YALE INDUSTRIAL PRODUCTS INC
REGIMENT DOMESTIC CREDIT AGREEMENT
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>regiment.txt
<DESCRIPTION>REGIMENT DOMESTIC CREDIT AGREEMENT
<TEXT>
                               FINANCING AGREEMENT

                          DATED AS OF NOVEMBER 21, 2002

                                  BY AND AMONG

                         COLUMBUS MCKINNON CORPORATION,
                                  AS BORROWER,

              EACH SUBSIDIARY OF THE BORROWER LISTED AS A GUARANTOR
                         ON THE SIGNATURE PAGES HERETO,
                                 AS GUARANTORS,

           THE FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO,
                                   AS LENDERS,

                                       AND

                           REGIMENT CAPITAL III, L.P.,
                                    AS AGENT



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                                TABLE OF CONTENTS

                                                                           Page

ARTICLE I     DEFINITIONS; CERTAIN TERMS......................................1
    Section 1.01   Definitions................................................1
    Section 1.02   Terms Generally...........................................24
    Section 1.03   Accounting and Other Terms................................25
    Section 1.04   Time References...........................................25

ARTICLE II    THE LOANS......................................................25
    Section 2.01   Term Loan Commitments.....................................25
    Section 2.02   Making the Term Loan......................................26
    Section 2.03   Repayment of the Term Loan; Evidence of Debt..............26
    Section 2.04   Interest..................................................27
    Section 2.05   Reduction of the Term Loan Commitment; Prepayment of the
                   Term Loan.................................................28
    Section 2.06   Fees......................................................31
    Section 2.07   Securitization............................................32
    Section 2.08   Taxes.....................................................32

ARTICLE III   THE COLLATERAL.................................................34
    Section 3.01   Grant of Security Interest................................34
    Section 3.02   Special Representations, Warranties and Covenants
                   of the Loan Parties.......................................35
    Section 3.03   Fixtures, etc.............................................42
    Section 3.04   Right of Agent to Dispose of Collateral, etc..............42
    Section 3.05   Right of Agent to Use and Operate Collateral, etc.........42
    Section 3.06   Proceeds of Collateral....................................43
    Section 3.07   Relation to Collateral Documents..........................43
    Section 3.08   Marshalling...............................................44

ARTICLE IV    FEES, PAYMENTS AND OTHER COMPENSATION..........................45
    Section 4.01   Audit and Collateral Monitoring Fees......................45
    Section 4.02   Payments; Computations and Statements.....................45
    Section 4.03   Sharing of Payments, Etc..................................46
    Section 4.04   Apportionment of Payments.................................46
    Section 4.05   Increased Costs and Reduced Return........................47

ARTICLE V     CONDITIONS TO THE TERM LOAN....................................48
    Section 5.01   Conditions Precedent to Effectiveness.....................48

ARTICLE VI    REPRESENTATIONS AND WARRANTIES.................................53
    Section 6.01   Representations and Warranties............................53

ARTICLE VII   COVENANTS OF THE LOAN PARTIES..................................63
    Section 7.01   Affirmative Covenants.....................................63
    Section 7.02   Negative Covenants........................................72


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ARTICLE VIII  MANAGEMENT, COLLECTION AND STATUS OF
              ACCOUNTS RECEIVABLE AND OTHER
              COLLATERAL.....................................................81
    Section 8.01   Management of Collateral..................................81
    Section 8.02   Accounts Receivable Documentation.........................83
    Section 8.03   Status of Accounts Receivable and Other Collateral........83
    Section 8.04   Collateral Custodian......................................84
    Section 8.05   Compliance with Working Capital Loan Agreement............84

ARTICLE IX    EVENTS OF DEFAULT..............................................84
    Section 9.01   Events of Default.........................................84

ARTICLE X     AGENT..........................................................88
    Section 10.01  Appointment...............................................88
    Section 10.02  Nature of Duties..........................................89
    Section 10.03  Rights, Exculpation, Etc..................................89
    Section 10.04  Reliance..................................................90
    Section 10.05  Indemnification...........................................90
    Section 10.06  Agent Individually........................................90
    Section 10.07  Successor Agent...........................................91
    Section 10.08  Collateral Matters........................................91
    Section 10.09  Agency for Perfection.....................................92

ARTICLE XI    GUARANTY.......................................................93
    Section 11.01  Guaranty..................................................93
    Section 11.02  Guaranty Absolute.........................................93
    Section 11.03  Waiver....................................................94
    Section 11.04  Continuing Guaranty; Assignments..........................94
    Section 11.05  Subrogation...............................................94

ARTICLE XII   MISCELLANEOUS..................................................95
    Section 12.01  Notices, Etc..............................................95
    Section 12.02  Amendments, Etc...........................................96
    Section 12.03  No Waiver; Remedies, Etc..................................97
    Section 12.04  Expenses; Taxes; Attorneys' Fees..........................97
    Section 12.05  Right of Set-off..........................................98
    Section 12.06  Severability..............................................98
    Section 12.07  Assignments and Participations............................98
    Section 12.08  Counterparts.............................................101
    Section 12.09  GOVERNING LAW............................................101
    Section 12.10  CONSENT TO JURISDICTION; SERVICE OF PROCESS
                   AND VENUE................................................101
    Section 12.11  WAIVER OF JURY TRIAL, ETC................................102
    Section 12.12  Consent by the Agent and Lenders.........................102
    Section 12.13  No Party Deemed Drafter..................................103
    Section 12.14  Reinstatement; Certain Payments..........................103
    Section 12.15  Indemnification..........................................103
    Section 12.16  Records..................................................104


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    Section 12.17  Binding Effect...........................................104
    Section 12.18  Interest.................................................104
    Section 12.19  Confidentiality..........................................106
    Section 12.20  Integration..............................................106


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                              FINANCING AGREEMENT

         Financing  Agreement,  dated as of  November  21,  2002,  by and  among
Columbus McKinnon  Corporation,  a New York corporation (the  "BORROWER"),  each
subsidiary of the Borrower listed as a "GUARANTOR" on the signature pages hereto
(each  a  "Guarantor"  and  collectively,   the  "GUARANTORS"),   the  financial
institutions  from time to time party hereto (each a "LENDER" and  collectively,
the "LENDERS"),  and Regiment Capital III, L.P., a Delaware limited partnership,
as agent for the Lenders (in such capacity, the "AGENT").


                                    RECITALS

         The  Borrower  has asked the Lenders to extend  credit to the  Borrower
consisting of a term loan in the aggregate principal amount of $60,000,000.  The
proceeds  of the term loan shall be used to  partially  refinance  the  Existing
Indebtedness  (as  hereinafter  defined) under the Existing  Credit Facility (as
hereinafter defined), thereby constituting a partial replacement of the Existing
Credit  Facility,  and to pay fees and expenses  related to this Agreement.  The
Lenders are  severally,  and not  jointly,  willing to extend such credit to the
Borrower subject to the terms and conditions hereinafter set forth.

         In  consideration  of the premises  and the  covenants  and  agreements
contained herein, the parties hereto agree as follows:

                                   ARTICLE I

                           DEFINITIONS; CERTAIN TERMS

         Section 1.01  DEFINITIONS.  As used in this  Agreement,  the  following
terms shall have the respective  meanings  indicated below,  such meanings to be
applicable equally to both the singular and plural forms of such terms:

         "ACCOUNT  DEBTOR"  means each  debtor,  customer  or obligor in any way
obligated on or in connection with any Account Receivable.

         "ACCOUNT  RECEIVABLE"  means,  with respect to any Person,  any and all
rights of such  Person to  payment  for goods  sold  and/or  services  rendered,
including accounts, general intangibles and any and all such rights evidenced by
chattel  paper,  instruments  or  documents,  whether  due or to become  due and
whether or not earned by performance,  and whether now or hereafter  acquired or
arising in the future, and any proceeds arising therefrom or relating thereto.

         "ACCUMULATED OTHER  COMPREHENSIVE GAINS (OR LOSSES)" means "accumulated
other comprehensive gains (or losses)" as defined under GAAP.

         "ACTION" has the meaning specified therefor in Section 12.12.

         "ADDITIONAL  MORTGAGES" has the meaning  specified  therefor in Section
7.01(m).

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         "ADDITIONAL  MORTGAGED  PROPERTY" means any Real Property Asset that is
now owned or leased,  or  hereinafter  acquired or leased,  by the Loan Parties,
which the Agent  determines  to acquire a Mortgage on  following  the  Effective
Date.

         "AFFILIATE"  means, with respect to a specified Person,  another Person
that  Controls or is  Controlled  by or is under common  Control with the Person
specified.  Notwithstanding  anything herein to the contrary,  in no event shall
any Agent or any Lender be considered an "Affiliate" of any Loan Party.

         "AGENT" has the meaning specified therefor in the preamble hereto.

         "AGENT  ADVANCES"  has  the  meaning  specified   therefor  in  Section
10.08(a).

         "AGENT'S  ACCOUNT"  means an account at a bank  designated by the Agent
from time to time as the  account  into  which the Loan  Parties  shall make all
payments to the Agent for the  benefit of the Agent and the  Lenders  under this
Agreement and the other Loan Documents.

         "AGREEMENT" means this Financing  Agreement,  including all amendments,
modifications  and  supplements  and any  exhibits  or  schedules  to any of the
foregoing,  and shall refer to the Agreement as the same may be in effect at the
time such reference becomes operative.

         "ANNIVERSARY  FEE"  has  the  meaning  specified  therefor  in  Section
2.06(c).

         "ANNIVERSARY  FEE  PERCENTAGE"  means a percentage  equal to (a) on the
first anniversary of the Effective Date, 1.00%, (b) on the second anniversary of
the Effective Date,  1.25%, (c) on the third  anniversary of the Effective Date,
1.50%, and (d) on the fourth anniversary of the Effective Date, 1.75%.

         "APPLICABLE  MARGIN"  means,  as  of  any  date  of  determination,   a
percentage  equal to (a) during the period of time from and after the  Effective
Date up to the date that is  immediately  prior to the first  anniversary of the
Effective Date, 0.00%, (b) during the period of time from and including the date
that is the  first  anniversary  of the  Effective  Date up to the date  that is
immediately  prior to the second  anniversary of the Effective Date,  0.50%, (c)
during  the  period  of time  from and  including  the date  that is the  second
anniversary of the Effective  Date up to the date that is  immediately  prior to
the third anniversary of the Effective Date, 1.00%, and (d) during the period of
time from and including the date that is the third  anniversary of the Effective
Date up to and including the Final Maturity Date, 1.50%.

         "APPRAISED  VALUE"  means the fair  market  value of any Real  Property
Assets  determined  by  the  most  recent  appraisal  performed  by a  qualified
independent  appraiser,  in form and substance acceptable to the Working Capital
Agent.

         "APPROVED  RESTRUCTURING  CHARGES"  means  cash  restructuring  charges
incurred by the Borrower and/or its Subsidiaries and approved by the Agent up to
an amount not to exceed  $4,500,000 in the aggregate  from the Effective Date to
the second  anniversary of the Effective Date (of which no more than  $2,300,000
shall be paid in cash by the Borrower and/or its Subsidiaries from September 30,
2002 through  March 31, 2003); PROVIDED, HOWEVER,  that no more than  $2,000,000


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in cash  restructuring  charges for any one  facility,  plant or other  Property
shall constitute Approved Restructuring Charges.

         "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance  entered
into by an  assigning  Lender and an  assignee,  and  accepted by the Agent,  in
accordance with Section 12.07 hereof and  substantially in the form of Exhibit J
hereto or such other form acceptable to the Agent.

         "AUDUBON EUROPE" means Audubon Europe S.a.r.l.,  a company duly founded
and validly existing under the laws of Luxembourg.

         "AUTHORIZED  OFFICER"  means,  with  respect to any  Person,  the chief
executive  officer,  chief  financial  officer,   president  or  executive  vice
president of such Person.

         "BANK" means  JPMorgan  Chase Bank,  its  successors  or any other bank
designated by the Agent to the Borrower from time to time.

         "BANKRUPTCY CODE" means the United States Bankruptcy Code (11 U.S.C.ss.
101, ET SEQ.), as amended, and any successor statute.

         "BASE INTEREST RATE" means the greater of (i) 11.50% per annum and (ii)
the Reference Rate plus 5.00% per annum.

         "BOARD" means the Board of Governors of the Federal  Reserve  System of
the United States.

         "BOARD OF DIRECTORS"  means,  with respect to any Person,  the board of
directors (or comparable  managers) of such Person or any committee thereof duly
authorized to act on behalf of the board.

         "BORROWER" has the meaning specified therefor in the preamble hereto.

         "BUSINESS DAY" means any day other than a Saturday, Sunday or other day
on which commercial banks in New York City are authorized or required to close.

         "CANADIAN  BORROWERS" means,  collectively,  Larco Industrial Services,
Ltd., a business  corporation  organized under the laws of Canada,  and Columbus
McKinnon Limited, a business corporation organized under the laws of Canada.

         "CANADIAN  AGENT" means Regiment  Capital III, L.P., in its capacity as
agent for the Canadian Lenders.

         "CANADIAN  FINANCING  AGREEMENT"  means the Financing  Agreement by and
among the Canadian Borrowers, the Canadian Lenders and the Canadian Agent.

         "CANADIAN  LENDERS" means the financial  institutions from time to time
party to the Canadian Financing Agreement.


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         "CANADIAN LOAN DOCUMENTS" means,  collectively,  the Canadian Financing
Agreement and each other "Loan Document" as defined under the Canadian Financing
Agreement.

         "CANADIAN  TERM LOAN" means the term loan made by the Canadian  Lenders
to the  Canadian  Borrowers  on the  Effective  Date  pursuant  to the  Canadian
Financing Agreement in the aggregate principal amount of $10,000,000.

         "CAPITAL  EXPENDITURES" means, for any period, the sum for the Borrower
and its consolidated  Subsidiaries  (determined on a consolidated  basis without
duplication  in accordance  with GAAP) of the aggregate  amount of  expenditures
made or liabilities  incurred during such period (including the aggregate amount
of  Capital  Lease  Obligations  incurred  during  such  period)  to  acquire or
construct fixed assets, plant and equipment  (including  renewals,  improvements
and  replacements,  but excluding  repairs)  computed in  accordance  with GAAP;
PROVIDED  that such term shall not include any such  expenditures  in connection
with any replacement or repair of Property affected by a Casualty Event.

         "CAPITAL GUIDELINE" means any law, rule, regulation,  policy, guideline
or  directive  (whether  or not having  the force of law and  whether or not the
failure  to  comply  therewith  would  be  unlawful)  of  any  central  bank  or
Governmental  Authority (i) regarding capital adequacy,  capital ratios, capital
requirements,  the calculation of a bank's capital or similar  matters,  or (ii)
affecting  the amount of capital  required to be obtained or  maintained  by any
Lender or any Person controlling any Lender or the manner in which any Lender or
any Person  controlling  any Lender  allocates  capital to any of its contingent
liabilities (including letters of credit), advances,  acceptances,  commitments,
assets or liabilities.

         "CAPITAL LEASE OBLIGATIONS" of any Person means the obligations of such
Person to pay rent or other  amounts  under  any lease of (or other  arrangement
conveying the right to use) real or personal property, or a combination thereof,
which  obligations  are required to be  classified  and accounted for as capital
leases on a balance  sheet of such  Person  under  GAAP,  and the amount of such
obligations  shall be the  capitalized  amount thereof  determined in accordance
with GAAP.

         "CAPITAL  STOCK"  means  (i)  with  respect  to any  Person  that  is a
corporation, any and all shares, interests,  participations or other equivalents
(however designated and whether or not voting) of corporate stock, and (ii) with
respect  to any  Person  that is not a  corporation,  any  and all  partnership,
membership or other equity interests of such Person.

         "CASH MANAGEMENT BANK" means Fleet National Bank.

         "CASUALTY EVENT" means, with respect to any Property of any Person, any
loss of or damage to, or any  condemnation or other taking of, such Property for
which such Person or any of its Subsidiaries  receives  insurance  proceeds,  or
proceeds of a condemnation award or other compensation.

         "CHANGE OF CONTROL" means each occurrence of any of the following:


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         (a) the  acquisition,  directly or  indirectly,  by any person or group
(within  the  meaning of Section  13(d)(3) of the  Exchange  Act) of  beneficial
ownership  of more than 25% of the  aggregate  outstanding  voting  power of the
Capital Stock of the Borrower;

         (b) during any period of two consecutive years,  individuals who at the
beginning  of such period  constituted  the Board of  Directors  of the Borrower
(together  with any new directors  whose  election by such Board of Directors or
whose  nomination for election by the  shareholders of the Borrower was approved
by a vote of at least a majority the  directors  of the  Borrower  then still in
office who were either  directors  at the  beginning  of such  period,  or whose
election or  nomination  for election  was  previously  approved)  cease for any
reason to constitute a majority of the Board of Directors of the Borrower;

         (c) the Borrower shall cease to have  beneficial  ownership (as defined
in Rule 13d-3 under the Exchange Act) of 100% of the  aggregate  voting power of
the Capital  Stock of each other Loan Party,  free and clear of all Liens (other
than any Liens granted hereunder and Permitted Liens); or

         (d) (i) any Loan Party  consolidates with or merges into another entity
or conveys,  transfers or leases all or substantially  all of its properties and
assets to another Person other than as permitted under Section 7.02(d)(iii),  or
(ii) any entity consolidates with or merges into any Loan Party in a transaction
pursuant to which the  outstanding  voting  Capital  Stock of such Loan Party is
reclassified  or  changed  into or  exchanged  for  cash,  securities  or  other
property, other than any such transaction described in this clause (ii) in which
either (A) in the case of any such transaction involving the Borrower, no person
or group  (within the  meaning of Section  13(d)(3)  of the  Exchange  Act) has,
directly or indirectly,  acquired  beneficial  ownership of more than 25% of the
aggregate outstanding voting Capital Stock of the Borrower or (B) in the case of
any such  transaction  involving  a Loan  Party  other  than the  Borrower,  the
Borrower has beneficial  ownership of 100% of the aggregate  voting power of all
Capital Stock of the resulting, surviving or transferee entity; or

         (e) a "Change of Control"  shall  occur  under the Senior  Subordinated
Note Indenture.

         "CLOSING FEE" has the meaning specified therefor in Section 2.06(a).

         "COLLATERAL"  means all of the  property  and assets and all  interests
therein and proceeds thereof now owned or hereafter  acquired by any Person upon
which a Lien is granted or  purported  to be granted by such  Person as security
for all or any part of the Obligations.

         "COLLATERAL  DOCUMENT"  means  any  Patent  Agreement,   any  Trademark
Agreement,  any Copyright  Mortgage,  any Pledge Agreement  (including,  without
limitation,  any pledge and  security  agreement  delivered  pursuant to Section
5.01(d),  7.01(o) or  7.01(r)),  any  Mortgage,  and any other  instruments  and
documents,  including  without  limitation  Uniform  Commercial  Code  financing
statements,  and the like, required to be executed or delivered pursuant to this
Agreement or any Collateral Document.

         "COMPLIANCE  CERTIFICATE"  means a  certificate  signed by a Designated
Financial Officer,  substantially in the form of Exhibit H, (a) certifying as to
whether a  Default has occurred  and,  if a Default has occurred, specifying the


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details  thereof  and any action  taken or  proposed  to be taken  with  respect
thereto,  (b)  setting  forth  reasonably  detailed  calculations  demonstrating
compliance with Section  7.02(j),  and (c) stating whether any change in GAAP or
in the application  thereof has occurred since the date of the audited financial
statements  referred to in Section 6.01(d) and, if any such change has occurred,
specifying  the effect of such change on the financial  statements  accompanying
such certificate.

         "CONTINGENT   OBLIGATION"  means,  with  respect  to  any  Person,  any
obligation   of  such  Person   guaranteeing   or  intended  to  guarantee   any
Indebtedness,  leases, dividends or other obligations ("primary obligations") of
any other  Person (the  "primary  obligor") in any manner,  whether  directly or
indirectly,  including, without limitation, (i) the direct or indirect guaranty,
endorsement  (other than for  collection  or deposit in the  ordinary  course of
business),  co-making,  discounting  with recourse or sale with recourse by such
Person of the  obligation  of a primary  obligor,  (ii) the  obligation  to make
take-or-pay or similar  payments,  if required,  regardless of nonperformance by
any other party or parties to an agreement, (iii) any obligation of such Person,
whether or not  contingent,  (A) to purchase any such primary  obligation or any
property  constituting  direct or indirect security therefor,  (B) to advance or
supply funds (1) for the purchase or payment of any such primary  obligation  or
(2) to maintain  working  capital or equity  capital of the  primary  obligor or
otherwise to maintain the net worth or solvency of the primary  obligor,  (C) to
purchase property,  assets,  securities or services primarily for the purpose of
assuring the owner of any such primary  obligation of the ability of the primary
obligor to make payment of such primary obligation or (D) otherwise to assure or
hold  harmless  the holder of such  primary  obligation  against loss in respect
thereof;  PROVIDED,  HOWEVER,  that the term "Contingent  Obligation"  shall not
include any product warranties extended in the ordinary course of business.  The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or  determinable  amount of the primary  obligation with respect to which
such  Contingent  Obligation  is made (or, if less,  the maximum  amount of such
primary  obligation for which such Person may be liable pursuant to the terms of
the  instrument  evidencing  such  Contingent  Obligation)  or, if not stated or
determinable,  the maximum reasonably anticipated liability with respect thereto
(assuming such Person is required to perform thereunder),  as determined by such
Person in good faith.

         "CONTROL" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through  the  ability to  exercise  voting  power,  by  contract  or  otherwise.
"CONTROLLING" and "CONTROLLED" have meanings  correlative  thereto. A Person who
owns  or  holds  capital  stock,   beneficial   interests  or  other  securities
representing  five  percent  (5%) or more of the Total  Voting  Power of another
Person shall be deemed, for purposes of this Agreement,  to "control" such other
Person.

         "COPYRIGHT  MORTGAGE" means a Memorandum of Grant of Security  Interest
in Copyrights made by a Loan Party in favor of the Agent,  substantially  in the
form of Exhibit E.

         "COPYRIGHTS"  means all  copyrights,  whether  statutory or common law,
owned by or assigned to the Loan Parties,  and all  exclusive  and  nonexclusive
licenses  to the Loan  Parties  from third  parties or rights to use  copyrights
owned by such third parties,  including,  without limitation, the registrations,
applications and licenses listed on Schedule 6.01(e) hereto,  along with any and
all (a) renewals and extensions thereof, (b) income, royalties, damages,  claims


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and  payments  now and  hereafter  due  and/or  payable  with  respect  thereto,
including, without limitation,  damages and payments for past, present or future
infringements   thereof,  (c)  rights  to  sue  for  past,  present  and  future
infringements   thereof,  and  (d)  foreign  copyrights  and  any  other  rights
corresponding thereto throughout the world.

         "DEFAULT" means an event which,  with the giving of notice or the lapse
of time or both, would constitute an Event of Default.

         "DESIGNATED  FINANCIAL OFFICER" means an individual holding one or more
of the  following  offices  with the  Borrower  or  otherwise  having  executive
responsibilities  for financial  matters and listed in Schedule  1.01(B) hereto:
chief financial officer,  principal  accounting  officer,  treasurer,  assistant
treasurer or controller.

         "DISCLOSED  MATTERS" means the actions,  suits and  proceedings and the
environmental matters disclosed in Schedule 6.01(f) hereto.

         "DISPOSITION" means any transaction, or series of related transactions,
pursuant  to  which  any  Person  or  any of its  Subsidiaries  sells,  assigns,
transfers or otherwise  disposes of any property or assets (whether now owned or
hereafter  acquired)  to any other  Person,  in each  case,  whether  or not the
consideration therefor consists of cash, securities or other assets owned by the
acquiring  Person,  EXCLUDING  any sales of Inventory in the ordinary  course of
business on ordinary business terms.

         "DOLLAR,"  "DOLLARS"  and the symbol "$" each means lawful money of the
United States of America.

         "DOMESTIC  SUBSIDIARY"  means,  at  any  time,  any  Subsidiary  of the
Borrower  organized  under the laws of the United States of America or any State
thereof,  including any  Subsidiary of the Borrower  listed in Schedule  1.01(C)
hereto.

         "EBITDA"  means,  for any period and without  duplication,  (a) the net
income of the Borrower and its Subsidiaries  (determined on a consolidated basis
in  accordance  with GAAP) for such period,  PLUS (b) to the extent  deducted in
calculating net income without  duplication (i) income taxes accrued during such
period,   (ii)  Interest  Expense  during  such  period,   (iii)   depreciation,
amortization  and other  Non-Cash  Charges  accrued  for such  period,  and (iv)
Approved  Restructuring  Charges  incurred during such period,  MINUS (c) to the
extent such items were added in calculating net income (i)  extraordinary  gains
during  such  period,  (ii)  gains  from any  Casualty  Event,  Disposition,  or
discontinued  operation during such period,  and (iii) interest and other income
(excluding  interest and other income  related to CM  Insurance  Company,  Inc.)
during such period.

         "EFFECTIVE  DATE" means the date,  on or before  November 30, 2002,  on
which all of the conditions precedent set forth in Section 5.01 are satisfied or
waived and the Term Loan is made.

         "ENVIRONMENTAL ACTIONS" means any complaint, summons, citation, notice,
directive, order, claim, litigation,  investigation,  judicial or administrative
proceeding,   judgment,  letter  or  other  communication  from  any  Person  or
Governmental Authority involving violations of Environmental Laws or Releases of


                                      - 7 -

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Hazardous  Materials  (i) from any assets,  properties  or  businesses  owned or
operated  by any Loan Party or any of its  Subsidiaries  or any  predecessor  in
interest;  (ii) from  adjoining  properties  or  businesses;  or (iii)  onto any
facilities which received Hazardous Materials generated by any Loan Party or any
of its Subsidiaries or any predecessor in interest.

