties. . . . . . . . . . . . . . . . . . 60
(C) Rights, Exculpation, Etc. . . . . . . . . . . . . . 60
(D) Reliance. . . . . . . . . . . . . . . . . . . . . . 61
(E) Indemnification . . . . . . . . . . . . . . . . . . 61
(F) Heller Individually . . . . . . . . . . . . . . . . 61
(G) Successor Agent . . . . . . . . . . . . . . . . . . 61
(1) Resignation. . . . . . . . . . . . . . . . . . 61
(2) Appointment of Successor . . . . . . . . . . . 61
(3) Successor Agent. . . . . . . . . . . . . . . . 61
(H) Collateral Matters. . . . . . . . . . . . . . . . . 62
(1) Release of Collateral. . . . . . . . . . . . . 62
(2) Confirmation of Authority; Execution of
Releases.. . . . . . . . . . . . . . . . . . . 62
(3) Absence of Duty. . . . . . . . . . . . . . . . 62
(I) Agency for Perfection . . . . . . . . . . . . . . . 63
(J) Exercise of Remedies. . . . . . . . . . . . . . . . 63
9.3 Consents.. . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.4 Set Off and Sharing of Payments. . . . . . . . . . . . . . . 63
9.5 Disbursement of Funds. . . . . . . . . . . . . . . . . . . . 64
9.6 Settlements, Payments and Information. . . . . . . . . . . . 64
(A) Revolving Loan Advances and Payments; Fee
Payments. . . . . . . . . . . . . . . . . . . . . 64
(B) Availability of Lender's Pro Rata Share . . . . . . 65
(C) Return of Payments. . . . . . . . . . . . . . . . . 66
9.7 Dissemination of Information . . . . . . . . . . . . . . . . 66
9.8 Discretionary Advances . . . . . . . . . . . . . . . . . . . 66

SECTION 10. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . 66
10.1 Expenses and Attorneys' Fees . . . . . . . . . . . . . . . . 66
10.2 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . 67
10.3 Amendments and Waivers . . . . . . . . . . . . . . . . . . . 67

-v-

<PAGE>

10.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.5 Survival of Warranties and Certain Agreements. . . . . . . . 69
10.6 Indulgence Not Waiver. . . . . . . . . . . . . . . . . . . . 69
10.7 Marshaling; Payments Set Aside . . . . . . . . . . . . . . . 69
10.8 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 70
10.9 Independence of Covenants. . . . . . . . . . . . . . . . . . 70
10.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . 70
10.11 Lenders' Obligations Several; Independent Nature of
Lenders' Rights. . . . . . . . . . . . . . . . . . . . . . 70
10.12 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.13 APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . 71
10.14 Successors and Assigns . . . . . . . . . . . . . . . . . . . 71
10.15 No Fiduciary Relationship; Limitation of Liabilities . . . . 71
10.16 CONSENT TO JURISDICTION. . . . . . . . . . . . . . . . . . . 71
10.17 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . 71
10.18 Construction . . . . . . . . . . . . . . . . . . . . . . . . 72
10.19 Counterparts; Effectiveness. . . . . . . . . . . . . . . . . 72
10.20 No Duty. . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.21 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . 72

-vi-

<PAGE>

SECOND AMENDED AND RESTATED

CREDIT AGREEMENT

dated as of December 12, 1995

between

UNITEL VIDEO, INC.,

as Borrower

and

THE CHASE MANHATTAN BANK, N.A.,

as Bank

<PAGE>

SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 12,
1995 between UNITEL VIDEO, INC. ("Unitel" or the "Borrower") and THE CHASE
MANHATTAN BANK, N.A. ("Chase" or the "Bank").

PRELIMINARY STATEMENTS

1. REFERENCES. Reference is made to each of (a) the Amended and
Restated Credit Agreement and Guaranty dated as of May 6, 1992 among the
Borrower, R Squared, Inc. ("R Squared"), Chase, Chemical Bank ("Chemical") (each
of Chase and Chemical a "Bank" and collectively, the "Banks"), Chemical as
revolving credit agent for the Banks, and Chase as collateral agent for the
Banks (as previously amended and supplemented from time to time, the "1992
Credit Agreement"); and (b) the Assignment of Loans, Liens and Loan Documents
dated the date hereof (the "Assignment Agreement") among the Borrower, R
Squared, Chase, Chemical, and Heller Financial Inc. ("Heller").

2. BIFURCATION. Pursuant to the Assignment Agreement each of Chase
and Chemical sold and assigned all of their respective rights and obligations
under the 1992 Credit Agreement to Heller (other than any mortgage related
indebtedness owed to Chase under the 1992 Credit Agreement). As set forth in
the fourth Preliminary Statement hereof, Chase retains mortgage related
indebtedness under the 1992 Credit Agreement of Four Million Dollars
($4,000,000) (the "Chase Indebtedness").

The 1992 Credit Agreement shall now be bifurcated such that the
indebtedness sold and assigned to Heller pursuant to the Assignment Agreement
shall be governed by the terms and provisions of the Amended and Restated Loan
and Security Agreement dated the date hereof between Unitel and Heller, as agent
and lender, and the Chase Indebtedness shall be governed by the terms and
provisions of this Second Amended and Restated Credit Agreement.

3. AMENDMENT AND RESTATEMENT. To the extent this Second Amended and
Restated Credit Agreement amends the 1992 Credit Agreement, the 1992 Credit
Agreement is amended, and to the extent this Second Amended and Restated Credit
Agreement restates the 1992 Credit Agreement, the 1992 Credit Agreement is
restated.

4. MORTGAGED PROPERTY. Chase is currently the owner and holder of a
consolidated note made by the Borrower which is more particularly described in
that certain Note Modification and Consolidation Agreement between the Borrower
and Chase dated as of May 18, 1992 and which

<PAGE>

consolidated note evidences an indebtedness in the principal amount of Three
Million Eight Hundred Forty-Five Thousand Eight Hundred Thirty-Three Dollars and
Thirty-Five Cents ($3,845,833.35) as of the date hereof (the "Existing Chase
Note"). The Existing Chase Note is secured by a consolidated mortgage made by
the Borrower which is more particularly described in that certain Mortgage
Modification and Consolidation Agreement by and among the New York City
Industrial Development Agency (the "Agency"), the Borrower and Chase dated as of
May 18, 1992 (the "Existing Chase Mortgage") and which encumbers the Mortgaged
Property (as hereinafter defined). In order to restructure and refinance the
existing indebtedness evidenced by the Existing Chase Note and extend a
restructured credit facility to the Borrower, on the date hereof Chase shall
advance an amount equal to One Hundred Fifty-Four Thousand One Hundred Sixty-Six
Dollars and Sixty-Five Cents ($154,166.65) to Chemical and take by assignment
from Chemical a severed note made by the Borrower (the "Existing Chemical Note")
and the severed mortgage made by the Borrower and the Agency which encumbers the
Mortgaged Property (the "Existing Chemical Mortgage") and which secures the
Borrower's obligations under the Existing Chemical Note, and Chase shall
consolidate the Existing Chase Note with the Existing Chemical Note, as
assigned, into a single indebtedness in the principal amount of Four Million
Dollars ($4,000,000) pursuant to a Note Consolidation and Modification Agreement
between the Borrower and Chase of even date herewith (the "Note Consolidation
and Modification Agreement" in substantially the form of Exhibit B hereto) (the
Existing Chase Note and the Existing Chemical Note, as consolidated and
modified, the "Amended and Restated Term Loan Note" in substantially the form of
Exhibit A hereto) and consolidate the Existing Chase Mortgage with the Existing
Chemical Mortgage, as assigned, into a single lien of $4,000,000 pursuant to a
Mortgage Consolidation and Modification Agreement between the Borrower and Chase
of even date herewith (the "Mortgage Consolidation and Modification Agreement"
in substantially the form of Exhibit C hereto) (the Existing Chase Mortgage and
the Existing Chemical Mortgage, as consolidated and modified, the "Consolidated
Term Loan Mortgage" in substantially the form of Exhibit D hereto).

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.01 DEFINED TERMS. As used in this Agreement, the following
terms have the following meanings (terms defined in the singular to have the
same meaning when used in the plural and vice versa):

<PAGE>

"Affected Loans" has the meaning specified in Section 2.16.

"Affiliate" means, as to any Person, any other Person which directly
or indirectly controls, or is under common control with, or is controlled by,
such Person and, if such Person is an individual, any member of the immediate
family (including parents, spouse and children) of such individual and any trust
whose principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or trust.
As used in this definition, "controls", "controlled by" and "under common
control with" shall mean possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise), provided that, in any event, any Person which owns directly or
indirectly five percent (5%) or more of the securities having ordinary voting
power for the election of directors or other governing body of a corporation or
five percent (5%) or more of the partnership or other ownership interests of any
other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation or other Person. Notwithstanding the
foregoing, no individual shall be deemed to be an Affiliate of a corporation
solely by reason of his or her being an officer or director of such corporation.

"Agreement" means this Second Amended and Restated Credit Agreement.

"Amended and Restated Term Loan" has the meaning specified in Section
2.01.

"Amended and Restated Term Loan Note" has the meaning specified in
Preliminary Statement designated 3.

"Amendment to Guarantee and Contingent Purchase Agreement" means the
Amendment to Guarantee and Contingent Purchase Agreement in substantially the
form of Exhibit E hereto, to be delivered by the Borrower under the terms of
this Agreement.

"Amendment to Loan Agreement" means the Amendment to Loan Agreement in
substantially the form of Exhibit F hereto, to be delivered by the a trustee
under the ESOT Agreement under the terms of this Agreement.

"Applicable Lending Office" shall mean, for each type of Loan, the
lending office of the Bank

<PAGE>

(or of an affiliate of the Bank) designated for such type of Loan, on the
signature pages hereof or such other office of the Bank (or of an affiliate of
the Bank) as the Bank may from time to time specify to the Borrower as the
office by which its Amended and Restated Term Loan of such type is to be made
and maintained.

"Applicable Margin" means: (1) with respect to a Prime Rate Loan,
three quarters of one percent (.75%); and (2) with respect to a LIBOR Loan, two
and one half of one percent (2.50%);

"Bank" has the meaning specified in the preamble to this Agreement.

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

"Borrower" has the meaning specified in the preamble to this
Agreement.

"Business Day" means: (1) any day other than a Saturday, Sunday, or
other day on which commercial banks in New York City are authorized or required
to close under the laws of the State of New York; and (2) if the applicable day
relates to a LIBOR Loan, an Interest Period with respect to a LIBOR Loan, or
notice with respect to any LIBOR Loan, a day on which dealings in Dollar
deposits are also carried on in the London interbank market and banks are open
for business in London.

"Capital Lease" means any lease which has been or should be
capitalized on the books of the lessee in accordance with GAAP.

"Cash Dividends" means, for any period, the amount of cash dividends
paid by the Borrower during such period.

"Code" means the Internal Revenue Code of 1986.

"Collateral" means any and all real property or fixtures or other
assets subject to a Lien granted by any of the Mortgage Documents.

"Consolidated Capital Expenditures" means, for any period, the amount
of gross expenditures made or required to be made during such period for fixed
assets, real property, plant and equipment, and all renewals, improvements and
replacements thereto (but not repairs thereof) by the Borrower or any
Consolidated Subsidiary.

"Consolidated Current Portion of Long Term Debt" means, for any
period, the portion of Long Term Debt of the Borrower and its Consolidated
Subsidiaries as of the beginning of such period which is scheduled to be paid

<PAGE>

during such period, all as determined in accordance with GAAP (but excluding (i)
the scheduled payments of principal of Term Loan B under the Heller Loan
Agreement, and (ii) the non-scheduled mandatory prepayments of principal of the
Amended and Restated Term Loan required to be made by the Borrower during such
period in accordance with Section 2.06 hereof).

"Consolidated Deferred Financing Costs" means, for any period, all
deferred financing costs with respect to all Debt of the Borrower and its
Consolidated Subsidiaries on a consolidated basis, all as determined in
accordance with GAAP.

"Consolidated Deferred Liabilities" means the deferred liabilities of
the Borrower and its Consolidated Subsidiaries, on a consolidated basis, all as
determined in accordance with GAAP.

"Consolidated Depreciation" means, for any period, the depreciation
and amortization of the Borrower and the Consolidated Subsidiaries, on a
consolidated basis, all as determined in accordance with GAAP.

"Consolidated Earnings Before Interest, Taxes and Depreciation" means,
for any period, Consolidated Earnings from Operations for such period, plus
Consolidated Interest Expense for such period plus Consolidated Depreciation for
such period.

"Consolidated Earnings from Operations" means, for any period, the
earnings from operations exclusive of extraordinary items (i.e., items included
in a separate line item in the consolidated statements of operations of the
Borrower and its Consolidated Subsidiaries), of the Borrower and its
Consolidated Subsidiaries, on a consolidated basis, all as determined in
accordance with GAAP.

"Consolidated Interest Expense" means, for any period, all interest
paid or required to be paid on all Debt of the Borrower and the Consolidated
Subsidiaries on a consolidated basis, all as determined in accordance with GAAP
excluding the amortization of all Consolidated Deferred Financing Costs and
accreted interest for such period.

"Consolidated Subsidiaries" means with respect to the Borrower, any
Subsidiary of the Borrower at the time when such term is used, the accounts of
which, in accordance with GAAP, are or are required to be in a consolidated
financial statement of the Borrower and its consolidated subsidiaries.

<PAGE>

"Consolidated Tangible Net Worth" means, as at any date of
determination thereof, the sum of the following for the Borrower and its
Consolidated Subsidiaries on a consolidated basis determined (without
duplication) in accordance with GAAP:

(i) the common stock portion of stockholders' equity, PLUS

(ii) the preferred stock portion of stockholders' equity, PLUS

(iii) the amount of additional paid-in capital and retained earnings
(or, in the case of an additional paid-in capital or retained
earnings deficit, MINUS the amount of such deficit), MINUS

(iv) the sum of the following: loans to officers, directors or
employees of the Borrower or any Consolidated Subsidiary, the
cost of treasury shares and unearned employee benefit expense
(i.e., the amount held in any ESOP suspense account for the
purpose of repurchasing stock) and the book value of all assets
of the Borrower and its Consolidated Subsidiaries which should be
classified as intangibles (without duplication of deductions in
respect of items already deducted in arriving at additional paid-
in capital and retained earnings) but in any event including
goodwill, research and development costs, trade-marks, trade
names, copyrights, patents and franchises, unamortized debt
discount and expense, and all reserves.

"Consolidated Taxes" means, for any period, the income and franchise
taxes of the Borrower and the Consolidated Subsidiaries, on a consolidated
basis, all as determined in accordance with GAAP.

"Consolidated Term Loan Mortgage" has the meaning specified in
Preliminary Statement designated 3.

"Consolidated Total Liabilities" means, as at any date of
determination thereof, all Debt of the Borrower and its Consolidated
Subsidiaries on a consolidated basis and all other liabilities of the Borrower
and its Consolidated Subsidiaries on a consolidated basis which should be
classified as liabilities on a balance sheet of the Borrower and its
Consolidated Subsidiaries prepared in accordance with GAAP and in any event
including all reserves (other

<PAGE>

than general contingency reserves and reserves representing mere appropriations
of surplus).

"Continue", "Continuation" and "Continued" shall refer to the
continuation pursuant to Section 2.10 hereof of a LIBOR Loan as a LIBOR Loan
from one Interest Period to the next Interest Period.

"Convert", "Conversion" and "Converted" shall refer to a conversion
pursuant to Section 2.10 hereof of Loans of one type into Loans of another type,
which may be accompanied by the transfer by a Bank (at its sole discretion) of a
Loan from one Applicable Lending Office to another.

"Debt" means: (1) indebtedness or liability for borrowed money, or
for the deferred purchase price of property or services (including trade
obligations); (2) obligations as lessee under Capital Leases; (3) current
liabilities in respect of unfunded vested benefits under any Plan; (4)
obligations under letters of credit issued for the account of any Person; (5)
all obligations arising under bankers' or trade acceptance facilities; (6) all
guarantees, endorsements (other than for collection or deposit in the ordinary
course of business), and other contingent obligations to purchase any of the
items included in this definition, to provide funds for payment, to supply funds
to invest in any Person, or otherwise to assure a creditor against loss; (7)
obligations secured by any Lien on property owned by such Person, whether or not
the obligations have been assumed; and (8) all obligations under any agreement
providing for a swap, ceiling rates, ceiling and floor rates, contingent
participation or other hedging mechanisms with respect to interest payable on
any of the items described above in this definition.