         "ENVIRONMENTAL  LAWS" means the Comprehensive  Environmental  Response,
Compensation  and  Liability Act (42 U.S.C.ss.  9601, ET SEQ.  ("CERCLA")),  the
Hazardous Materials Transportation Act (49 U.S.C.ss.1801, ET SEQ.), the Resource
Conservation  and Recovery Act (42 U.S.C.ss.  6901, ET SEQ.),  the Federal Clean
Water Act (33 U.S.C.ss.  1251 ET SEQ.), the Clean Air Act (42 U.S.C.ss.  7401 ET
SEQ.),  the Toxic  Substances  Control  Act (15  U.S.C.ss.  2601 ET  SEQ.),  the
Occupational Safety and Health Act (29 U.S.C.ss. 651 ET seq.), and the Superfund
Amendments  and  Reauthorization  Act of 1986,  as such laws may be  amended  or
otherwise  modified from time to time, and any other present or future  federal,
state, local or foreign statute,  ordinance, rule, regulation,  order, judgment,
decree,  permit,  license or other  binding  determination  of any  Governmental
Authority imposing liability or establishing standards of conduct for protection
of the environment or other government  restrictions  relating to the protection
of the  environment  or the  Release,  deposit  or  migration  of any  Hazardous
Materials into the environment.

         "ENVIRONMENTAL    LIABILITIES"   means   all   liabilities,    monetary
obligations,  Remedial Actions, losses, damages, punitive damages, consequential
damages,  treble  damages,  costs and expenses  (including all reasonable  fees,
disbursements  and  expenses of counsel,  experts and  consultants  and costs of
investigations  and  feasibility  studies),  fines,  penalties,   sanctions  and
interest  incurred  as a result  of any  claim  or  demand  by any  Governmental
Authority or any third party, and which relate to any environmental condition or
a Release of  Hazardous  Materials  from or onto (i) any  property  presently or
formerly owned by any Loan Party or any of its Subsidiaries or (ii) any facility
which  received  Hazardous  Materials  generated by any Loan Party or any of its
Subsidiaries.

         "ENVIRONMENTAL  LIEN"  means  any  Lien in  favor  of any  Governmental
Authority for Environmental Liabilities.

         "EQUITY RIGHTS" means, with respect to any Person,  any  subscriptions,
options,  warrants,  commitments,  preemptive  rights or  agreements of any kind
(including any  stockholders'  or voting trust  agreements)  for the issuance or
sale of, or securities  convertible into, any additional shares of Capital Stock
of any class, or partnership or other  ownership  interests of any type in, such
Person.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended,   and  any  successor  statute  of  similar  import,   and  regulations
thereunder, in each case, as in effect from time to time. References to sections
of ERISA shall be construed also to refer to any successor sections.

         "ERISA   AFFILIATE"  means  any  trade  or  business  (whether  or  not
incorporated)  that,  together  with the Loan  Parties,  is  treated as a single
employer within the meaning of Section  414(b),  (c), (m) or (o) of the Internal
Revenue  Code.  Notwithstanding  the foregoing,  for  purposes of  any liability


                                      - 8 -

<PAGE>

related  to a  Multiemployer  Plan  under  Title IV of  ERISA,  the term  "ERISA
Affiliate" means any trade or business that,  together with the Loan Parties, is
treated as a single employer within the meaning of Section 4001(b) of ERISA.

         "ERISA  EVENT" means (a) a  "reportable  event",  as defined in Section
4043 of  ERISA  or the  regulations  issued  thereunder  for  which  the  notice
requirement  has not been  waived  with  respect to any  Pension  Plan,  (b) the
existence  with  respect  to  any  Pension  Plan  of  an  "accumulated   funding
deficiency"  (as defined in Section 412 of the Internal  Revenue Code or Section
302 of ERISA),  whether or not waived, (c) the filing pursuant to Section 412(d)
of the Internal  Revenue Code or Section 303(d) of ERISA of an application for a
waiver of the minimum funding standard with respect to any Pension Plan, (d) the
incurrence by any Loan Party or any ERISA Affiliate of any liability under Title
IV of ERISA with respect to the termination of any Pension Plan, (e) the receipt
by any Loan Party or any ERISA Affiliate from the PBGC or plan  administrator of
any notice  relating to an intention  to  terminate  any Pension Plan or Pension
Plans or to appoint a trustee to administer any Pension Plan, or (f) the receipt
by any Loan Party or any ERISA  Affiliate  of any notice,  or the receipt by any
Multiemployer  Plan from any Loan Party or any ERISA  Affiliate of any notice of
Withdrawal  Liability or a  determination  that a  Multiemployer  Plan is, or is
expected to be, insolvent or in  reorganization,  within the meaning of Title IV
of ERISA.

         "EVENT OF DEFAULT" means any of the events set forth in Section 9.01.

         "EXCESS  CASH FLOW"  means,  with respect to any Person for any period,
(i) Net Income of such Person and its  Subsidiaries  for such period,  PLUS (ii)
all non-cash items of such Person and its  Subsidiaries  deducted in determining
Net Income for such period, LESS (iii) the sum of (A) all non-cash items of such
Person  and its  Subsidiaries  added to the  calculation  of Net Income for such
period,  (B) all  scheduled  cash  principal  payments  on the Term Loan and the
Canadian  Term Loan made during such period,  and all scheduled  cash  principal
payments on other Indebtedness of such Person or any of its Subsidiaries  during
such period (but,  in the case of revolving  loans,  only to the extent that the
commitments  with respect thereto are permanently  reduced by the amount of such
payments) to the extent such other Indebtedness is permitted to be incurred, and
such  payments are  permitted  to be made,  under this  Agreement,  (C) the cash
portion of Capital  Expenditures made by such Person and its Subsidiaries during
such period to the extent  permitted to be made under this Agreement and (D) all
optional  prepayments of principal on the Term Loan pursuant to Section  2.05(b)
made to the Agent and the Lenders during and after the end of such period but on
or prior to the date  any  Excess  Cash  Flow  payment  is  required  to be made
pursuant  to  Section  2.05(c)(i)  (it being  understood  that any such  payment
deducted pursuant to this clause (D) shall not be deducted from Excess Cash Flow
for any subsequent period).

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

         "EXISTING  CREDIT  FACILITY"  means the Credit  Agreement,  dated as of
March 31,  1998,  among the  Borrower,  the  lenders  named  therein,  and Fleet
National Bank, as Agent.

         "EXISTING  INDEBTEDNESS"  means (i)  Indebtedness  of the Loan  Parties
existing as of the  Effective  Date which is being  refinanced  in full with the
proceeds of  the Term Loan and  the Working Capital Loans  on the Effective Date


                                      - 9 -

<PAGE>

including  Indebtedness under the Existing Credit Facility and (ii) Indebtedness
of the Loan  Parties  existing as of the  Effective  Date which is  permitted to
remain  outstanding after the Effective Date under Section 7.02(a) and is listed
on Schedule 7.02(a) hereto.

         "EXISTING  LENDERS"  means the  lenders  party to the  Existing  Credit
Facility.

         "EXTRAORDINARY RECEIPTS" means any cash received by the Borrower or any
of its  Subsidiaries  not in the ordinary course of business (and not consisting
of  proceeds  described  in Section  2.05(c)(ii)  or (iii)  hereof),  including,
without limitation, (i) foreign, United States, state or local tax refunds, (ii)
pension plan reversions,  (iii) proceeds of insurance, (iv) judgments,  proceeds
of settlements or other  consideration  of any kind in connection with any cause
of  action,  (v)  condemnation  awards  (and  payments  in lieu  thereof),  (vi)
indemnity  payments  and  (vii)  any  purchase  price  adjustment   received  in
connection with any purchase agreement.

         "FASB" means Financial Accounting Standards Board.

         "FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate
per annum equal to, for each day during such period, 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 next
succeeding  Business Day by the Federal  Reserve  Bank of New York,  or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations  for such day on such  transactions  received by the Agent from three
Federal funds brokers of recognized standing selected by it.

         "FIELD  SURVEY  AND AUDIT"  means a field  survey and audit of the Loan
Parties and an appraisal  of the  Collateral  performed  by auditors,  examiners
and/or  appraisers  selected  by the Agent,  at the sole cost and expense of the
Borrower.

         "FINAL MATURITY DATE" means May 21, 2007, or such earlier date on which
the Term Loan shall become due and payable in accordance  with the terms of this
Agreement and the other Loan Documents.

         "FINANCIAL STATEMENTS" means (i) the audited consolidated balance sheet
of the Borrower and its  Subsidiaries for the Fiscal Years ended March 31, 2000,
March 31, 2001 and March 31,  2002,  and the related  consolidated  statement of
operations, shareholders' equity and cash flows for the Fiscal Years then ended,
and (ii) the  unaudited  consolidated  balance  sheet  of the  Borrower  and its
Subsidiaries  for the 6  months  ended  September  30,  2002,  and  the  related
consolidated  statement of operations,  shareholder's  equity and cash flows for
the 6 months then ended.

         "FISCAL   YEAR"  means  the  fiscal  year  of  the   Borrower  and  its
Subsidiaries ending on March 31st of each year.

         "FIXED CHARGE  COVERAGE  RATIO" means,  for any Reference  Period,  the
ratio of (a) (i)  EBITDA for such  Reference  Period  MINUS  (ii) the  aggregate
amount of all Capital  Expenditures during such Reference Period MINUS (iii) the
aggregate amount paid, or required to be paid (without duplication),  in cash in
respect of the current portion of  all income taxes for such Reference Period to


                                     - 10 -

<PAGE>

(b) the sum for the Borrower and its Subsidiaries  (determined on a consolidated
basis without  duplication in accordance with GAAP), of (i) the aggregate amount
of  Interest  Expense  for  such  Reference  Period  (net  of the sum of (A) the
capitalized interest accrued during such Reference Period in respect of the Term
Loan and the Canadian Term Loan, PLUS (B) the amortization during such Reference
Period of  financing  costs  incurred in  connection  with this  Agreement,  the
Canadian Financing Agreement,  the Existing Credit Facility, the Working Capital
Loan  Agreement  and the  Senior  Subordinated  Note  Indenture),  and  (ii) the
aggregate  amount of  regularly  scheduled  payments of  principal in respect of
Indebtedness  for  borrowed  money  (including  the  principal  component of any
payments in respect of Capital  Lease  Obligations)  paid or required to be paid
during such Reference Period.

         "FOREIGN  SUBSIDIARY"  means any  Subsidiary of the Borrower  organized
under the laws of any  jurisdiction  other than the United  States of America or
any State thereof.

         "GAAP" means generally  accepted  accounting  principles in effect from
time to time in the United States,  applied on a consistent basis, PROVIDED that
for the purpose of Section  7.02(j)  hereof and the  definitions  used  therein,
"GAAP" shall mean generally accepted accounting principles in effect on the date
hereof  and  consistent  with  those used in the  preparation  of the  Financial
Statements,  PROVIDED,  FURTHER,  that if there  occurs  after  the date of this
Agreement any change in GAAP that affects in any respect the  calculation of any
covenant  contained in Section 7.02(j) hereof,  the Agent and the Borrower shall
negotiate in good faith  amendments  to the  provisions of this  Agreement  that
relate to the  calculation  of such  covenant  with the  intent  of  having  the
respective  positions of the Lenders and the Borrower  after such change in GAAP
conform as nearly as possible to their  respective  positions  as of the date of
this  Agreement  and,  until any such  amendments  have been  agreed  upon,  the
covenants in Section  7.02(j) hereof shall be calculated as if no such change in
GAAP has occurred.

         "GOVERNMENTAL  AUTHORITY" means any nation or government,  any Federal,
state, city, town,  municipality,  county, local or other political  subdivision
thereof   or   thereto   and  any   department,   commission,   board,   bureau,
instrumentality,  agency  or other  entity  exercising  executive,  legislative,
judicial,  taxing,  regulatory  or  administrative  powers  or  functions  of or
pertaining to government.

         "GUARANTEED  OBLIGATIONS" has the meaning specified therefor in Section
11.01.

         "GUARANTOR"  means  (i) each  Subsidiary  of the  Borrower  listed as a
"Guarantor"  on the  signature  pages  hereto,  and (ii) each other Person which
guarantees,  pursuant to Section  7.01(o) or  otherwise,  all or any part of the
Obligations.

         "GUARANTY"  means  (i) the  guaranty  of each  Guarantor  party  hereto
contained in ARTICLE XI hereof, and (ii) each guaranty substantially in the form
of Exhibit A, made by any other  Guarantor in favor of the Agent for the benefit
of the Lenders pursuant to Section 7.01(o) or otherwise.

         "HAZARDOUS  MATERIAL" means (a) any element,  compound or chemical that
is defined,  listed or otherwise classified as a contaminant,  pollutant,  toxic
pollutant,  toxic or  hazardous  substance,  extremely  hazardous  substance  or
chemical,  hazardous waste,  special waste,  or solid waste  under Environmental


                                     - 11 -

<PAGE>

Laws or that is likely to cause  immediately,  harm to or have an adverse effect
on,  the  environment  or risk to human  health or  safety,  including,  without
limitation, any pollutant,  contaminant, waste, hazardous waste, toxic substance
or dangerous  good which is defined or identified in any  Environmental  Law and
which  is  present  in the  environment  in  such  quantity  or  state  that  it
contravenes any Environmental  Law; (b) petroleum and its refined products;  (c)
polychlorinated  biphenyls;  (d) any  substance  exhibiting  a  hazardous  waste
characteristic,   including,  without  limitation,  corrosivity,   ignitability,
toxicity or reactivity as well as any  radioactive or explosive  materials;  and
(e) any raw  materials,  building  components  (including,  without  limitation,
asbestos-containing  materials) and manufactured  products containing  hazardous
substances listed or classified as such under Environmental Laws.

         "HEDGING   AGREEMENT"  means  any  interest  rate,   foreign  currency,
commodity or equity swap, collar, cap, floor or forward rate agreement, or other
agreement or arrangement  designed to protect  against  fluctuations in interest
rates or currency,  commodity or equity values (including,  without  limitation,
any option  with  respect to any of the  foregoing  and any  combination  of the
foregoing  agreements  or  arrangements),   and  any  confirmation  executed  in
connection with any such agreement or arrangement.

         "HIGHEST  LAWFUL RATE" means,  with respect to the Agent or any Lender,
the maximum non-usurious interest rate, if any, that at any time or from time to
time  may be  contracted  for,  taken,  reserved,  charged  or  received  on the
Obligations  under  laws  applicable  to the  Agent  or such  Lender  which  are
currently in effect or, to the extent allowed by law, under such applicable laws
which may hereafter be in effect and which allow a higher  maximum  non-usurious
interest rate than applicable laws now allow.

         "INDEBTEDNESS" means, with respect to any Person,  without duplication,
(i) all indebtedness of such Person for borrowed money;  (ii) all obligations of
such Person for the deferred  purchase price of property or services (other than
trade  payables  which are not for  borrowed  money) or other  accounts  payable
(including  accrued expenses and deferred taxes) incurred in the ordinary course
of such Person's  business and not  outstanding  for more than 90 days after the
date such payable was created);  (iii) all obligations of such Person  evidenced
by bonds, debentures,  notes or other similar instruments or upon which interest
payments  are  customarily  made;  (iv)  all  reimbursement,  payment  or  other
obligations  and  liabilities  of such  Person  created  or  arising  under  any
conditional  sales or other title  retention  agreement with respect to property
used and/or acquired by such Person,  even though the rights and remedies of the
lessor,  seller and/or lender  thereunder may be limited to repossession or sale
of such property;  (v) all Capital Lease  Obligations  of such Person;  (vi) all
obligations and liabilities, contingent or otherwise, of such Person, in respect
of letters of credit, acceptances and similar facilities;  (vii) all obligations
and  liabilities,  calculated  on a  basis  satisfactory  to  the  Agent  and in
accordance  with accepted  practice,  of such Person under  Hedging  Agreements;
(viii) all Contingent  Obligations;  (ix) liabilities incurred under Title IV of
ERISA with  respect to any plan (other  than a  Multiemployer  Plan)  covered by
Title IV of ERISA and  maintained  for  employees  of such  Person or any of its
ERISA Affiliates;  (x) Withdrawal  Liability incurred under ERISA by such Person
or any of its ERISA Affiliates with respect to any Multiemployer  Plan; and (xi)
all  obligations  referred to in clauses (i) through (x) of this  definition  of
another Person secured by (or for which the holder of such  Indebtedness  has an
existing right, contingent or otherwise, to be secured by)  a Lien upon property


                                     - 12 -

<PAGE>

owned by such Person,  even though such Person has not assumed or become  liable
for the  payment of such  Indebtedness.  The  Indebtedness  of any Person  shall
include the  Indebtedness  of any  partnership of or joint venture in which such
Person is a general partner or a joint venturer.

         "INDEMNIFIED  MATTERS"  has the meaning  specified  therefor in Section
12.15.

         "INDEMNITEES" has the meaning specified therefor in Section 12.15.

         "INSOLVENCY  PROCEEDING"  means any proceeding  commenced by or against
any  Person  under  any  provision  of the  Bankruptcy  Code or under  any other
bankruptcy or insolvency law,  assignments for the benefit of creditors,  formal
or informal moratoria,  compositions, or extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.

         "INTERCREDITOR    AGREEMENT"   means   the   Lien   Subordination   and
Intercreditor  Agreement,  substantially  in the form of Exhibit F, by and among
the Borrower,  the Agent, the Lenders, the Working Capital Agent and the Working
Capital Lenders.

         "INTEREST EXPENSE" means, for any period, the sum, without duplication,
for the  Borrower  and its  Subsidiaries  (determined  on a  consolidated  basis
without duplication in accordance with GAAP), of the following: (a) all interest
in respect of  Indebtedness  accrued or paid during such period  (whether or not
actually  paid during such period),  PLUS (b) the net amounts  payable (or MINUS
the net amounts receivable) in respect of Hedging Agreements accrued during such
period (whether or not actually paid or received  during such period)  excluding
reimbursement  of legal fees and other similar  transaction  costs and excluding
payments  required by reason of the early  termination of Hedging  Agreements in
effect on the date hereof,  PLUS (c) all fees,  including  letter of credit fees
and expenses (but excluding reimbursement of legal fees), incurred hereunder and
under the Canadian  Financing  Agreement and the Working  Capital Loan Agreement
during such period.

         "INTERNAL  REVENUE  CODE" means the Internal  Revenue Code of 1986,  as
amended (or any successor statute thereto) and the regulations thereunder.

         "INVENTORY"   means,  with  respect  to  any  Person,   all  goods  and
merchandise of such Person,  including,  without limitation,  all raw materials,
work-in-process,  packaging,  supplies,  materials  and finished  goods of every
nature used or usable in connection with the shipping,  storing,  advertising or
sale of such goods and merchandise, whether now owned or hereafter acquired, and
all such other  property the sale or other  disposition of which would give rise
to an Account Receivable or cash.

         "INVESTMENT"  means, for any Person:  (a) the acquisition  (whether for
cash,  Property,  services or securities or otherwise) of Capital Stock,  bonds,
notes,  debentures,  partnership,  limited  liability company or other ownership
interests or other  securities  of any other Person or any agreement to make any
such acquisition (including, without limitation, any "short sale" or any sale of
any  securities  at a time when  such  securities  are not  owned by the  Person
entering into such short sale);  (b) the making of any deposit with, or advance,
loan or other  extension of credit to, any other Person  (including the purchase
of Property  from  another  Person subject  to an  understanding  or  agreement,


                                     - 13 -

<PAGE>

contingent or otherwise,  to resell such Property to such Person,  but excluding
any such advance, loan or extension of credit representing the purchase price of
Inventory or supplies  sold by such Person in the  ordinary  course of business,
PROVIDED  that in no  event  shall  the  term of any such  Inventory  or  supply
advance,  loan or extension of credit exceed 180 days); or (c) the entering into
of any Guaranty of, or other contingent obligation with respect to, Indebtedness
or other  liability  of any other Person and  (without  duplication)  any amount
committed to be advanced, lent or extended to such Person.

         "LANDLORD'S  WAIVER AND CONSENT"  means,  with respect to any Leasehold
Property,  a letter,  certificate or other instrument in writing from the lessor
under  the  related  Lease,  in the  form  approved  by the  Agent  in its  sole
discretion.

         "LEASE" means any lease of real property to which any Loan Party or any
of its Subsidiaries is a party as lessor or lessee.

         "LEASEHOLD  PROPERTY" means any leasehold interest of any Loan Party as
lessee under any Lease, other than any such leasehold  interest  designated from
time to time by the Agent in its sole  discretion  as not being  required  to be
included in the Collateral and not being of material  importance to the business
or operations of the Loan Parties.

         "LENDER" has the meaning specified therefor in the preamble hereto.

         "LIABILITIES" has the meaning specified therefor in Section 2.07.

         "LIEN" means any mortgage,  deed of trust,  pledge,  lien (statutory or
otherwise),  security  interest,  charge or other  encumbrance  or  security  or
preferential  arrangement  of any nature,  including,  without  limitation,  any
conditional  sale or title  retention  arrangement,  any  capital  lease and any
assignment,  deposit  arrangement or financing  lease intended as, or having the
effect of, security.

         "LOAN  ACCOUNT" means an account  maintained  hereunder by the Agent on
its books of account at the Payment Office and, with respect to the Borrower, in
which the  Borrower  will be  charged  with the Term Loan made to, and all other
Obligations incurred by, the Borrower.

         "LOAN  DOCUMENT"  means this  Agreement,  any Guaranty,  any Collateral
Document, any UCC Filing Authorization Letter, the Participation  Agreement, the
Intercreditor Agreement, and any other agreement, instrument, and other document
executed and  delivered  pursuant  hereto or thereto or otherwise  evidencing or
securing the Term Loan or any other Obligation.

         "LOAN PARTY" means the Borrower and any Guarantor.

         "LOAN  SERVICING  FEE" has the  meaning  specified  therefor in Section
2.06(b).

         "MATERIAL ADVERSE EFFECT" means a material adverse effect on any of (i)
the operations, business, assets, properties, condition (financial or otherwise)
or  prospects of the  Borrower or the Loan  Parties  taken as a whole,  (ii) the
ability of  any Loan  Party to  perform any  of its  obligations  under any Loan


                                     - 14 -

<PAGE>

Document to which it is a party, (iii) the legality,  validity or enforceability
of this  Agreement or any other Loan  Document,  (iv) the rights and remedies of
the Agent or any Lender under any Loan Document, or (v) the validity, perfection
or  priority  of a Lien in favor of the Agent for the  benefit of the Lenders on
any of the Collateral with an aggregate fair market value in excess of $100,000.

         "MATERIAL  INDEBTEDNESS" means Indebtedness (other than the Term Loan),
including,  without  limitation,  obligations  in respect of one or more Hedging
Agreements, in an aggregate principal amount exceeding $1,000,000.  For purposes
of determining Material Indebtedness,  the "principal amount" of the obligations
of any Person in respect of a Hedging Agreement at any time shall be the maximum
aggregate  amount  (giving  effect to any netting  agreements)  that such Person
would be required to pay if such Hedging Agreement were terminated at such time.

         "MATERIAL  LEASEHOLD  PROPERTY" means a Leasehold  Property  reasonably
determined  by the Agent to be of material  value as  Collateral  or of material
importance  to the  operations of the Loan Parties and as to which the aggregate
amount of all rents payable during any Fiscal Year exceeds $100,000.

         "MATERIAL  OWNED  PROPERTY"  means any real property  owned by any Loan
Party that is  reasonably  determined  by the Agent to be of  material  value as
Collateral or of material importance to the operations of the Loan Parties.

         "MATERIAL RENTAL  OBLIGATIONS" means obligations of the Loan Parties to
pay rent  under any one or more  operating  leases  with  respect to any real or
personal property that is material to the business of the Loan Parties and as to
which the aggregate  amount of all rents payable  during any Fiscal Year exceeds
$100,000.

         "MOODY'S"  means  Moody's  Investors  Service,  Inc. and any  successor
thereto.

         "MORTGAGED  PROPERTY" means, at any time of determination,  any and all
real property owned or leased by the Loan Parties that are subject to a Mortgage
in favor of the Agent for the benefit of the  Lenders  and the Agent,  including
without limitation the Properties listed on Schedule 1.01(D).

         "MORTGAGES"  means,  collectively,  the  several  security  instruments
(whether  designated  as a deed of  trust  or a  mortgage,  leasehold  mortgage,
assignment of leases and rents or by any similar  title)  executed and delivered
by any  Loan  Party,  in  such  form  as may be  approved  by the  Agent  in its
reasonable  discretion,  in  each  case  with  such  changes  thereto  as may be
recommended by the Agent's local counsel based on local laws or customary  local
practices, with respect to the Real Property Assets owned by a Loan Party.

         "MULTIEMPLOYER  PLAN" means a multiemployer  plan as defined in Section
4001(a)(3) of ERISA to which any Loan Party or any of its ERISA  Affiliates  has
contributed  to, or has been  obligated  to  contribute,  at any time during the
preceding six (6) years.


                                     - 15 -

<PAGE>


         "NET CASH PROCEEDS" means,

                  (a) with respect to any Casualty Event,  the aggregate  amount
of cash  proceeds  of  insurance,  condemnation  awards  and other  compensation
received by the Borrower or any of its  Subsidiaries in respect of such Casualty
Event net of (i)  reasonable  expenses  incurred  by the  Borrower or any of its
Subsidiaries in connection therewith and (ii) contractually  required repayments
of  Indebtedness to the extent secured by a Lien permitted by Section 7.02(b) on
such property and (iii) any income and transfer taxes payable by the Borrower or
any of its Subsidiaries in respect of such Casualty Event;

                  (b) with respect to any  Disposition,  the aggregate amount of
all cash payments  received by the Borrower or any of its Subsidiaries  directly
or indirectly in connection with such  Disposition,  whether at the time of such
Disposition or after such  Disposition  under deferred  payment  arrangements or
Investments entered into or received in connection with such Disposition, net of
(i) the  amount of any  legal,  title,  transfer  and  recording  tax  expenses,
commissions  and other fees and  expenses  payable by the Borrower or any of its
Subsidiaries in connection therewith,  (ii) any Federal,  state and local income
or other Taxes  payable by the Borrower or any of its  Subsidiaries  as a result
thereof,  and (iii) any repayments by the Borrower or any of its Subsidiaries of
Indebtedness to the extent that such Indebtedness is secured by a Lien permitted
by Section  7.02(b) on the property that is the subject of such  Disposition and
the  transferee  of (or holder of a Lien on) such  property  requires  that such
Indebtedness be repaid as a condition to the purchase of such property, and (iv)
any  repayments  by  the  Borrower  or  any  of  its  Subsidiaries  to  minority
stockholders if and to the extent permitted hereby; and

                  (c) with respect to any incurrence of Indebtedness or offering
of Capital  Stock,  the aggregate  amount of all cash  proceeds  received by the
Borrower or any of its Subsidiaries  therefrom less all legal,  underwriting and
similar fees and expenses incurred in connection therewith;

in each case of clause (a),  (b) and (c) to the extent,  but only to the extent,
that the amounts so deducted are (x) actually  paid to a Person that,  except in
the case of  reasonable  out-of-pocket  expenses,  is not an  Affiliate  of such
Person  or any  of its  Subsidiaries  and  (y)  properly  attributable  to  such
transaction or to the asset that is the subject thereof.

         "NET INCOME" means, with respect to any Person for any period,  the net
income (loss) of such Person and its Subsidiaries for such period, determined on
a  consolidated  basis and in  accordance  with  GAAP,  but  excluding  from the
determination of Net Income (without  duplication) (a) any  extraordinary or non
recurring   gains  or  losses  or  gains  or  losses  from   Dispositions,   (b)
restructuring  charges, (c) effects of discontinued  operations and (d) interest
income (excluding interest income from CM Insurance Company, Inc.).

         "NET WORTH" means, as of any date of determination  thereof, the sum of
Total Assets MINUS (a) Total Liabilities,  plus (b) non-cash goodwill impairment
charges  recorded after the Effective Date in accordance with FASB Statement No.
142, and MINUS (c) Accumulated Other Comprehensive Gains (or Losses).


                                     - 16 -

<PAGE>

         "NON-CASH CHARGES" means, with respect to any calculation of net income
for any  period,  all  non-cash  extraordinary  losses  and  charges  (excluding
inventory  write-downs  and Accounts  Receivable  charge-offs)  deducted in such
calculation  (as  determined  in  accordance  with  GAAP,   including,   without
limitation,  non-cash  recognition of unrealized declines in the market value of
marketable  securities  recorded  in  accordance  with FASB  Statement  No. 115,
non-cash asset impairment charges recorded in accordance with FASB Statement No.
142 and FASB  Statement  No. 144 (in each case,  to the extent not  expected  to
result in cash charges in the future), and non-cash restructuring charges.

         "NOTICE OF  BORROWING"  has the meaning  specified  therefor in Section
2.02(a).

         "OBLIGATIONS" means all present and future  indebtedness,  obligations,
and  liabilities  of each Loan Party to the Agent and the Lenders under the Loan
Documents,  whether  or not the right of  payment  in  respect  of such claim is
reduced to  judgment,  liquidated,  unliquidated,  fixed,  contingent,  matured,
disputed,  undisputed,  legal, equitable, secured, unsecured, and whether or not
such  claim is  discharged,  stayed  or  otherwise  affected  by any  proceeding
referred to in Section 9.01.  Without  limiting the generality of the foregoing,
the  Obligations  of each Loan Party  under the Loan  Documents  include (a) the
obligation  to pay  principal,  interest  (including  the Term Loan PIK Amount),
charges,  expenses,  fees,  attorneys' fees and  disbursements,  indemnities and
other  amounts  payable by such  Person  under the Loan  Documents,  and (b) the
obligation  of such  Person to  reimburse  any  amount in  respect of any of the
foregoing that the Agent or any Lender (in its sole discretion) may elect to pay
or advance on behalf of such Person.

         "PARTICIPANT  REGISTER" has the meaning  specified  therefor in Section
12.07(b)(v).

         "PARTICIPATION   AGREEMENT"   means  the  Master   Risk   Participation
Agreement,  dated as of the date  hereof,  by and  among the Loan  Parties,  the
Canadian Agent and the Canadian Lenders.

         "PATENT  AGREEMENT" means a Patent  Collateral  Assignment and Security
Agreement made by a Loan Party in favor of the Agent,  substantially in the form
of Exhibit D.

         "PATENTS"  means all  patents  issued  or  assigned  to and all  patent
applications  made by the Loan  Parties  and,  to the extent that the grant of a
security interest does not cause a breach or termination  thereof, all exclusive
and  nonexclusive  licenses to the Loan Parties from third  parties or rights to
use patents owned by such third  parties,  including,  without  limitation,  the
patents,  patent  applications  and licenses listed on Schedule  6.01(e) hereto,
along with any and all (a)  inventions  and  improvements  described and claimed
therein,    (b)   reissues,    divisions,    continuations,    extensions    and
continuations-in-part  thereof,  (c)  income,  royalties,  damages,  claims  and
payments now and  hereafter due and/or  payable under and with respect  thereto,
including,  without  limitation,   damages  and  payments  for  past  or  future
infringements   thereof,  (d)  rights  to  sue  for  past,  present  and  future
infringements thereof, and (e) any other rights corresponding thereto throughout
the world.


                                     - 17 -

<PAGE>

         "PAYMENT OFFICE" means the Agent's office located at 70 Federal Street,
7th Floor,  Boston, MA 02110, or at such other office or offices of the Agent as
may be designated in writing from time to time by the Agent to the Borrower.

         "PBGC" means the Pension Benefit Guaranty  Corporation or any successor
thereto.

         "PENSION  PLAN" means any Plan that is a defined  benefit  pension plan
subject to the  provisions  of Title IV of ERISA or Section 412 of the  Internal
Revenue Code or Section 302 of ERISA,  and in respect of which any Loan Party or
any ERISA  Affiliate is (or, if such plan were  terminated,  would under Section
4069 of ERISA be deemed to be) an  "employer"  as  defined  in  Section  3(5) of
ERISA.

         "PERMITTED INVESTMENTS" means:

         (a) direct obligations of, or obligations the principal of and interest
on which are unconditionally  guaranteed by, the United States of America (or by
any agency thereof to the extent such  obligations  are backed by the full faith
and credit of the United States of America),  in each case  maturing  within one
year from the date of acquisition thereof;

         (b)  investments in commercial  paper maturing within 270 days from the
date of acquisition thereof and having, at such date of acquisition, the highest
credit rating obtainable from Standard and Poor's or from Moody's;

         (c) investments in certificates  of deposit,  banker's  acceptances and
time  deposits  maturing  within 180 days from the date of  acquisition  thereof
issued or guaranteed by or placed with, and money market deposit accounts issued
or offered by, any domestic  office of any commercial  bank organized  under the
laws of the United  States of America or any State  thereof which has a combined
capital and surplus and undivided profits of not less than $250,000,000;

         (d) fully collateralized  repurchase agreements with a term of not more
than 30 days for securities  described in clause (a) above and entered into with
a financial institution satisfying the criteria described in clause (c) above;

         (e) advances,  loans and extensions of credit to any director,  officer
or employee of the Loan Parties, if the aggregate outstanding amount of all such
advances,  loans and  extensions  of credit  (excluding  travel  advances in the
ordinary course of business) does not at any time exceed $500,000;

         (f)  investments  in money  market  mutual  funds that are rated AAA by
Standard & Poor's; and

         (g) stocks,  bonds, funds,  covered call options,  cash equivalents and
cash included in the  portfolio of  Investments  owned by CM Insurance  Company,
Inc. under the investment objective of "Aggressive Growth/Moderate Income" using
the following asset guidelines:  cash, 0% to 20%; bonds, 0% to 30%; stocks,  70%
to 90%;  other,  0% to 20%; in each case,  invested at the  discretion  of Fleet
Investment Advisors, Inc. and Gold-K Securities, Inc.


                                     - 18 -

<PAGE>

         "PERMITTED  LIENS"  has  the  meaning  specified  therefor  in  Section
7.02(b).

         "PERSON" means an individual,  corporation,  limited liability company,
partnership,    association,    joint-stock   company,   trust,   unincorporated
organization,  joint  venture  or other  enterprise  or entity  or  Governmental
Authority.

         "PLAN"  means any  employee  benefit plan within the meaning of Section
3(3) of ERISA in which any Loan Party or any ERISA Affiliate is an "employer" as
defined in Section 3(5) of ERISA or any employee  benefit plan  established  and
maintained  by, or for the  benefit  of such Loan  Party for the  benefit of its
respective  employees,  including,  but not  limited  to,  any  Pension  Plan or
Multiemployer Plan.

         "PLEDGE AGREEMENT" means a Pledge and Security Agreement made by a Loan
Party in favor of the Agent for the benefit of the Lenders, substantially in the
form of Exhibit B or otherwise acceptable to the Agent, securing the Obligations
and delivered to the Agent.

         "POST-DEFAULT  RATE"  means a rate of  interest  per annum equal to the
rate of interest  otherwise in effect from time to time pursuant to the terms of
this Agreement plus 3%.

         "PRO RATA SHARE" means,  with respect to a Lender's  obligation to make
the Term Loan and receive payments of interest, fees, and principal with respect
thereto,   and  all  other   matters   (including,   without   limitation,   the
indemnification   obligations  arising  under  Section  10.05),  the  percentage
obtained by dividing (i) such Lender's Term Loan  Commitment,  by (ii) the Total
Term Loan  Commitment,  PROVIDED that if the Total Term Loan Commitment has been
reduced to zero, the numerator shall be the aggregate unpaid principal amount of
such  Lender's  portion  of the  Term  Loan  and the  denominator  shall  be the
aggregate unpaid principal amount of the Term Loan.

         "PROPERTY"  means  any  interest  of any kind in  property  or  assets,
whether real, personal or mixed, and whether tangible or intangible.

         "PROPRIETARY  RIGHTS"  has the  meaning  specified  therefor in Section
6.01(e)(ii).

         "PTO"  means the  United  States  Patent  and  Trademark  Office or any
successor or substitute office in which filings are necessary or, in the opinion
of the Agent,  desirable  in order to create or perfect  Liens on any Patents or
Trademarks.

         "RATING AGENCIES" has the meaning specified therefor in Section 2.07.

         "REAL PROPERTY ASSET" means, at any time of determination,  any and all
real property owned or leased by the Loan Parties.

         "REFERENCE BANK" means JPMorgan Chase Bank, its successors or any other
commercial bank designated by the Agent to the Borrower from time to time.

         "REFERENCE  PERIOD" means, as of any date of determination,  the period
of four (4)  consecutive  fiscal  quarters of the Borrower and its  Subsidiaries
ending on  such date,  or if  such date  is not a fiscal  quarter end date,  the


                                     - 19 -

<PAGE>

period of four (4) consecutive fiscal quarters most recently ended (in each case
treated as a single accounting period).

         "REFERENCE RATE" means the rate of interest  publicly  announced by the
Reference  Bank in New York,  New York from time to time as its reference  rate,
base  rate or prime  rate.  The  reference  rate,  base  rate or  prime  rate is
determined  from time to time by the  Reference  Bank as a means of pricing some
loans to its  borrowers  and neither is tied to any external rate of interest or
index nor necessarily  reflects the lowest rate of interest  actually charged by
the Reference Bank to any particular class or category of customers. Each change
in the Reference Rate shall be effective from and including the date such change
is publicly announced as being effective.

         "REGISTER" has the meaning specified therefor in Section 12.07(b)(ii).

         "REGISTERED  LOAN"  has  the  meaning  specified  therefor  in  Section
12.07(b)(ii).

         "REGISTERED  PROPRIETARY  RIGHTS" has the meaning specified therefor in
Section 6.01(e)(iii).

         "REGULATION T",  "REGULATION U" and "REGULATION X" mean,  respectively,
Regulations T, U and X of the Board or any successor, as the same may be amended
or supplemented from time to time.

         "RELEASE"  means any spilling,  leaking,  pumping,  pouring,  emitting,
emptying,  discharging,   injecting,  escaping,  leaching,  seeping,  migrating,
dumping or disposing of any Hazardous  Material  (including  the  abandonment or
discarding of barrels,  containers and other closed  receptacles  containing any
Hazardous Material) into the indoor or outdoor environment,  including,  without
limitation,  the movement of Hazardous  Materials through or in the ambient air,
soil, surface or ground water, or property.

         "REMEDIAL  ACTION"  means all  actions  taken to (i) clean up,  remove,
remediate, contain, treat, monitor, assess, evaluate or in any other way address
Hazardous  Materials  in the  indoor or  outdoor  environment;  (ii)  prevent or
minimize a Release or threatened  Release of Hazardous  Materials so they do not
migrate or endanger or  threaten  to  endanger  public  health or welfare or the
indoor  or  outdoor   environment;   (iii)  perform   pre-remedial  studies  and
investigations and post-remedial operation and maintenance  activities;  or (iv)
perform any other actions authorized by 42 U.S.C. ss. 9601.

         "REQUIRED LENDERS" means Lenders whose Pro Rata Shares of the Term Loan
aggregate at least 51%.

         "RESTRICTED   JUNIOR   PAYMENT"   means  (i)  any   dividend  or  other
distribution, direct or indirect, on account of any shares of any class of stock
of, or other equity interest in, any Loan Party or any of its  Subsidiaries  now
or hereafter outstanding, except a dividend payable solely in shares of stock or
other equity interests, (ii) any redemption, retirement, sinking fund or similar
payment,  purchase or other  acquisition for value,  direct or indirect,  of any
shares of any class of stock of, or other equity  interest in, any Loan Party or
any of its Subsidiaries now or hereafter outstanding,  (iii) any payment made to
retire,  or to obtain  the surrender of,  any outstanding  warrants,  options or


                                     - 20 -

<PAGE>

other  rights to  acquire  shares  of any  class of stock  of,  or other  equity
interest  in, any Loan  Party or any of its  Subsidiaries,  (iv) any  payment or
prepayment  of principal  of,  premium,  if any, or interest  on, or  redemption
purchase,  retirement,  defeasance  (including  economic  or legal  defeasance),
sinking fund or similar  payment with respect to the Senior  Subordinated  Notes
and/or any intercompany Indebtedness owing by the Borrower or any Guarantor, and
(v)  any  payment  made  to any  Affiliates  of  any  Loan  Party  or any of its
Subsidiaries  in respect of  management,  consulting or other  similar  services
provided to any Loan Party or any of its Subsidiaries.

         "RESTRICTIVE  AGREEMENTS" has the meaning specified therefor in Section
6.01(m)(ii).

         "SEC" means the Securities and Exchange Commission or any other similar
or successor agency of the Federal government administering the Securities Act.

         "SECURITIES  ACT" means the Securities Act of 1933, as amended,  or any
similar  Federal  statute,  and the rules and regulations of the SEC thereunder,
all as the same shall be in effect from time to time.

         "SECURITIZATION" has the meaning specified therefor in Section 2.07.

         "SECURITIZATION  PARTIES" has the meaning specified therefor in Section
2.07.

         "SENIOR FUNDED INDEBTEDNESS"  means, at any time of determination,  the
sum of Total  Funded  Indebtedness  minus the  principal  amount  of the  Senior
Subordinated Notes outstanding at such time.

         "SENIOR  LEVERAGE  RATIO"  means as at any date of  determination,  the
ratio of (a) Senior  Funded  Indebtedness  of the Borrower and its  Subsidiaries
outstanding  on such date to (b) the EBITDA for the  Referenced  Period ended on
such date.

         "SENIOR SUBORDINATED NOTE DOCUMENTS" means the Senior Subordinated Note
Indenture,  the Senior  Subordinated Notes and all other documents,  instruments
and agreements executed and delivered in connection with the Senior Subordinated
Notes.

         "SENIOR  SUBORDINATED  NOTE  INDENTURE"  means  the  Columbus  McKinnon
Corporation  Series A and  Series B 8 1/2%  Senior  Subordinated  Notes Due 2008
Indenture,  dated as of March  31,  1998 (as  supplemented  by the  Supplemental
Indenture,  dated as of March 31, 1998, the Second Supplemental Indenture, dated
as of February 12, 1999, the Third Supplemental Indenture,  dated as of March 1,
1999, the Fourth Supplemental Indenture, dated as of November 1, 1999, the Fifth
Supplemental  Indenture,  dated as of April 4, 2002 and the  Sixth  Supplemental
Indenture,  dated as of August 5, 2002),  between the Borrower,  as issuer,  and
State Street Bank and Trust Company, N.A., as trustee.

         "SENIOR   SUBORDINATED  NOTES"  means  the  Borrower's  8  1/2%  senior
subordinated  notes due 2008  issued  pursuant to the Senior  Subordinated  Note
Indenture.


                                     - 21 -

<PAGE>

         "STANDARD  &  POOR'S"  means  Standard  & Poor's  Ratings  Services,  a
division of The McGraw-Hill Companies, Inc. and any successor thereto.

         "SUBSIDIARY"  means,  with  respect  to any  Person  at any  date,  any
corporation,  limited or general partnership,  limited liability company, trust,
estate, association,  joint venture or other business entity (i) the accounts of
which  would  be  consolidated  with  those  of such  Person  in  such  Person's
consolidated  financial statements if such financial statements were prepared in
accordance  with  GAAP or (ii) of which  more  than  50% of (A) the  outstanding
Capital Stock having (in the absence of contingencies)  ordinary voting power to
elect a  majority  of the  board of  directors  or other  managing  body of such
Person,  (B) in the case of a  partnership  or limited  liability  company,  the
interest  in the  capital or profits of such  partnership  or limited  liability
company or (C) in the case of a trust,  estate,  association,  joint  venture or
other entity,  the  beneficial  interest in such trust,  estate,  association or
other entity  business  is, at the time of  determination,  owned or  controlled
directly or indirectly through one or more intermediaries, by such Person.

         "SYNTHETIC LEASE" means, any lease of goods or other property,  whether
real or  personal,  which is treated as an  operating  lease under GAAP and as a
loan or financing for U.S. income tax purposes.

         "TAXES" has the meaning specified therefor in Section 2.08(a).

         "TERM LOAN" means,  collectively,  the loans made by the Lenders to the
Borrower on the Effective Date pursuant to Section 2.01(a).

         "TERM  LOAN  COMMITMENT"  means,  with  respect  to  each  Lender,  the
commitment  of such  Lender to make the Term Loan to the  Borrower in the amount
set forth in Schedule  1.01(A) hereto,  as the same may be terminated or reduced
from time to time in accordance with the terms of this Agreement.

         "TERM LOAN PIK  AMOUNT"  means,  as at any date of  determination,  the
amount  of all  interest  accrued  with  respect  to the Term Loan that has been
paid-in-kind  by being added to the  outstanding  principal  balance of the Term
Loan in accordance with Section 2.04(a).

         "TITLE INSURANCE  POLICY" means a mortgagee's loan policy,  in form and
substance  satisfactory to the Agent,  together with all endorsements  made from
time to time  thereto,  issued  by or on  behalf  of a title  insurance  company
satisfactory to the Agent,  insuring the Lien created by a Mortgage in an amount
and on terms satisfactory to the Agent, delivered to the Agent.

         "TRADEMARK  AGREEMENT" means a Trademark Collateral Security and Pledge
Agreement made by a Loan Party in favor of the Agent,  substantially in the form
of Exhibit C.

         "TRADEMARKS" means all trademarks  (including  service marks),  federal
and state trademark  registrations  and  applications  made by the Loan Parties,
common law  trademarks and trade names owned by or assigned to the Loan Parties,
all  registrations  and  applications  for the  foregoing  and all exclusive and
nonexclusive  licenses from third parties of the right to use trademarks of such
third parties, including,  without limitation, the registrations,  applications,
unregistered  trademarks,  service marks and licenses listed on Schedule 6.01(e)
hereto,  along with any  and all  (a) renewals  thereof, (b) income,  royalties,


                                     - 22 -

<PAGE>

damages and payments now and hereafter due and/or payable with respect  thereto,
including,  without limitation,  damages, claims and payments for past or future
infringements   thereof,  (c)  rights  to  sue  for  past,  present  and  future
infringements thereof, and (d) foreign trademarks,  trademark registrations, and
trade name  applications  for any  thereof  and any other  rights  corresponding
thereto throughout the world.

         "TOTAL ASSETS" means the sum of (a) all assets  ("CONSOLIDATED  BALANCE
SHEET ASSETS") of the Borrower and its Subsidiaries determined on a consolidated
basis in accordance with GAAP, PLUS (b) without  duplication,  all assets leased
by the Borrower or any of its  Subsidiaries  as lessee under any Synthetic Lease
to the extent that such assets would have been consolidated balance sheet assets
had the Synthetic Lease been treated for accounting  purposes as a Capital Lease
Obligation.

         "TOTAL FUNDED INDEBTEDNESS" means, with respect to the Borrower and its
Subsidiaries,  the sum,  without  duplication,  of (a) the  aggregate  amount of
Indebtedness of the Borrower and its  Subsidiaries  determined on a consolidated
basis in  accordance  with GAAP,  relating to (i) the  borrowing of money or the
obtaining of credit, including the issuance of notes or bonds, (ii) the deferred
purchase  price of assets  (other than trade  payables  incurred in the ordinary
course of  business),  (iii) in respect of any  Synthetic  Leases or any Capital
Lease Obligations,  and (iv) the maximum drawing amount of all letters of credit
outstanding,  PLUS (b)  Indebtedness  of the type  referred  to in clause (a) of
another Person guaranteed by the Borrower or any of its Subsidiaries.

         "TOTAL  LIABILITIES"  means all  liabilities  of the  Borrower  and its
Subsidiaries  determined on a  consolidated  basis in  accordance  with GAAP and
classified  as such on the  consolidated  balance  sheet of the Borrower and its
Subsidiaries  and all other  Indebtedness of the Borrower and its  Subsidiaries,
whether or not so classified.

         "TOTAL  TERM  LOAN  COMMITMENT"  means  the sum of the  amounts  of the
Lenders' Term Loan Commitments.

         "TOTAL  VOTING  POWER"  means,  with  respect to any Person,  the total
number of votes which holders of securities  having the ordinary  power to vote,
in the  absence  of  contingencies,  are  entitled  to cast in the  election  of
directors of such Person.

         "UCC FILING AUTHORIZATION  LETTER" means a letter duly executed by each
Loan Party  authorizing the Agent to file  appropriate  financing  statements on
Form UCC-1 without the signature of such Loan Party in such office or offices as
may be  necessary  or, in the  opinion of the Agent,  desirable  to perfect  the
security interests purported to be created by each Collateral Document.

         "UNIFORM COMMERCIAL CODE" has the meaning specified therefor in Section
1.03.

         "WITHDRAWAL  LIABILITY"  means liability to a  Multiemployer  Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.


                                     - 23 -

<PAGE>

         "WORKING CAPITAL AGENT" means Fleet Capital  Corporation,  as agent for
the Working Capital Lenders under the Working Capital Loan Agreement.

         "WORKING CAPITAL  AVAILABILITY" means "Domestic Excess Availability" as
such term is defined in the Working  Capital Loan Agreement as such agreement is
in effect on the date hereof.

         "WORKING  CAPITAL  BORROWING BASE" means,  collectively,  the "Domestic
Borrowing  Base" and the "Canadian  Borrowing Base" as each such term is defined
in the Working Capital Loan Agreement as such agreement is in effect on the date
hereof.

         "WORKING CAPITAL INDEBTEDNESS" means, collectively, the Indebtedness of
the Borrowers owing to the Working Capital Agent and the Working Capital Lenders
and (ii) the Indebtedness of the Canadian Borrowers owing to the Canadian Lender
(as  defined in the  Working  Capital  Loan  Agreement  as in effect on the date
hereof), in each case under the Working Capital Loan Agreement.

         'WORKING  CAPITAL LC  EXPOSURE"  means the "Total LC  Exposure" as such
term is defined in the Working  Capital Loan  Agreement as such  agreement is in
effect on the date hereof.

         "WORKING  CAPITAL LENDERS" means the lenders from time to time party to
the Working Capital Loan Agreement.

         "WORKING  CAPITAL LOAN AGREEMENT" means the amended and restated credit
and security agreement,  dated as of the date hereof, by and among the Borrower,
the Canadian  Borrowers,  the  Guarantors,  the Working  Capital Lenders and the
Working Capital Agent.

         "WORKING CAPITAL LOAN DOCUMENTS" means,  collectively,  (i) the Working
Capital Loan Agreement,  and (ii) all other agreements,  instruments,  and other
documents executed and delivered in connection therewith.

         "WORKING  CAPITAL LOANS" means,  collectively,  the (i) Working Capital
Revolving Loans and (ii) the Working Capital Term Loan.

         "WORKING  CAPITAL  REVOLVING  LOANS"  means  the  "Revolving  Loan" (as
defined in the Working Capital Loan Agreement as in effect on the date hereof).

         "WORKING  CAPITAL  TERM LOAN"  means the "Term Loan" (as defined in the
Working Capital Loan Agreement as in effect on the date hereof).

         Section 1.02 TERMS  GENERALLY.  The  definitions  of terms herein shall
apply  equally to the singular and plural forms of the terms  defined.  Whenever
the context may require, any pronoun shall include the corresponding  masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed  by the phrase  "without  limitation".  The word "will"
shall be  construed  to have the same  meaning  and effect as the word  "shall".
Unless the context requires otherwise, (a) any definition of or reference to any
agreement,  instrument or other document  herein shall be construed as referring


                                     - 24 -

<PAGE>

to such  agreement,  instrument or other  document as from time to time amended,
supplemented  or  otherwise  modified  (subject  to  any  restrictions  on  such
amendments,  supplements or modifications  set forth herein),  (b) any reference
herein to any Person shall be construed to include such Person's  successors and
assigns, (c) the words "herein", "hereof" and "hereunder",  and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any  particular  provision  hereof,  (d)  all  references  herein  to  Articles,
Sections,  Exhibits  and  Schedules  shall be construed to refer to Articles and
Sections of, and Exhibits and  Schedules  to, this  Agreement  and (e) the words
"asset" and  "property"  shall be  construed to have the same meaning and effect
and to refer to any right or interest in or to assets and properties of any kind
whatsoever,  whether real, personal or mixed and whether tangible or intangible.
References in this Agreement to  "determination" by the Agent include good faith
estimates  by the Agent (in the case of  quantitative  determinations)  and good
faith beliefs by the Agent (in the case of qualitative determinations).