"Default" means any of the events specified in Section 8.01, whether
or not any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.

"Default Rate" means, with respect to an amount of all or any portion
of the Amended and Restated Term Loan not paid when due, a rate per annum equal
to: (1) if such Loan is a Prime Rate Loan, a variable rate per annum equal to
two percent (2%) above the rate then in effect thereon (including the Applicable
Margin); (2) if such Loan is a LIBOR Loan, a fixed rate per annum equal to two
percent (2%) above the rate of interest then in effect thereon (including the
Applicable Margin) at the time of default until the end of the current Interest
Period therefor, and thereafter, a variable rate per annum equal to two percent
(2%) above the rate of interest for a Prime Rate Loan (including the

<PAGE>

Applicable Margin), and (3) if such Loan is a Fixed Rate Loan, a fixed rate per
annum equal to two percent (2%) above the Fixed Rate.

"Dollars" and the sign "$" mean lawful money of the United States of
America.

"Emedge Works" means Emedge Works, a California general partnership.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereof.

"ERISA Affiliate" means any corporation or trade or business which is
a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as Borrower or is under common control (within the
meaning of Section 414(c) of the Code) with Borrower.

"ESOT Agreement" means the Unitel Video, Inc. Employee Stock Ownership
Trust Agreement, dated as of May 8, 1987, between the Borrower and the trustees
named therein.

"ESOP" means the Unitel Video, Inc. Employee Stock Ownership Plan,
established by the Borrower for the benefit of employees of the Borrower and
certain of its Subsidiaries, as said Plan shall be modified, supplemented and in
effect from time to time.

"ESOT" means the Unitel Video, Inc. Employee Stock Ownership Trust.

"ESOT Loan" means the One Million Two Hundred Fifty Thousand Dollar
($1,250,000) ESOT Loan made pursuant to the terms and conditions of the ESOT
Loan Agreement.

"ESOT Loan Agreement" means the ESOT Loan Agreement dated as of May
13, 1987 among Herbert Bass, Alex Geisler, John Hoffman and Barry Knepper as
trustees of the ESOT and Chase.

"ESOT Mortgage" means the ESOT Mortgage in substantially the form of
Exhibit F hereto.

"ESOT Obligations" means any and all amounts payable to Chase pursuant
either to the ESOT Loan Agreement or guaranteed by the Borrower and payable
pursuant to the Guarantee and Contingent Purchase Agreement.

"Event of Default" means any of the events specified in Section 8.01,
provided that any requirement for

<PAGE>

the giving of notice, the lapse of time, or both, or any other condition, has
been satisfied.

"Existing Chase Note" has the meaning specified in Preliminary
Statement designated 3.

"Existing Chemical Note" has the meaning specified in Preliminary
Statement designated 3.

"Fiscal Year" means the fiscal year of the Borrower and its
Consolidated Subsidiaries, which year begins on September 1 and ends on August
31.

"Fixed Rate" means the rate of interest per annum (expressed as a
percentage) which may be quoted by the Bank in its sole discretion as the
applicable rate of interest on all or any portion of the Amended and Restated
Term Loan.

"Fixed Rate Loan" means all or any portion of the Amended and Restated
Term Loan when and to the extent the interest rate therefor is determined by
reference to the Fixed Rate.

"GAAP" means generally accepted accounting principles as in effect on
August 31, 1995 applied in a manner consistent with the preparation of the
consolidated financial statements of the Borrower and its Subsidiaries referred
to in Section 4.06 hereof, provided, that if the concept of deferred taxes is
eliminated from generally accepted accounting principles as in effect after the
date of this Agreement, deferred taxes shall no longer be used in calculating
any amounts hereunder.

"Good Faith Contest" means the contest of an item if: (1) the item is
diligently pursued and contested in good faith, including, if required, by
appropriate proceedings timely instituted; (2) adequate cash reserves are
established with respect to the contested item; (3) during the period of such
contest, the enforcement of any contested item is effectively stayed; and (4)
the failure to pay or comply with the contested item could not result in a
Material Adverse Change.

"Governmental Approvals" means any authorization, consent, approval,
license, permit, certification or exemption of, registration or filing with or
report or notice to, any Governmental Authority.

"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.

<PAGE>

"Guarantee and Contingent Purchase Agreement" means the Guarantee and
Contingent Purchase Agreement dated as of May 13, 1987 between the Borrower and
Chase, as amended, modified, or supplemented from time to time, whereby the
Borrower guarantees the obligations of the ESOT under the ESOT Loan Agreement.

"Heller Loan Agreement" means the Amended and Restated Loan and
Security Agreement dated as of December 12, 1995 between Unitel Video, Inc., as
Borrower and Heller Financial, Inc., as Agent and Lender.

"Interest Period" means with respect to any LIBOR Loan, the period
commencing on the date such LIBOR Loan is made and ending, as the Borrower may
select, pursuant to Section 2.02 on the numerically corresponding day in the
first, second, third or sixth calendar month thereafter, except that each such
Interest Period that commences on the last Business Day of a calendar month (or
on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month.

"Jee See Notes" means the twelve subordinated notes dated February 24,
1995 made by the Borrower in favor of Jee See & Co., Inc., a California
corporation, which in the aggregate equal Seven Hundred Fifty Thousand Dollars
($750,000)

"Law" means any federal, state or local statute, law, rule,
regulation, ordinance, order, code, policy or rule of common law and any
judicial or administrative interpretation thereof by a Governmental Authority or
otherwise, including any judicial or administrative order, consent decree or
judgment.

"LIBOR Base Rate" means, with respect to any LIBOR Loan for any
Interest Period therefor, the rate per annum (rounded upward, if necessary, to
the nearest 1/16 of 1%) quoted at approximately 11:00 a.m. London time (or as
soon thereafter as practicable) by the principal London branch of Chase on the
date two (2) Business Days prior to the first day of such Interest Period for
such LIBOR Loan for the offering to leading banks in the London interbank market
of Dollar deposits in immediately available funds, for a period, and in an
amount, comparable to such Interest Period and principal amount of the LIBOR
Loan which shall be made by the Bank and outstanding during such Interest
Period.

"LIBOR Interest Rate" means for any LIBOR Loan, a rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by the
Bank to be equal to the quotient of (1) the LIBOR Base Rate for such Loan for

<PAGE>

the Interest Period therefor, divided by (2) one minus the LIBOR Reserve
Requirement for such Interest Period.

"LIBOR Loan" means all or a portion of the Amended and Restated Term
Loan when and to the extent the interest rate therefor is determined by
reference to the LIBOR Interest Rate.

"LIBOR Reserve Requirement" means, for any LIBOR Loan, the average
maximum rate at which reserves (including any marginal, supplemental or
emergency reserves) are required to be maintained during the Interest Period for
such Loan under Regulation D by member banks of the Federal Reserve System in
New York City with deposits exceeding One Billion Dollars ($1,000,000,000)
against "Eurocurrency liabilities" (as such term is used in Regulation D).
Without limiting the effect of the foregoing, the LIBOR Reserve Requirement
shall also reflect any other reserves required to be maintained by such member
banks by reason of any Regulatory Change against (1) any category of liabilities
which includes deposits by reference to which the LIBOR Base Rate is to be
determined or (2) any category of extensions of credit or other assets which
include LIBOR Loans.

"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing).

"Loan" means any portion of the Amended and Restated Term Loan to the
extent it is a Prime Rate Loan, a LIBOR Loan, or a Fixed Rate Loan.

"Loan Document(s)" means this Agreement, the Amended and Restated Term
Loan Note, and the Mortgage Documents.

"Long Term Debt" means all Debt created, assumed or guaranteed by a
Person which matures by its terms, or is renewable at the option of such person,
to a date more than one (1) year after the date of the original creation,
assumption or guarantee of such Debt by such Person.

<PAGE>

"Material Adverse Change" means (1) a material adverse change in the
results of operations, condition (financial or otherwise), property or prospects
of the Borrower, or (2) any event or occurrence of whatever nature which could
have a material adverse effect on the Borrower's ability to perform its
obligations under the Loan Documents to which it is a party.

"Maturity Date" means December 12, 2002.

"Monthly Date" means the fifth (5th) Business Day of each month.

"Mortgage" means each of the ESOT Mortgage or Consolidated Term Loan
Mortgage, or both, as the context may require.

"Mortgage Consolidation and Modification Agreement" has the meaning
specified in Preliminary Statement designated 3.

"Mortgage Documents" means the Mortgage Consolidation and Modification
Agreement, the Consolidated Term Loan Mortgage, and the Note Consolidation and
Modification Agreement.

"Mortgaged Property" means the land and improvements located at 515
West 57th Street, New York, New York 10019, as more fully described in the
Mortgage Documents.

"Multiemployer Plan" means a Plan described in Section 4001(a)(3) of
ERISA which covers employees of the Borrower or any ERISA Affiliate.

"Note Consolidation and Modification Agreement" has the meaning
specified in Preliminary Statement designated 3.

"Obligations" means (1) each and every obligation, covenant and
agreement of the Borrower now or hereafter existing contained in this Agreement,
and any of the other Loan Documents to which the Borrower is a party, whether
for principal, interest, fees, expenses, indemnities or otherwise, and any
amendments or supplements thereto, extensions or renewals thereof or
replacements therefor, including but not limited to all indebtedness,
obligations and liabilities of the Borrower to the Bank now existing or
hereafter incurred under or arising out of or in connection with the Amended and
Restated Term Loan Note, this Agreement, the other Loan Documents, and any
documents or instruments executed in connection therewith, and (2) any amounts
paid by the Bank in preservation of any of the

<PAGE>

Bank's rights or interest in the Collateral, together with interest on such
amounts from the date such amounts are paid until reimbursement in full at a
rate per annum equal at all times to the Default Rate on Prime Rate Loans; in
each case whether direct or indirect, joint or several, absolute or contingent,
liquidated or unliquidated, now or hereafter existing, renewed or restructured,
whether or not from time to time decreased or extinguished and later increased,
created or incurred, and including all indebtedness of the Borrower under any
instrument now or hereafter evidencing or securing any of the foregoing.

"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority, or other entity of whatever nature.

"Plan" means any plan, agreement, arrangement or commitment which is
an employee benefit plan, as defined in section 3(3) of ERISA, maintained by the
Borrower or any ERISA Affiliate or with respect to which the Borrower or any
ERISA Affiliate at any relevant time has any liability or obligation to
contribute.

"Prime Rate" means the rate of interest as announced by Chase at its
Principal Office as in effect from time to time as its prime commercial lending
rate.

"Prime Rate Loan" means all or a portion of the Amended and Restated
Term Loan when and to the extent the interest rate therefor is determined by
reference to the Prime Rate.

"Principal Office" means One Chase Manhattan Plaza, New York, New
York, 10081, or such other office designated by Chase as its principal or head
office.

"Prohibited Transaction" means any transaction set forth in Section
406 of ERISA or Section 4975 of the Code.

"Quarterly Date(s)" means the last day of each February, May, August
and November.

"Real Property Appraiser" means an independent appraiser of real
property acceptable to the Bank.

"Real Property Appraisal Value" means the fair market value of the
Mortgaged Property as determined by the Real Property Appraiser, as set forth in
the most recent

<PAGE>

report furnished by such Appraiser to the Borrower and the Bank.

"Regulation D" means Regulation D of the Board of Governors as the
same may be amended or supplemented from time to time.

"Regulatory Change" means, with respect to the Bank, any change after
the date of this Agreement in United States Federal law, state law or foreign
law or regulations (including, without limitation, Regulation D) or the adoption
or making after such date of any interpretation, directive or request applying
to a class of banks including the Bank of or under any United States Federal
law, state law or foreign law or regulations (whether or not having the force of
law) by any court or governmental or monetary authority charged with the
interpretation or administration thereof.

"Reportable Event" means any of the events set forth in Section 4043
of ERISA or in the regulations thereunder.

"R Squared" means R Squared, Inc., a California corporation.

"Subordinated Debt" means the Debt evidenced by the Subordinated
Notes.

"Subordinated Notes" means each of (1) the Two Million Five Hundred
Thousand Dollar ($2,500,000) term note dated May 6, 1992 made by the Borrower in
favor of ScanLine Communications, a Wisconsin general partnership, and (2) the
Jee See Notes.

"Subsidiary" means, as to any Person, a corporation of which shares of
stock having ordinary voting power (other than stock having such power only by
reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation are at the time owned, or the
management of which is otherwise controlled, directly, or indirectly through one
or more intermediaries, or both, by such Person.

"Third Closing Date" means December 12, 1995.

"type" means, with regard to each Loan, such Loan is either a Prime
Rate Loan or a LIBOR Loan.

SECTION 1.02 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, and except as
provided herein, all financial data and calculations as to compliance with

<PAGE>

financial covenants submitted pursuant to this Agreement shall be prepared in
accordance with such principles.

SECTION 1.03 RULES OF CONSTRUCTION. When used in this Agreement:
(1) "or" is not exclusive; (2) a reference to a Law includes any amendment or
modification to such Law; (3) a reference to a Person includes its permitted
successors and permitted assigns; and (4) a reference to an agreement,
instrument or document shall include such agreement, instrument or document as
the same may be amended, modified or supplemented from time to time in
accordance with its terms and as permitted by the Loan Documents.

ARTICLE II

AMOUNT AND TERMS OF THE AMENDED AND RESTATED TERM LOAN

SECTION 2.01 AMENDED AND RESTATED TERM LOAN. The Bank agrees, on the
terms and conditions set forth in this Agreement, that as of the Third Closing
Date, the Existing Chase Note and the Existing Chemical Note will be
consolidated into a single Amended and Restated Term Loan Note consolidating and
continuing a loan (the "Amended and Restated Term Loan") to the Borrower in a
principal amount of Four Million Dollars ($4,000,000). Any principal amount of
the Amended and Restated Term Loan which is prepaid or repaid cannot be
reborrowed.

The Amended and Restated Term Loan may be: (1) a Prime Rate Loan; (2)
a LIBOR Loan; (3) if offered by Chase and agreed to by the Borrower, a Fixed
Rate Loan; or (4) any combination of the foregoing, as determined by the
Borrower and notified to the Bank in accordance with Section 2.12.

SECTION 2.02 INTEREST PERIODS; REQUEST FOR FIXED RATE LOAN. In the
case of each LIBOR Loan, the Borrower shall select an Interest Period of any
duration in accordance with the definition of Interest Period in Section 1.01,
subject to the following limitations; (1) no Interest Period may extend beyond
the last date the Amended and Restated Term Loan is scheduled to be repaid; (2)
no Interest Period for a LIBOR Loan shall have a duration less than one month,
and if any such proposed Interest Period would otherwise be for a shorter
period, such Interest Period shall not be available; and (3) if an Interest
Period would end on a day which is not a Business Day, such Interest Period
shall be extended to the next Business Day, unless such Business Day would fall
in the next calendar month, in which event such Interest Period shall end on the
immediately preceding Business Day.

<PAGE>

In the case of Fixed Rate Loans, the Borrower may make one request
that Chase convert, subject to the terms hereof, all or part of any type of Loan
into a Loan to which the Fixed Rate applies by providing Chase with a written or
telegraphic or facsimile request (effective upon receipt), by no later than
10:00 a.m. (New York time) on the proposed date of borrowing, specifying the
proposed amount of such Loan and requesting that Chase quote a rate for such
Loan to the Borrower. If Chase, in its sole discretion, quotes a rate to the
Borrower in response to such request and the Borrower immediately accepts such
rate, then such annual rate of interest shall apply to such Fixed Rate Loan
until the Maturity Date. If Chase in its sole discretion does not quote a rate
to the Borrower or if the Borrower fails to accept the quoted rate, the
applicable annual rate of interest which applies to such Loan shall be the Prime
Rate or the LIBOR Interest Rate in accordance with the Section 2.10 hereof.
Once all or a portion of the Amended and Restated Term Loan has been converted
to a Fixed Rate Loan, no other portion of the Amended and Restated Term Loan can
be converted to a Fixed Rate Loan.