         Section 1.03  ACCOUNTING AND OTHER TERMS.  Unless  otherwise  expressly
provided  herein,  each accounting term used herein shall have the meaning given
it under GAAP applied on a basis  consistent  with those used in  preparing  the
Financial  Statements.  All terms used in this  Agreement  which are  defined in
Article 8 or Article 9 of the Uniform  Commercial Code as in effect from time to
time in the State of New York (the "UNIFORM  COMMERCIAL CODE") and which are not
otherwise  defined  herein  shall  have the same  meanings  herein  as set forth
therein,  provided  that  terms used  herein  which are  defined in the  Uniform
Commercial  Code as in effect in the State of New York on the date hereof  shall
continue to have the same meaning  notwithstanding  any replacement or amendment
of such statute except as the Agent may otherwise determine.

         Section 1.04 TIME REFERENCES.  Unless otherwise  indicated herein,  all
references  to time of day refer to Eastern  Standard  Time or Eastern  daylight
saving  time,  as in effect in New York City on such day.  For  purposes  of the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and  including"  and the words "to" and "until" each
means "to but excluding";  PROVIDED, HOWEVER, that with respect to a computation
of fees or interest payable to the Agent or any Lender, such period shall in any
event consist of at least one full day.

                                   ARTICLE II

                                    THE LOANS

         Section  2.01  TERM  LOAN  COMMITMENTS.  (a)  Subject  to the terms and
conditions and relying upon the representations and warranties herein set forth,
each  Lender  severally  agrees  to make the Term  Loan to the  Borrower  on the
Effective  Date,  in an aggregate  principal  amount not to exceed the amount of
such Lender's Term Loan Commitment.


                                     - 25 -

<PAGE>

                  (b)  Notwithstanding  the foregoing,  the aggregate  principal
amount of the Term Loan made on the  Effective  Date  shall not exceed the Total
Term Loan  Commitment.  Any principal amount of the Term Loan which is repaid or
prepaid may not be reborrowed.


         Section 2.02 MAKING THE TERM LOAN.  The  Borrower  shall give the Agent
prior telephonic notice (immediately confirmed in writing,  substantially in the
form of  Exhibit G (a "NOTICE  OF  BORROWING")),  not later than 12:00 noon (New
York City time) on the date which is one (1) Business Day prior to the Effective
Date.  Such Notice of Borrowing  shall be irrevocable  and shall specify (i) the
principal  amount of the Term  Loan,  (ii) the use of the  proceeds  of the Term
Loan, and (iii) the proposed  borrowing date,  which must be a Business Day. The
Agent and the  Lenders  may act  without  liability  upon the basis of  written,
telecopied or telephonic  notice  believed by the Agent in good faith to be from
the Borrower  (or from any  Authorized  Officer  thereof  designated  in writing
purportedly  from the  Borrower to the Agent).  The Borrower  hereby  waives the
right to dispute the Agent's record of the terms of any such  telephonic  Notice
of Borrowing.  The Agent and each Lender shall be entitled to rely  conclusively
on any Authorized  Officer's authority to request the Term Loan on behalf of the
Borrower until the Agent receives written notice to the contrary.  The Agent and
the  Lenders  shall have no duty to verify  the  authenticity  of the  signature
appearing on any written Notice of Borrowing.

                  (b) The Term Loan shall be made by the Lenders  simultaneously
and  proportionately to their Pro Rata Shares of the Total Term Loan Commitment,
it being  understood  that no Lender shall be responsible for any default by any
other Lender in that other Lender's  obligations to make the Term Loan requested
hereunder,  nor shall the Term Loan  Commitment  of any Lender be  increased  or
decreased as a result of the default by any other Lender in that other  Lender's
obligation to make the Term Loan requested  hereunder,  and each Lender shall be
obligated  to make the Term Loan  required to be made by it by the terms of this
Agreement regardless of the failure by any other Lender.

         Section  2.03  REPAYMENT  OF THE TERM LOAN;  EVIDENCE OF DEBT.  (a) The
outstanding  principal  of the Term  Loan  shall be  repaid in full on the Final
Maturity Date.

                  (b) Each Lender shall  maintain in  accordance  with its usual
practice an account or accounts  evidencing the  Indebtedness of the Borrower to
such Lender  resulting  from the Term Loan made by such  Lender,  including  the
amounts of principal  and interest  payable and paid to such Lender from time to
time hereunder.

                  (c) The Agent shall maintain accounts in which it shall record
(i) the amount of the Term Loan made hereunder, (ii) the amount of any principal
or interest  due and payable or to become due and payable  from the  Borrower to
each  Lender  hereunder  and (iii) the amount of any sum  received  by the Agent
hereunder for the account of the Lenders and each Lender's share thereof.

                  (d) The entries  made in the accounts  maintained  pursuant to
paragraph  (b) or (c) of this  Section  shall be  PRIMA  FACIE  evidence  of the
existence and amounts of the  obligations  recorded  therein;  PROVIDED that the
failure  of any  Lender  or the Agent to  maintain  such  accounts  or any error
therein shall not in any manner  affect the  obligation of the Borrower to repay
the Term Loan in accordance with the terms of this Agreement.


                                     - 26 -

<PAGE>

                  (e) Any  Lender may  request  that the Term Loan made by it be
evidenced by a promissory  note. In such event,  the Borrower  shall execute and
deliver to such  Lender a  promissory  note  payable to the order of such Lender
(or, if requested by such Lender, to such Lender and its registered  assigns) in
a form  furnished  by the  Agent  and  reasonably  acceptable  to the  Borrower.
Thereafter, the Term Loan evidenced by such promissory note and interest thereon
shall at all times  (including  after  assignment  pursuant to Section 12.07) be
represented by one or more promissory notes in such form payable to the order of
the payee named therein (or, if such  promissory  note is a registered  note, to
such payee and its registered assigns).

         Section 2.04 INTEREST.

                  (a) TERM LOAN.

                           (i)  The  Term  Loan  shall  bear   interest  on  the
principal  amount  thereof from time to time  outstanding,  from the date of the
Term Loan until such principal  amount becomes due, at a rate per annum equal to
the sum of (A) the  lesser of (1) the Base  Interest  Rate  plus the  Applicable
Margin  and (2)  15.0%  PLUS (B)  1.25%;  PROVIDED  that,  in the  absence  of a
continuing  Event of Default,  that portion of such interest  equal to 1.25% per
annum shall,  in the absence of an election by the Borrower to pay such interest
in cash, be paid-in-kind by being added to the outstanding  principal  amount of
the Term Loan,  PROVIDED,  FURTHER,  that,  the Borrower may, on or prior to the
date that is 5 Business Days prior to due date thereof, elect to pay all accrued
and unpaid interest under this Section 2.04(a)(i)(B) in cash.

                           (ii)   Notwithstanding   anything  to  the   contrary
contained in Section  2.04(a)(i),  (A) in the event that the Borrower  repays in
full in cash all  Obligations  (other than the Term Loan PIK Amount)  under this
Agreement and the other Loan  Documents on or prior to the first  anniversary of
the Effective  Date, the Borrower shall not be required to repay any of the Term
Loan PIK Amount and (B) in the event  that the  Borrower  repays in full in cash
all  Obligations  (other than the Term Loan PIK Amount) under this Agreement and
the other Loan Documents on or prior to the second  anniversary of the Effective
Date,  the  Borrower  shall  not be  required  to repay 50% of the Term Loan PIK
Amount.

                  (b) DEFAULT INTEREST. To the extent permitted by law, upon the
occurrence and during the continuance of an Event of Default,  the principal of,
and all accrued and unpaid interest on, the Term Loan, fees, indemnities, or any
other  Obligations  of the Loan Parties under this  Agreement and the other Loan
Documents,  shall bear  interest,  from the date such Event of Default  occurred
until the date such Event of Default is cured or waived in writing in accordance
herewith, at a rate per annum equal at all times to the Post-Default Rate.

                  (c)  INTEREST  PAYMENT.  Interest  on the Term  Loan  shall be
payable monthly, in arrears,  on the first day of each month,  commencing on the
first day of the month following the month in which the Term Loan is made and at
maturity  (whether upon demand,  by acceleration or otherwise).  Interest at the
Post-Default Rate shall be payable on demand. The Borrower hereby authorizes the
Agent to, and the Agent may, from time to time, charge the Loan Account pursuant
to  Section  4.02  with the  amount  of any  interest  payment  due and  payable
hereunder.


                                     - 27 -

<PAGE>

                  (d) GENERAL.  All interest shall be computed on the basis of a
year of 360 days for the  actual  number  of days,  including  the first day but
excluding the last day, elapsed.

         Section 2.05 REDUCTION OF THE TERM LOAN  COMMITMENT;  PREPAYMENT OF THE
TERM LOAN.

                  (a) REDUCTION OF THE TERM LOAN COMMITMENT. The Total Term Loan
Commitment  shall  terminate at 5:00 p.m.  (New York City time) on the Effective
Date.

                  (b) OPTIONAL PREPAYMENT.  The Borrower may, upon at least five
(5) Business Days' prior written notice to the Agent,  prepay without penalty or
premium the  principal of the Term Loan,  in whole or in part.  Each  prepayment
made pursuant to this clause (b) shall be  accompanied by the payment of accrued
interest to the date of such payment on the amount prepaid. Each such prepayment
shall be applied against the remaining installments of principal due on the Term
Loan in the inverse order of maturity.

                  (c) MANDATORY PREPAYMENT.

                           (i) Within 10 days of  delivery  to the Agent and the
Lenders of audited annual financial  statements  pursuant to Section 7.01(a)(i),
commencing  with the  delivery  to the Agent and the  Lenders  of the  financial
statements  for the  Fiscal  Year  ended  March 31,  2004 or, if such  financial
statements  are not  delivered  to the  Agent and the  Lenders  on the date such
statements are required to be delivered pursuant to Section 7.01(a)(i),  10 days
after the date such statements are required to be delivered to the Agent and the
Lenders pursuant to Section 7.01(a)(i),  the Borrower shall make a prepayment to
the  Working  Capital  Loans  and/or the Term Loan in  accordance  with  Section
2.05(d) hereto in an amount equal to 50% of the Excess Cash Flow of the Borrower
and its Subsidiaries for such Fiscal Year.

                           (ii)  Immediately  upon any  Disposition  by any Loan
Party or its  Subsidiaries  pursuant to Sections  7.02(d)(ii)  and  7.02(d)(iii)
(other than (A)  Dispositions  permitted  under Section  7.02(d)(ii)(B)  and (B)
Dispositions  permitted  under  Section  7.02(d)(iii)  to the  extent  that  the
aggregate  Net Cash Proceeds  received  therefrom do not exceed  $500,000),  the
Borrower shall make a prepayment to the Working Capital Loans (which may include
provision of cash collateral in respect of Working  Capital LC Exposure)  and/or
the Term Loan in accordance  with Section  2.05(d)  hereto in an amount equal to
100% of the Net Cash Proceeds  received by such Person in  connection  with such
Disposition.  Nothing  contained in this  subsection  (ii) shall permit any Loan
Party or any of its  Subsidiaries  to make a Disposition  of any property  other
than in accordance with Sections 7.02(d)(ii) and 7.02(d)(iii).

                           (iii) Upon the  issuance  or  incurrence  by any Loan
Party or any of its  Subsidiaries of any Indebtedness  (other than  Indebtedness
permitted  pursuant  to Section  7.02(a)),  or the sale or  issuance by any Loan
Party  or any of its  Subsidiaries  of any  shares  of its  Capital  Stock,  the
Borrower shall make a prepayment to the Working Capital Loans (which may include
provision of cash collateral in respect of Working  Capital LC Exposure)  and/or
the Term Loan in accordance  with Section  2.05(d)  hereto in an amount equal to
100% of the Net Cash Proceeds  received by such Person in connection  therewith.


                                     - 28 -

<PAGE>

The  provisions  of this  subsection  (iii)  shall not be  deemed to be  implied
consent to any such  issuance,  incurrence or sale  otherwise  prohibited by the
terms and conditions of this Agreement.

                           (iv) Upon the receipt by any Loan Party or any of its
Subsidiaries of any Extraordinary Receipts, the Borrower shall make a prepayment
to the Working Capital Loans (which may include  provision of cash collateral in
respect of Working Capital LC Exposure)  and/or the Term Loan in accordance with
Section  2.05(d)  hereto  in an  amount  equal  to 100%  of  such  Extraordinary
Receipts,   net  of  any  reasonable   expenses   incurred  in  collecting  such
Extraordinary  Receipts;  PROVIDED,  that  in the  case  of  insurance  proceeds
received in connection  with a Casualty Event with respect to Property having an
aggregate market value less than $1,500,000,  so long as, at the time of receipt
and use of such insurance proceeds,  no Event of Default shall have occurred and
be continuing, the Loan Parties shall be entitled to use such insurance proceeds
(in an amount not in excess of  $1,500,000)  to repair or replace  the  Property
affected by such Casualty Event, PROVIDED, FURTHER, that (A) until so used, such
insurance  proceeds shall be deposited into a cash collateral  account (and when
so  deposited  such  insurance  proceeds  shall  constitute  Collateral  for the
Obligations then outstanding), (B) such insurance proceeds may be used solely to
repair or replace the Property that was the subject of such Casualty  Event with
other Property of the same type,  (C) such  insurance  proceeds must be used and
such  Property  must be repaired  or replaced  within 180 days after the date of
receipt  thereof,  and (D) upon the occurrence and during the  continuance of an
Event of Default or after such 180 day period shall have expired, such insurance
proceeds,  if not so used,  shall be applied to the  prepayment  of the  Working
Capital Loans and/or the Term Loan as provided in Section 2.05(d).

                           (v) In the  event  that the  aggregate  amount of the
cash and Permitted Investments (other than cash in the Prepayment Escrow Account
(as defined in the Working  Capital Loan  Agreement) and  Investments  permitted
pursuant to clause (g) of the definition of Permitted  Investments)  of the Loan
Parties and their  Subsidiaries  exceeds at any time  $1,500,000,  the  Borrower
shall  immediately  make a prepayment  to the Working  Capital  Loans (which may
include  provision of cash collateral in respect of Working Capital LC Exposure)
and/or the Term Loan in  accordance  with  Section  2.05(d)  hereto in an amount
equal to such excess.

                  (d)  APPLICATION  OF  PAYMENTS.  Each  prepayment  pursuant to
subsections (c)(i), (c)(ii), (c)(iii), (c)(iv) and (c)(v) above shall be applied
as follows:

                           (i) if the proceeds are from (A) any  Disposition  of
any Account  Receivable  or Inventory or any  insurance  policy or  condemnation
award  with  respect  to  Inventory  or (B)  any  event  set  forth  in  Section
2.05(c)(v),  such  proceeds  shall be applied,  first,  to the  Working  Capital
Revolving  Loans  until  paid in  full  (which  may  include  provision  of cash
collateral in respect of Working  Capital LC Exposure),  second,  to the Working
Capital Term Loan until paid in full and,  third, to the Term Loan until paid in
full;

                           (ii) if the proceeds are from any  Disposition of any
of the  Mortgaged  Properties  described  on Schedule  1.01(E) or any  insurance
policy or condemnation award with respect to any such Mortgaged Properties, such
proceeds  shall be applied  either to the Working  Capital Term Loan or the Term
Loan;


                                     - 29 -

<PAGE>

                           (iii) if the proceeds are from any Disposition of any
Mortgaged  Properties  other than those  described  on  Schedule  1.01(E) or any
insurance  policy or  condemnation  award  with  respect  to any such  Mortgaged
Properties,  such proceeds shall be applied,  first, to the Working Capital Term
Loan in an amount equal to the Appraised Value of such Mortgaged  Properties (as
set forth in the most recent appraisal of such Mortgaged  Property  delivered by
the Working Capital Agent to the Agent) and, second, to the Term Loan until paid
in full;

                           (iv) subject to clause (v) below, if the proceeds are
from the  Disposition  of any (A) other assets of the Loan Parties not described
in clause (i), (ii) or (iii) above or (B) event set forth in Section 2.05(c)(i),
(c)(iii)  or  (c)(iv),  such  proceeds  shall be applied  either to the  Working
Capital Term Loan or to the Term Loan; and

                           (v) if the proceeds are from a Disposition  of all or
substantially all of the assets or Capital Stock of any Person or any insurance,
which Disposition or proceeds of insurance includes both (1) Accounts Receivable
or Inventory  and (2) other assets,  such proceeds  shall be applied as follows:
(A) an  amount  equal to the net  book  value of such  Accounts  Receivable  and
Inventory  shall be applied to the Working  Capital  Revolving  Loans (which may
include  provision of cash collateral in respect of Working Capital LC Exposure)
and (B) the remaining  proceeds shall be applied  either to the Working  Capital
Term Loan or to the Term Loan;

PROVIDED,  that in the case of each of clauses (i) through (v) above,  if either
(x) the  conditions to any prepayment of the Term Loan set forth in Section 8.14
of the Working  Capital Loan Agreement (as in effect on the date hereof) are not
satisfied or (y) the Borrower is required to apply such  proceeds to the Working
Capital  Revolving  Loans  pursuant  to the terms of the  Working  Capital  Loan
Agreement  (as in effect on the date  hereof),  then the  Borrower  shall not be
required to make such prepayment of the Term Loan to the extent that:

                                    (1) in the case of clause  (x) or (y) above,
either (AA) the Borrower  actually  applies the proceeds that would otherwise be
required  to be applied to the Term Loan  pursuant  to Section  2.05(c) and this
Section 2.05(d) to the Working  Capital Term Loan or (BB) the Borrower  actually
applies the proceeds that would  otherwise be required to be applied to the Term
Loan pursuant to Section 2.05(c) and this Section 2.05(d) to the Working Capital
Revolving  Loans (which may include  provision of cash  collateral in respect of
Working Capital LC Exposure),  and the Working Capital Agent,  concurrently with
such payment of the Working Capital  Revolving Loans, (xx) makes a corresponding
permanent  reduction  in the  Revolving  Credit  Commitments  (as defined in the
Working  Capital Loan Agreement as in effect on the date hereof) and (yy) except
in the case of Section  2.05(c)(iii),  establishes and maintains a corresponding
permanent  reserve  against the Working  Capital  Borrowing Base, in the case of
each of (xx) and (yy),  in an amount equal to the amount of proceeds  that would
have  otherwise  been applied by the Borrower to the prepayment of the Term Loan
pursuant to Section 2.05(c) and this Section 2.05(d),

                                    (2) in the case of clauses (x) or (y) above,
(AA) the Borrower actually applies the proceeds that would otherwise be required
to be applied to the Term Loan  pursuant  to Section  2.05(c)  and this  Section


                                     - 30 -

<PAGE>

2.05(d) to the Working Capital  Revolving Loans (which may include  provision of
cash collateral in respect of Working Capital LC Exposure) and (BB) concurrently
with such payment of the Working Capital  Revolving  Loans,  the Working Capital
Agent  establishes and maintains a reserve against the Working Capital Borrowing
Base in an amount equal to the amount of proceeds that would have otherwise been
applied by the Borrower to the  prepayment  of the Term Loan pursuant to Section
2.05(c) and this Section  2.05(d),  PROVIDED,  that, the amount of such proceeds
that are  applied  to the  Working  Capital  Revolving  Loans  pursuant  to this
subclause (2) shall be required to be applied to the prepayment of the Term Loan
at any time after such  application to the Working  Capital  Revolving  Loans if
either (xx) no breach of Section 8.14 of the Working  Capital Loan Agreement (as
in effect on the date hereof) would occur as a result of such  prepayment of the
Term Loan or (yy) the Working  Capital Agent  releases all or any portion of the
reserve  established against the Working Capital Borrowing Base at the time such
proceeds were applied to the Working Capital Revolving Loans, or

                                    (3) in the  case of  clause  (x)  above at a
time  when  the  Working  Capital  Term  Loan  has  been  paid in full  and such
prepayment  of the Term Loan is  required  pursuant to Section  2.05(c)(i),  the
Borrower  makes such payment on a deferred  basis (in whole or in part from time
to time) to the extent that such payment(s) do not result in a breach of Section
8.14 of the Working Capital Loan Agreement (as in effect on the date hereof).

Each such  prepayment  of the Working  Capital  Term Loan made  pursuant to this
subsection  2.05(d)  shall be applied  against  the  remaining  installments  of
principal of the Working Capital Term Loan in the inverse order of maturity.

                  (e) INTEREST AND FEES.  Any  prepayment  made pursuant to this
Section 2.05 shall be  accompanied by accrued  interest on the principal  amount
being prepaid to the date of prepayment, and if such prepayment would reduce the
outstanding  principal amount of the Term Loan to zero, such prepayment shall be
accompanied  by the payment of all fees accrued to such date pursuant to Section
2.06.

                  (f)  CUMULATIVE  PREPAYMENTS.  Except as  otherwise  expressly
provided in this Section 2.05,  payments with respect to any  subsection of this
Section  2.05 are in addition to payments  made or required to be made under any
other subsection of this Section 2.05.

         Section 2.06 FEES.

                  (a)  CLOSING  FEE.  On or prior  to the  Effective  Date,  the
Borrower  shall pay to the Agent for the account of the Lenders,  in  accordance
with their Pro Rata Shares,  a  non-refundable  closing fee (the "CLOSING  FEE")
equal to $2,100,000, which shall be deemed fully earned when paid.

                  (b) LOAN  SERVICING FEE. From and after the Effective Date and
until the later of (i) the  Final  Maturity  Date and (ii) the date on which all
Obligations  are paid in full,  the  Borrower  shall  pay to the  Agent  for the
account of the Agent, a  non-refundable  loan servicing fee (the "LOAN SERVICING
FEE") equal to $7,500 each month,  which shall be deemed  fully earned when paid
and which shall be payable on the Effective  Date (payable  ratably based on the


                                     - 31 -

<PAGE>

number of days  remaining in the month in which the  Effective  Date occurs) and
monthly  in advance  thereafter  on the first day of each  month  commencing  on
December 1, 2002.

                  (c)  ANNIVERSARY  FEE. The Borrower shall pay to the Agent for
the  account  of the  Lenders,  in  accordance  with  their Pro Rata  Shares,  a
non-refundable anniversary fee (the "ANNIVERSARY FEE") in an amount equal to the
product of (i)  Anniversary  Fee Percentage  MULTIPLIED BY (ii) the  outstanding
principal  amount of the Term Loan, which shall be deemed fully earned when paid
and which shall be payable on each anniversary of the Effective Date.

         Section 2.07  SECURITIZATION.  The Loan Parties hereby acknowledge that
the  Lenders  and  their  Affiliates  may sell or  securitize  the Term  Loan (a
"SECURITIZATION") through the pledge of the Term Loan as collateral security for
loans to the Lenders or their Affiliates or through the sale of the Term Loan or
the issuance of direct or indirect  interests  in the Term Loan,  which loans to
the Lenders or their Affiliates or direct or indirect interests will be rated by
Moody's,  Standard & Poor's or one or more other  rating  agencies  (the "RATING
AGENCIES").  The Loan  Parties  shall  cooperate  with  the  Lenders  and  their
Affiliates to effect the Securitization  including,  without limitation,  by (a)
amending  this  Agreement  and the other  Loan  Documents,  and  executing  such
additional documents,  as reasonably requested by the Lenders in connection with
the  Securitization,   PROVIDED  THAT  (i)  any  such  amendment  or  additional
documentation does not impose material  additional costs on the Loan Parties and
(ii)  any  such  amendment  or  additional  documentation  does  not  materially
adversely affect the rights, or materially increase the obligations, of the Loan
Parties under the Loan  Documents or change or affect in a manner adverse to the
Loan  Parties  the  financial  terms  of  the  Term  Loan,  (b)  providing  such
information as may be reasonably requested by the Lenders in connection with the
rating of the Term Loan or the  Securitization,  and (c) providing in connection
with any rating of the Term Loan a  certificate  (i) agreeing to  indemnify  the
Lenders and their Affiliates, any of the Rating Agencies, or any party providing
credit support or otherwise  participating in the Securitization  (collectively,
the  "SECURITIZATION  PARTIES") for any losses,  claims,  damages or liabilities
(the   "LIABILITIES")   to  which  the  Lenders,   their   Affiliates   or  such
Securitization  Parties may become subject insofar as the Liabilities  arise out
of or are based upon any untrue  statement  or alleged  untrue  statement of any
material fact  contained in any Loan Document or in any writing  delivered by or
on behalf of any Loan Party to the Lenders in connection  with any Loan Document
or arise out of or are based  upon the  omission  or alleged  omission  to state
therein a material fact required to be stated therein,  or necessary in order to
make the statements therein, in light of the circumstances under which they were
made,  not  misleading,  and such  indemnity  shall  survive any transfer by the
Lenders or their  successors  or assigns of the Term Loan and (ii)  agreeing  to
reimburse  the  Lenders  and their  Affiliates  for any legal or other  expenses
reasonably   incurred  by  such  Persons  in  connection   with   defending  the
Liabilities.

         Section 2.08 TAXES.  (a) All payments made by any Loan Party  hereunder
or under any other Loan Document  shall be made without  set-off,  counterclaim,
deduction or other  defense.  All such payments  shall be made free and clear of
and without deduction for any present or future income,  franchise,  sales, use,
excise,  stamp or other  taxes,  levies,  imposts,  deductions,  charges,  fees,
withholdings, restrictions or conditions of any nature now or hereafter imposed,
levied, collected, withheld or assessed by any jurisdiction (whether pursuant to
Federal,  state, local or foreign law) or by any political subdivision or taxing
authority thereof or therein, and all interest, penalties or additional amounts,
excluding  taxes on the net  income of any  Lender or the Agent  imposed  by the


                                     - 32 -

<PAGE>

jurisdiction  in which such Lender or the Agent is  organized  or any  political
subdivision  thereof or taxing  authority  thereof or any  jurisdiction in which
such Person's principal office is located or any political  subdivision  thereof
or  taxing  authority  thereof  (such  nonexcluded   taxes,   levies,   imposts,
deductions,  charges, fees, withholdings,  restrictions,  conditions,  interest,
penalties and additional amounts being hereinafter  collectively  referred to as
"TAXES"). If any Loan Party shall be required to deduct or to withhold any Taxes
from or in  respect  of any  amount  payable  hereunder  or under any other Loan
Document,

                           (i) the amount so payable  shall be increased so that
after  making all  required  deductions  and  withholdings  (including  Taxes on
amounts payable pursuant to this sentence) the Lenders or the Agent, as the case
may be,  receive an amount equal to the sum they would have received had no such
deduction or withholding been made,

                           (ii) such Loan  Party  shall make such  deduction  or
withholding,

                           (iii)  such  Loan  Party  shall  pay the full  amount
deducted or withheld to the  relevant  taxation  authority  in  accordance  with
applicable law, and

                           (iv) as promptly as  possible  thereafter,  such Loan
Party  shall send the  Lenders  and the Agent an  official  receipt  (or,  if an
official  receipt  is not  available,  such  other  documentation  as  shall  be
satisfactory to the Lenders or the Agent, as the case may be) evidencing payment
of the amount or amounts so deducted or withheld.  In addition,  each Loan Party
agrees to pay any present or future taxes, charges or similar levies which arise
from any payment made  hereunder or from the execution,  delivery,  performance,
recordation  or filing of, or otherwise  with respect to, this  Agreement or any
other  Loan  Document  other  than the  foregoing  excluded  taxes  (hereinafter
referred to as "OTHER TAXES").

                  (b) The Loan Parties  hereby  jointly and severally  indemnify
and agree to hold the Lenders and the Agent  harmless  from and against Taxes or
Other Taxes (including,  without limitation, any Taxes or Other Taxes imposed by
any  jurisdiction on amounts payable under this Section 2.08) paid by any Lender
or the Agent and any liability (including  penalties,  interest and expenses for
nonpayment,  late  payment  or  otherwise)  arising  therefrom  or with  respect
thereto,  whether or not such Taxes or Other  Taxes  were  correctly  or legally
asserted.  Such  indemnification  shall be paid  within 10 days from the date on
which any such Lender or the Agent makes written demand  therefor,  which demand
shall identify in reasonable detail the nature and amount of such Taxes or Other
Taxes.

                  (c) Each Lender that is  organized in a  jurisdiction  outside
the United States hereby agrees that it shall,  no later than the Effective Date
or, in the case of a Lender  which  becomes a party  hereto  pursuant to Section
12.07 hereof after the Effective Date, the date upon which such Lender becomes a
party hereto (and from time to time  thereafter  upon the reasonable  request of
the  Borrower or the Agent,  but only if such Lender is legally  able to do so),
deliver to the  Borrower  and the Agent  either (i) two  accurate,  complete and
signed  copies  of either  (x) U.S.  Internal  Revenue  Service  Form  W-8ECI or
successor  form, or (y) U.S.  Internal  Revenue Service Form W-8BEN or successor
form,  in each  case,  indicating  that such  Lender is on the date of  delivery
thereof entitled to receive payments of interest hereunder free from, or subject
to a reduced rate of, withholding of United States Federal income tax or (ii) in


                                     - 33 -

<PAGE>

the case of such a Lender that is entitled to claim  exemption from  withholding
of United States  Federal  income tax under Section  871(h) or Section 881(c) of
the Internal  Revenue Code,  (x) a certificate to the effect that such Lender is
(A) not a "bank"  within the  meaning of Section  881(c)(3)(A)  of the  Internal
Revenue  Code,  (B) not a "10 percent  shareholder"  of the Borrower  within the
meaning of  Section  881(c)(3)(B)  of the  Internal  Revenue  Code and (C) not a
controller foreign  corporation  receiving interest from a related person within
the meaning of Section  881(c)(3)(C)  of the  Internal  Revenue Code and (y) two
accurate,  complete  and signed  copies of U.S.  Internal  Revenue  Service Form
W-8BEN or successor form.

                  (d) If any Loan Party fails to perform any of its  obligations
under this Section 2.08,  the Loan Parties  shall  indemnify the Lenders and the
Agent for any taxes,  interest or penalties  that may become payable as a result
of any such failure. The obligations of the Loan Parties under this Section 2.08
shall survive the termination of this Agreement and the payment of the Term Loan
and all other amounts payable hereunder.

                                  ARTICLE III

                                 THE COLLATERAL

         Section 3.01 GRANT OF SECURITY INTEREST. As collateral security for all
of the Obligations, each Loan Party hereby pledges and assigns to the Agent, and
grants  to the Agent  for the  benefit  of the  Lenders  a  continuing  security
interest  in, all  personal  property of such Loan Party,  wherever  located and
whether now or hereafter  existing and whether now owned or hereafter  acquired,
of every  kind and  description,  tangible  or  intangible  (the  "COLLATERAL"),
including, without limitation, the following:

                  (a) all Accounts;

                  (b) all Chattel Paper (whether tangible or electronic);

                  (c) the Commercial Tort Claims  specified on Schedule  6.01(f)
hereto;

                  (d) all Deposit  Accounts,  all cash,  and all other  property
from  time  to time  deposited  therein  and  the  monies  and  property  in the
possession  or under the  control of the Agent or any  Lender or any  affiliate,
representative, agent or correspondent of the Agent or any Lender;

                  (e) all Documents;

                  (f) all Equipment;

                  (g) all Fixtures;

                  (h) all General  Intangibles  (including,  without limitation,
all Payment Intangibles);

                  (i) all Goods;

                  (j) all Instruments (including, without limitation, Promissory
Notes);


                                     - 34 -

<PAGE>

                  (k) all Inventory;

                  (l) all Investment Property;

                  (m) all Copyrights, Patents and Trademarks;

                  (n) all Letter-of-Credit Rights;

                  (o) all Supporting Obligations;

                  (p) all other  tangible and  intangible  personal  property of
such Loan  Party  (whether  or not  subject  to the  Uniform  Commercial  Code),
including,  without limitation, all bank and other accounts and all cash and all
investments  therein,  all proceeds,  products,  offspring,  accessions,  rents,
profits, income,  benefits,  substitutions and replacements of and to any of the
property of such Loan Party  described in the preceding  clauses of this Section
3.01 (including,  without limitation,  any proceeds of insurance thereon and all
causes of action, claims and warranties now or hereafter held by such Loan Party
in respect of any of the items  listed  above),  and all books,  correspondence,
files and other Records, including, without limitation, all tapes, desks, cards,
Software,  data and computer  programs in the possession or under the control of
such Loan Party or any other Person from time to time acting for such Loan Party
that at any time evidence or contain information relating to any of the property
described  in the  preceding  clauses  of this  Section  3.01  or are  otherwise
necessary or helpful in the collection or realization thereof; and

                  (q) all  Proceeds,  including  all Cash  Proceeds  and Noncash
Proceeds, and products of any and all of the foregoing Collateral;

in each case  howsoever such Loan Party's  interest  therein may arise or appear
(whether by ownership, security interest, claim or otherwise).

As used in this Section  3.01,  the  following  terms shall have the  respective
meanings  provided  for  in  the  Uniform  Commercial  Code:  "Accounts",  "Cash
Proceeds",   "Chattel  Paper",   "Commercial  Tort  Claim",  "Deposit  Account",
"Documents",    "Equipment",   "Fixtures",   "General   Intangibles",   "Goods",
"Instruments",  "Inventory",  "Investment Property",  "Letter-of-Credit Rights",
"Noncash  Proceeds",  "Payment  Intangibles",  "Proceeds",  "Promissory  Notes",
"Record", "Software", and "Supporting Obligations".

         Section 3.02 SPECIAL  REPRESENTATIONS,  WARRANTIES AND COVENANTS OF THE
LOAN PARTIES. Each Loan Party hereby warrants and covenants to the Agent and the
Lenders that:

                  (a) Such Loan Party has  delivered  to the Agent a  Perfection
Certificate,  substantially in the form of Exhibit C to the Working Capital Loan
Agreement. All information set forth in such Perfection Certificate is complete,
true and correct in all material respects and there has been no change in any of
such information  since the date on which the Perfection  Certificate was signed
by such Loan Party.

                  (b)  No  Loan  Party   will   change   its   jurisdiction   of
organization,  type of organization or other legal  structure,  principal or any
other place of business,  or the location of any  Collateral  from the locations


                                     - 35 -

<PAGE>

set forth in the Perfection  Certificate  delivered by such Loan Party,  or make
any change in its name or conduct its business  operations  under any fictitious
business name or trade name,  without, in any such case, at least 30 days' prior
written notice to the Agent;  PROVIDED that the Inventory of such Loan Party may
be in the possession of manufacturers or processors in any jurisdiction in which
all necessary  Uniform  Commercial Code financing  statements have been filed by
the Agent and with respect to which the Agent has received  waiver  letters from
all landlords,  warehousemen and processors in form and substance  acceptable to
the Agent.

                  (c) Each Loan Party represents and warrants to the Lenders and
the Agent as  follows:  (i) except  for the  security  interest  created by this
Agreement and other Liens permitted hereunder,  there is no financing statement,
security  agreement,  chattel  mortgage,  real estate mortgage or other document
filed or recorded with any filing records, registry or other public office, that
purports to cover,  affect or give notice of any present or possible future Lien
on any assets or property of the Loan  Parties or any rights  relating  thereto,
(ii) such Loan Party is the owner of or has other rights in or power to transfer
the Collateral,  free from any right or claim of any Person or any adverse lien,
except for the  security  interest  created by this  Agreement  and other  Liens
permitted  hereunder,  (iii)  none  of  the  Collateral  constitutes,  or is the
proceeds  of,  "farm  products"  as defined in  ss.9-102(a)(34)  of the  Uniform
Commercial Code, (iv) none of the Account Debtors or other Persons  obligated on
any of  the  Collateral  is a  Governmental  Authority  covered  by the  Federal
Assignment  of Claims  Act or like  federal,  state or local  statute or rule in
respect of such Collateral and (v) such Loan Party has at all times operated its
business in compliance with all applicable  provisions of the federal Fair Labor
Standards Act, as amended, and with all applicable provisions of federal,  state
and local statutes and ordinances dealing with the control, shipment, storage or
disposal of Hazardous Materials.

                  (d) Each Loan Party  covenants  with the Lenders and the Agent
that,  such Loan Party  shall  defend its rights in the  Collateral  against all
claims and demands of all Persons at any time claiming the same or any interests
therein adverse to the Agent or any of the Lenders.

                  (e) Each Loan Party represents and warrants to the Lenders and
the Agent that all  filings,  assignments,  pledges and deposits of documents or
instruments  have been  made and all other  actions  have  been  taken  that are
necessary or  advisable,  under  applicable  law, to  establish  and perfect the
Agent's  security  interest in the  Collateral.  The  Collateral and the Agent's
rights with  respect to the  Collateral  are not subject to any setoff,  claims,
withholdings or other defenses.

                  (f) Except for  Collateral  that is obsolete or no longer used
in their  business,  the Loan Parties will keep the Collateral in good order and
repair  (normal wear  excepted) and will not use the same in violation of law or
any policy of insurance  thereon and keep the Collateral  adequately  insured at
all times in accordance with the provisions of Section 7.01(e). The Loan Parties
will pay  promptly  when due all taxes,  assessments,  governmental  charges and
levies upon the  Collateral  or for its use or  operation,  except for taxes and
assessments permitted to be contested as provided in Section 7.01(d).  Following
the occurrence and during the continuance of an Event of Default,  the Agent may
at its option  discharge  any taxes or Liens to which any  Collateral  is at any
time subject (other than Permitted Liens), and may, upon the failure of the Loan
Parties to do so in accordance  with this Agreement,  purchase  insurance on any


                                     - 36 -

<PAGE>

Collateral and pay for the repair, maintenance or preservation thereof, and each
Loan Party agrees to reimburse  the Agent on demand for any payments or expenses
incurred by the Agent or the Lenders pursuant to the foregoing authorization and
any unreimbursed amounts shall constitute Obligations for all purposes hereof.

                  (g) The  Agent  may from  time to time  request  and each Loan
Party shall deliver copies of all customer lists and vendor lists.

                  (h) Each Loan Party hereby  irrevocably  authorizes the Agent,
at any  time  and  from  time to  time,  to file in any  jurisdiction  financing
statements  and  amendments  thereto that (i) indicate the Collateral (x) as all
assets of such Loan Party or words of similar effect,  regardless of whether any
particular  asset falls within the scope of Article 9 of the Uniform  Commercial
Code or such other  jurisdiction  or (y) as being of an equal or lesser scope or
with greater  detail and (ii) which  contain any other  information  required by
Article 9 of the Uniform  Commercial  Code  (including  Part 5 thereof)  for the
sufficiency or filing office acceptance of any financing statement or amendment,
including  whether  (A)  any  Loan  Party  is  an  organization,   the  type  of
organization  and any  organization  identification  number  issued to such Loan
Party and (B) in the case of a financing  statement filed as a fixture filing or
indicating  Collateral  as  as-extracted  collateral  or  timber  to be  cut,  a
sufficient description of the real property to which the Collateral relates. The
Loan Parties agree to furnish any such  information  to the Agent  promptly upon
request.  Each Loan Party also ratifies its  authorization for the Agent to have
filed in any Uniform  Commercial Code  jurisdiction  any like initial  financing
statements or amendments thereto if filed prior to the date hereof.

                  (i) Each Loan Party agrees that it will join with the Agent in
executing  and, at its own expense file and refile,  or permit the Agent to file
and  refile  such  financing  statements,   continuation  statements  and  other
documents   (including,   without  limitation,   Patent  Agreements,   Trademark
Agreements,  Copyright Mortgages and licenses to use software and other property
protected by copyright),  in such offices (including,  without  limitation,  the
PTO, the United States Copyright Office, and appropriate state patent, trademark
and  copyright  offices),   as  the  Agent  may  reasonably  deem  necessary  or
appropriate,  wherever  required  or  permitted  by law, in order to perfect and
preserve the rights and interests  granted to the Agent in the Collateral.  Each
Loan Party will give the Agent  notice of each  office at which  records of such
Loan Party pertaining to all intangible items of Collateral are kept.  Except as
may be provided in such notice, the records concerning all intangible Collateral
are  and  will  be  kept  at the  address  shown  in the  respective  Perfection
Certificate  for such Loan Party as the principal place of business of such Loan
Party.

                  (j) The Loan Parties are the sole and exclusive  owners of the
websites and domain names listed on Schedule  3.02(j) hereto and have registered
such  domain  names  with all  applicable  authorities  which  provides  for the
exclusive  use by the Loan  Parties of such domain  names.  The  websites do not
contain any material,  the  publication of which may result in (i) the violation
of rights of any Person or (ii) a right of any Person  against the  publisher or
distributor of such material.

                  (k) The Loan Parties  shall,  annually by the end of the first
fiscal quarter following the previous Fiscal Year, provide written notice to the


                                     - 37 -

<PAGE>

Agent of all applications for registration of Patents, Trademarks or Copyrights,
to the extent such  applications  exist,  made during the preceding Fiscal Year.
The Loan  Parties  shall file and  prosecute  diligently  all  applications  for
registration of Patents,  Trademarks or Copyrights now or hereafter pending that
would be  necessary  to the  business  of the  Loan  Parties  to which  any such
applications  pertain,  and to do all acts, in any such  instance,  necessary to
preserve and  maintain  all rights in such  registered  Patents,  Trademarks  or
Copyrights unless such Patents, Trademarks or Copyrights are not material to the
business of the Loan  Parties,  as  reasonably  determined  by the Loan  Parties
consistent with prudent and commercially reasonable business practices.  Any and
all costs and expenses  incurred in  connection  with any such actions  shall be
borne by the Loan Parties.  Except in accordance  with prudent and  commercially
reasonable business  practices,  the Loan Parties shall not abandon any right to
file a  Patent,  Trademark  or  Copyright  application  or any  pending  Patent,
Trademark  or  Copyright  application  or any  registered  Patent,  Trademark or
Copyright,  in each case  material to its  business,  without the consent of the
Agent.

                  (l) The domain name servers used in connection with the domain
names of the Loan Parties and all other relevant information  pertaining to such
domain  names,  and the  administrative  contacts  used in  connection  with the
registration of such domain names are identified on Schedule 3.02(j) hereto.  No
Loan Party will change such domain name servers  without 10 days' prior  written
notice to the Agent.  No Loan Party will cause a change in the  identity  of any
domain name administrative  contact without 10 days' prior written notice to the
Agent.

                  (m) If any Loan  Party  is,  now or at any time  hereafter,  a
beneficiary  under a letter of credit in the face amount in excess of  $100,000,
such Loan Party shall promptly  notify the Agent thereof and, at the request and
option of the Agent, such Loan Party shall, pursuant to an agreement in form and
substance  satisfactory to the Agent,  either (i) arrange for the issuer and any
confirmer  or other  nominated  Person of such letter of credit to consent to an
assignment  to the Agent of the proceeds of the letter of credit or (ii) arrange
for the Agent to become the transferee beneficiary of the letter of credit, with
the Agent agreeing,  in each case, that the proceeds of the letter of credit are
to be  applied  by the  Agent  against  the  Obligations  as  provided  in  this
Agreement.

                  (n) To the  extent any Loan  Party  shall,  now or at any time
hereafter,  hold or acquire any promissory note or other  instrument or tangible
chattel paper (the  principal  amount of which is greater than  $100,000),  such
Loan Party will promptly notify the Agent thereof and, at the request and option
of the Agent, such Debtor will endorse,  assign and deliver such promissory note
or  other  instrument  or  tangible  chattel  paper  to the  Agent to be held as
Collateral  hereunder,  together with such instruments of transfer or assignment
thereof reasonably satisfactory in form and substance to the Agent.

                  (o) If any Loan  Party  shall,  now or at any time  hereafter,
hold or acquire any  certificated  securities,  such Loan Party shall  forthwith
endorse,  assign  and  deliver  the  same  to the  Agent,  accompanied  by  such
instruments  of transfer or  assignment  duly executed in blank as the Agent may
from time to time specify;  PROVIDED,  HOWEVER,  except with respect to entities
which are  disregarded  entities for U.S.  income tax purposes,  such Loan Party
shall only be  required  to  endorse,  assign and  deliver  shares  representing
sixty-five  percent (65%) of the Capital  Stock of such Loan Party's  first-tier
Foreign  Subsidiaries.  If any securities now or hereafter  acquired by any Loan


                                     - 38 -

<PAGE>

Party  are  uncertificated  and are  issued to such  Loan  Party or its  nominee
directly by the issuer thereof,  such Loan Party shall promptly notify the Agent
thereof and, at the Agent's request and option, pursuant to an agreement in form
and substance satisfactory to the Agent, either (i) cause the issuer to agree to
comply without further  consent of such Loan Party or such nominee,  at any time
with instructions from the Agent as to such securities,  or (ii) arrange for the
Agent to become  the  registered  owner of the  securities.  If any  securities,
whether  certificated or  uncertificated,  or other  investment  property now or
hereafter  acquired by any Loan Party are held by such Loan Party or its nominee
through a securities  intermediary  or commodity  intermediary,  such Loan Party
shall promptly  notify the Agent thereof and, at the Agent's request and option,
pursuant to an agreement in form and substance satisfactory to the Agent, either
(A)  cause  such  securities  intermediary  or (as the  case  may be)  commodity
intermediary  to agree to comply,  in each case without  further consent of such
Loan  Party  or such  nominee,  at any time  with  entitlement  orders  or other
instructions  from  the  Agent  to  such  securities  intermediary  as  to  such
securities or other  investment  property,  or (as the case may be) to apply any
value distributed on account of any commodity  contract as directed by the Agent
to such commodity intermediary,  or (B) in the case of financial assets or other
investment  property  held  through a securities  intermediary,  arrange for the
Agent to become the entitlement holder with respect to such investment property,
with such Loan Party being  permitted,  only with the  consent of the Agent,  to
exercise rights to withdraw or otherwise deal with such investment property. The
Agent  agrees  with  each  Loan  Party  that the  Agent  shall not give any such
entitlement orders or instructions or directions to any such issuer,  securities
intermediary  or commodity  intermediary,  and shall not withhold its consent to
the exercise of any withdrawal or dealing  rights by such Loan Party,  unless an
Event of Default has occurred and is continuing,  or, after giving effect to any
such  investment  and  withdrawal  rights not  otherwise  permitted  by the Loan
Documents,  would occur. The provisions of this paragraph shall not apply to any
financial  assets  credited to a  securities  account for which the Agent is the
securities intermediary.

                  (p) For each deposit  account or other  accounts that any Loan
Party,  now or at any time hereafter,  opens or maintains  (other than a deposit
account for which the Agent is the depositary  bank),  such Loan Party shall, at
the Agent's  request and option,  pursuant to an agreement in form and substance
satisfactory  to the Agent,  either (i) cause the depositary bank or such Person
to agree to comply without  further consent of such Loan Party, at any time with
instructions from the Agent to such depositary bank or such Person directing the
disposition  of funds  from  time to time  credited  to or held in such  deposit
account or other  account,  as the case may be, or (ii) arrange for the Agent to
become the customer of the  depositary  bank or other Person with respect to the
deposit  account or other account,  with such Loan Party being  permitted,  only
with the consent of the Agent,  to exercise  rights to withdraw  funds from such
deposit  account or other account.  The  provisions of this paragraph  shall not
apply to (A) a deposit account for which the Agent is in automatic control,  (B)
any deposit accounts  specially and exclusively used for payroll,  payroll taxes
and other employee wage and benefit  payments to or for the benefit of such Loan
Party's salaried employees, (C) the deposit accounts or other accounts listed on
Schedule 3.02(p), and (D) deposit accounts or local bank accounts not subject to
the Agent's  control so long as (1) the aggregate  amount of funds on deposit in
all such local bank  accounts  does not exceed  $500,000,  and (2) the aggregate
amount of funds on  deposit  in any such  local  bank  account  does not  exceed
$50,000.


                                     - 39 -

<PAGE>

                  (q) No Loan Party holds any commercial tort claims, as defined
in  Article  9 of the  Uniform  Commercial  Code,  except  as  indicated  in the
Perfection Certificates.  If any of the Loan Parties shall at any time acquire a
commercial  tort  claim,  such Loan Party shall  promptly  notify the Agent in a
writing signed by such Loan Party of the brief details  thereof and grant to the
Agent in such writing a security  interest therein and in the proceeds  thereof,
all upon the  terms  of this  Agreement,  with  such  writing  to be in form and
substance reasonably satisfactory to the Agent.

                  (r) If any Collateral is, now or at any time hereafter, in the
possession of a bailee, the Loan Parties shall promptly notify the Agent thereof
and, at the Agent's request and option, shall promptly obtain an acknowledgement
from the  bailee,  in form and  substance  satisfactory  to the Agent,  that the
bailee  holds such  Collateral  for the  benefit of the Agent and such  bailee's
agreement to comply,  without  further  consent of such Loan Party,  at any time
with instructions of the Agent as to such Collateral. The Agent agrees with each
Loan Party that the Agent shall not give any such  instructions  unless an Event
of Default has  occurred  and is  continuing  or would  occur after  taking into
account any action by such Loan Party with respect to the bailee.

                  (s) If any Loan Party, now or at any time hereafter,  holds or
acquires  an  interest  in any  electronic  chattel  paper or any  "transferable
record,"  as that term is  defined  in  Section  201 of the  federal  Electronic
Signatures  in Global and  National  Commerce  Act,  or in ss.16 of the  Uniform
Electronic Transactions Act as in effect in any relevant jurisdiction, such Loan
Party shall promptly  notify the Agent thereof and, at the request and option of
the Agent, shall take such action as the Agent may reasonably request to vest in
the Agent  control,  under  ss.9-105 of the  Uniform  Commercial  Code,  of such
electronic  chattel paper or control under Section 201 of the federal Electronic
Signatures in Global and National  Commerce Act or, as the case may be, ss.16 of
the Uniform  Electronic  Transactions Act, as so in effect in such jurisdiction,
of such  transferable  record.  The Agent  agrees  with each Loan Party that the
Agent will arrange, pursuant to procedures satisfactory to the Agent and so long
as such procedures will not result in the Agent's loss of control, for such Loan
Party to make alterations to the electronic chattel paper or transferable record
permitted under Uniform Commercial Code ss.9-105 or, as the case may be, Section
201 of the federal Electronic  Signatures in Global and National Commerce Act or
ss.16 of the Uniform Electronic Transactions Act, unless an Event of Default has
occurred and is  continuing  or would occur after taking into account any action
by such Loan Party with respect to such electronic chattel paper or transferable
record.

                  (t) If any Loan Party has  Accounts  Receivable  in respect of
which the Account Debtor is located in Minnesota, the Loan Parties represent and
warrant  that  the   applicable   Loan  Party  has  filed  and  shall  file  all
legally-required  Notice of Business  Activities  Reports and comparable reports
with the appropriate Governmental Authorities.

                  (u) Each Loan Party  further  agrees,  upon the request of the
Agent and at the Agent's option,  to take any and all other actions as the Agent
may  determine  to be  necessary or useful for the  attachment,  perfection  and
priority  of, and the  ability of the Agent to  enforce,  the  Agent's  security
interest in any and all of the Collateral,  including,  without limitation,  (i)
executing,  delivering and, where appropriate,  filing financing  statements and
amendments relating thereto,  certificates and other documents or instruments as


                                     - 40 -

<PAGE>

may be  necessary  to enable the Agent to perfect or from time to time renew the
security  interest granted hereby or by any other Collateral  Document under the
Uniform Commercial Code, to the extent, if any, that such Loan Party's signature
thereon is required  therefor,  including,  without  limitation,  such financing
statements and amendments  thereto,  certificates  and other documents as may be
necessary to perfect a security interest in any additional  Collateral hereafter
acquired by such Loan Party or in any  replacements  or proceeds  thereof,  (ii)
causing  the Agent's  name to be noted as secured  party on any  certificate  of
title  for a  titled  good  if  such  notation  is a  condition  to  attachment,
perfection  or  priority  of, or ability of the Agent to  enforce,  the  Agent's
security interest in such Collateral,  (iii) complying with any provision of any
statute,  regulation  or treaty of the  United  States as to any  Collateral  if
compliance  with such  provision is a condition  to  attachment,  perfection  or
priority of, or ability of the Agent to enforce,  the Agent's security  interest
in such Collateral,  (iv) obtaining  governmental and other third party waivers,
consents  and  approvals,  in form  and  substance  satisfactory  to the  Agent,
including,  without  limitation,  any consent of any  licensor,  lessor or other
Person  obligated on  Collateral,  (v)  obtaining  waivers from  mortgagees  and
landlords in form and  substance  satisfactory  to the Agent and (vi) taking all
actions under any earlier  versions of the Uniform  Commercial Code or under any
other  law,  as  reasonably  determined  by the  Agent to be  applicable  in any
relevant Uniform  Commercial Code or other  jurisdiction,  including any foreign
jurisdiction.