SECTION 2.03 INTEREST. The Borrower shall pay interest to the Bank
on the outstanding and unpaid principal amount of the Amended and Restated Term
Loan at a rate per annum as follows: (1) for a Prime Rate Loan at a rate equal
to the Prime Rate plus the Applicable Margin; (2) for a LIBOR Loan at a rate
equal to the LIBOR Interest Rate plus the Applicable Margin; and (3) for a Fixed
Rate Loan at a rate equal to the Fixed Rate. Any principal amount not paid when
due (at maturity, by acceleration or otherwise) shall bear interest thereafter,
payable on demand, at the Default Rate.

The interest rate on each Prime Rate Loan shall change when the Prime
Rate changes. Interest on each Amended and Restated Term Loan shall not exceed
the maximum amount permitted under applicable law and shall be calculated on the
basis of a year of three hundred sixty (360) days for the actual number of days
elapsed.

Accrued interest shall be due and payable in arrears upon any payment
of principal and (1) for each Prime Rate Loan and Fixed Rate Loan, on each
Monthly Date, commencing the first such date after the Third Closing Date, (2)
for each LIBOR Loan, on the last day of an Interest Period with respect thereto
and, in the case of an Interest Period greater than three (3) months, at three
(3) months' intervals after the first day of such Interest Period, and (3)
interest accruing at the Default Rate shall be due and payable on demand.

<PAGE>

SECTION 2.04 NOTE. The Amended and Restated Term Loan shall be
evidenced by, and repaid with interest in accordance with, a single Amended and
Restated Term Loan Note of the Borrower, in substantially the form of Exhibit A
duly completed, in the principal amount equal to Four Million Dollars
($4,000,000), payable to the Bank for the account of its Applicable Lending
Office. The Amended and Restated Term Loan Note shall be dated the Third
Closing Date and the principal of the Amended and Restated Term Loan shall be
repaid in eighty-four (84) consecutive monthly installments where each of the
first eighty-three (83) installments shall be in an amount equal to Twenty-Two
Thousand Two Hundred and Fifty Dollars ($22,250) and the eighty-fourth
installment shall be in an amount equal to Two Million One Hundred Fifty-Three
Thousand Two Hundred Fifty Dollars ($2,153,250); the first installment shall be
due on January 5, 1996, with subsequent installments on the fifth day of each
month thereafter, to and including December 5, 2002; PROVIDED, HOWEVER, that the
last such installment shall be in an amount necessary to repay in full the
unpaid principal amount of such Amended and Restated Term Loan.

SECTION 2.05 OPTIONAL PREPAYMENTS. The Borrower may, upon at least
one (1) Business Day's notice to the Bank in the case of Prime Rate Loans or
Fixed Rate Loans, and at least three Business Day's notice to the Bank in the
case of LIBOR Loans, prepay the Amended and Restated Term Loan Note, in whole or
in part with accrued interest to the date of such prepayment on the amount
prepaid, provided that: (1) each partial prepayment shall be in a principal
amount of not less than One Hundred Thousand Dollars ($100,000); (2) LIBOR Loans
may be prepaid only on the last day of the Interest Period for such Loan; and
(3) Fixed Rate Loans may be prepaid only if the Borrower pays the Bank the fees
set forth in Section 2.07. Except as provided above, prepayments of the Amended
and Restated Term Loan in accordance with the terms of this Section 2.05 shall
be without premium or penalty.

SECTION 2.06 MANDATORY PREPAYMENTS. If at any time a Real Property
Appraisal demonstrates that the aggregate outstanding principal amount of each
of the Amended and Restated Term Loan and the ESOT Loan exceeds seventy-five
percent of the Real Property Appraisal Value, then the Borrower shall
immediately (1) have a standby letter of credit issued for the benefit of Chase
in an amount equal to such excess, in a form and by a party acceptable to Chase,
and with respect to which Chase shall have the ability to draw at any time on
such standby letter of credit, or (2) make a payment to the Bank in an amount
equal to such excess which payment shall be applied pro rata to the remaining
scheduled installments of principal of the Amended and Restated Term Loan.

<PAGE>

SECTION 2.07 PREPAYMENT PREMIUM ON FIXED RATE LOANS. Any prepayment
by the Borrower of the Fixed Rate Loans shall be accompanied by a prepayment
premium on any principal balance prepaid equal to the total of the present
values of the monthly prepayment premiums for each month from the date of
prepayment through the remaining term of the Amended and Restated Term Loan.
The monthly prepayment premium shall be the product of (1) the principal amount
prepaid, (2) multiplied by the interest rate differential, (3) divided by 12.
The interest rate differential shall equal the difference between (a) the
average yield on U.S. Treasury Securities having maturities matching the
original term of the Amended and Restated Term Loan on the Third Closing Date
and (b) the average yield of U.S. Treasury Securities having maturities matching
the remaining term of the Amended and Restated Term Loan on the prepayment date.
The present value of each monthly prepayment premium shall be the monthly
prepayment premium discounted from the due date thereof to the prepayment date
at a discount rate equal to the average yield on U.S. Treasury Securities having
maturities matching the remaining term of the Amended and Restated Term Loan.
Anything to the contrary notwithstanding, no prepayment premium will be payable
upon the prepayment of the Amended and Restated Term Loan if, on the prepayment
date, (b) is greater than (a). A determination by the Bank of any amounts
payable pursuant to this Section 2.07 shall be conclusive absent manifest error.

SECTION 2.08 METHOD OF PAYMENT. The Borrower shall make each payment
under this Agreement and under the Amended and Restated Term Loan Note not later
than 2:00 P.M. (New York time) on the date when due in lawful money of the
United States to the Bank in immediately available funds. The Borrower hereby
authorizes the Bank, if and to the extent payment is not made when due under
this Agreement or under the Bank's Amended and Restated Term Loan Note, to
charge from time to time against any account it maintains with the Bank any
amount so due to the Bank.

Except to the extent provided in this Agreement, whenever any payment
to be made under this Agreement or under the Amended and Restated Term Loan Note
shall be stated to be due on any day other than a Business Day, such payment
shall be made on the next succeeding Business Day, and such extension of time
shall in such case be included in the computation of the payment of interest.

SECTION 2.09 MARGIN STOCK. The Borrower shall not, directly or
indirectly, use any part of the proceeds of the Amended and Restated Term Loan
for the purpose of purchasing or carrying any margin stock within the meaning of
Regulation U of the Board of Governors or to extend

<PAGE>

credit to any Person for the purpose of purchasing or carrying any such margin
stock.

SECTION 2.10 CONVERSIONS OR CONTINUATION OF LOANS. Subject to
Section 2.11 hereof, the Borrower shall have the right to Convert Loans of one
type into Loans of another type or Continue Loans of one type as Loans of the
same type, at any time or from time to time, provided that: (1) the Borrower
shall give the Bank notice of each such Conversion or Continuation as provided
in Section 2.12; (2) LIBOR Loans may be Converted or Continued only on the last
day of an Interest Period for such Loans; and (3) no Loans may be Converted into
LIBOR Loans or Continued as LIBOR Loans if a Default or Event of Default shall
have occurred and is continuing.

SECTION 2.11 MINIMUM AMOUNTS. Each Conversion of Loans made by the
Bank shall, in the case of Prime Rate Loans, be in an amount at least equal to
Fifty Thousand Dollars ($50,000), and in the case of LIBOR Loans, be in an
amount at least equal to Fifty Thousand Dollars ($50,000) (Conversions of or
into Loans of different types or, in the case of LIBOR Loans having different
Interest Periods at the same time hereunder to be deemed separate Conversions
for purposes of the foregoing, one for each type or Interest Period). Anything
in this Agreement to the contrary notwithstanding, the aggregate principal
amount of LIBOR Loans of the Bank having the same Interest Period shall be at
least equal to Fifty Thousand Dollars ($50,000) and, if any LIBOR Loan would
otherwise be in a lesser principal amount for any period, such LIBOR Loan shall
be a Prime Rate Loan during such period.

SECTION 2.12 CERTAIN NOTICES. Notices by the Borrower to the Bank of
Conversions, and Continuations of all or any portion of the Amended and Restated
Term Loan and of the duration of Interest Periods shall be irrevocable and shall
be effective only if received by the Bank not later than 10:00 a.m. New York
time on the number of Business Days prior to the date of the relevant
Conversion, and Continuation or the first day of such Interest Period specified
below:

Number of
Notice Business Days Prior
------ -------------------
Conversions into Prime Rate Loans one (1)

Conversions into, Continuations
as, or duration of Interest
Period for, LIBOR Loans two (2)

<PAGE>

Each such notice of Conversion or Continuation shall specify the Loan to be
Converted or Continued, the amount (subject to Section 2.11) thereof, the
Interest Period therefor in the case of LIBOR Loans, and the date of Conversion
or Continuation (which shall be a Business Day). Each such notice of the
duration of an Interest Period shall specify the LIBOR Loans to which such
Interest Period is to relate. In the event that the Borrower fails to select
the type of Loan, or the duration of any Interest Period, for any LIBOR Loan
within the time period and otherwise as provided in this Section 2.12, such Loan
(if outstanding as a LIBOR Loan) will be automatically Converted into a Prime
Rate Loan on the last day of the then current Interest Period for such LIBOR
Loan.

SECTION 2.13 ADDITIONAL COSTS. The Borrower shall pay directly to
the Bank from time to time on demand such amounts as the Bank may determine to
be necessary to compensate it for any increased costs which the Bank determines
are attributable to its making or maintaining any LIBOR Loan, or its obligation
to Convert any Prime Rate Loan to a LIBOR Loan hereunder, or any reduction in
any amount receivable by the Bank hereunder in respect of any of such LIBOR
Loans or such obligation (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), resulting from any
Regulatory Change which:

(1) changes the basis of taxation of any amounts payable to the Bank
under this Agreement or the Amended and Restated Term Loan Note in respect
of any of such LIBOR Loans (other than taxes imposed on or measured by the
overall net income of the Bank or of its Applicable Lending Office for any
of such LIBOR Loans by the jurisdiction in which the Bank has its principal
office or such Applicable Lending Office); or

(2) (other than to the extent of the LIBOR Reserve Requirement taken
into account in determining the LIBOR Rate, at the commencement of the
applicable Interest Period) imposes or modifies any reserve, special
deposit, deposit insurance or assessment, minimum capital, capital ratio or
similar requirements relating to any extensions of credit or other assets
of, or any deposits with or other liabilities of, the Bank (including any
LIBOR Loans or any deposits referred to in the definition of "LIBOR
Interest Rate" in Section 1.01 hereof), or any commitment of the Bank; or

(3) imposes any other condition affecting this Agreement or the
Amended and Restated Term Loan Note (or any of such extensions of credit or
liabilities).

<PAGE>

If the Bank requests compensation from the Borrower under the first paragraph of
this Section 2.13, the Borrower may, by notice to the Bank, suspend the
obligation of the Bank to Continue LIBOR Loans with respect to which such
compensation is requested or to Convert Prime Rate Loans to LIBOR Loans, until
the Regulatory Change giving rise to such request ceases to be in effect (in
which case the provisions of Section 2.16 hereof shall be applicable).

Without limiting the effect of the provisions of the first paragraph
of this Section 2.13, in the event that, by reason of any Regulatory Change, the
Bank either (1) incurs Additional Costs based on or measured by the excess above
a specified level of the amount of a category of deposits of other liabilities
of the Bank which includes deposits by reference to which the LIBOR Interest
Rate is determined as provided in this Agreement or a category of extensions of
credit or other assets of the Bank which includes loans based on the LIBOR
Interest Rate or (2) becomes subject to restrictions on the amount of such a
category of liabilities or assets which it may hold, then, if the Bank so elects
by notice to the Borrower, the obligation of the Bank to Continue, or to Convert
Prime Rate Loans into LIBOR Loans shall be suspended until such Regulatory
Change ceases to be in effect (in which case the provisions of Section 2.16
hereof shall be applicable).

Without limiting the effect of the foregoing provisions of this
Section 2.13 (but without duplication), the Borrower shall pay directly to the
Bank from time to time on request such amounts as the Bank may determine to be
necessary to compensate the Bank for any costs which it determines are
attributable to the maintenance by the Bank (or any Applicable Lending Office),
pursuant to any law or regulation or any interpretation, directive or request
(whether or not having the force of law and whether in effect on the date of
this Agreement or thereafter) of any court or governmental or monetary authority
of capital in respect of the Amended and Restated Term Loan (such compensation
to include, without limitation, an amount equal to any reduction of the rate of
return on assets or equity of the Bank (or any Applicable Lending Office) to a
level below that which the Bank (or any Applicable Lending Office) could have
achieved but for such law, regulation, interpretation, directive or request).
The Bank hereby agrees that it shall designate a different Applicable Lending
Office if such designation will avoid the need for, or reduce the amount of
Additional Costs and will not, in the sole discretion of the Bank, be illegal or
in any way disadvantageous to the Bank.

Determinations and allocations by the Bank for purposes of this
Section 2.13 of the effect of any

<PAGE>

Regulatory Change pursuant to the first or second paragraph of this Section 2.13
or of the effect of capital maintained pursuant to the third paragraph of this
Section 2.13, on its costs or rate of return of maintaining the Amended and
Restated Term Loan or on amounts receivable by it in respect of the Amended and
Restated Term Loan, and the amounts required to compensate the Bank under this
Section 2.13, shall be conclusive absent manifest error.

SECTION 2.14 LIMITATION ON TYPES OF LOANS. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of the LIBOR
Interest Rate for any Interest Period:

(1) the Bank determines (which determination shall be conclusive)
that quotations of interest rates for the relevant deposits referred to in
the definition of "LIBOR Interest Rate" in Section 1.01 hereof are not
being provided in the relevant amounts or for the relevant maturities for
purposes of determining rates of interest for LIBOR Loans as provided in
this Agreement; or

(2) the Bank determines (which determination shall be conclusive)
that the relevant rates of interest referred to in the definition of "LIBOR
Interest Rate" in Section 1.01 hereof upon the basis of which the rate of
interest for LIBOR Loans for such Interest Period is to be determined do
not adequately cover the cost to the Bank of making or maintaining such
LIBOR Loans for such Interest Period;

then the Bank shall give the Borrower prompt notice thereof, and so long as such
condition remains in effect, the Bank shall be under no obligation to Convert
Prime Rate Loans into LIBOR Loans, or Continue LIBOR Loans, and the Borrower
shall, on the last day(s) of the then current Interest Period(s) for the
outstanding LIBOR Loans, either prepay such LIBOR Loans or Convert such LIBOR
Loans into a Prime Rate Loan in accordance with Section 2.10.

SECTION 2.15 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for the Bank or its Applicable
Lending Office to honor its obligation to maintain LIBOR Loans hereunder or
Convert Prime Rate Loans into LIBOR Loans, then the Bank shall promptly notify
the Borrower thereof and the Bank's obligation to Continue, or to Convert Loans
of any other type into LIBOR Loans shall be suspended until such time as the
Bank may again make and maintain LIBOR Loans (in which case the provisions of
Section 2.16 hereof shall be applicable). If the Bank invokes the foregoing
provision, then upon the request of the Borrower the Bank will attempt

<PAGE>

to establish a different Applicable Lending Office to fulfill its obligation to
maintain LIBOR Loans hereunder, provided that such offices are available to the
Bank and the Bank incurs no additional costs due to the use of such office
unless the Borrower agrees to reimburse the Bank for such costs.

SECTION 2.16 TREATMENT OF AFFECTED LOANS. If the obligations of the
Bank to Continue LIBOR Loans, or to Convert Prime Rate Loans into LIBOR Loans
are suspended pursuant to Section 2.13 or 2.15 hereof (LIBOR Loans so affected
being herein called "Affected Loans") the Bank's Affected Loans shall be
automatically Converted into Prime Rate Loans on the last day(s) of the then
current Interest Period(s) for the Affected Loans (or, in the case of a
Conversion required by Section 2.13 or 2.15, on such earlier date as the Bank
may specify to the Borrower).

To the extent that the Bank's Affected Loans have been so Converted,
all payments and prepayments of principal which would otherwise be applied to
the Bank's Affected Loans shall be applied instead to its Prime Rate Loans. All
Loans which would otherwise be made or Continued by the Bank as LIBOR Loans
shall be made or Continued instead as Prime Rate Loans and all Prime Rate Loans
of the Bank which would otherwise be Converted into LIBOR Loans shall remain as
Prime Rate Loans.