                  (v) Each Loan Party  authorizes and appoints the Agent and any
officer  or agent  thereof,  with full  power of  substitution,  as its true and
lawful  attorney-in-fact  with full irrevocable power and authority in the place
and stead of such Loan  Party or in the  Agent's  own name,  for the  purpose of
carrying out the terms of this Agreement, to take any and all appropriate action
and to execute any and all  documents and  instruments  that may be necessary or
useful to accomplish the purposes of this Agreement  and,  without  limiting the
generality of the foregoing, hereby gives said attorneys the power and right, on
behalf of such Loan Party, without notice to or assent by such Loan Party, to do
the following: (i) upon the occurrence and during the continuance of an Event of
Default, generally to sell, transfer, pledge, make any agreement with respect to
or otherwise  dispose of or deal with any of the Collateral in such manner as is
consistent  with the  Uniform  Commercial  Code and as fully and  completely  as
though the Agent were the absolute owner thereof for all purposes, and to do, at
the Loan  Parties'  expense,  at any time,  or from  time to time,  all acts and
things which the Agent deems necessary or useful to protect, preserve or realize
upon the  Collateral  and the Agent's  security  interest  therein,  in order to
effect the intent of this  Agreement,  all no less fully and  effectively as any
Loan  Party  might  do,  including,  without  limitation,  (A)  the  filing  and
prosecuting  of  registration  and transfer  applications  with the  appropriate
federal,  state or local  agencies or  authorities  with respect to  trademarks,
copyrights and patentable  inventions and processes,  (B) upon written notice to
such  Loan  Party,  the  exercise  of  voting  rights  with  respect  to  voting
securities,  which rights may be exercised,  if the Agent so elects, with a view
to causing the  liquidation  of assets of the issuer of any such  securities and
(C) the execution,  delivery and recording, in connection with any sale or other
disposition  of  any  Collateral,  of the  endorsements,  assignments  or  other
instruments of conveyance or transfer with respect to such Collateral;  and (ii)
to the extent  that such Loan  Party's  authorization  given in this  subsection
3.02(v)  is not  sufficient,  to file such  financing  statements  with  respect
hereto,  with or without  such Loan  Party's  signature,  or a photocopy of this
Agreement  in  substitution  for a  financing  statement,  as the Agent may deem
appropriate  and to execute in such Loan Party's name such financing  statements
and amendments  thereto and continuation  statements which may require such Loan


                                     - 41 -

<PAGE>

Party's  signature.  To the extent  permitted  by law,  each Loan  Party  hereby
ratifies all that said attorneys shall lawfully do or cause to be done by virtue
hereof.  This power of  attorney  is a power  coupled  with an  interest  and is
irrevocable.  The powers  conferred on the Agent hereunder are solely to protect
the  interests  of the Agent and the  Lenders  in the  Collateral  and shall not
impose any duty upon the Agent to exercise any such  powers.  The Agent shall be
accountable  only for the amounts  that it actually  receives as a result of the
exercise  of such  powers,  and neither it nor any of its  officers,  directors,
employees  or  agents  shall be  responsible  to any Loan  Party  for any act or
failure  to  act,  except  for the  Agent's  own  gross  negligence  or  willful
misconduct  as  determined  by  a  final   judgment  of  a  court  of  competent
jurisdiction.

         Section 3.03  FIXTURES,  ETC. It is the intention of the parties hereto
that  (except for  Collateral  located on any  Mortgaged  Property)  none of the
Collateral  shall  become  fixtures  and  each  Loan  Party  will  take all such
reasonable  action  or  actions  as  may  be  necessary  to  prevent  any of the
Collateral  from  becoming  fixtures.  Without  limiting the  generality  of the
foregoing,  each Loan Party will,  if requested by the Agent,  use  commercially
reasonable  efforts to obtain  waivers  of Liens,  in form  satisfactory  to the
Agent, from each lessor of real property on which any of the Collateral is or is
to be located to the extent requested by the Agent.

         Section  3.04 RIGHT OF AGENT TO DISPOSE OF  COLLATERAL,  ETC.  Upon the
occurrence and during the  continuance  of any Event of Default,  subject to the
provisions of the Uniform  Commercial  Code or other  applicable  law, the Agent
shall have the right to take  possession  of the  Collateral  and,  in  addition
thereto,  the right to enter upon any  premises on which the  Collateral  or any
part  thereof  may be  situated  and  remove the same  therefrom.  The Agent may
require  the Loan  Parties  to make the  Collateral  (to the  extent the same is
moveable)  available  to the Agent at a place to be  designated  by the Agent or
transfer any  information  related to the  Collateral to the Agent by electronic
medium.  The Agent may in its discretion  require any Loan Party to assemble all
or any  part  of the  Collateral  at  such  location  or  locations  within  the
jurisdiction(s)  of such  Loan  Party's  principal  office(s)  or at such  other
locations  as the Agent may  reasonably  designate.  Unless  the  Collateral  is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a  recognized  market,  the Agent will give the Loan  Parties at least 7
days' prior  written  notice of the time and place of any public sale thereof or
of the time  after  which any  private  sale or any other  intended  disposition
thereof is to be made.  Any such notice shall be deemed to meet any  requirement
hereunder or under any applicable law  (including the Uniform  Commercial  Code)
that  reasonable  notification  be given of the time and  place of such  sale or
other disposition.  In addition,  each Loan Party waives any and all rights that
it may have to a judicial  hearing in advance of the  enforcement  of any of the
Agent's rights and remedies hereunder.

         Section 3.05 RIGHT OF AGENT TO USE AND OPERATE  COLLATERAL,  ETC.  Upon
the  occurrence and during the  continuance of any Event of Default,  subject to
the provisions of the Uniform Commercial Code or other applicable law, the Agent
shall have the right and power (a) to take  possession of all or any part of the
Collateral,  and to exclude the Loan Parties and all Persons  claiming under the
Loan Parties wholly or partly therefrom,  and thereafter to hold, store,  and/or
use, operate, manage and control the same, and (b) to grant a license to use, or
cause to be granted a license to use, any or all of the Patents,  Trademarks and
Copyrights  (in the  case of  Trademarks,  along  with the  goodwill  associated
therewith),  but subject to the terms of any  licenses.  Upon any such taking of
possession,  the  Agent  may,  from  time to time,  at the  expense  of the Loan


                                     - 42 -

<PAGE>

Parties,  make  all  such  repairs,  replacements,  alterations,  additions  and
improvements to and of the Collateral as the Agent may deem proper.  In any such
case the Agent shall have the right to manage and control the  Collateral and to
carry on the  business and to exercise all rights and powers of the Loan Parties
in respect thereto as the Agent shall deem proper,  including the right to enter
into any and all such agreements with respect to the operation of the Collateral
or any part thereof as the Agent may see fit; and the Agent shall be entitled to
collect and receive all rents, issues,  profits, fees, revenues and other income
of the same and every part thereof. Such rents, issues,  profits, fees, revenues
and other income  shall be applied to pay the expenses of holding and  operating
the Collateral and of conducting the business  thereof,  and of all maintenance,
repairs, replacements,  alterations, additions and improvements, and to make all
payments  which the  Agent may be  required  or may elect to make,  if any,  for
taxes, assessments,  insurance and other charges upon the Collateral or any part
thereof, and all other payments which the Agent may be required or authorized to
make under any provision of this Agreement (including legal costs and reasonable
attorneys'  fees).  The Agent shall apply the  remainder of such rents,  issues,
profits, fees, revenues and other income as provided in Section 3.06.

         Section 3.06 PROCEEDS OF  COLLATERAL.  After  deducting all  reasonable
costs and expenses of collection,  storage,  custody,  sale or other disposition
and delivery  (including  reasonable  legal costs and  attorneys'  fees) and all
other charges against the  Collateral,  the Agent shall apply the residue of the
proceeds of any such sale or disposition to the  Obligations in accordance  with
the terms hereof and any surplus shall be returned to the Loan Parties or to any
Person or party  lawfully  entitled  thereto.  In the event the  proceeds of any
sale,  lease or other  disposition of the Collateral are insufficient to pay all
of the  Obligations in full, the Loan Parties will be liable for the deficiency,
together  with  interest  thereon  at the  Post-Default  Rate,  and the cost and
expenses of collection of such deficiency, including (to the extent permitted by
law),   without   limitation,   reasonable   attorneys'   fees,   expenses   and
disbursements.

         Section 3.07 RELATION TO COLLATERAL  DOCUMENTS.  The provisions of this
Agreement supplement the provisions of any real estate mortgage or deed of trust
granted by any Loan Party to the Agent,  for the  benefit of the Lenders and the
Agent,  and which secures the payment or performance of any of the  Obligations.
Nothing  contained  in any such  real  estate  mortgage  or deed of trust  shall
derogate  from any of the rights or  remedies of the Agent or any of the Lenders
hereunder.  In addition,  to the provisions of this Agreement  being so read and
construed  with any such  mortgage  or deed of  trust,  the  provisions  of this
Agreement shall be read and construed with the Collateral  Documents referred to
below in the manner so indicated.

                  (a) PLEDGE AGREEMENTS.  Concurrently  herewith each Loan Party
is executing and delivering to the Agent, for the benefit of the Lenders and the
Agent, a Pledge  Agreement  pursuant to which such Loan Party is pledging to the
Agent (a) 100% of the shares of the Capital Stock of its Domestic  Subsidiary or
Subsidiaries,  and/or Audubon Europe,  as the case may be, (b) 65% of the shares
of the  Capital  Stock of its Foreign  Subsidiary  or  Subsidiaries  (other than
Audubon Europe) and (c) all  intercompany  promissory  notes of such Loan Party.
Such pledge shall be governed by the terms of such pledge  agreement  and not by
the terms of this Agreement.

                  (b) TRADEMARK  AND PATENT  AGREEMENTS.  Concurrently  herewith
each Loan Party is executing and delivering to the Agent, for the benefit of the


                                     - 43 -

<PAGE>

Lenders and the Agent, a Trademark  Agreement and a Patent Agreement pursuant to
which such Loan Party is assigning to the Agent,  for the benefit of the Lenders
and the Agent,  certain Collateral  consisting of trademarks,  service marks and
trademark and service mark rights,  patent and patent rights,  together with the
goodwill  appurtenant thereto. The provisions of the Trademark Agreement and the
Patent  Agreement are  supplemental  to the  provisions of this  Agreement,  and
nothing  contained  in the  Trademark  Agreement or the Patent  Agreement  shall
derogate  from any of the rights or  remedies of the Agent or any of the Lenders
hereunder.  Neither the delivery of, nor anything  contained  in, the  Trademark
Agreement  or the Patent  Agreement  shall be deemed to prevent or postpone  the
time of attachment or  perfection  of any security  interest in such  Collateral
created hereby.

                  (c) COPYRIGHT MORTGAGES,  ETC. Concurrently herewith each Loan
Party is also  executing  and  delivering  to the Agent,  for the benefit of the
Lenders and the Agent,  for recording in the United States Copyright Office (the
"COPYRIGHT  OFFICE") a Memorandum of Grant of Security  Interest in  Copyrights.
Such Loan Party  represents  and warrants to the Lenders and the Agent that such
Copyright  Mortgage  identifies all now existing  material  copyrights and other
rights  in  and  to  all  material  copyrightable  works  of  such  Loan  Party,
identified,   where  applicable,   by  title,  author  and/or  Copyright  Office
registration  number and date.  Each Loan Party  represents  and warrants to the
Lenders and the Agent that it has  registered all material  copyrights  with the
Copyright  Office,  as identified in such  Copyright  Mortgage.  Each Loan Party
covenants,  promptly following such Loan Party's acquisition thereof, to provide
to the Agent like identifications of all material copyrights and other rights in
and to all material  copyrightable  works hereafter acquired by such Loan Party,
to register such copyrights with the Copyright Office and to execute and deliver
to the Agent,  for the  benefit of the  Lenders  and the Agent,  a  supplemental
Memorandum of Grant of Security  Interest in  Copyrights,  in form and substance
satisfactory  to the  Agent,  for the  benefit  of the  Lenders  and the  Agent,
modified to reflect such subsequent acquisitions and registrations.

         Section  3.08  MARSHALLING.  Neither the Agent nor any Lender  shall be
required to marshal any present or future collateral security (including but not
limited  to the  Collateral)  for,  or  other  assurances  of  payment  of,  the
Obligations  or any of them or to resort to such  collateral  security  or other
assurances  of  payment  in any  particular  order,  and all of the  rights  and
remedies of the Agent or any Lender  hereunder and of the Agent or any Lender in
respect of such  collateral  security and other  assurances  of payment shall be
cumulative and in addition to all other rights and remedies, however existing or
arising.  To the extent that it lawfully may, each Loan Party hereby agrees that
it will not invoke any law relating to the marshalling of collateral which might
cause  delay in or impede the  enforcement  of the Agent's  rights and  remedies
under this Agreement or under any other instrument creating or evidencing any of
the Obligations or under which any of the Obligations is outstanding or by which
any of the Obligations is secured or payment thereof is otherwise assured,  and,
to the extent that it lawfully  may, such Loan Party hereby  irrevocably  waives
the benefits of all such laws.


                                     - 44 -

<PAGE>

                                   ARTICLE IV

                      FEES, PAYMENTS AND OTHER COMPENSATION

         Section  4.01  AUDIT  AND  COLLATERAL  MONITORING  FEES.  The  Borrower
acknowledges that pursuant to Section 7.01(f),  representatives of the Agent and
the  Lenders may visit any or all of the Loan  Parties  and/or  conduct  audits,
inspections,  valuations  and/or  field  examinations  of any or all of the Loan
Parties.  The Borrower  agrees to pay (i) $1,500 per day per  examiner  plus the
examiner's  out-of-pocket  costs and reasonable  expenses incurred in connection
with all such visits, audits, inspections, valuations and field examinations and
(ii)  the  cost  of  all  visits,  audits,  inspections,  valuations  and  field
examinations conducted by a third party on behalf of the Agent or the Lenders.

         Section 4.02 PAYMENTS;  COMPUTATIONS  AND STATEMENTS.  (a) The Borrower
will make each payment under this  Agreement not later than 12:00 noon (New York
City time) on the day when due, in lawful money of the United  States of America
and in  immediately  available  funds,  to the  Agent's  Account.  All  payments
received by the Agent after 12:00 noon (New York City time) on any  Business Day
will be credited to the Loan Account on the next  succeeding  Business  Day. All
payments shall be made by the Borrower without set-off, counterclaim,  deduction
or other  defense to the Agent and the Lenders.  After  receipt,  the Agent will
promptly  thereafter  cause to be distributed like funds relating to the payment
of principal ratably to the Lenders in accordance with their Pro Rata Shares and
like funds  relating to the payment of any other amount payable to any Lender to
such  Lender,  in each case to be applied in  accordance  with the terms of this
Agreement, provided that the Agent will cause to be distributed all interest and
fees  received  from or for the account of the  Borrower not less than once each
month and in any event  promptly  after  receipt  thereof.  The  Lenders and the
Borrower  hereby  authorize  the Agent to, and the Agent may, from time to time,
charge the Loan Account of the  Borrower  with any amount due and payable by the
Borrower  under any Loan Document.  Each of the Lenders and the Borrower  agrees
that the Agent  shall  have the right to make such  charges  whether  or not any
Default or Event of Default  shall have occurred and be  continuing.  Any amount
charged to the Loan Account of the Borrower shall be deemed an Obligation of the
Borrower  hereunder made by the Lenders to the Borrower,  funded by the Agent on
behalf of the  Lenders.  The Lenders and the  Borrower  confirm that any charges
which  the  Agent  may so make to the Loan  Account  of the  Borrower  as herein
provided  will be made as an  accommodation  to the  Borrower  and solely at the
Agent's discretion. Whenever any payment to be made under any such Loan Document
shall be stated to be due on a day other than a Business Day, such payment shall
be made on the next succeeding  Business Day and such extension of time shall in
such case be included in the  computation  of interest or fees,  as the case may
be. All  computations  of fees shall be made by the Agent on the basis of a year
of 360 days for the actual number of days (including the first day but excluding
the last day)  occurring  in the period for which  such fees are  payable.  Each
determination  by the  Agent  of an  interest  rate or fees  hereunder  shall be
conclusive and binding for all purposes in the absence of manifest error.

                  (b) The Agent shall provide the Borrower,  promptly  after the
end of each calendar  month, a summary  statement (in the form from time to time
used by the Agent) of the opening and closing daily balances in the Loan Account
of the  Borrower  during  such month,  the amounts and dates of all  payments on


                                     - 45 -
<PAGE>

account of the Term Loan during such  month,  the amount of interest  accrued on
the Term Loan during such month, and the amount and nature of any charges to the
Loan  Account made during such month on account of fees,  commissions,  expenses
and other Obligations. All entries on any such statement shall be presumed to be
correct  and,  30 days  after the same is sent,  shall be final  and  conclusive
absent manifest error.

         Section 4.03  SHARING OF PAYMENTS,  ETC. If any Lender shall obtain any
payment (whether  voluntary,  involuntary,  through the exercise of any right of
set-off,  or  otherwise)  on account of any  Obligation in excess of its ratable
share of payments on account of similar obligations obtained by all the Lenders,
such Lender shall forthwith purchase from the other Lenders such  participations
in such  similar  obligations  held by them as shall be  necessary to cause such
purchasing  Lender  to share  the  excess  payment  ratably  with  each of them;
PROVIDED,  HOWEVER,  that  if all or any  portion  of  such  excess  payment  is
thereafter recovered from such purchasing Lender, such purchase from each Lender
shall be  rescinded  and such Lender  shall repay to the  purchasing  Lender the
purchase  price to the extent of such recovery  together with an amount equal to
such Lender's  ratable share  (according to the  proportion of (i) the amount of
such Lender's required  repayment to (ii) the total amount so recovered from the
purchasing  Lender of any interest or other amount paid by the purchasing Lender
in respect of the total  amount so  recovered).  The  Borrower  agrees  that any
Lender so  purchasing  a  participation  from  another  Lender  pursuant to this
Section 4.03 may, to the fullest  extent  permitted by law,  exercise all of its
rights   (including  the  Lender's  right  of  set-off)  with  respect  to  such
participation  as  fully  as if such  Lender  were the  direct  creditor  of the
Borrower in the amount of such participation.

         Section 4.04 APPORTIONMENT OF PAYMENTS.  Subject to Section 2.02 hereof
and to any written agreement among the Agent and/or the Lenders:

                  (a) all payments of  principal  and interest in respect of the
Term Loan,  all payments of fees (other than the Loan Servicing Fee set forth in
Section 2.06 hereof and the audit and collateral  monitoring fee provided for in
Section 4.01) and all other payments in respect of any other Obligations,  shall
be allocated by the Agent among such of the Lenders as are entitled thereto,  in
proportion to their  respective Pro Rata Shares or otherwise as provided  herein
or, in respect of payments not made on account of the Term Loan,  as  designated
by the Person making payment when the payment is made.

                  (b) After the  occurrence  and  during the  continuance  of an
Event of Default,  the Agent may, and upon the direction of the Required Lenders
shall,  apply all payments in respect of any Obligations and all proceeds of the
Collateral,  subject to the provisions of this Agreement,  (i) FIRST, to pay the
Obligations  in respect of any fees,  expense  reimbursements,  indemnities  and
other  amounts  then due to the Agent until paid in full;  (ii)  SECOND,  to pay
interest due in respect of the Agent Advances  until paid in full;  (iii) THIRD,
to pay principal of the Agent Advances until paid in full; (iv) FOURTH,  ratably
to pay the  Obligations in respect of any fees and  indemnities  then due to the
Lenders until paid in full; (v) FIFTH, ratably to pay interest due in respect of
the Term Loan until paid in full;  (vi) SIXTH,  ratably to pay  principal of the
Term Loan until paid in full, and (vii) SEVENTH,  to the ratable  payment of all
other Obligations then due and payable.

                  (c) In each  instance,  so long as no  Event  of  Default  has
occurred and is continuing,  Section 4.04(b) shall not be deemed to apply to any


                                     - 46 -

<PAGE>

payment by the  Borrower  specified  by the  Borrower to the Agent to be for the
prepayment of all or part of the  principal of the Term Loan in accordance  with
the terms and conditions of Section 2.05.

                  (d) For  purposes  of  Section  4.04(b),  "paid in full"  with
respect to interest shall include interest accrued after the commencement of any
Insolvency  Proceeding  irrespective  of  whether a claim for such  interest  is
allowable in such Insolvency Proceeding.

                  (e) In the event of a direct  conflict  between  the  priority
provisions of this Section 4.04 and other provisions contained in any other Loan
Document,  it is the  intention  of the parties  hereto that both such  priority
provisions  in such  documents  shall be read  together  and  construed,  to the
fullest extent  possible,  to be in concert with each other. In the event of any
actual,  irreconcilable conflict that cannot be resolved as aforesaid, the terms
and provisions of this Section 4.04 shall control and govern.

         Section 4.05 INCREASED COSTS AND REDUCED  RETURN.  (a) If any Lender or
the Agent shall have determined that the adoption or  implementation  of, or any
change in, any law,  rule,  treaty or  regulation,  or any policy,  guideline or
directive of, or any change in, the interpretation or administration thereof by,
any court,  central bank or other administrative or Governmental  Authority,  or
compliance by any Lender or the Agent or any Person  controlling any such Lender
or the Agent with any directive of, or guideline from, any central bank or other
Governmental  Authority  or the  introduction  of, or change in, any  accounting
principles  applicable to any Lender or the Agent or any Person  controlling any
such Lender or the Agent (in each case, whether or not having the force of law),
shall (i) subject any Lender or the Agent,  or any Person  controlling  any such
Lender  or the  Agent to any tax,  duty or other  charge  with  respect  to this
Agreement or the Term Loan made by such Lender or the Agent, or change the basis
of taxation of payments to any Lender or the Agent or any Person controlling any
such Lender or the Agent of any amounts payable  hereunder  (except for taxes on
the overall net income of any Lender or the Agent or any Person  controlling any
such Lender or the Agent),  (ii) impose,  modify or deem applicable any reserve,
special deposit or similar  requirement  against the Term Loan or against assets
of or held by, or deposits  with or for the account of, or credit  extended  by,
any Lender or the Agent or any Person  controlling  any such Lender or the Agent
or (iii)  impose on any Lender or the Agent or any Person  controlling  any such
Lender or the Agent any other  condition  regarding  this  Agreement or the Term
Loan,  and the result of any event  referred  to in clauses  (i),  (ii) or (iii)
above  shall be to  increase  the cost to any  Lender or the Agent of making the
Term Loan or agreeing to make the Term Loan, or to reduce any amount received or
receivable by any Lender or the Agent  hereunder,  then, upon demand by any such
Lender or the Agent,  the  Borrower  shall pay to such  Lender or the Agent such
additional  amounts  as will  compensate  such  Lender  or the  Agent  for  such
increased costs or reductions in amount.

                  (b) If any Lender or the Agent shall have  determined that any
Capital  Guideline or the adoption or  implementation  of, or any change in, any
Capital Guideline by the Governmental  Authority charged with the interpretation
or  administration  thereof,  or  compliance  by any  Lender or the Agent or any
Person  controlling such Lender or the Agent with any Capital  Guideline or with
any request or directive of any such Governmental  Authority with respect to any
Capital  Guideline,  or the  implementation of, or any change in, any applicable
accounting  principles  (in each case,  whether or not having the force of law),
either (i) affects or would affect the amount of capital required or expected to


                                     - 47 -

<PAGE>

be maintained by any Lender or the Agent or any Person  controlling  such Lender
or the  Agent,  and any Lender or the Agent  determines  that the amount of such
capital is increased as a direct or indirect consequence of the Term Loan or any
Lender's or the Agent's or any such other controlling Person's other obligations
hereunder,  or (ii) has or would have the effect of reducing  the rate of return
on any Lender's or the Agent's or any such other controlling Person's capital to
a level  below that which such  Lender or the Agent or such  controlling  Person
could have achieved but for such circumstances as a consequence of the Term Loan
or any  agreement to make the Term Loan, or such Lender's or the Agent's or such
other  controlling  Person's other  obligations  hereunder (in each case, taking
into  consideration,  such  Lender's  or the  Agent's or such other  controlling
Person's  policies with respect to capital  adequacy),  then, upon demand by any
Lender or the Agent,  the  Borrower  shall pay to such  Lender or the Agent from
time to time such additional amounts as will compensate such Lender or the Agent
for such cost of  maintaining  such  increased  capital or such reduction in the
rate of  return  on such  Lender's  or the  Agent's  or such  other  controlling
Person's capital.

                  (c) All amounts  payable  under this  Section  4.05 shall bear
interest from the date that is 10 days after the date of demand by any Lender or
the Agent  until  payment in full to such  Lender or the Agent at the  Reference
Rate. A certificate of such Lender or the Agent claiming compensation under this
Section 4.05, specifying the event herein above described and the nature of such
event shall be  submitted by such Lender or the Agent to the  Borrower,  setting
forth the additional  amount due and an explanation of the calculation  thereof,
and such  Lender's or the Agent's  reasons for invoking the  provisions  of this
Section 4.05, and shall be final and conclusive absent manifest error.

                                   ARTICLE V

                           CONDITIONS TO THE TERM LOAN

         Section 5.01  CONDITIONS  PRECEDENT TO  EFFECTIVENESS.  This  Agreement
shall become  effective as of the Business Day (the "EFFECTIVE  DATE") when each
of the  following  conditions  precedent  shall have been  satisfied in a manner
satisfactory to the Agent:

                  (a) PAYMENT OF FEES,  ETC. The Borrower  shall have paid on or
before  the date of this  Agreement  all fees,  costs,  expenses  and taxes then
payable pursuant to Section 2.06 and Section 12.04.

                  (b) REPRESENTATIONS AND WARRANTIES;  NO EVENT OF DEFAULT.  The
following  statements  shall be true and correct:  (i) the  representations  and
warranties contained in ARTICLE VI and in each other Loan Document,  certificate
or other writing delivered to the Agent or any Lender pursuant hereto or thereto
on or  prior  to the  Effective  Date  are  true  and  correct  on and as of the
Effective  Date as  though  made on and as of such date and (ii) no  Default  or
Event of Default shall have occurred and be continuing on the Effective  Date or
would result from this Agreement or the other Loan Documents  becoming effective
in accordance with its or their respective terms.

                  (c) LEGALITY. The making of the Term Loan shall not contravene
any law, rule or regulation applicable to the Agent or any Lender.


                                     - 48 -

<PAGE>

                  (d) DELIVERY OF DOCUMENTS. The Agent shall have received on or
before the Effective Date the following, each in form and substance satisfactory
to the Agent and, unless indicated otherwise, dated the Effective Date:

                           (i) a Pledge  Agreement,  duly  executed by each Loan
Party;

                           (ii) a pledge and security  agreement,  duly executed
by Yale  Industrial  Products,  Inc.,  with  respect to the pledge of the common
stock of Audubon Europe;

                           (iii) a Patent Agreement,  duly executed by each Loan
Party;

                           (iv) a  Trademark  Agreement,  duly  executed by each
Loan Party;

                           (v) an  Assignment  of  Trademarks  and Service Marks
(U.S.),  in the form of Exhibit 1 to the Trademark  Agreement,  duly executed by
each Loan Party;

                           (vi) a Copyright Mortgage, duly executed by each Loan
Party;

                           (vii) a  Mortgage  with  respect  to  each  Mortgaged
Property;

                           (viii)  evidence of the recording of each Mortgage in
such  office or offices  as may be  necessary  or, in the  opinion of the Agent,
desirable to perfect the Lien  purported  to be created  thereby or to otherwise
protect the rights of the Agent and the Lenders thereunder;

                           (ix) a Title  Insurance  Policy with  respect to each
Mortgage (other than with respect to the Mortgaged Properties listed on Schedule
1.01(E)), dated as of the Effective Date;

                           (x) a survey of each Mortgaged  Property  (other than
the  Mortgaged  Properties  listed on Schedule  1.01(E)),  in form and substance
satisfactory  to the  Agent,  certified  to the Agent  and to the  issuer of the
relevant Title Insurance Policy;

                           (xi) a copy of each letter  issued by the  applicable
State Governmental  Authority,  evidencing each Mortgaged Property's (other than
the  Mortgaged  Properties  listed  on  Schedule  1.01(E))  compliance  with all
applicable  building  codes,  fire  codes,  other  health and  safety  rules and
regulations,  parking,  density and height  requirements  and other building and
zoning laws;

                           (xii)  a  UCC  Filing   Authorization   Letter,  duly
executed by each Loan Party,  together with appropriate  financing statements on
Form UCC-1 duly filed in such office or offices as may be  necessary  or, in the
opinion of the Agent,  desirable to perfect the security interests  purported to
be created hereby and by the Collateral Documents;

                           (xiii)  certified  copies of  request  for  copies of
information on Form UCC-11,  listing all effective  financing  statements  which
name as debtor any Loan Party and which are filed in the offices  referred to in
paragraph (xii) above, together with copies of such financing  statements,  none


                                     - 49 -

<PAGE>

of which, except as otherwise agreed in writing by the Agent, shall cover any of
the  Collateral  and the results of searches for any tax Lien and judgment  Lien
filed against such Person or its property,  which  results,  except as otherwise
agreed to in writing by the Agent, shall not show any such Liens;

                           (xiv) the Participation  Agreement,  duly executed by
the Loan Parties;

                           (xv) the  Intercreditor  Agreement,  duly executed by
the Working Capital Agent and the Working Capital  Lenders,  and acknowledged by
the Loan Parties;

                           (xvi) a copy of the  resolutions  of each Loan Party,
certified as of the Effective Date by an Authorized Officer thereof, authorizing
(A) the  borrowings  hereunder  and the  transactions  contemplated  by the Loan
Documents to which such Loan Party is or will be a party, and (B) the execution,
delivery and  performance by such Loan Party of each Loan Document to which such
Loan Party is or will be a party and the  execution  and  delivery  of the other
documents to be delivered by such Person in connection herewith and therewith;

                           (xvii) a certificate of an Authorized Officer of each
Loan Party,  certifying the names and true signatures of the  representatives of
such Loan Party  authorized  to sign each Loan Document to which such Loan Party
is or will be a party and the other  documents to be executed  and  delivered by
such Loan Party in connection herewith and therewith,  together with evidence of
the incumbency of such authorized officers;

                           (xviii) a certificate of the appropriate  official(s)
of the state of  organization  and each state of foreign  qualification  of each
Loan Party certifying as to the subsistence in good standing of, and the payment
of taxes by, such Loan Party in such states;

                           (xix)  a true  and  complete  copy  of  the  charter,
certificate of formation,  certificate of limited  partnership or other publicly
filed  organizational  document of each Loan Party certified as of a recent date
not more than 30 days prior to the Effective Date by an appropriate  official of
the state of  organization  of such Loan  Party  which  shall set forth the same
complete  name of such Loan Party as is set forth herein and the  organizational
number  of  such  Loan  Party,  if  an  organized   number  is  issued  in  such
jurisdiction;

                           (xx)  a copy  of the  charter  and  by-laws,  limited
liability  company  agreement,   operating   agreement,   agreement  of  limited
partnership or other organizational  document of each Loan Party,  together with
all  amendments  thereto,  certified as of the  Effective  Date by an Authorized
Officer of such Loan Party;

                           (xxi) an opinion from each of the  following  counsel
to the Borrower and its Subsidiaries,  in form and substance satisfactory to the
Agent, as to such matters as the Agent may reasonably request:

                                    (A)  Phillips,  Lytle,  Hitchcock,  Blaine &
Huber LLP, counsel to the Loan Parties;


                                     - 50 -

<PAGE>

                                    (B)  Theodore  Hadzi-Antich,   environmental
counsel to the Loan Parties;

                                    (C) Hodgson  Russ LLP,  bond  counsel to the
Loan Parties;

                                    (D) Shook,  Hardy & Bacon  L.L.P.,  Missouri
counsel to Audubon West, Inc. and LICO Steel, Inc.;

                                    (E) Brune & Neff,  Oklahoma counsel to Crane
Equipment & Service, Inc.;

                                    (F) Linklaters Loesch, Luxembourg counsel to
Audubon Europe; and

                                    (G) Opinion of the  Manager - Legal  Affairs
of the Borrower.

                           (xxii) a certificate of an Authorized Officer of each
Loan Party,  certifying  as to the matters set forth in  subsection  (b) of this
Section 5.01;

                           (xxiii) a copy of the  Financial  Statements  and the
financial  projections  described in Section 6.01(d)(i) hereof,  certified as of
the Effective Date as true and correct by a Designated  Financial Officer of the
Borrower;

                           (xxiv)  a  certificate  of  a  Designated   Financial
Officer of each Loan Party,  certifying  as to the  solvency of such Loan Party,
which certificate shall be satisfactory in form and substance to the Agent;

                           (xxv) evidence of the insurance  coverage required by
Section 7.01(e) and the terms of each Mortgage and such other insurance coverage
with respect to the business and operations of the Loan Parties as the Agent may
reasonably  request,  in each case,  where  requested  by the  Agent,  with such
endorsements as to the named insureds or loss payees thereunder as the Agent may
request and  providing  that such policy may be  terminated  or canceled (by the
insurer or the insured  thereunder)  only upon 30 days' prior written  notice to
the Agent and each such named  insured or loss payee,  together with evidence of
the payment of all premiums due in respect  thereof for such period as the Agent
may request;

                           (xxvi) a certificate of an Authorized  Officer of the
Borrower,  certifying  the names and true  signatures  of the  persons  that are
authorized  to provide the Notice of Borrowing  and all other notices under this
Agreement and the other Loan Documents;

                           (xxvii) a Landlord's Waiver and Consent,  executed by
each landlord with respect to each Material Leasehold Property,  together with a
copy of the relevant Lease, and all amendments  thereto,  between the applicable
Loan Party and the landlord party thereto;

                           (xxviii)  copies of the Canadian Loan Documents as in
effect on the Effective Date, certified as true and correct copies thereof by an
Authorized Officer of the Borrower, together with a certificate of an Authorized


                                     - 51 -

<PAGE>

Officer of the Borrower  stating that such  agreements  remain in full force and
effect and that none of the Canadian  Borrowers has breached or defaulted in any
of its obligations under such agreements;

                           (xxix) copies of the Working  Capital Loan  Documents
as in effect on the Effective Date, certified as true and correct copies thereof
by an  Authorized  Officer of the Borrower,  together  with a certificate  of an
Authorized  Officer of the Borrower stating that such agreements  remain in full
force and effect and that none of the Loan  Parties has breached or defaulted in
any of its obligations under such agreements;

                           (xxx)   copies  of  the  Senior   Subordinated   Note
Documents  as in effect on the  Effective  Date,  certified  as true and correct
copies  thereof  by an  Authorized  Officer  of the  Borrower,  together  with a
certificate  of  an  Authorized  Officer  of  the  Borrower  stating  that  such
agreements remain in full force and effect and that none of the Loan Parties has
breached or defaulted in any of its obligations under such agreements;

                           (xxxi) an  assignment  agreement  with respect to the
Existing  Credit Facility and all related  documents,  duly executed by the Loan
Parties and the Existing  Lender in favor of the Working  Capital  Agent and the
Working Capital Lenders, together with an assignment of mortgage in favor of the
Working Capital Agent and the Working Capital Lenders for each mortgage filed by
the Existing  Lender on the Mortgaged  Properties  and UCC-3  amendments for all
UCC-1 financing statements filed by the Existing Lender and covering any portion
of the Collateral;

                           (xxxii)  a   satisfactory   ASTM   1527-00   Phase  I
Environmental  Site  Assessment  ("Phase I ESA") (and, if requested by the Agent
based  upon  the  results  of  such  Phase  I ESA,  an  ASTM  1527-00  Phase  II
Environmental  Site  Assessment)  of each  Mortgaged  Property  (other  than the
Mortgaged  Properties listed on Schedule 1.01(E)),  in form and substance and by
an independent firm satisfactory to the Agent;

                           (xxxiii)  copies of all lockbox  agreements,  control
agreements  and blocked  account  agreements  delivered  pursuant to the Working
Capital Loan Agreement; and

                           (xxxiv)   such   other    agreements,    instruments,
approvals,  opinions and other documents, each satisfactory to the Agent in form
and substance, as the Agent may reasonably request.

                  (e) MATERIAL ADVERSE EFFECT.  The Agent shall have determined,
in its sole  judgment,  that no event or  development  shall have occurred since
September 30, 2002 which could have a Material Adverse Effect.

                  (f) WORKING  CAPITAL  FINANCING.  On or prior to the Effective
Date, the Agent shall have received evidence that the transactions  contemplated
by the Working Capital Loan Agreement shall have been consummated.

                  (g) APPROVALS. All consents,  authorizations and approvals of,
and filings and  registrations  with,  and all other  actions in respect of, any
Governmental Authority or other Person required in connection with the making of
the Term Loan or the  conduct  of the Loan  Parties'  business  shall  have been
obtained and shall be in full force and effect.


                                     - 52 -

<PAGE>

                  (h)  PROCEEDINGS;  RECEIPT OF DOCUMENTS.  All  proceedings  in
connection  with  the  making  of the  Term  Loan  and  the  other  transactions
contemplated by this Agreement and the other Loan  Documents,  and all documents
incidental  hereto  and  thereto,  shall be  satisfactory  to the  Agent and its
counsel, and the Agent and such counsel shall have received all such information
and such counterpart originals or certified or other copies of such documents as
the Agent or such counsel may reasonably request.

                  (i) MANAGEMENT REFERENCE CHECKS. The Agent shall have received
satisfactory  reference  checks for, and shall have had an  opportunity  to meet
with, key management of each Loan Party.

                  (j)  DUE  DILIGENCE.   The  Agent  shall  have  completed  its
business, legal and collateral due diligence with respect to each Loan Party and
the results  thereof shall be acceptable to the Agent,  in its sole and absolute
discretion.  Without  limiting the  foregoing,  the Agent shall have  received a
Field Survey and Audit,  dated not earlier  than 30 days prior to the  Effective
Date,  and  such  Field  Survey  and  Audit  and the  results  thereof  shall be
acceptable to the Agent, in its sole and absolute discretion.

                  (k)  AVAILABILITY.  After giving effect to the Term Loan,  the
Canadian  Term Loan and the Working  Capital  Loans to be made on the  Effective
Date, (i) Working Capital  Availability  shall not be less than  $15,000,000 and
(ii) all  liabilities  of the Loan Parties shall be current.  The Borrower shall
deliver to the Agent a  certificate  of a  Designated  Financial  Officer of the
Borrower  certifying  as to the  matters set forth in clauses (i) and (ii) above
and containing the calculation of Working Capital Availability.

                                   ARTICLE VI

                         REPRESENTATIONS AND WARRANTIES

         Section 6.01  REPRESENTATIONS  AND  WARRANTIES.  Each Loan Party hereby
represents and warrants to the Agent and the Lenders as follows:

                  (a)  ORGANIZATION;  POWERS.  Each  of  the  Borrower  and  its
Subsidiaries  has been duly formed or organized  and is validly  existing and in
good standing under the laws of its  jurisdiction  of organization or formation.
Each of the Borrower and its  Subsidiaries  has all  requisite  power to own its
property  and  authority  to  carry  on its  business  as now  conducted  and as
presently  contemplated,  and is  qualified  to do  business  in, and is in good
standing and duly  authorized to do business in, every  jurisdiction  where such
qualification  is  required,  except  where the  failure  to have such  power or
authority  or to be so  qualified or in good  standing,  individually  or in the
aggregate,  could not  reasonably  be expected  to result in a Material  Adverse
Effect.

                  (b) AUTHORIZATION;  ENFORCEABILITY.  The borrowing of the Term
Loan and the grant of  security  interests  pursuant to the Loan  Documents  are
within the power and authority of the Borrower and each of its Subsidiaries,  as
applicable and have been duly authorized by all necessary  action on the part of
the Borrower and each of its Subsidiaries, as applicable. This Agreement and the
other Loan  Documents have been duly  authorized,  executed and delivered by the


                                     - 53 -

<PAGE>

Borrower and each of its  Subsidiaries,  as applicable,  and  constitute  legal,
valid and binding  obligations of the Borrower and each of its Subsidiaries,  as
applicable,  enforceable in accordance with their respective  terms,  subject to
applicable  bankruptcy,  insolvency,  reorganization,  moratorium  or other laws
affecting  creditors'  rights  generally  and subject to general  principles  of
equity, regardless of whether considered in a proceeding in equity or at law.

                  (c) GOVERNMENTAL APPROVALS; NO CONFLICTS. The borrowing of the
Term Loan and the grant of the security interests pursuant to the Loan Documents
(i) do not require any consent or approval of,  registration  or filing with, or
any other action by, any  Governmental  Authority  which has not been  obtained,
except as disclosed on Schedule  6.01(c),  (ii) will not violate any  applicable
law, policy or regulation or the organizational documents of the Borrower or any
of its Subsidiaries or any order of any Governmental  Authority,  (iii) will not
violate  or result  in a  default  under  any  material  term of any  indenture,
agreement  or  other  instrument  binding  upon  the  Borrower  or  any  of  its
Subsidiaries,  or any of their  assets,  or give rise to a right  thereunder  to
require any payment to be made by the Borrower or any of its  Subsidiaries,  and
(iv) except for the Liens created by the Loan Documents,  will not result in the
creation or  imposition  of any Lien on any asset of the  Borrower or any of its
Subsidiaries.

                  (d) FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE.

                           (i) The Loan Parties have heretofore delivered to the
Agent and the Lenders the following financial statements:

                                    (A)  the  consolidated  balance  sheets  and
statements of operations and cash flows of the Borrower and its Subsidiaries, as
of and for the Fiscal Years ended March 31, 2000,  March 31, 2001, and March 31,
2002, audited and accompanied by an opinion of the Borrower's independent public
accountants;

                                    (B) the unaudited consolidated balance sheet
and   statements  of  operations   and  cash  flows  of  the  Borrower  and  its
Subsidiaries,  as of and for the fiscal  year-to-date period ended September 30,
2002, certified by a Designated Financial Officer that such financial statements
fairly present the financial  condition of the Borrower and its  Subsidiaries as
at  such  date  and  the  results  of the  operations  of the  Borrower  and its
Subsidiaries  for the  period  ended on such  date  and that all such  financial
statements, including the related schedules and notes thereto have been prepared
in all material respects in accordance with GAAP applied consistently throughout
the periods involved, except as disclosed on Schedule 6.01(d); and

                                    (C)  the  projected   consolidated   balance
sheets,  statements  of  operations  and cash flows,  for the  Borrower  and its
Subsidiaries for the Fiscal Years ended March 31, 2003 through March 31, 2007.

Except as disclosed on Schedule 6.01(d),  such financial  statements (except for
the  projections)  present  fairly,  in all material  respects,  the  respective
consolidated  financial position and results of operations and cash flows of the
respective  entities  as of such  respective  dates  and  for  such  periods  in
accordance with GAAP,  subject to year-end audit  adjustments and the absence of


                                     - 54 -

<PAGE>

footnotes in the case of such unaudited or pro forma statements. The projections
were prepared by the Borrower in good faith and were based on  assumptions  that
were reasonable when made.

                           (ii) Except as disclosed on Schedule  6.01(d),  since
September 30, 2002,  there has been no material  adverse change in the business,
assets, operations or condition, financial or otherwise, of the Borrower and its
Subsidiaries from that set forth in the September 30, 2002 financial  statements
referred to in clause (B) of paragraph (i) above.

                           (iii)   Neither   the   Borrower   nor   any  of  its
Subsidiaries has on the date hereof any contingent liabilities,  liabilities for
taxes,  unusual  forward or long-term  commitments  or unrealized or anticipated
losses from any unfavorable  commitments in each case that are material,  except
as  referred  to or  reflected  or  provided  for  in the  financial  statements
described in this Section 6.01(d) or in Schedule 6.01(d) hereto, or as otherwise
permitted pursuant to this Agreement.

                           (iv)  Schedule   6.01(d)(iv)   hereto   contains  the
calculation of EBITDA and other financial information,  including  restructuring
charges  for the  fiscal  quarters  ending  March 31,  2002,  June 30,  2002 and
September 30, 2002.

                  (e) PROPERTIES.

                           (i) Each of the  Borrower  and its  Subsidiaries  has
good and marketable  title to, or valid,  subsisting and  enforceable  leasehold
interests in, all Property material to its business. All machinery and equipment
of each of the Borrower and its Subsidiaries is in good operating  condition and
repair, and all necessary replacements of and repairs thereto have be made so as
to preserve and maintain the value and operating  efficiency  of such  machinery
and equipment.

                           (ii)  Set  forth  on  Schedule  6.01(e)  hereto  is a
complete list of all Patents,  Trademarks and  Copyrights.  The Borrower and its
Subsidiaries own, or are licensed to use, all Patents, Trademarks and Copyrights
and other intellectual  property material to their business  (collectively,  the
"PROPRIETARY   RIGHTS"),   and  to  the   knowledge  of  the  Borrower  and  its
Subsidiaries,  the use thereof by the Borrower or any of its  Subsidiaries  does
not  infringe  upon  the  rights  of any  other  Person,  except  for  any  such
infringements  that,  individually or in the aggregate,  could not reasonably be
expected to have a Material Adverse Effect.

                           (iii)  Schedule   6.01(e)   clearly   identifies  all
Patents,  Trademarks and Copyrights  that have been duly registered in, filed in
or issued by the PTO or the United States Register of Copyrights  (collectively,
the "REGISTERED  PROPRIETARY  RIGHTS").  The Registered  Proprietary Rights have
been  properly   maintained  and  renewed  in  accordance  with  all  applicable
provisions  of law and  administrative  regulations  in the  United  States,  as
applicable. The Borrower and its Subsidiaries have taken commercially reasonable
steps to  protect  their  Registered  Proprietary  Rights  and to  maintain  the
confidentiality  of all Proprietary  Rights that are not generally in the public
domain.

                           (iv) As of the date hereof, Schedule 6.01(e) contains
a true,  accurate and complete  list of (A) all Real  Property  Assets,  whether
owned  or  leased,  and (B) all  Leases,  subleases  or  assignments  of  Leases
(together  with  all  amendments,   modifications,   supplements,   renewals  or


                                     - 55 -

<PAGE>

extensions of any thereof)  affecting  each  Leasehold  Property,  regardless of
whether  the  Borrower  or any of its  Subsidiaries  is the  landlord  or tenant
(whether  directly or as an assignee or successor in interest) under such Lease,
sublease or assignment.  Except as specified in Schedule 6.01(e), each agreement
listed in clause (B) of the immediately  preceding sentence is in full force and
effect and neither the Borrower nor any of its Subsidiaries has any knowledge of
any  default  that has  occurred  and is  continuing  thereunder,  and each such
agreement  constitutes the legal,  valid and binding  obligation of the Borrower
and each of its Subsidiaries,  as applicable,  enforceable  against the Borrower
and each of its  Subsidiaries,  as  applicable,  in  accordance  with its terms,
except as enforcement may be limited by bankruptcy, insolvency,  reorganization,
moratorium or similar laws relating to or limiting  creditors'  rights generally
or by equitable principles.

                  (f) LITIGATION AND ENVIRONMENTAL MATTERS.

                           (i) Except as set forth on  Schedule  6.01(f),  there
are no  Environmental  Actions  of any  kind  by or  before  any  arbitrator  or
Governmental  Authority pending against or, to the knowledge of the Borrower and
its  Subsidiaries,  threatened  against or affecting  the Borrower or any of its
Subsidiaries  that (A) if adversely  determined,  could have a Material  Adverse
Effect or (B)  relates  to this  Agreement  or any other  Loan  Document  or any
transaction contemplated hereby or thereby.

                           (ii) The Borrower and its Subsidiaries have taken all
necessary steps to investigate  the past and present  condition and usage of the
Real Property Assets and the operations  conducted  thereon and, based upon such
diligent  investigation,  have  determined,  except  as set  forth  on  Schedule
6.01(f), that:

                                    (A) none of the Borrower,  its  Subsidiaries
or any operator of the Real Property Assets currently or formerly owned,  leased
or   operated   by   the   Borrower,    any   of   its   Subsidiaries   or   any
predecessor-in-interest  or any  operations  thereon are in violation or alleged
violation, in any material respect, of any Environmental Laws;

                                    (B)  neither  the  Borrower  nor  any of its
Subsidiaries has become subject to any Environmental Liabilities and do not know
of any  basis  for any  Environmental  Liabilities  which  could  reasonably  be
expected  to  result in any  Environmental  Liabilities  in  excess of  $200,000
individually or $4,000,000 in the aggregate;

                                    (C)  neither  the  Borrower  nor  any of its
Subsidiaries  has  received  notice  from any  third  party  including,  without
limitation,  any  Governmental  Authority,  (1)  that  any one of them  has been
identified by a Governmental Authority as a potentially  responsible party under
Environmental   Law;   (2)  that  the   Borrower,   its   Subsidiaries   or  any
predecessor-in-interest has generated,  transported or disposed of any Hazardous
Materials at any site at which a  Governmental  Authority  has  conducted or has
ordered a party to conduct a Remedial  Action,  removal or other response action
pursuant  to any  Environmental  Law;  or (3)  that the  Borrower  or any of its
Subsidiaries  is or shall be a named party to any  Environmental  Action arising
out of any third party's incurrence of costs, expenses, losses or damages of any
kind whatsoever in connection with the Release of Hazardous Materials;


                                     - 56 -

<PAGE>

                                    (D)  (1) no  portion  of the  Real  Property
Assets currently or formerly owned, leased or operated by the Borrower or any of
its Subsidiaries has been used for the generation, handling, processing, storage
or disposal of Hazardous Materials except in accordance in all material respects
with applicable Environmental Laws; and no underground tank or other underground
storage receptacle for Hazardous Materials is located on any portion of the Real
Property Assets currently or formerly owned,  leased or operated by the Borrower
or any of its  Subsidiaries;  (2) there  have  been no  Releases  or  threatened
Releases of Hazardous  Materials  on, upon,  into or from the  properties of the
Borrower  or any of its  Subsidiaries,  which  Releases  would  have a  material
adverse  effect on the  value of any of the Real  Property  Assets  or  adjacent
properties;  (3) to the best  knowledge of the  Borrower  and its  Subsidiaries,
there have been no generation,  storage,  disposal or Releases on, upon, from or
into any real property in the vicinity of any of the Real Property Assets which,
through soil or groundwater  contamination,  may have come to be located on, and
which would have a material  adverse  effect on the value of, any Real  Property
Asset; and (4) in addition,  any Hazardous Materials that have been generated on
any of the Real Property Assets currently or formerly owned,  leased or operated
by the Borrower,  any of its  Subsidiaries or any  predecessor-in-interest  have
been transported offsite only by carriers having an identification number issued
by any Governmental  Authority,  treated or disposed of, to the knowledge of the
Borrower or any of its  Subsidiaries,  only by treatment or disposal  facilities
maintaining valid permits as required under applicable Environmental Laws, which
transporters  and  facilities  have been and are, to the best  knowledge  of the
Borrower and its Subsidiaries,  operating in compliance in all material respects
with such permits and applicable Environmental Laws; and

                                    (E) none of the Borrower,  its  Subsidiaries
or any of the Real Property  Assets are subject to any applicable  Environmental
Law requiring the  performance of Hazardous  Material site  assessments,  or the
removal or  remediation of Hazardous  Materials,  or the giving of notice to any
Governmental  Authority  or the  recording  or delivery  to other  Persons of an
environmental disclosure document or statement by virtue of the transactions set
forth herein and contemplated  hereby, or as a condition to the recording of any
Mortgage or to the effectiveness of any other transactions contemplated hereby.

                           (iii)  Since  the date of this  Agreement,  there has
been no change in the status of the Disclosed  Matters that,  individually or in
the  aggregate,  has had, or materially  increased the  likelihood of having,  a
Material Adverse Effect.

                  (g) COMPLIANCE WITH LAWS AND  AGREEMENTS.  Except as set forth
on Schedule  6.01(g),  each of the Borrower and its  Subsidiaries is in material
compliance with all laws,  decrees,  judgments,  licenses,  rules,  regulations,
policies, permits, approvals and orders of any Governmental Authority applicable
to it, its property or the  operation of its business and all material  terms of
indentures, agreements and other instruments binding upon it or its property.