SECTION 2.17 CERTAIN COMPENSATION. The Borrower shall pay to the
Bank, upon the request of the Bank, such amount or amounts as shall be
sufficient (in the reasonable opinion of the Bank) to compensate it for any
loss, cost or expense which the Bank determines is attributable to:

(1) any payment, prepayment, Conversion or Continuation of a LIBOR
Loan made by the Bank on a date other than the last day of an Interest
Period for such Loan whether by reason of acceleration or otherwise; or

(2) any failure by the Borrower for any reason to Convert or Continue
a LIBOR Loan to be made, Converted or Continued by the Bank on the date
specified therefor in the relevant notice issued by the Borrower.

Without limiting the foregoing, such compensation shall include an
amount equal to the excess, if any, of (1) the amount of interest which
otherwise would have accrued on the principal amount so paid, prepaid, Converted
or Continued or not borrowed, Converted or Continued for the period from and
including the date of such payment, prepayment, Conversion or Continuation or
failure to Convert or Continue to but excluding the last day of the then current
Interest Period for such LIBOR Loan (or, in the case

<PAGE>

of a failure to Convert or Continue, to but excluding the last day of the
Interest Period for such LIBOR Loan which would have commenced on the date
specified therefor in the relevant notice) at the applicable rate of interest
for such LIBOR Loan provided for herein; over (2) the amount of interest (as
reasonably determined by the Bank) which the Bank would have bid in the London
interbank market for Dollar deposits, for amounts comparable to such principal
amount and maturities comparable to such period. A determination of the Bank as
to the amounts payable pursuant to this Section 2.17 shall be conclusive absent
manifest error.

SECTION 2.18 RISK-BASED CAPITAL. In the event that the Bank
determines that (1) compliance with any judicial, administrative, or other
governmental interpretation of any law or regulation or (2) compliance by the
Bank or any corporation controlling the Bank with any guideline or request from
any central bank or other governmental authority (whether or not having the
force of law) has the effect of requiring an increase in the amount of capital
required or expected to be maintained by the Bank or any corporation controlling
the Bank, and the Bank determines that such increase is based upon its
obligations hereunder, and other similar obligations, the Borrower shall pay to
the Bank, such additional amount as shall be certified by the Bank to be the
amount allocable to the Bank's obligations to the Borrower hereunder. The Bank
will notify the Borrower of any event occurring after the date of this Agreement
that will entitle the Bank to compensation pursuant to this Section 2.18 as
promptly as practicable after it obtains knowledge thereof and determines to
request such compensation.

Determinations by the Bank for purposes of this Section 2.18 of the
effect of any increase in the amount of capital required to be maintained by the
Bank and of the amount allocable to the Bank's obligations to the Borrower
hereunder shall be conclusive absent manifest error.

ARTICLE III

CONDITIONS PRECEDENT

SECTION 3.01 CONDITIONS PRECEDENT TO THIS AGREEMENT AND TO THE
AMENDED AND RESTATED TERM LOAN. The obligation of the Bank to enter into this
Agreement and to continue the Amended and Restated Term Loan to the Borrower is
subject to the condition precedent that the Bank shall have received on or
before the Third Closing Date each of the following documents, in form and
substance satisfactory

<PAGE>

to the Bank and its counsel, and each of the following requirements shall have
been fulfilled:

(1) EVIDENCE OF DUE ORGANIZATION OF BORROWER. Certified copies,
dated the Third Closing Date, of the Certificate of Incorporation and By-
Laws of the Borrower and all amendments thereto;

(2) EVIDENCE OF ALL CORPORATE ACTION OF THE BORROWER. Certified
copies, dated the Third Closing Date, of all corporate action taken by the
Borrower, including resolutions of its Board of Directors, authorizing the
execution, delivery, and performance of the Loan Documents to which it is a
party and each document to be delivered pursuant to this Agreement;

(3) INCUMBENCY AND SIGNATURE CERTIFICATES OF THE BORROWER.
Certificates, dated the Third Closing Date, of the Secretary of the
Borrower, certifying the names and true signatures of the officers of the
Borrower authorized to sign the Loan Documents to which it is a party and
the other documents to be delivered pursuant to this Agreement;

(4) GOOD STANDING CERTIFICATE FOR THE BORROWER. Certificates, dated
reasonably near the Third Closing Date, from the Secretary of State (or
other appropriate official) of the jurisdictions of incorporation of the
Borrower certifying as to the due incorporation and good standing of the
Borrower and certificates, dated reasonably near the Third Closing Date,
from the Secretary of State (or other appropriate official) of each other
jurisdiction where the Borrower is required to be qualified to conduct
business, certifying that the Borrower is duly qualified to do such
business and is in good standing in such state;

(5) AMENDED AND RESTATED TERM LOAN NOTE. The Amended and Restated
Term Loan Note duly executed by the Borrower;

(6) OPINION OF COUNSEL. A favorable opinion of Karen Lapidus, Esq.,
General Counsel of the Borrower in substantially the form of Exhibit G and
as to such other matters as the Bank may reasonably request;

(7) REAL ESTATE APPRAISAL. An appraisal of the Mortgaged Property by
Pearson Partners Inc.;

(8) REAL PROPERTY APPRAISAL VALUE. Evidence that seventy-five
percent (75%) of the Real Property Appraisal Value is greater than or equal
to Four Million Three Hundred Thirty-One Thousand Three Hundred

<PAGE>

Ninety-Six Dollars and Thirty-Six Cents ($4,331,396.36);

(9) FINANCIAL ADVISORY FEE. Payment in full by the Borrower to Chase
of the Financial Advisory Fee set forth in the Commitment Letter dated July
21, 1995 from Chase to the Borrower;

(10) NY IRB BONDS. Evidence satisfactory to the Bank that the NY IRB
Bonds have been paid in full;

(11) MORTGAGE DOCUMENTS, ETC. Each of the Mortgage Documents in the
forms attached hereto and any other documents related thereto, all with
such other changes as are required by the Bank, including but not limited
to changes required to conform the terms of such Documents to the extent
they are inconsistent with any of the other Loan Documents duly executed
and delivered by the parties thereto and execution by the Borrower of an
amendment to this Agreement, if necessary, in the form required by the Bank
to address all the issues presented by the changes required by the NY
Agency in any of the Mortgage Documents and any other documents related
thereto;

(12) UPDATED TITLE INSURANCE, ETC. (a) A title insurance policy
dated the Third Closing Date issued by Lawyer's Title Insurance Company
with a liability limit of not less than Four Million Dollars ($4,000,000),
insuring each Mortgage as a lien on the good and marketable fee simple
title to the Mortgaged Property; which title insurance shall be subject
only to such exceptions as shall be approved by the Bank and its counsel
and shall contain such endorsements as may be required by the Bank and its
counsel;

(13) AMENDMENT TO GUARANTEE AND CONTINGENT PURCHASE AGREEMENT The
Amendment to Guarantee and Contingent Purchase Agreement duly executed by
the Borrower;

(14) AMENDMENT TO LOAN AGREEMENT The Amendment to Loan Agreement
duly executed by the Borrower;

(15) OFFICER'S CERTIFICATE. The following statements shall be true
and the Bank shall have received a certificate signed by a duly authorized
officer of the Borrower dated the Third Closing Date stating that:

(a) The representations and warranties contained in this
Agreement and in each of the other Loan Documents are correct on
and as of the

<PAGE>

Third Closing Date as though made on and as of such date; and

(b) No Default or Event of Default has occurred and is
continuing, or would result from the transactions
contemplated by this Agreement and the other Loan Documents;
and

(16) ADDITIONAL DOCUMENTATION. The Bank shall have received such
other approvals or documents as any the Bank may reasonably request.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Bank that:

SECTION 4.01 INCORPORATION, GOOD STANDING AND DUE QUALIFICATION. The
Borrower is a corporation duly incorporated, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation; has the
corporate power and authority to own its assets and to transact the business in
which it is now engaged or proposed to be engaged in; and is duly qualified to
do business and is in good standing in all jurisdictions where failure to so
qualify could result in a Material Adverse Change.

SECTION 4.02 CORPORATE POWER AND AUTHORITY. The execution, delivery,
and performance by the Borrower of the Loan Documents to which it is a party
have been duly authorized by all necessary corporate action and does not and
will not: (1) require any consent or approval of the stockholders of the
Borrower; (2) contravene the Borrower's charter or bylaws; (3) violate any
provision of any Law (including, without limitation, Regulation U of the Board
of Governors), order, writ, judgment, injunction, decree, determination, award
or Governmental Approval presently in effect having applicability to the
Borrower; (4) result in a breach of or constitute a default under any indenture
or loan or credit agreement or any other agreement, lease, or instrument to
which the Borrower is a party or by which it or its properties may be bound or
affected; (5) result in, or require, the creation or imposition of any Lien on
the Mortgaged Property (other than Liens permitted by the Mortgage Documents);
or (6) cause the Borrower to be in default under any such order, writ, judgment,
injunction, decree, determination, award or Governmental Approval or any such
indenture or loan or credit agreement or other agreement, lease or instrument.
No authorization, approval

<PAGE>

or other action by, and no notice to or filing with, any Governmental Authority
is required for the due execution, delivery and performance by the Borrower of
the Loan Documents.

SECTION 4.03 COMPLIANCE WITH LAWS. The Borrower is not in violation
of any Law which violation could reasonably be expected to result in a Material
Adverse Change and the Borrower has not received notice of a violation which
would have such effect.

SECTION 4.04 LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and
each of the other Loan Documents when delivered under this Agreement will be,
the legal, valid, and binding obligation of the Borrower, enforceable against
the Borrower in accordance with their terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, and other similar laws affecting
creditors' rights generally.

SECTION 4.05 FINANCIAL STATEMENTS. The draft of the consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as at August 31,
1995, and the related draft consolidated statements of operations, consolidated
statements of stockholders' equity and consolidated statements of cash flows of
the Borrower and its Consolidated Subsidiaries for the Fiscal Year, and the
accompanying draft footnotes, together, with the draft opinion thereon of Grant
Thornton, independent certified public accountants, copies of which have been
furnished to the Bank, fairly present the financial condition of the Borrower
and its Consolidated Subsidiaries as at such date and the results of the
operations of the Borrower and its Consolidated Subsidiaries for the periods
covered by such statements, all in accordance with GAAP consistently applied,
and since August 31, 1995, there has been no Material Adverse Change. There are
no liabilities of the Borrower or any Subsidiary, fixed or contingent, which are
material to the financial condition of the Borrower and its Subsidiaries taken
as a whole, but are not reflected in the draft financial statements or in the
notes thereto, other than liabilities arising in the ordinary course of business
since August 31, 1995.

SECTION 4.06 DISCLOSURE. The information, exhibits and reports
furnished by the Borrower (or by any Person on behalf of the Borrower) to the
Bank in connection with the negotiation of this Agreement, when read as a whole,
do not contain any material misstatement of fact or omit to state a material
fact or any fact necessary to make the statements contained therein not
materially misleading.

<PAGE>

SECTION 4.07 LABOR DISPUTES AND ACTS OF GOD. Except as set forth on
Schedule 4.07 hereto, neither the business nor the properties of the Borrower
are affected by any fire, explosion, accident, strike, lockout, or other labor
dispute, drought, storm, hail, earthquake, embargo, act of God or of the public
enemy, or other casualty (whether or not covered by insurance), which could
result in a Material Adverse Change.

SECTION 4.08 OTHER AGREEMENTS. The Borrower is not in default in any
material respect in the performance, observance, or fulfillment of any of the
obligations, covenants, or conditions contained in any agreement or instrument
material to its business to which it is a party.

SECTION 4.10 LITIGATION. There is no pending or to the knowledge of
the Borrower threatened action or proceeding against or affecting the Borrower
before any court, governmental agency, or arbitrator, which is likely to be
adversely determined and if so determined could, in any one case or in the
aggregate, result in a Material Adverse Change. Schedule 4.10 hereto contains a
description of each action or proceeding pending as of the Third Closing Date
where the claim against the Borrower exceeds Five Hundred Thousand Dollars
($500,000).

SECTION 4.11 NO DEFAULTS ON OUTSTANDING JUDGMENTS OR ORDERS. Except
as set forth on Schedule 4.11 hereto, the Borrower has satisfied all judgments,
the Borrower is not in default with respect to any judgment, writ, injunction,
decree, rule, or regulation of any court, arbitrator, or federal, state,
municipal, or other Governmental Authority, commission, board, bureau, agency,
or instrumentality, domestic or foreign where failure to comply, in any one case
or in the aggregate, could result in a Material Adverse Change.

SECTION 4.12 OWNERSHIP. The Borrower has title to, or valid
leasehold interests in, all of its properties and assets, real and personal,
including the properties and assets and leasehold interests reflected in the
financial statements referred to in Section 4.06 (other than any properties or
assets disposed of in the ordinary course of business).

SECTION 4.13 SUBSIDIARIES. Set forth on Schedule 4.13 hereto is a
complete and accurate list of the Subsidiaries of the Borrower as of the Third
Closing Date, showing the jurisdiction of incorporation of each and showing the
percentage of the ownership of the outstanding stock of each Subsidiary. All of
the outstanding capital stock of each Subsidiary has been validly issued, is
fully paid and non-assessable, other than pursuant to the

<PAGE>

provisions of Section 630 of the Business Corporation Law of the State of New
York.

SECTION 4.14 ERISA. Except with respect to employee benefit plans
set forth on Schedule 4.14 hereto, the Borrower is in compliance in all material
respects with all applicable provisions of ERISA; neither a Reportable Event nor
a Prohibited Transaction has occurred and is continuing with respect to any
Plan; no notice of intent to terminate a Plan under Section 4041(c) of ERISA has
been filed nor has any Plan been terminated pursuant to Section 4041(c) of
ERISA; no circumstances exist which constitute grounds under Section 4042 of
ERISA on which the PBGC could institute proceedings to terminate, or appoint a
trustee to administer, a Plan, nor has the PBGC instituted any such proceedings;
neither the Borrower nor any ERISA Affiliate has completely or partially
withdrawn under Section 4201 or 4204 of ERISA from a Multiemployer Plan; the
Borrower and each ERISA Affiliate has met its minimum funding requirements under
ERISA with respect to all of their Plans and there are no unfunded vested
liabilities which in the aggregate exceed Fifty Thousand Dollars ($50,000); and
neither the Borrower nor any ERISA Affiliate has incurred any liability to the
PBGC under ERISA which in the aggregate exceeds Fifty Thousand Dollars
($50,000).

SECTION 4.15 OPERATION OF BUSINESS. The Borrower possesses all
licenses, permits, franchises, patents, copyrights, trademarks, and trade names,
or rights thereto, necessary to conduct its business substantially as now
conducted and as presently proposed to be conducted, except where the failure to
obtain any of the foregoing could not result in a Material Adverse Change, and
except as set forth on Schedule 4.15 hereto, the Borrower is not in violation of
any valid rights of others with respect to any of the foregoing.

SECTION 4.16 TAXES. Except as set forth on Schedule 4.16 hereto, the
Borrower has filed all tax returns (federal, state and local) required to be
filed and have paid all taxes, assessments and governmental charges and levies
thereon required to be paid, including interest and penalties, except to the
extent they are the subject of a Good Faith Contest.

ARTICLE V

AFFIRMATIVE COVENANTS

So long as any portion of the Amended and Restated Term Loan remains
outstanding or any obligation under any Loan Document remains outstanding, the
Borrower will:

<PAGE>

SECTION 5.01 MAINTENANCE OF EXISTENCE. Preserve and maintain its
corporate existence and good standing in the jurisdiction of its incorporation
and qualify and remain qualified as a foreign corporation in each jurisdiction
in which the failure to so qualify could result in a Material Adverse Change.

SECTION 5.02 MAINTENANCE OF RECORDS. Keep, and cause each of its
Subsidiaries to keep, adequate records and books of account, in which complete
entries will be made in accordance with GAAP consistently applied for all
reporting periods, reflecting all financial transactions of the Borrower and its
Subsidiaries.

SECTION 5.03 MAINTENANCE OF PROPERTIES. Operate its business in a
first class manner and maintain, keep and preserve or replace all of its
properties necessary to do so.

SECTION 5.04 COMPLIANCE WITH LAWS. Comply in all material respects
with all applicable Laws, such compliance to include, without limitation, paying
before the same become delinquent all taxes, assessments, and governmental
charges imposed upon it or upon its property, except to the extent they are the
subject of a Good Faith Contest.

SECTION 5.05 RIGHT OF INSPECTION. At any time and from time to time,
upon reasonable notice (which may be telephonic) and during normal business
hours, permit the Bank or any agent or representative thereof to examine and,
make copies of and abstracts from the records and books of account of, and visit
the properties of the Borrower and to discuss the affairs, finances, and
accounts of the Borrower with any of its respective officers, directors and
independent accountants.

SECTION 5.06 REPORTING REQUIREMENTS. Furnish to the Bank:

(1) UNAUDITED QUARTERLY FINANCIAL STATEMENTS. As soon as available
and in any event within sixty (60) days after the end of each of the first
three fiscal quarters in each Fiscal Year consolidated and consolidating
statements of operations and consolidated and consolidating statements of
cash flows of the Borrower and its Consolidated Subsidiaries for such
fiscal quarter and for the period from the beginning of such Fiscal Year to
the end of such fiscal quarter, and the related consolidated and
consolidating balance sheet as at the end of such fiscal quarter, setting
forth in each case in comparative form the corresponding figures for the
corresponding fiscal

<PAGE>

quarter and period in the preceding Fiscal Year accompanied by a
certificate of the chief financial officer of the Borrower, which
certificate shall state that said financial statements fairly present the
consolidated financial condition and results of operations of the Borrower
and its Consolidated Subsidiaries in accordance with GAAP, consistently
applied, as at the end of, and for, such period (subject for the first
three fiscal quarters to normal year-end recurring audit adjustments);
provided, however, if there is a change in generally accepted accounting
principles after August 31, 1995, which affects the presentation of the
financial statements noted above in this Section 5.06(1), then, in addition
to the financial statements required above, the Borrower will furnish to
the Bank the same financial statements required under this Section 5.06(1)
prepared in accordance with then current generally accepted accounting
principles at the same time it provides the financial statements noted
above in this Section 5.06(1);

(2) AUDITED ANNUAL FINANCIAL STATEMENTS. As soon as available and in
any event within one hundred twenty (120) days after the end of each Fiscal
Year, consolidated and consolidating statements of operations, consolidated
and consolidating statements of changes in stockholders' equity and
consolidated and consolidating statements of cash flows of the Borrower and
its Consolidated Subsidiaries for such Fiscal Year and the related
consolidated and consolidating balance sheet as at the end of such Fiscal
Year, setting forth in each case in comparative form the corresponding
figures for the preceding Fiscal Year, and with respect to the consolidated
financial statements accompanied by an unqualified opinion thereon
acceptable to the Bank of Grant Thornton or other independent certified
public accountants acceptable to the Bank, which opinion shall state that
said financial statements fairly present the consolidated financial
condition and results of operations of the Borrower and its Consolidated
Subsidiaries as at the end of, and for, such Fiscal Year in accordance with
generally accepted accounting principles then in effect; provided, however,
if there is a change in generally accepted accounting principles after
August 31, 1995, which affects the presentation of the financial statements
noted above in this Section 5.06(2), then, in addition to the financial
statements required above, the Borrower will furnish to the Bank the same
financial statements required under this Section 5.06(2) prepared in
accordance with GAAP at the same time it provides the financial statements
noted above in this Section 5.06(2);

<PAGE>

(3) UNAUDITED MONTHLY FINANCIAL STATEMENTS. As soon as available,
consolidated and consolidating statements of operations of the Borrower and
its Consolidated Subsidiaries for such month (broken down by each division
of the Borrower or any Consolidated Subsidiary) and for the period from the
beginning of such Fiscal Year to the end of such month, and the related
consolidated and consolidating balance sheet as at the end of such month
(broken down by each division of the Borrower or any Consolidated
Subsidiary); provided, however, if there is a change in generally accepted
accounting principles after August 31, 1995, which affects the presentation
of the financial statements noted above in this Section 5.06(3), then, in
addition to the financial statements required above, the Borrower will
furnish to the Bank the same financial statements required under this
Section 5.06(3) prepared in accordance with then current generally accepted
accounting principals at the same time it provides the financial statements
noted above in this Section 5.06(3);

(4) MANAGEMENT LETTERS. When received, a management letter from the
accountants which prepared such financial statements and which discusses
matters usually addressed in management letters (including, without
limitation, the financial controls of the Borrower and its Consolidated
Subsidiaries); and promptly upon receipt thereof, copies of any other
management letters or reports submitted to the Borrower or any of its
Subsidiaries by independent certified public accountants in connection with
the examination of the financial statements of the Borrower or any
Subsidiary made by such accountants;

(5) CERTIFICATE OF NO DEFAULT. Together with the quarterly and
annual financial statements required to be delivered by the Borrower
pursuant to paragraphs (1) and (2) of this Section 5.06, a certificate of
the chief financial officer of the Borrower (i) certifying that no Default
or Event of Default has occurred and is continuing, or if a Default or
Event of Default has occurred and is continuing a statement as to the
nature thereof and the action which is proposed to be taken with respect
thereto; and (ii) in the case of the quarterly and annual financial
statements, with computations demonstrating compliance with the covenants
contained in Article VII;

(6) MONTHLY ACCOUNTS RECEIVABLE REPORTS. Together with the monthly
financial statements required to be delivered by the Borrower pursuant to
paragraph (3) of this Section 5.06, accounts receivable aging

<PAGE>

schedules along with accounts receivable aging summaries with respect to
the Borrower;

(7) NOTICE OF LITIGATION. Promptly after the commencement thereof,
notice of all actions, suits, and proceedings before any court or
Governmental Authority, governmental department, commission, board, bureau,
agency, or instrumentality, domestic or foreign, affecting the Borrower or
any of its Subsidiaries which, if determined adversely, could result in a
Material Adverse Change;

(8) NOTICE OF DEFAULTS AND EVENTS OF DEFAULT. As soon as possible
and in any event within three (3) days after any officer or director of the
Borrower has knowledge of the occurrence of a Default or Event of Default,
a written notice setting forth the details of such Default or Event of
Default and the action which is proposed to be taken by the Borrower with
respect thereto;

(9) ERISA REPORTS. As soon as possible and in any event within seven
(7) days after any officer or director of the Borrower or any of its
Subsidiaries knows or has reason to know that any Reportable Event or
Prohibited Transaction has occurred with respect to any Plan or that the
PBGC or the Borrower or any of its Subsidiaries has instituted or will
institute proceedings under Title IV of ERISA to terminate any Plan, the
Borrower will deliver to the Bank a certificate of the chief financial
officer of the Borrower setting forth details as to such Reportable Event
or Prohibited Transaction or Plan termination and the action the Borrower
and its Subsidiaries proposes to take with respect thereto;

(10) PROXY STATEMENTS, ETC. Promptly after the sending or filing
thereof, copies of all proxy statements, financial statements and reports
which the Borrower sends to its stockholders, and copies of all regular,
periodic and special reports, and all registration statements (other than
those relating to stock option plans of the Borrower) which the Borrower
files with the Securities and Exchange Commission or any Governmental
Authority which may be substituted therefor, or with any national
securities exchange;

(11) MATERIAL ADVERSE CHANGE. As soon as possible and in any event
within three (3) days after the occurrence of any event or circumstances
which could result in or has resulted in a Material Adverse Change, written
notice thereof;

<PAGE>

(12) OFFICES. Thirty (30) days prior written notice of any change in
the chief executive office or principal place or business of the Borrower;

(13) LIENS. As soon as possible and in any event within three (3)
days after the Borrower has knowledge of the assertion of any event that
could have a material adverse effect on the value of the Collateral or the
Liens created under the Mortgage Documents, written notice thereof;

(14) ENVIRONMENTAL AUDIT. As soon as possible, a copy of the
environmental audit prepared by Warren & Panzer indicating that Mortgaged
Property is in a state acceptable to Chase; and

(15) GENERAL INFORMATION. Such other information respecting the
condition or operations, financial or otherwise, of the Borrower or any of
its Subsidiaries as the Bank may from time to time reasonably request.

SECTION 5.07 APPRAISAL. Permit an appraisal of the Borrower's
Mortgaged Property to be conducted (i) at any time while any portion of the
Amended and Restated Term Loan remains outstanding, at the expense of Chase, and
(ii) no more than one time while any portion of the Amended and Restated Term
Loan remains outstanding and there is a Material Adverse Change, at the expense
of Borrower.

ARTICLE VI

NEGATIVE COVENANTS

So long as any portion of the Amended and Restated Term Loan remains
outstanding or any obligation under any Loan Document remains outstanding, the
Borrower will not:

SECTION 6.01 MERGERS, ACQUISITIONS, ETC. Merge or consolidate with,
or sell, assign, lease, or otherwise dispose of (whether in one transaction or
in a series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired), to any Person (or enter into any agreement to do
any of the foregoing) except that any Subsidiary of the Borrower may merge into
the Borrower.

SECTION 6.02 SALE OF ASSETS. Sell assets other than as permitted by
the Heller Loan Agreement.

SECTION 6.03 INVESTMENTS. Make any loan or advance to any Person, or
purchase or otherwise acquire any capital stock, assets, obligations, or other
securities of,

<PAGE>

make any capital contribution to, or otherwise invest in or acquire any interest
in any Person, except: (1) direct obligations of the United States or any
agency thereof with maturities of one (1) year or less from the date of
acquisition; (2) commercial paper of a domestic issuer rated at least "A-1" by
Standard & Poor's Corporation or "P-1" by Moody's Investors Service, Inc.; (3)
certificates of deposit with maturities of one (1) year or less from the date of
acquisition issued by any commercial bank having both (a) a long term credit
rating by either Standard & Poor's Corporation or Moody's Investors Service,
Inc. of at least investment grade, and (b) capital and surplus in excess of One
Billion Dollars ($1,000,000,000); (4) for stock, obligations, or securities
received in settlement of debts (created in the ordinary course of business)
owing to the Borrower, (5) loans or advances made in the ordinary course of
business provided that the aggregate amount of all such loans or advances
outstanding at any time does not exceed One Hundred Thousand Dollars ($100,000),
and (6) loans or advances made by R Squared to Emedge Works provided that the
aggregate amount of all such loans or advances outstanding at any time does not
exceed One Hundred Fifty Thousand Dollars ($150,000), (7) the Borrower's
ownership of the stock of R Squared, and (8) the fifty percent (50%) partnership
interest of R Squared in Emedge Works.

SECTION 6.04 GUARANTIES, ETC. Assume, guaranty, endorse, or
otherwise be or become directly or contingently responsible or liable
(including, but not limited to, an agreement to purchase any obligation, stock,
assets, goods or services, or to supply or advance any funds, assets, goods, or
services, or to maintain or cause such Person to maintain a minimum working
capital or net worth, or otherwise to assure the creditors of any Person against
loss) for obligations of any Person in excess of Two Hundred Fifty Thousand
Dollars ($250,000) per such Person, except (1) guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; and (2) the obligations under the Guarantee and
Contingent Purchase Agreement.

SECTION 6.05 TRANSACTIONS WITH AFFILIATE. Enter into any
transaction, including, without limitation, the purchase, sale, or exchange of
property or the rendering of any service, with any Affiliate, except: (1)
transactions in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's business and upon fair and reasonable terms no
less favorable to the Borrower than it could obtain in a comparable arm's-length
transaction with a Person not an Affiliate; and (2) the transactions permitted
under the ESOT Agreement and advances to the ESOT to enable it to satisfy the
ESOT Obligations.

<PAGE>

SECTION 6.06 CHANGES, AMENDMENTS OR MODIFICATIONS. Change, amend,
modify or supplement the Subordinated Notes.

SECTION 6.07 SUBORDINATED DEBT. Prepay any or all of the
Subordinated Debt; or purchase, redeem or otherwise acquire any or all of the
Subordinated Debt or permit any Subsidiary to purchase, redeem or otherwise
acquire any or all of the Subordinated Debt except that the Borrower may prepay
the Jee See Notes in accordance with the terms and provisions of Section 7.5,
RESTRICTED JUNIOR PAYMENTS, of the Heller Loan Agreement.

SECTION 6.08 ACCOUNTING METHODS; FISCAL YEAR END. Except to the
extent required by then effective generally accepted accounting principles,
change any of its accounting methods or change the end of its Fiscal Year from
August 31.

SECTION 6.09 NO CHANGE IN BUSINESS. Alter or change the nature of
its business in any material respect.

ARTICLE VII
FINANCIAL COVENANTS

So long as any portion of the Amended and Restated Term Loan remains
outstanding or any obligation under any Loan Document remains outstanding:

SECTION 7.01 MINIMUM CONSOLIDATED TANGIBLE NET WORTH. The Borrower
and its Consolidated Subsidiaries will have as of each Quarterly Date in each
period specified below a Consolidated Tangible Net Worth of not less than the
amount specified for such date:

Date Amount
---- ------
Each Quarterly Date $16,500,000
during the period from
August 31, 1995
to and including
August 30, 1996

Each Quarterly Date $17,000,000
during the period from
August 31, 1996
to and including
August 30, 1997

Each Quarterly Date $17,500,000
during the period from
August 31, 1997

<PAGE>

to and including
August 30, 1998

Each Quarterly Date $18,000,000
during the period from
August 31, 1998
to and including
August 30, 1999

Each Quarterly Date $18,500,000
during the period from
August 31, 1999
to and including
August 30, 2000

Each Quarterly Date $19,000,000
during the period from
August 31, 2000
to and including
August 30, 2001

Each Quarterly Date $19,500,000
during the period from
August 31, 2001
to and including
August 30, 2002

On August 31, 2002 and $20,000,000
on each Quarterly Date
thereafter

SECTION 7.02 CONSOLIDATED LEVERAGE RATIO. The Borrower and its
Consolidated Subsidiaries will have as of each Quarterly Date in each period
specified a ratio of (1) the sum of (a) Consolidated Total Liabilities, less (b)
Consolidated Deferred Liabilities, less (c) Subordinated Debt to (2) the sum of
(a) Consolidated Tangible Net Worth, plus (b) Subordinated Debt of not greater
than the ratio specified below for such date:

Date Ratio
---- ------

Each Quarterly Date 2.75 to 1.0
during the period from
August 31, 1995
to and including
August 31, 1996

On November 30, 1996 and 2.50 to 1.0
on each Quarterly Date
thereafter

<PAGE>

SECTION 7.03 CASH FLOW RATIO. The Borrower and its Consolidated
Subsidiaries will have for the prior four quarters (taken as a whole) ending on
each Quarterly Date a ratio (1) the sum of (a) Consolidated Earnings Before
Interest, Taxes and Depreciation for such period, less (b) Five Million Dollars
($5,000,000) to (2) the sum of (a) Consolidated Interest Expense for such
period, plus (b) Consolidated Current Portion of Long Term Debt as of the first
day of such period, plus (c) Cash Dividends paid during such period, plus (d)
Consolidated Taxes payable for such period, of not less than 1.00 to 1.00.

SECTION 7.04 MAXIMUM CONSOLIDATED CAPITAL EXPENDITURES. The Borrower
and its Consolidated Subsidiaries will not have during any Fiscal Year
Consolidated Capital Expenditures in excess of Fifteen Million Dollars
($15,000,000).

ARTICLE VIII

EVENTS OF DEFAULT

SECTION 8.01 EVENTS OF DEFAULT. If any of the following events
("Events of Default") shall occur and be continuing:

(1) The Borrower shall fail to pay the principal of the Amended and
Restated Term Loan Note when due and payable; or shall fail to make any
mandatory prepayment of the Amended and Restated Term Loan as and when
required by Section 2.06; or shall fail to pay interest on the Amended and
Restated Term Loan Note or any fees or other amounts owing to the Bank
under this Agreement or any other Loan Document within three (3) days after
such interest or other fees or amounts shall be due and payable;

(2) Any representation or warranty made or deemed made by the
Borrower in any Loan Document to which it is a party or which is contained
in any certificate, document, opinion, or financial or other statement
furnished at any time under or in connection with any Loan Document shall
prove to have been incorrect in any material respect on or as of the date
made or deemed made;

(3) The Borrower shall fail to perform or observe any term, covenant,
or agreement contained in Article VI, Article VII or otherwise contained in
this Agreement or in any Loan Document (other than the Amended and Restated
Term Loan Note) to which it is a party on its part to be performed or
observed, and such

<PAGE>

failure shall remain unremedied for thirty (30) consecutive calendar days
after the occurrence thereof and such failure shall continue unremedied for
such thirty (30) day period;

(4) The Borrower shall: (a) fail to pay any Debt under the ESOT Loan
Agreement; (b) fail to pay any other Debt where the aggregate amount of
such Debt is greater than Five Hundred Thousand Dollars ($500,000), (other
than the payment obligations described in (1) above and the obligations
noted below) of the Borrower, including but not limited to the Subordinated
Debt or any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise) or shall
fail to satisfy its obligations under the Guarantee and Contingent Purchase
Agreement; (c) fail to perform or observe any term, covenant, or condition
on its part to be performed or observed under any agreement or instrument
relating to any Debt (other than the payment obligations described in the
subsequent provision (d), when required to be performed or observed, if the
effect of such failure to perform or observe is to accelerate the maturity
of such Debt, or any such Debt shall be declared to be due and payable, or
required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof; or (d) fail to pay the
principal of Term Loan B under the Heller Loan Agreement unless any
event of default resulting from such failure to pay under the Heller Loan
Agreement shall have been waived in writing;

(5) The Borrower (a) shall generally not, or shall be unable to, or
shall admit in writing its inability to pay its debts as such debts become
due; or (b) shall make an assignment for the benefit of creditors, petition
or apply to any tribunal for the appointment of a custodian, receiver, or
trustee for its or a substantial part of its assets; or (c) shall commence
any proceeding under any bankruptcy, reorganization, arrangements,
readjustment of debt, dissolution, or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or (d) shall have any
such petition or application filed or any such proceeding commenced against
it, in which an order for relief is entered or adjudication or appointment
is made and which remains undismissed for a period of thirty (30) days or
more; or (e) by any act or omission shall indicate its consent to, approval
of, or acquiescence in any such petition, application, or proceeding, or
order for relief, or the appointment of a custodian, receiver, or trustee
for all or any substantial part of its properties; or (f) shall suffer any
such custodianship, receivership, or trusteeship to

<PAGE>

continue undischarged for a period of thirty (30) days or more;

(6) One or more judgments, decrees, or orders for the payment of
money in excess of Five Hundred Thousand Dollars ($500,000) in the
aggregate shall be rendered against the Borrower and such judgments,
decrees, or orders shall continue unsatisfied and in effect for a period of
thirty (30) consecutive days without being vacated, discharged, satisfied,
or stayed or bonded pending appeal;

(7) Except in the case where the Bank fails to perform its duties or
obligations under any Loan Document, any Loan Document shall, at any time
after its execution and delivery and for any reason, cease to be in full
force and effect or shall be declared null and void, or the validity or
enforceability thereof shall be contested by any party thereto or any party
thereto shall deny it has any further liability or obligation under or
shall fail to perform its obligations under such Loan Document;

(8) Except in the case where the Bank fails to perform its duties or
obligations under any Loan Document, the ESOT Mortgage shall at any time
after its execution and delivery and for any reason cease to create a valid
first priority mortgage lien on the property subject thereto and after
recordation thereof, a valid and perfected mortgage lien on the property
subject thereto;

(9) Except in the case where the Bank fails to perform its duties or
obligations under any Loan Document, (a) the Consolidated Term Loan
Mortgage shall at any time after its execution and delivery and for any
reason cease to create a valid second priority mortgage lien on the
property subject thereto and after recordation thereof, a valid and
perfected mortgage lien on the property subject thereto; or (b) any
Mortgage Document shall fail to be in full force and effect or shall be
declared null and void, or the validity or enforceability thereof shall be
contested by any party to such Mortgage Document, or any party to such
Mortgage Document shall deny it has any further liability or obligation
under such Mortgage Document;

(10) Any event of default (after giving effect to any cure or grace
period) as defined in either Mortgage shall occur with respect to such
Mortgage;

(11) Any person or group of persons acting in concert (in each case,
excluding officers or directors

<PAGE>

of the Borrower on the Third Closing Date) holds more than fifty percent
(50%) of the outstanding common stock of the Borrower; or

(12) Any of the following events occur or exist with respect to the
Borrower or any ERISA Affiliate: (a) any Prohibited Transaction involving
any Plan; (b) any Reportable Event with Respect to any Plan; (c) the filing
under Section 4041(c) of ERISA of a notice of intent to terminate any Plan
or the termination of any Plan pursuant to Section 4041(c) of ERISA; (d)
any event or circumstance that might constitute grounds entitling the PBGC
to institute proceedings under Section 4042 of ERISA for the termination
of, or for the appointment of a trustee to administer, any Plan, or the
institution by the PBGC of any such proceedings; (e) complete or partial
withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer Plan or
the reorganization, insolvency, or termination of any Multiemployer Plan;
and in each case above, such event or condition, together with all other
events or conditions, if any, would in the opinion of the Bank subject the
Borrower to any tax, penalty, or other liability to a Plan, a Multiemployer
Plan, or the PBGC (or any combination thereof) which in the aggregate
exceed or may exceed Five Hundred Thousand Dollars ($500,000);

(13) The Borrower shall fail to comply with Warren & Panzer, the
auditor performing the environmental audit on the Mortgaged Property or
Chase, in its sole discretion, shall find the state of the Mortgaged
Property as set forth in such environmental audit to be unacceptable;

(14) The Borrower shall fail to pay any fees within sixty (60) days
of the Closing Date with respect to either the real estate appraisal
conducted by Pearson Partners Inc. or the environmental audit conducted by
Warren & Panzer;

then, and in any such event (other than Section 8.01(5)), the Bank may, by
notice to the Borrower, (1) declare the outstanding Amended and Restated Term
Loan Note, all interest thereon, and all other amounts payable under this
Agreement and the other Loan Documents to be forthwith due and payable,
whereupon the Amended and Restated Term Loan Note, all such interest, and all
such amounts shall become and be forthwith due and payable, without presentment,
demand, protest, or further notice of any kind, all of which are hereby
expressly waived by the Borrower; and (2) exercise any of the remedies provided
by law or in this Agreement or any of the other Loan Documents; PROVIDED,

<PAGE>

HOWEVER, that upon the occurrence of an Event of Default referred to in Section
8.01(5), the outstanding Amended and Restated Term Loan Note, all interest
thereon, and any other amounts payable under this Agreement in any of the other
Loan Documents, shall be forthwith due and payable without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived.

ARTICLE IX

MISCELLANEOUS

SECTION 9.01 AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Agreement or any other Loan Document nor consent to any
departure by the Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Borrower and the Bank and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.

SECTION 9.02 NOTICES, ETC. All notices and other communications
provided for under this Agreement and under the other Loan Documents to which
the Borrower is a party shall be in writing and mailed or delivered by messenger
or sent by facsimile, if to the Borrower, at its address at 515 West 57th
Street, New York, New York, 10019, Attention: Barry Knepper, Senior Vice
President - Finance, with a copy to Karen Lapidus, Esq. at the same address for
the Borrower; if to Chase at its address at 1411 Broadway, Fifth Floor, New
York, New York, 10018, Attention: Gordon Smith, Vice President; or, as to each
party, at such other address as shall be designated by such party in a written
notice to the other party complying as to delivery with the terms of this
Section. All such notices and communications shall be effective when received.

SECTION NO WAIVER; REMEDIES. No failure on the part of the Bank
to exercise and no delay in exercising, any right, power, or remedy under any
Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any right under any Loan Documents preclude any other or
further exercise thereof or the exercise of any other right. The remedies
provided in the Loan Documents are cumulative and not exclusive of any remedies
provided by law.

SECTION 9.04 ASSIGNMENT; PARTICIPATION. This Agreement shall be
binding upon, and shall inure to the benefit of, the Borrower and the Bank. The
Borrower may not assign or transfer its rights or obligations hereunder. The
Bank may at any time grant to one or more banks or other

<PAGE>

institutions (each a "Participant") participating interests in its portion of
the Loans. In the event of any such grant by a Bank of a participating interest
to a Participant, whether or not upon notice to the Borrower, the Bank shall
remain responsible for the performance of its obligations hereunder, and
Borrower shall continue to deal solely and directly with the Bank in connection
with the Bank's rights and obligations hereunder. Any agreement pursuant to
which the Bank may grant such a participating interest shall provide that the
Bank shall retain the sole right and responsibility to enforce the obligations
of the Borrower hereunder and under any other Loan Document including, without
limitation, the right to approve any amendment, modification or waiver of any
provision of this Agreement or any other Loan Document.

SECTION 9.05 EXPENSES; INDEMNIFICATION. The Borrower agrees to
reimburse the Bank on demand for all costs, expenses, and charges (including,
without limitation, all reasonable fees and expenses of external legal counsel
for the Bank and of persons conducting appraisals as provided in Section 5.10
and of persons conducting field examinations for the Bank) incurred by the Bank
in connection with the preparation, performance, or enforcement of this
Agreement, the Amended and Restated Term Loan Note, or any other Loan Documents
or in connection with any amendment, modification or waiver of the provisions
hereof or thereof (whether or not the proposed transaction is consummated). All
such costs, expenses, fees and charges paid by the Borrower shall be non-
refundable. The Borrower hereby indemnifies and holds harmless the Bank and
each director, officer, employee and affiliate thereof (each, an "indemnified
person"), from and against any and all losses, claims, damages, expenses and
liabilities incurred by any indemnified person that arise out of or relate to
any investigation or litigation or other proceeding (including any threatened
investigation or litigation or other proceedings and whether or not such
indemnified person is a party thereto) relating to the transactions contemplated
by the Loan Documents or to the actual or proposed use of the proceeds of the
Loans or that are otherwise attributable to the acts or omissions of the
Borrower or its officers, employees, agents or advisors in connection with the
transactions contemplated by the Loan Documents, including without limitation
the reasonable fees and disbursements of counsel incurred in connection with any
of the foregoing (but excluding any of the foregoing claimed by any indemnified
person to the extent incurred by reason of the gross negligence or willful
misconduct of such person as determined by a final judgment of a court).

<PAGE>

The obligations of the Borrower under this Section shall survive the
repayment of the Loans and all amounts due under or in connection with any of
the Loan Documents.

SECTION 9.06 RIGHT OF SETOFF. The Borrower agrees that, in addition
to (and without limitation of) any right of setoff, bankers' lien or
counterclaim the Bank may otherwise have, the Bank shall be entitled, at its
option, to offset balances (general or special, time or demand, provisional or
final) held by it for the account of the Borrower at any of the Bank's offices,
in Dollars or in any other currency, against any amount payable by the Borrower
to the Bank under this Agreement or the Bank's Amended and Restated Term Loan
Note, or any other Loan Document which is not paid when due (regardless of
whether such balances are then due to the Borrower), in which case it shall
promptly notify the Borrower thereof; provided that the Bank's failure to give
such notice shall not affect the validity thereof.

SECTION 9.07 TABLE OF CONTENTS; HEADINGS. Any table of contents and
the headings and captions hereunder are for convenience only and shall not
affect the interpretation or construction of this Agreement.

SECTION 9.08 SEVERABILITY. The provisions of this Agreement are
intended to be severable. If for any reason any provision of this Agreement
shall be held invalid or unenforceable in whole or in part in any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without in any manner affecting the validity
or enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.

SECTION 9.09 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any party hereto may execute this Agreement by signing any
such counterpart.

SECTION 9.10 INTEGRATION. The Loan Documents set forth the entire
agreement among the parties hereto relating to the transactions contemplated
thereby and supersede any prior oral or written statements or agreements with
respect to such transactions.

SECTION 9.11 GOVERNING LAW. This Agreement and the Notes shall be
governed by, and interpreted and construed in accordance with, the laws of the
State of New York.

<PAGE>

SECTION 9.12 JURISDICTION; IMMUNITIES. The Borrower and the Bank
hereby irrevocably submit to the jurisdiction of any New York State or United
States Federal court sitting in New York City over any action or proceeding
arising out of or relating to this Agreement, the Amended and Restated Term Loan
Note or any other Loan Document, and the Borrower and the Bank hereby
irrevocably agree that all claims in respect of such action or proceeding may be
heard and determined in such New York State or Federal court. The Borrower and
the Bank irrevocably consent to the service of any and all process in any such
action or proceeding by the mailing of copies of such process to the Borrower or
Bank at its address specified in Section 9.03. The Borrower and the Bank agree
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. The Borrower and the Bank further waive any objection
to venue in such State and any objection to an action or proceeding in such
State on the basis of forum non conveniens. The Borrower further agrees that
any action or proceeding brought against the Bank shall be brought only in New
York State or United States Federal court sitting in New York County.

Nothing in this Section 9.12 shall affect the right of the Bank to
serve legal process in any other manner permitted by law or affect the right of
the Bank to bring any action or proceeding against the Borrower or any of its
properties in the courts of any other jurisdictions.

To the extent that the Borrower has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, the
Borrower hereby irrevocably waives such immunity in respect of its obligations
under all of the Loan Documents.

THE BORROWER HEREBY WAIVES ITS RIGHT TO A JURY TRIAL.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.

UNITEL VIDEO, INC.

By /s/ Barry Knepper
----------------------------------
Name: Barry Knepper
Title: Senior Vice President -
Finance and Administration

THE CHASE MANHATTAN BANK, N.A.,
as Bank

By /s/ Gordon L. Smith
----------------------------------
Name: Gordon L. Smith
Title: Vice President

LENDING OFFICE FOR PRIME RATE, FIXED RATE AND
LIBOR LOANS:
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081

<PAGE>

TABLE OF CONTENTS
Page

ARTICLE I DEFINITIONS AND ACCOUNTING TERMS. . . . . . . . . . . . . . . 2

SECTION 1.01 Defined Terms. . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02 Accounting Terms . . . . . . . . . . . . . . . . . . 13
SECTION 1.03 Rules of Construction. . . . . . . . . . . . . . . . 14

ARTICLE II AMOUNT AND TERMS OF THE AMENDED AND RESTATED TERM LOAN. . . . 14

SECTION 2.01 Amended and Restated Term Loan . . . . . . . . . . . 14
SECTION 2.02 Interest Periods; Request for Fixed Rate Loans . . . 14
SECTION 2.03 Interest . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.04 Note . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.05 Optional Prepayments . . . . . . . . . . . . . . . . 15
SECTION 2.06 Mandatory Prepayments. . . . . . . . . . . . . . . . 16
SECTION 2.07 Prepayment Premium on Fixed Rate Loans . . . . . . . 16
SECTION 2.08 Method of Payment. . . . . . . . . . . . . . . . . . 17
SECTION 2.09 Margin Stock . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.10 Conversions or Continuation of Loans . . . . . . . . 17
SECTION 2.11 Minimum Amounts. . . . . . . . . . . . . . . . . . . 17
SECTION 2.12 Certain Notices. . . . . . . . . . . . . . . . . . . 18
SECTION 2.13 Additional Costs . . . . . . . . . . . . . . . . . . 18
SECTION 2.14 Limitation on Types of Loans . . . . . . . . . . . . 20
SECTION 2.15 Illegality . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.16 Treatment of Affected Loans. . . . . . . . . . . . . 21
SECTION 2.17 Certain Compensation . . . . . . . . . . . . . . . . 22
SECTION 2.18 Risk-Based Capital . . . . . . . . . . . . . . . . . 22

ARTICLE III CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . 23

SECTION 3.01 Conditions Precedent to this
Agreement and to the Amended and Restated
Term Loan. . . . . . . . . . . . . . . . . . . . . . 23

ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . 25

SECTION 4.01 Incorporation, Good Standing and Due Qualification . 25
SECTION 4.02 Corporate Power and Authority. . . . . . . . . . . . 26
SECTION 4.03 Compliance with Laws . . . . . . . . . . . . . . . . 26
SECTION 4.04 Legally Enforceable Agreement. . . . . . . . . . . . 26
SECTION 4.05 Financial Statements . . . . . . . . . . . . . . . . 26
SECTION 4.06 Disclosure . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.07 Labor Disputes and Acts of God . . . . . . . . . . . 27
SECTION 4.08 Other Agreements . . . . . . . . . . . . . . . . . . 27
SECTION 4.10 Litigation . . . . . . . . . . . . . . . . . . . . . 27

<PAGE>

Page

SECTION 4.11 No Defaults on Outstanding Judgments or Orders . . . 28
SECTION 4.12 Ownership. . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.13 Subsidiaries . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.14 ERISA. . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.15 Operation of Business. . . . . . . . . . . . . . . . 28
SECTION 4.16 Taxes. . . . . . . . . . . . . . . . . . . . . . . . 29

ARTICLE V AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 29

SECTION 5.01 Maintenance of Existence . . . . . . . . . . . . . . 29
SECTION 5.02 Maintenance of Records . . . . . . . . . . . . . . . 29
SECTION 5.03 Maintenance of Properties. . . . . . . . . . . . . . 29
SECTION 5.04 Compliance With Laws . . . . . . . . . . . . . . . . 29
SECTION 5.05 Right of Inspection. . . . . . . . . . . . . . . . . 29
SECTION 5.06 Reporting Requirements . . . . . . . . . . . . . . . 30
SECTION 5.07 Appraisal. . . . . . . . . . . . . . . . . . . . . . 34

ARTICLE VI NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . 34

SECTION 6.01 Mergers, Acquisitions, Etc.. . . . . . . . . . . . . 34
SECTION 6.02 Sale of Assets . . . . . . . . . . . . . . . . . . . 34
SECTION 6.03 Investments. . . . . . . . . . . . . . . . . . . . . 34
SECTION 6.04 Guaranties, Etc. . . . . . . . . . . . . . . . . . . 35
SECTION 6.05 Transactions With Affiliate. . . . . . . . . . . . . 35
SECTION 6.06 Changes, Amendments or Modifications . . . . . . . . 35
SECTION 6.07 Subordinated Debt. . . . . . . . . . . . . . . . . . 35
SECTION 6.08 Accounting Methods; Fiscal Year End. . . . . . . . . 35
SECTION 6.09 No Change in Business. . . . . . . . . . . . . . . . 35

ARTICLE VII FINANCIAL COVENANTS. . . . . . . . . . . . . . . . . . . 35

SECTION 7.01 Minimum Consolidated Tangible Net Worth. . . . . . . 36
SECTION 7.02 Consolidated Leverage Ratio. . . . . . . . . . . . . 37
SECTION 7.03 Cash Flow Ratio. . . . . . . . . . . . . . . . . . . 37
SECTION 7.04 Maximum Consolidated Capital Expenditures. . . . . . 37

ARTICLE VIII EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . 37

SECTION 8.01 Events of Default. . . . . . . . . . . . . . . . . . 37

ARTICLE IX MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . 41

SECTION 9.01 Amendments and Waivers . . . . . . . . . . . . . . . 41
SECTION 9.02 Notices, Etc.. . . . . . . . . . . . . . . . . . . . 41
SECTION 9.03 No Waiver; Remedies. . . . . . . . . . . . . . . . . 41
SECTION 9.04 Assignment; Participation. . . . . . . . . . . . . . 42
SECTION 9.05 Expenses; Indemnification. . . . . . . . . . . . . . 42

<PAGE>

Page

SECTION 9.06 Right of Setoff. . . . . . . . . . . . . . . . . . . 43
SECTION 9.07 Table of Contents; Headings. . . . . . . . . . . . . 43
SECTION 9.08 Severability . . . . . . . . . . . . . . . . . . . . 43
SECTION 9.09 Counterparts . . . . . . . . . . . . . . . . . . . . 43
SECTION 9.10 Integration. . . . . . . . . . . . . . . . . . . . . 43
SECTION 9.11 Governing Law. . . . . . . . . . . . . . . . . . . . 44
SECTION 9.12 Jurisdiction; Immunities . . . . . . . . . . . . . . 44

EXHIBITS

EXHIBIT A - AMENDED AND RESTATED TERM LOAN NOTE
EXHIBIT B - NOTE CONSOLIDATION AND MODIFICATION
AGREEMENT
EXHIBIT C - MORTGAGE CONSOLIDATION AND MODIFICATION
AGREEMENT
EXHIBIT D - AMENDMENT TO GUARANTEE AND CONTINGENT
PURCHASE AGREEMENT
EXHIBIT E - AMENDMENT TO LOAN AGREEMENT
EXHIBIT F - ESOT MORTGAGE
EXHIBIT G - OPINION OF COUNSEL

SCHEDULES

SCHEDULE 4.07 - LABOR DISPUTES AND ACTS OF GOD
SCHEDULE 4.10 - LITIGATION
SCHEDULE 4.11 - NO DEFAULTS ON OUTSTANDING
JUDGEMENTS OR ORDERS
SCHEDULE 4.13 - SUBSIDIARIES
SCHEDULE 4.14 - ERISA
SCHEDULE 4.15 - OPERATION OF BUSINESS
SCHEDULE 4.16 - TAXES

iii

<PAGE>

MEMO OF AGREEMENT

Agreed this 26 day of January 1995 between Putman Publishing Company
("Putman") and Unitel Video, Inc. ("Unitel"), regarding the lease and amendments
thereto ("the Lease") between the parties of certain portions of the building
located at 301 E. Erie, Chicago, Illinois, as follows:

For good and valuable consideration the parties do hereby agree to the
following modifications of the existing leasehold estate in the following
particulars:

1. $110,000.00 annual rent reduction to Unitel;
2. Unitel surrenders immediately the West 6100 square feet
approximately of the first floor to Putman.

3. Putman will use its best efforts to rent said space and the
rental generated from said space will be considered as
a credit to Unitel for purposes of calculating (in
accordance with paragraph 9) any rent reduction as it
entitles Putman to a credit for services granted
hereunder.

4. Unitel relinquishes its' right to take additional space
(2644 square feet) in 1996.

5. Putman is relieved of its obligation to pay $50,000.00 for
tenant improvements in January 1997.

6. Unitel agrees to vacate all of the premises remaining after
vacating the western first floor, i.e. 33,000 square feet
upon one year's prior notice from Putman whereupon the Lease
and this Memo of Understanding shall terminate and Unitel
shall have no further obligations under the Lease or this
Memo of Understanding other than for amounts due and owing
through the date of termination.

<PAGE>

7. Unitel agrees to a security deposit escrow at Chicago Title
& Trust in the amount of One Hundred Fifty Thousand and
no/100 Dollars ($150,000.00) for two (2) years with interest
payable to Unitel. Putman to have the right to claim such
escrow as damages for any default by Unitel of the leasehold
estate documents from this point forward.

8. This agreement and the provisions hereof to take effect
October 1, 1994.

9. Putman is entitled to a credit for services at
Editel/Chicago for any multi-media and consulting services
(the "Services") offered on the current standard rate and
data service card at an 80% of stated rate for day services
and 70% of stated rate for night services in the amount of
the 1) annual rent reduction less rent received for rental
to a third party of the west first floor PLUS 2) all soft
costs of said rental and this agreement as hereinafter
defined. The credit provided in this paragraph (i) shall
accrue monthly in connection with the monthly portion of the
annual rent reduction and (ii) may not be utilized for the
direct or indirect benefit of any person or entity which has
been a customer of Unitel during a period of two years prior
to the commencement of the performance of any Services. In
calculating barter credits, for any month in which the sum
of clauses (1) and (2) of the first sentence of this
paragraph 9 shall be a negative number (such negative number
being the "Putman Profit"), the Putman Profit shall be
applied against outstanding or future barter credits to
reduce such credits by the amount of the Putman Profit;
provided that the Putman Profit shall never result in any
out-of-pocket payment by Putman to Unitel.

10. Soft cost of rental to a third party of the west first
floor and this agreement are defined as, attorney's
fees for drafting that lease, and this agreement, cost
of demolition of tenant improvements necessary to rent
said

<PAGE>

west first floor, broker's commission paid, cost of tenant build
out agreed upon, $20,000.00 for various negotiated costs
attendant to Unitel's prior lease with Putman (modified
hereunder); provided, however, that said costs, commissions and
free rental shall be reasonable in the circumstances, shall have
been negotiated in an arms-length transaction and shall be
consistent with market dictates at the time of agreement of any
thereof (i.e., free rent terms shall be granted to a third party
only if and in an amount consistent with local real estate market
practices at the time granted and; provided further that any
particular item incurred (including without limitation the
$20,000 charge for negotiated costs) may be included only once in
the calculation of "soft costs" hereunder.

11. Unitel's current 59% of expense escalation shall remain
unaffected by the surrender of the west first floor until
such time as said space is rented to a third party in spite
of the immediate surrender of same. Once the space, or any
portion thereof, is rented the escalation rent shall be
calculated on the actual square footage (33,000
approximately).

12. Unitel and Putman agree to cooperate to reach a settlement
with Banta Corporation regarding the discontinuance of
Banta's obligations in respect of the leasehold estate and
to share in any such settlement 40% and 60%, respectively.

13. Barter credits which accrue each month from October 1, 1994
through September 1, 1995 shall be usable in each case for
36 months following the month in which each such credit
accrued at which time such credit will expire. Barter
credits which accrue each month after October 1, 1995 shall
be usable in each case for twenty four months following the
month in which each such credit accrued at which time such
credit will expire.

14. Unitel will bring all rents current and pay the note in the
principal sum of $62,415.45 plus interest by January 26,
1995.

<PAGE>

15. Neither party may assign any of its rights or delegate any
of its duties under this Memo of Understanding without the
prior written consent of the other party.

In witness whereof the parties set their hands the date first above
written.

PUTMAN PUBLISHING COMPANY

By:/s/ John M. Cappelletti
-----------------------
President

Witness:

/s/ Julie Capelletti Lange
- --------------------------

UNITEL VIDEO, INC.

By:/s/ Barry Knepper
-----------------
Vice President of Finance
Treasurer and C.F.O.

Witness:

/s/ Karen Ceil Lapidus
- ----------------------
<PAGE>

ESCROW AGREEMENT

THIS ESCROW AGREEMENT (this "Agreement") made this 26th day of
January, 1995 by and among Unitel Video, Inc., a Delaware corporation ("Unitel")
Putman Publishing Company, a Delaware corporation ("Putman") and Chicago Title
and Trust Company, an Illinois corporation ("Escrow Agent").

W I T N E S S E T H

WHEREAS, Unitel and Putman have entered into a Memo of Agreement dated
January26th, 1995 (the "Memo of Agreement") relating to and amending that
certain Office Lease Agreement dated April 16, 1987 (as amended to the date
hereof including by the Memo of Agreement, the "Lease") relating to certain
portions of the building located at 301 E. Erie Street, Chicago, Illinois (the
"Premises"); and

WHEREAS, in accordance with the Memo of Agreement Unitel has agreed to
deposit $150,000.00 (the "Escrow Fund") in escrow, which Escrow Fund shall be
used to cure a default by Unitel under the Lease as provided herein; and

WHEREAS, Unitel has agreed to deposit the Escrow Fund with the Escrow
Agent under the terms and conditions of this Agreement;

NOW, THEREFORE, the parties hereto hereby agree as follows:

1. The Escrow Fund shall be paid by Unitel upon the execution
hereof, and shall be held by the Escrow Agent together with all interest
(the "Interest") that accrues thereon (the Escrow Fund and the Interest
are, collectively, the "Deposit"), in escrow, in an insured 6-month
certificate of deposit, pursuant to the terms and conditions of
subparagraphs (a), (b), (c), (d), (e) and (f) below. Unitel and Putman
each represent that their respective Federal Taxpayer I.D. Numbers are set
forth opposite their respective signatures below.

(a) Provided that Unitel is then in compliance with all of its
material obligations under the Lease, which shall be deemed to be the case
unless the Escrow Agent shall have received a notice from Putman that Unitel is
then in default in any of such obligations under the Lease, the Escrow Agent
shall deliver the Escrow Deposit to Unitel on the first to occur of ( i )
receipt by the Escrow Agent of written notice signed by Putman and Unitel of the
termination of the Lease or ( ii ) January__, 1997 (provided that the Escrow
Agent shall have received a written request from Unitel on or after such date).

<PAGE>

(b) If Unitel shall default in the performance of any of its
material obligations under the Lease, Putman shall give written notice thereof
to Unitel. If Unitel shall not have cured such default within seven days after
receipt of such notice, Putman may give written demand (the "Demand") to the
Escrow Agent, with a copy to Unitel, for release to Putman of that portion of
the Escrow Fund equal to the amount necessary to cure such default, such amount
to be set forth in said Demand. Upon receipt of a Demand, the Escrow Agent shall
deliver the portion of the Escrow Fund demanded therein to Putman. A Demand
shall include a certification by Putman that it has afforded Unitel the cure
rights provided in the first sentence of this paragraph 1(b).

(c) The Escrow Agent shall upon receipt of a written request on
each semi-annual anniversary of this Escrow Agreement deliver all amounts of
Interest accrued to such date on the Escrow Fund to Unitel.

(d) Unitel and Putman, jointly and severally, agree to indemnify
and hold the Escrow Agent harmless from and against any loss, damage, claim,
expense, cost or disbursement, including reasonable attorneys' fees and
disbursements, resulting from the performance of its obligations under this
Agreement, except for the gross negligence or willful misconduct of the Escrow
Agent; provided, however, if such loss, damage, claim, expense, cost or
disbursement is incurred as a result of any dispute or any legal proceeding
involving the Deposit and such legal proceeding concluded in a decision or
order, the losing party shall be solely responsible for such loss, damage,
claim, expense, cost or disbursement. Unitel and Putman agree that the Escrow
Agent shall not be liable for any error of judgment or for any act done or step
taken or omitted by it in good faith, or for any mistake of fact or law, or for
anything which it may do or refrain from doing in connection therewith, except
for its own gross negligence or willful misconduct and that the Escrow Agent
shall have no duties or responsibilities except those specifically set forth
herein.

(e) The Escrow Agent shall not incur any liability for acting upon
any notice, demand, request, consent, waiver or document which appears to be
signed by Unitel, or Putman, not only as to its due execution and validity and
the effectiveness of its provisions, but also as to the truth of any information
therein contained, which the Escrow Agent in good faith believes to be genuine
and what it purports to be.

(f) The Escrow Agent shall not be obligated to inquire as to the
performance of any obligation described in this Agreement.

2. Except as otherwise required by statute, any notice, demand,
request or other communication required or permitted to be given under this
Agreement to Unitel, Putman or the Escrow Agent shall be in writing, signed by
the party giving it and conclusively deemed to have been properly given to and
received by Unitel, Putman or the Escrow Agent, as the case may be, and to be
effective (a) if sent by tested telex or cable, or hand-delivered against
receipt therefore, or by telecopy or other facsimile transmission, on the day on
which delivered to Unitel, Putman or the Escrow Agent, as the case may be,

<PAGE>

at the respective addresses written below, or, if such day of delivery is not a
business day, on the first business day thereafter, or (b) if sent by overnight
delivery, on the day following such delivery to Unitel, Putman or the Escrow
Agent, as the case may be, at the respective addresses first above written, or,
if such day following such delivery is not a business day, on the first business
day thereafter. All notices shall be given as provided in the preceding clauses
(a) and (b). Addresses for notice to any such party may be changed by written
notice to the other parties and to the persons, if any, receiving copies, except
that any such notice changing addresses shall not be effective until actually
received by the other parties.

3. Copies of all notices, demands, requests or other communications
under paragraph 2 of this Agreement shall be given in the manner provided in
said paragraph 2 to the parties at the following addresses:

If to Unitel:

Unitel Video, Inc.
515 West 57th Street
New York, NY 10019
Attention: Barry Knepper
VP - Finance
With a copy to:
Karen Ceil Lapidus
General Counsel
At the same address

If to Putman:

John M. Cappelletti, Jr.
President
Putman Publishing Co.
301 East Erie Street
Chicago, IL 60611

With a copy to:

Stephen Carponelli, Esquire
Carponelli & Krug, P.C.
55 West Monroe
Suite 2350
Chicago, IL 60603

<PAGE>

If to the Escrow Agent

Chicago Title and Trust Company
Attention: Chris Cameron
Escrow Department
171 N. Clark Street
Chicago, IL 60601
Escrow No. D2 094066813

4. BILLING INSTRUCTIONS:

Escrow trust fee will be billed as follows:
One-half (1/2) of the escrow trust fee will be billed to:
Mr. John Cappelletti, Jr.
President
Putman Publishing Co.
301 East Erie Street
Chicago, Illinois 60611

One-half (1/2) of the escrow trust fee will be billed to:
Unitel Video, Inc.
515 West 57th Street
New York, New York 10019
Attention: Barry Knepper, VP-Finance

An annual maintenance fee, as determined by the then current rate schedule, will
commence____________________and will be billed as provided above.

PLEASE NOTE: The escrow trust fee for these joint order escrow trust
instructions is due and payable within 30 days from the projected disbursement
date (which may be amended by joint written direction of the parties hereto).
In the event no projected disbursement date is ascertainable, said escrow trust
fee is to be billed at acceptance and is due and payable within 30 days from the
billing date. The Escrow Agent, at its sole discretion, may reduce or waive the
escrow trust fee for these joint order escrow trust instructions in the event
the funds on deposit herein are transferred to or disbursed in connection with
sale escrow trust instructions or an agency closing transaction established at
Chicago Title.

INVESTMENT:

Deposits made pursuant to these instructions may be invested on behalf of any
party or parties hereto; provided that any direction to the Escrow Agent for
such investment shall be expressed in writing and contain the consent of all
other parties to this escrow, and also provided that you are in receipt of the
taxpayer's identification number and investment

<PAGE>

forms as required. The Escrow Agent will, upon request, furnish information
concerning its procedures and fee schedules for investment.

Except as to deposits of funds for which the Escrow Agent has received express
written direction concerning investment or other handling, the parties hereto
agree that the Escrow Agent shall be under no duty to invest or reinvest any
deposits at any time held by it hereunder, and, further, that the Escrow Agent
may commingle such deposits with other deposits or with its own funds in the
manner provided for the administration of funds under Section 2-8 of the
Corporate Fiduciary Act Ill. Rev. Stat. [989, Ch 17. Par. 1552-8] and may use
any part or all such funds for its own benefit without obligation of any party
for interest or earnings derived thereby, if any. Provided, however, nothing
herein shall diminish the Escrow Agent's obligation to apply the full amount of
the deposits in accordance with the terms of these escrow trust instructions

In the event the Escrow Agent is requested to invest deposits hereunder, Chicago
Title and Trust Company is not to be held responsible for any loss of principal
or interest which may be incurred as a result of making the investments or
redeeming said investment for the purposes of these escrow trust instructions.

Notwithstanding the foregoing, the Escrow Agent has been instructed with respect
to investments as set forth in paragraph 1 above.

COMPLIANCE WITH COURT ORDER:

The undersigned authorize and direct the Escrow Agent to disregard any and all
notices, warnings or demands given or made by the undersigned (other than
jointly) or by any other person. The said undersigned also hereby authorize and
direct the Escrow Agent to accept, comply with, and obey any and all writs,
orders, judgments or decrees entered or issued by any court with or without
jurisdiction; and in case the said Escrow Agent obeys or complies with any such
writ, order, judgment or decree of any court, it shall not be liable to any of
the parties hereto or any other person, by reason of such compliance,
notwithstanding any such writ, order, judgment or decree be entered without
jurisdiction or be subsequently reversed, modified, annulled, set aside or
vacated. In case the Escrow Agent is made a party defendant to any suit or
proceedings regarding this escrow trust, the undersigned, for themselves, their
heirs, personal representatives, successors, and assigns, jointly and severally,
agree to pay to said Escrow Agent, upon written demand, all costs, attorney's
fees, and expenses incurred with respect thereto. The Escrow Agent shall have a
lien on the deposit(s) herein for any and all such costs, fees and expenses. If
said costs, fees and expenses are not paid, then the Escrow Agent shall have the
right to reimburse itself out of the said deposit(s).

5. The terms and provisions of this Agreement shall create no right
in any person, firm or corporation other than the parties and their respective
successors and permitted assigns of this Agreement; no third party shall have
the right to enforce, or benefit from, the terms hereof; and no tenant of the
Premises and no contractor,

<PAGE>

materialman, laborer or third party has or shall acquire any third party
beneficiary status by virtue hereof.

6. Putman and Unitel will share equally in the payment of all Escrow
Agent fees and expenses.

7. This Agreement shall be governed by and construed according to
the laws of the State of Illinois.

8. This Agreement shall be binding upon and shall inure to the
benefit of each of the parties hereto and their successors and/or assigns.

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first written above.

Unitel Video, Inc.

By:/s/ Barry Knepper
-----------------
Name: Barry Knepper
Title:VP-Finance

23-1713238
- --------------------
Federal Taxpayer I.D. No.

Putman Publishing Company

By:/s/ John M. Cappelletti, Jr.
Name: John M. Cappelletti, Jr.
Title: President
36-2787897
- --------------------
Federal Taxpayer I.D. No.

AGREED TO AND RECEIPT OF ESCROW
FUNDS ACKNOWLEDGED:

CHICAGO TITLE AND TRUST COMPANY

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

<PAGE>

Exhibit 10 (A)(A)

EMPLOYMENT AND CONSULTING AGREEMENT

THIS AGREEMENT, made as of the 19th day of July 1995, by and between UNITEL
VIDEO, INC., a Delaware corporation, (hereinafter called "Company"), and JOHN
HOFFMAN, an individual (hereinafter called "Hoffman").

W I T N E S S E T H

Hoffman has been employed by the Company as an executive for many years
without a formal employment agreement. At the request of Hoffman, the Board of
Directors of the Company, with Hoffman abstaining, has authorized the Company to
enter into a formal employment and consulting agreement on the terms and
conditions contained in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein and intending to be legally bound hereby, the Company and
Hoffman agree as follows:

1. EMPLOYMENT. The Company hereby engages the services of Hoffman and
Hoffman hereby accepts said engagement by the Company for the period and upon
the terms and conditions contained in this Agreement.

2. OFFICE AND DUTIES.

(a) During his employment hereunder Hoffman shall serve the Company
in the position of consultant with respect to the daily business affairs of the
Company.

<PAGE>

(b) The parties agree that there will be no fixed time commitment of
Hoffman once he has become a consultant; he shall make himself available to the
officers and Board of Directors of the Company for consultation at such times as
may be mutually agreed upon by Hoffman and the Company.

3. TERM. This Agreement shall be for a term of three (3) years and one
(1) month commencing as of May 3, 1995 and ending on June 4, 1998 (the "Term").
Hoffman's employment hereunder shall be for the period from May 3, 1995 through
November 3, 1995 (the "Employment Period"), with compensation as specified in
paragraph 4. On November 3, 1995 Hoffman shall resign his employment with the
Company and during the balance of the Term Hoffman shall serve as an outside
consultant to the Company, with compensation as specified in paragraph 7

4. COMPENSATION. During the Employment Period, Hoffman shall receive,
for all of the services rendered by Hoffman to the Company, a salary at the rate
of One Hundred Seventy-Eight Thousand Nine Hundred and Seventy-Five Dollars
($178,975.00) per annum, payable in accordance with the Company's usual payroll
practices, and subject to such withholdings as may be required by law.

5. AUTOMOBILE; BENEFITS DURING EMPLOYMENT PERIOD.

(a) The Company shall make all payments on the lease currently in effect
on Hoffman's automobile and shall pay all related expenses which the Company had
paid prior to the commencement of the Term, in each case through the end of the
lease term in July, 1996.

(b) Throughout the Employment Period, Hoffman shall be entitled to
participate in and receive the benefits of any health, medical, dental, life,
accident and

<PAGE>

401(k) insurance plans or programs made generally available to executive
employees of the Company (but excluding the Company's disability plans and
programs); provided that Hoffman shall pay the portion of the cost of such
benefits paid by full-time employees of the Company. Hoffman shall not be
entitled to any sick leave or vacation benefits.

6. [RESERVED]

7. CONSULTING.

(a) On November 3, 1995 Hoffman shall resign his employment with the
Company and on November 4, 1995 Hoffman shall become an outside consultant to
the Company for the balance of the Term (such period being the "Consultancy
Period").

(c) During the Consultancy Period, Hoffman shall be paid a consulting fee
at the annual rate of $44,743.75, payable on a bi-weekly basis.

8. BENEFITS DURING CONSULTANCY PERIOD.

During the Consultancy Period, Hoffman shall be entitled to
participate in and receive the benefits of any health, medical, dental, life and
accident insurance plans or programs made generally available to executive
employees of the Company; provided that Hoffman shall pay the portion of the
cost of such benefits paid by full-time employees of the Company. Hoffman shall
not be entitled to any disability insurance, pension (including 401(k)), sick
leave or vacation benefits during the Consultancy Period.

<PAGE>

9. TERMINATION FOR CAUSE. The Company may terminate this Agreement at
any time during the Term if Hoffman breaches any material obligation under this
Agreement, or is convicted of any fraud, embezzlement or dishonest action
against the Company, in which event the Company shall have no further obligation
or liability for any compensation, consulting fees or other payments otherwise
due or to become due to Hoffman hereunder; provided, however, that the Company
shall not terminate this Agreement, and shall continue to make the payments
provided hereunder, in the event that Hoffman becomes disabled for any reason.

10. NONCOMPETITION, TRADE SECRETS, ETC.

(a) During the Term Hoffman shall not engage in (as principal,
partner, director, officer, agent, employee, consultant or otherwise), or be
financially interested in, any business operating within the United States which
has as a principal business activity any of the principal business activities
conducted by the Company. However, nothing contained in this paragraph 10 shall
prevent Hoffman from holding for investment no more than one percent (1%) of any
class of equity securities of a company whose securities are traded on a
national securities exchange.

(b) During the Term and at all times thereafter, Hoffman shall not use for
his personal benefit, or disclose, communicate or divulge to, or use for the
direct or indirect benefit of, any person, firm, association or company other
than the Company, any proprietary and confidential information of the Company
made known to Hoffman or learned or acquired by Hoffman while in the employ of
the Company, including without limitation, any proprietary data (financial or
otherwise) on or relating to past, present or prospective customers or clients
of the Company.

<PAGE>

(c) Hoffman acknowledges that the restrictions contained in the foregoing
subparagraphs (a) and (b), in view of the nature of the business in which the
Company is engaged, are reasonable and necessary in order to protect the
legitimate interests of the Company, and that any violation thereof would result
in irreparable injuries to the Company, and Hoffman therefore acknowledges that,
in the event of his violation of any of these restrictions, the Company shall be
entitled to obtain from any court of competent jurisdiction preliminary and
permanent injunctive relief as well as damages and an equitable accounting of
all earnings, profits and other benefits arising from such violation, which
rights shall be cumulative and in addition to any other rights or remedies to
which the Company may be entitled.

(d) If the period of time or the area specified in subparagraph (a) above
should be adjudged unreasonable in any proceeding, then the period of time shall
be reduced by such number of months or the area shall be reduced by the
elimination of such portion thereof or both so that such restrictions may be
enforced in such areas and for such time as is adjudged to be reasonable.

11. GENERAL RELEASE.

(a) Hoffman waives and hereby releases and discharges Employer from any
and all claims, demands, causes of action, fees and liabilities of any kind
whatsoever, whether known or unknown, which Hoffman ever had or now has against
Employer by reason of any actual or alleged act, omission, transaction,
practice, conduct, occurrence, or other matter up to and including the date of
this Agreement.

(b) Without limiting the generality of the foregoing, this Agreement is
intended to and shall release Employer from any and all claims, whether known or
unknown, which

<PAGE>

Hoffman ever had or now has against Employer arising out of his employment with
Employer , including, but not limited to: (i) any claim under the Civil Rights
Act of 1964, as amended; (ii) any claim under the Age Discrimination in
Employment Act, as amended; (iii) any other claim of discrimination in
employment (whether based on federal, state or local law, statutory or
decisional); (iv) any claim arising out of the terms and conditions of his
employment with Employer; and (v) any claim for attorneys' fees, costs,
disbursements and/or the like.

12. MISCELLANEOUS.

(a) INDULGENCES, ETC. Neither the failure nor any delay on the part of
either party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.

(b) CONTROLLING LAW. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement (including, without
limitation, provisions concerning limitations of actions), shall be governed by
and construed in accordance with the laws of the State of New York,
notwithstanding any conflict-of-laws doctrines of such state or other
jurisdiction to the contrary, and without the aid of any canon, custom or rule
of law requiring construction against the draftsman. The courts of the State of
New York

<PAGE>

shall have exclusive jurisdiction over all matters of this Agreement. The venue
of such action shall be in New York County.

(c) NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received only when delivered
(personally, by courier service such as Federal Express, or by other messenger)
against receipt or upon actual receipt of registered or certified mail, postage
prepaid, return receipt requested, addressed as set forth below:

(i) If to Hoffman:
Mr. John Hoffman
30 West 60th Street
Apt. 4P
New York, New York 10023

(ii) If to Company:

Unitel Video, Inc.
515 West 57th Street
New York, New York 10019
Attention: President

Any party may change the address to which communications or copies are to
be sent by giving notice of such change of address in conformity with the
provisions of this paragraph for the giving of notice.

(d) BINDING NATURE OF AGREEMENT. This Agreement shall be binding upon and
inure to the benefit of the Company and its successors and assigns and shall be
binding upon Hoffman, his heirs and legal representatives.

<PAGE>

(e) PROVISIONS SEPARABLE. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.

(f) ENTIRE AGREEMENT. This Agreement contains the entire understanding
among the parties hereto with respect to the subject matter hereof, and
supersedes all prior and contemporaneous agreements and understandings,
inducements or conditions, express or implied, oral or written, except as herein
contained. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms hereof.
This Agreement may not be modified or amended other than by an agreement in
writing.

(g) PARAGRAPH HEADINGS. The paragraph headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.

13. KNOWING AND VOLUNTARY AGREEMENT. Upon execution of this Agreement,
Hoffman acknowledges that he has been afforded the time (at least 21 days) and
opportunity necessary to consider this agreement and seek independent advice and
counsel and that he understands his rights and obligations and that, with such
knowledge, he has entered into and executed this Agreement freely and
voluntarily.

14. REVOCATION. Hoffman may, on or before the seventh (7th) day
following his execution of this Agreement, revoke this Agreement, by notifying
the Company in writing of his desire to revoke the Agreement, whereupon the
Agreement shall be rendered null and void.

<PAGE>

15. EFFECTIVENESS. Although this Agreement is dated as of the date set
forth above, it shall govern the relationship between the parties for the entire
Term.

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
UNITEL VIDEO, INC.
By: /s/ Barry Knepper
-----------------------
Name: Barry Knepper
Title: Senior VP - Finance &
Administration

/s/ John Hoffman
-----------------------
John Hoffman

<PAGE>

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our report dated November 28, 1995 (except for Note B, as to
which the date is December 12, 1995), accompanying the consolidated financial
statements and schedule included in the Annual Report of Unitel Video, Inc. on
Form 10-K for the year ended August 31, 1995. We hereby consent to the
incorporation by reference of said report in the Registration Statement of
Unitel Video, Inc. on Form S-8, filed on July 15, 1986 (file No. 33-7306), the
Registrant's Registration Statement on Form S-8 filed on April 20, 1987 (File
No. 33-13660), the Registrant's Registration Statement on Form S-8 filed on May
28, 1987 (File No. 33-14654) and the Registrant's Registration Statement on Form
S-3 (File No. 33-38839).

/s/ GRANT THORNTON LLP

New York, New York
December 13, 1995

<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Unitel
Video, Inc.'s Form 10K for the year ended August 31, 1995 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> AUG-31-1995
<CASH> 161
<SECURITIES> 0
<RECEIVABLES> 13,386
<ALLOWANCES> 686
<INVENTORY> 0
<CURRENT-ASSETS> 37,694
<PP&E> 94,472
<DEPRECIATION> 59,981
<TOTAL-ASSETS> 74,975
<CURRENT-LIABILITIES> 19,357
<BONDS> 30,298
<COMMON> 26
0
0
<OTHER-SE> 22,500
<TOTAL-LIABILITY-AND-EQUITY> 74,975
<SALES> 83,285
<TOTAL-REVENUES> 83,285
<CGS> 69,219
<TOTAL-COSTS> 69,219
<OTHER-EXPENSES> 19,792
<LOSS-PROVISION> (36)
<INTEREST-EXPENSE> 3,649
<INCOME-PRETAX> (9,341)
<INCOME-TAX> (2,794)
<INCOME-CONTINUING> (6,547)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,547)
<EPS-PRIMARY> (2.53)
<EPS-DILUTED> 0

</TABLE>