                  (h)  INVESTMENT  AND  HOLDING  COMPANY  STATUS.   Neither  the
Borrower  nor any of its  Subsidiaries  is (i) an  "investment  company",  or an
"affiliated company" or a "principal underwriter" of an "investment company", as
defined in, or subject to regulation under, the Investment  Company Act of 1940,
as amended,  (ii) a "holding company",  or a "subsidiary  company" of a "holding
company", or an "affiliate" of a "holding company", as defined in, or subject to
regulation  under, the Public Utility Holding Company Act of 1935, as amended or


                                     - 57 -

<PAGE>

(iii) a "bank holding  company" as defined in, or subject to  regulation  under,
the Bank Holding Company Act of 1956, as amended.

                  (i) TAXES.  Except as set forth on Schedule  6.01(i),  each of
the Borrower and its  Subsidiaries  has timely made, filed or caused to be filed
all Tax returns,  declarations  and reports  required to have been filed or made
and has paid or caused to be paid all  Taxes  required  to have been paid by it,
except (A) as of the  Effective  Date,  Taxes that are being  contested  in good
faith by appropriate  proceedings,  so long as such contest  operates to suspend
the  enforcement  of compliance  therewith,  the  collection  thereof and/or the
imposition of any penalty,  fine or Lien with respect thereto, and for which the
Borrower or any of its Subsidiaries has set aside on its books adequate reserves
with respect thereto in accordance with GAAP, which reserves shall be acceptable
to Agent and (B) after the  Effective  Date,  as permitted  by Section  7.01(d).
There are no unpaid Taxes in any material amount claimed to be due by the taxing
authority of any  jurisdiction,  and none of the officers of the Borrower or any
of its Subsidiaries knows of any basis for any such claim.

                  (j) ERISA.  Except as set forth on Schedule  6.01(j),  neither
the Borrower nor any of its  Subsidiaries  has any Pension Plans. No ERISA Event
has  occurred  or is  reasonably  expected  to occur  with  respect to any Plan.
Neither the  Borrower  nor any of its  Subsidiaries  has a present  intention to
terminate any Pension Plan (except in connection with the transactions described
in Schedules  7.02(d)(ii) and 7.02(d)(iii)),  with respect to which the Borrower
or any of its Subsidiaries would incur a cost of more than $100,000 to terminate
such Plan,  including  amounts required to be contributed to fund such Plan upon
termination thereof and all costs and expenses associated therewith,  including,
without  limitation,  attorneys' and actuaries'  fees and expenses in connection
with such  termination and reasonable  expenses and settlement or judgment costs
and attorneys'  fees and expenses in connection  with any litigation  related to
such termination.

                  (k) DISCLOSURE. As of the Effective Date, the Borrower and its
Subsidiaries  have disclosed to the Agent all material  agreements,  instruments
and  corporate  or  other  restrictions  to  which  the  Borrower  or any of its
Subsidiaries is subject after the Effective Date, and all other matters known to
the Borrower or any of its Subsidiaries, that, individually or in the aggregate,
could   reasonably  be  expected  to  have  a  Material   Adverse  Effect.   The
organizational structure of the Borrower and its Subsidiaries is as set forth on
Schedule 6.01(l). The information,  reports, financial statements,  exhibits and
schedules furnished at or prior to the Effective Date in writing by or on behalf
of the  Borrower  and its  Subsidiaries  to the  Agent  in  connection  with the
negotiation,  preparation  or  delivery  of this  Agreement  and the other  Loan
Documents or included herein or therein or delivered pursuant hereto or thereto,
at the Effective Date, when taken as a whole do not contain any untrue statement
of  material  fact or omit to state  any  material  fact  necessary  to make the
statements  herein or therein,  in light of the  circumstances  under which they
were made, not materially  misleading.  All written information  furnished after
the Effective Date by the Borrower and its  Subsidiaries to the Agent and/or the
Lenders in connection  with this  Agreement and the other Loan Documents and the
transactions contemplated hereby and thereby will be true, complete and accurate
in  every  material  respect,  or (in the  case  of pro  forma  information  and
projections) prepared in good faith based on reasonable assumptions, on the date
as of which such  information is stated or certified.  There is no fact known to
the Borrower or any of its  Subsidiaries  that could  reasonably  be expected to


                                     - 58 -

<PAGE>

have a Material Adverse Effect that has not been disclosed  herein, in the other
Loan  Documents  or  in  a  report,  financial  statement,   exhibit,  schedule,
disclosure  letter or other writing furnished to the Agent for use in connection
with the transactions contemplated hereby or thereby.

                  (l)  CAPITALIZATION.  As of the  Effective  Date,  the capital
structure  and  ownership of the  Subsidiaries  of the  Borrower  are  correctly
described on Schedule 6.01(l). As of the Effective Date, the authorized,  issued
and  outstanding  Capital  Stock of the  Borrower  and each of its  Subsidiaries
consists of the Capital  Stock  described on Schedule  6.01(l),  all of which is
duly and validly issued and outstanding, fully paid and nonassessable. Except as
set  forth on  Schedule  6.01(l),  as of the  Effective  Date,  (x) there are no
outstanding   Equity  Rights  with  respect  to  the  Borrower  or  any  of  its
Subsidiaries  and, (y) there are no  outstanding  obligations of the Borrower or
any of its Subsidiaries to repurchase,  redeem,  or otherwise acquire any shares
of  Capital  Stock  of  or  other  interest  in  the  Borrower  or  any  of  its
Subsidiaries,  nor are there any outstanding  obligations of the Borrower or any
of its  Subsidiaries  to make  payments to any Person,  such as "phantom  stock"
payments,  where the amount  thereof is  calculated  with  reference to the fair
market value or equity value of the Borrower or any of its Subsidiaries.

                  (m) SUBSIDIARIES.

                           (i) Set forth on Schedule  6.01(m) is a complete  and
correct  list of all  Subsidiaries  of the Loan  Parties as of the date  hereof,
together with, for each such Subsidiary, (A) the jurisdiction of organization of
such Subsidiary,  (B) each Person holding ownership interests in such Subsidiary
and (C) the nature of the ownership  interests  held by each such Person and the
percentage  of  ownership  of such  Subsidiary  represented  by  such  ownership
interests.  Except as disclosed in Schedule 6.01(m), (x) each Loan Party and its
respective  Subsidiaries  owns,  free and clear of all Liens  (other  than Liens
permitted  hereunder),  and has the unencumbered  right to vote, all outstanding
ownership  interests in each Person shown to be held by it in Schedule  6.01(m),
(y)  all of the  issued  and  outstanding  Capital  Stock  of each  such  Person
organized as a corporation is validly issued,  fully paid and  nonassessable and
(z) there are no outstanding Equity Rights with respect to such Person.

                           (ii) Except as set forth on Schedule  7.02(h),  as of
the date of this Agreement,  neither the Borrower nor any of its Subsidiaries is
subject to any indenture,  agreement, instrument or other arrangement containing
any  provision  of  the  type   described  in  Section   7.02(h)   ("RESTRICTIVE
AGREEMENTS"),  other  than any  such  provision  the  effect  of which  has been
unconditionally, irrevocably and permanently waived.

                  (n) INDEBTEDNESS, LIENS AND AGREEMENTS.

                           (i) Schedule  6.01(n) contains a complete and correct
list, as of the Effective  Date, of any  Indebtedness or any extension of credit
(or commitment for any extension of credit) to, or guarantee by, the Borrower or
any of its  Subsidiaries  in an amount in excess of $100,000,  and the aggregate
principal or face amount outstanding or that may become outstanding with respect
thereto is correctly described on Schedule 6.01(n).

                           (ii) Schedule 6.01(n) contains a complete and correct
list, as of the  Effective  Date, of each Lien (other than the Liens in favor of


                                     - 59 -

<PAGE>

the Agent) securing  Indebtedness of any Person and covering any property of the
Borrower or any of its Subsidiaries,  and the aggregate Indebtedness secured (or
which may be  secured) by each such Lien and the  Property  covered by each such
Lien is correctly described in the appropriate part of Schedule 6.01(n).

                           (iii)  Schedule   6.01(n)  contains  a  complete  and
correct  list, as of the Effective  Date,  of each contract and  arrangement  to
which the  Borrower  or any of its  Subsidiaries  is a party  for which  breach,
nonperformance,  cancellation or failure to renew would have a Material  Adverse
Effect other than  purchase  orders made in the ordinary  course of business and
subject to customary terms.

                           (iv) To the extent  requested by the Agent,  true and
complete copies of each agreement listed on Schedule 6.01(n) have been delivered
to the Agent,  together  with all  amendments,  waivers and other  modifications
thereto.  All such agreements are valid,  subsisting,  in full force and effect,
are currently binding and will continue to be binding upon the Borrower and each
of its  Subsidiaries  that is a party thereto and, to the best  knowledge of the
Borrower  and its  Subsidiaries,  binding  upon the  other  parties  thereto  in
accordance  with their  terms.  The  Borrower  and its  Subsidiaries  are not in
default under any such agreements, the occurrence of which could have a Material
Adverse Effect.

                  (o) FEDERAL RESERVE REGULATIONS.  Neither the Borrower nor any
of its Subsidiaries is engaged principally or as one of its important activities
in the business of extending  credit for the purpose of  purchasing  or carrying
margin stock (as defined in  Regulation U of the Board).  The making of the Term
Loan hereunder,  the use of the proceeds thereof as contemplated hereby, and the
security arrangements contemplated by the Loan Documents, will not violate or be
inconsistent with any of the provisions of Regulations T, U, or X of the Board.

                  (p) SOLVENCY. As of the Effective Date and after giving effect
to the Term Loan hereunder and the consummation of the transactions contemplated
hereby  and  by the  Canadian  Loan  Documents  and  the  Working  Capital  Loan
Documents:

                           (i) the  aggregate  value  of all  properties  of the
Borrower and its  Subsidiaries  at their present fair saleable  value on a going
concern basis (i.e.,  the amount that may be realized within a reasonable  time,
considered to be six months to one year,  either  through  collection or sale at
the  regular  market  value,  conceiving  the latter as the amount that could be
obtained  for such  properties  within  such  period by a capable  and  diligent
businessman  from an interested  buyer who is willing to purchase under ordinary
selling  conditions),  exceed  the  amount  of all  the  debts  and  liabilities
(including contingent,  subordinated, unmatured and unliquidated liabilities) of
the Borrower and its Subsidiaries;

                           (ii) the Borrower and its Subsidiaries will not, on a
consolidated  basis,  have an  unreasonably  small capital with which to conduct
their business operations as heretofore conducted; and

                           (iii) the Borrower and its Subsidiaries will have, on
a consolidated basis,  sufficient cash flow to enable them to pay their debts as
they mature.


                                     - 60 -

<PAGE>

                  (q) FORCE  MAJEURE.  Since  September  30,  2002,  none of the
business,  properties and other assets of the Borrower and its  Subsidiaries  is
affected by any fire or other casualty,  strike, lockout or other labor trouble,
embargo,  sabotage,  confiscation,   contamination,   riot,  civil  disturbance,
activity of armed forces or act of God that has or could  reasonably be expected
to have a Material Adverse Effect.

                  (r) ACCOUNTS  RECEIVABLE.  Unless  otherwise  indicated to the
Agent in writing:

                           (i) Each  Account  Receivable  is genuine  and in all
respects what it purports to be, and it is not evidenced by a judgment;

                           (ii)  Each  Account   Receivable   arises  out  of  a
completed,  bona fide sale and  delivery of goods or  rendition of services by a
Loan Party in the ordinary  course of its business  and in  accordance  with the
terms and  conditions  of all  purchase  orders,  contracts  or other  documents
relating  thereto and forming a part of the contract between such Loan Party and
the Account  Debtor,  and,  in the case of goods,  title to the goods has passed
from the Loan Party to the Account Debtor;

                           (iii) Each  Account  Receivable  is for a  liquidated
amount  maturing  as  stated  in the  duplicate  invoice  covering  such sale or
rendition of services, a copy of which has been furnished or is available to the
Agent;

                           (iv)  Each  Account   Receivable,   and  the  Agent's
security interest therein, is not, and will not (by voluntary act or omission of
the Loan  Parties) be in the future,  subject to any  offset,  Lien,  deduction,
defense,  dispute,  counterclaim  or any  other  adverse  condition  except  for
disputes  resulting in returned  goods where the amount in controversy is deemed
by the Agent to be  immaterial,  and each such Account  Receivable is absolutely
owing to one of the Loan Parties and is not contingent in any respect or for any
reason;

                           (v) No Loan  Party  has made any  agreement  with any
Account Debtor for any extension, compromise,  settlement or modification of any
Account  Receivable or any deduction  therefrom,  except discounts or allowances
which are granted by the Loan Parties in the ordinary course of their businesses
for prompt payment and which are reflected in the  calculation of the net amount
of each  respective  invoice  related thereto and are reflected in the borrowing
base  certificates  and collateral  update  certificates  furnished to the Agent
hereunder;

                           (vi) To the best  knowledge of the Loan Parties,  the
Account Debtor under each Account Receivable had the capacity to contract at the
time any contract or other  document  giving rise to an Account  Receivable  was
executed and such Account Debtor is not insolvent; and

                           (vii) To the  best  knowledge  of the  Loan  Parties,
there are no proceedings or actions which are threatened or pending  against any
Account Debtor which might result in any material adverse change in such Account
Debtor's financial condition or the collectability of any Account Receivable.

                  (s) LABOR AND EMPLOYMENT MATTERS.


                                     - 61 -

<PAGE>

                           (i) Except as set forth on Schedule  6.01(s),  (A) to
the  knowledge  of the Borrower or any of its  Subsidiaries,  no employee of the
Borrower or any of its  Subsidiaries  is represented by a labor union,  no labor
union has been certified or recognized as a representative of any such employee,
and the  Borrower  and its  Subsidiaries  do not have any  obligation  under any
collective  bargaining  agreement or other agreement with any labor union or any
obligation  to  recognize  or deal with any labor  union,  and there are no such
contracts or other  agreements  pertaining  to or which  determine  the terms or
conditions  of  employment  of  any  employee  of  the  Borrower  or  any of its
Subsidiaries;  (B) to the knowledge of the Borrower or any of its  Subsidiaries,
there are no  pending  or  threatened  representation  campaigns,  elections  or
proceedings;  (C) the Borrower and its Subsidiaries do not have knowledge of any
strikes,  slowdowns or work  stoppages of any kind, or threats  thereof,  and no
such  activities  occurred  during the 24-month  period  preceding the Effective
Date;  (D)  neither the  Borrower  nor any of its  Subsidiaries  has engaged in,
admitted  committing or been held to have  committed any unfair labor  practice;
and (E) to the knowledge of the Borrower or any of its  Subsidiaries,  there are
no controversies  or grievances  between the Borrower or any of its Subsidiaries
and any of its employees or representatives  thereof;  in each case, which would
have a Material Adverse Effect.

                           (ii)  Except as set forth on  Schedule  6.01(s),  the
Borrower  and  its  Subsidiaries  have at all  times  complied  in all  material
respects,  and are in material  compliance  with, all applicable laws, rules and
regulations respecting  employment,  wages, hours,  compensation,  benefits, and
payment and withholding of taxes in connection with employment.

                           (iii) Except as set forth on Schedule 6.01(s), to the
knowledge  of the  Borrower or any of its  Subsidiaries,  the  Borrower  and its
Subsidiaries  have at all times complied  with, and are in compliance  with, all
applicable  laws,  rules and  regulations  respecting  occupational  health  and
safety,  whether now  existing or  subsequently  amended or enacted,  including,
without  limitation,  the  Occupational  Safety & Health Act of 1970,  29 U.S.C.
Section  651 et  seq.  and  the  state  analogies  thereto,  all as  amended  or
superseded  from time to time,  and any common law  doctrine  relating to worker
health and  safety,  except for  noncompliance  which  could not  reasonably  be
expected to have, individually or in the aggregate, a Material Adverse Effect.

                  (t) BANK ACCOUNTS.  Schedule 6.01(t) lists all banks and other
financial  institutions  at which  the  Borrower  and  each of its  Subsidiaries
maintains  deposits  and/or other  accounts as of the Effective  Date,  and such
Schedule correctly identifies the name and address of each depository,  the name
in which the account is held, a description  of the purpose of the account,  and
the complete account number.

                  (u)  OBLIGATIONS  AS SENIOR DEBT. The  Obligations  constitute
Senior  Debt  (as  defined  in  the  Senior  Subordinated  Note  Indenture)  and
Designated  Senior Debt (as defined in the Senior  Subordinated Note Indenture).
As such, all of the Obligations  (and the Agent and Lenders) are entitled to the
benefits of each of the  subordination  and other  provisions  contained  in the
Senior Subordinated Note Indenture which are available in respect of Senior Debt
and  Designated  Senior  Debt  (and to the  holders  thereof),  and each of such
subordination  and other  provisions is in full force and effect and enforceable
in accordance with its terms.


                                     - 62 -

<PAGE>


                  (v) SENIOR  SUBORDINATED  NOTE  DOCUMENTS AND WORKING  CAPITAL
LOAN DOCUMENTS.  The Loan Parties have  heretofore  furnished to the Agent true,
complete and correct  copies of each of the Senior  Subordinated  Note Documents
and the Working  Capital  Loan  Documents  (including  schedules,  exhibits  and
annexes thereto). The Senior Subordinated Note Documents and the Working Capital
Loan Documents have not been amended,  supplemented or modified,  and constitute
the complete  understanding  among the parties thereto in respect of the matters
and transactions covered thereby, except for amendments thereto delivered to the
Agent  prior  to the  Effective  Date.  Each  of the  Senior  Subordinated  Note
Documents  and the Working  Capital Loan  Documents is in full force and effect,
and neither the Borrower nor any of its  Subsidiaries is in default under any of
such documents.

                  (w) CERTAIN TRANSACTIONS. Except for arm's length transactions
pursuant to which the Borrower or any of its Subsidiaries  makes payments in the
ordinary  course of business upon terms no less  favorable  than the Borrower or
any of its Subsidiaries  could obtain from third parties,  none of the officers,
directors,  or employees of the Borrower or any of its Subsidiaries is presently
a party to any transaction with the Borrower or any of its  Subsidiaries  (other
than for services as employees, officers and directors), including any contract,
agreement or other  arrangement  providing for the  furnishing of services to or
by,  providing for rental of real or personal  property to or from, or otherwise
requiring payments to or from any officer,  director or such employee or, to the
knowledge of the Borrower, any corporation,  partnership,  trust or other entity
in which any officer,  director, or any such employee has a substantial interest
or is an officer, director, trustee or partner.

                  (x) COLUMBUS MCKINNON FINANCE  CORPORATION.  Columbus McKinnon
Finance  Corporation  does  not (i) own  any  assets  other  than  that  certain
intercompany  promissory  note issued by Columbus  McKinnon  Limited and made to
Columbus   McKinnon  Finance   Corporation  in  the  aggregate  face  amount  of
C$3,750,000, (ii) have any liabilities or (iii) engage in any business.

                                  ARTICLE VII

                          COVENANTS OF THE LOAN PARTIES

         Section  7.01  AFFIRMATIVE  COVENANTS.  So long as any  principal of or
interest  on the Term Loan or any other  Obligation  (whether  or not due) shall
remain  unpaid,  each Loan Party  covenants  and  agrees  with the Agent and the
Lenders that:

                  (a)  FINANCIAL  STATEMENTS  AND  OTHER  INFORMATION.  The Loan
Parties will furnish to the Agent and each Lender:

                           (i) as soon as  available  and in any event within 90
days after the end of each Fiscal Year of the Borrower and its Subsidiaries:

                                    (A)    consolidated    and     consolidating
statements of operations and cash flows of the Borrower and its Subsidiaries for
such Fiscal Year and the related  consolidated and consolidating  balance sheets
of the Borrower and its Subsidiaries as at the end of such Fiscal Year,  setting
forth in each  case in  comparative  form  the  corresponding  consolidated  and


                                     - 63 -

<PAGE>

consolidating figures for the preceding Fiscal Year, and consolidated statements
of shareholders' equity for such Fiscal Year, and

                                    (B)  an  opinion  of  independent  certified
public accountants of recognized national standing (without a "going concern" or
like qualification or exception and without any qualification or exception as to
the scope of such audit)  stating  that the  consolidated  financial  statements
referred to in the preceding clause (A) fairly present in all material  respects
the consolidated  financial  condition and results of operations of the Borrower
and its  Subsidiaries  as at the end of, and for, such Fiscal Year in accordance
with GAAP.

                           (ii) as soon as available  and in any event within 45
days after the end of each fiscal quarter of the Borrower and its Subsidiaries:

                                    (A)    consolidated    and     consolidating
statements  of  operations  and  consolidated  statements  of cash  flows of the
Borrower and its  Subsidiaries  for such fiscal  quarter and for the period from
the beginning of the respective  Fiscal Year to the end of such fiscal  quarter,
and the related  consolidated and  consolidating  balance sheets of the Borrower
and its Subsidiaries as at the end of such period, setting forth in each case in
comparative form the corresponding  consolidated and  consolidating  figures for
the  corresponding  period in the preceding  Fiscal Year, and the  corresponding
figures for the budgets  (except with respect to  consolidating  balance sheets)
most recently delivered to the Agent for such period, and

                                    (B) a certificate of a Designated  Financial
Officer,  which certificate shall state that said consolidated and consolidating
financial  statements  referred to in the preceding clause (A) fairly present in
all  material  respects  the  consolidated  financial  condition  and results of
operations of the Borrower and its  Subsidiaries as at the end of, and for, such
period  (subject  to normal  year-end  audit  adjustments  and the  omission  of
footnotes) in accordance with GAAP;

                           (iii) as soon as available and in any event within 30
days  after the end of each of the first 11  months in each  Fiscal  Year of the
Borrower and its Subsidiaries:

                                    (A)  consolidated  statements  of operations
and cash flows of the Borrower and its  Subsidiaries  for such month and for the
period  from the  beginning  of the  respective  Fiscal  Year to the end of such
month,  and the related  consolidated  balance  sheets of the  Borrower  and its
Subsidiaries  as at the end of  such  period,  setting  forth  in  each  case in
comparative form the  corresponding  consolidated  figures for the corresponding
period in the  preceding  Fiscal  Year,  and the  corresponding  figures for the
budgets most recently delivered to the Agent for such period, and

                                    (B) a certificate of a Designated  Financial
Officer,   which  certificate  shall  state  that  said  consolidated  financial
statements  referred  to in the  preceding  clause  (A)  fairly  present  in all
material respects the consolidated financial condition and results of operations
of the  Borrower  and its  Subsidiaries  as at the end of, and for,  such period
(subject to normal year-end audit  adjustments and the omission of footnotes) in
accordance with GAAP;


                                     - 64 -

<PAGE>


                           (iv) as soon as available  and in any event within 30
days  after  the  beginning  of  each  Fiscal  Year  of  the  Borrower  and  its
Subsidiaries,  statements of budgeted  consolidated and consolidating income and
statements  of  budgeted  consolidated  cash  flows  for  the  Borrower  and its
Subsidiaries  for each fiscal  month in such period and a budgeted  consolidated
balance  sheet of the Borrower and its  Subsidiaries  as of the last day of each
fiscal month in such period,  and the projected  availability  under the Working
Capital  Borrowing  Base as of the last day of each fiscal month in such period,
together with  supporting  assumptions  which shall be reasonable when made, all
prepared in good faith in reasonable  detail and consistent  with the Borrower's
past practices in preparing  budgets and otherwise  reasonably  satisfactory  in
scope to the Agent;

                           (v) as soon as available  and in any event (A) within
90 days  after  the end of each  Fiscal  Year,  a  Compliance  Certificate  duly
executed by a Designated  Financial Officer with respect to the annual financial
statements  delivered  pursuant to subsection  (a)(i) above,  (B) within 45 days
after the end of each fiscal  quarter of the  Borrower and its  Subsidiaries,  a
Compliance  Certificate  duly  executed by a Designated  Financial  Officer with
respect to the quarterly financial  statements  delivered pursuant to subsection
(a)(ii) above,  and (C) within 30 days after the end of each fiscal month of the
Borrower and its  Subsidiaries,  a  Compliance  Certificate  duly  executed by a
Designated  Financial Officer with respect to the monthly  financial  statements
delivered pursuant to subsection (a)(iii) above;

                           (vi) as soon as  available  and in any event no later
than 1:00 p.m.  (New York City time) on  Wednesday of each week (or, if such day
is not a Business  Day, on the  preceding  Business  Day) (or with such  greater
frequency as the Agent may reasonably  request), a borrowing base certificate in
the form delivered to the Working Capital Agent,  with respect to the Collateral
of the Borrower as of the close of business on the previous  Friday (or, if such
day is not a  Business  Day,  on the  preceding  Business  Day)  (PROVIDED  that
Inventory  and total  ineligible  accounts may be  calculated as of the close of
business on the last  Business Day of the previous  month),  together  with such
other  information  relating to the  Collateral  as the Agent  shall  reasonably
request,  and accompanied by such  supporting  detail and  documentation  as the
Agent shall reasonably request;

                           (vii) as soon as available and in any event within 30
days after the end of each month with respect to such month (or more  frequently
if requested  by the Agent),  (A) a collateral  update  certificate  in the form
delivered  to  the  Working  Capital  Agent,  (B)  an  accounts  receivable/loan
reconciliation  report in the form delivered to the Working Capital Agent, (C) a
summary of  Inventory by type and  location,  (D) an accounts  receivable  aging
report (which report shall contain amounts denominated in Dollars), and (E) such
other  information  relating to the  Collateral  as the Agent  shall  reasonably
request,  in each case,  accompanied by such supporting detail and documentation
as the Agent shall reasonably request;

                           (viii) as soon as available and in any event no later
than 45 days after the last Business Day of each calendar  quarter,  a term loan
borrowing base  certificate in the form delivered to the Working  Capital Agent,
together  with  an  updated  list  of  eligible  fixed  assets  and  such  other
information  relating  to the term  loan  borrowing  base  collateral  under the
Working  Capital  Loan  Agreement  as the Agent shall  reasonably  request,  and
accompanied  by such  supporting  detail and  documentation  as the Agent  shall
reasonably request;


                                     - 65 -

<PAGE>


                           (ix) as soon as available  and in any event within 10
days after the end of each month (or more frequently if requested by the Agent),
a rolling 13 week cash flow projection,  of the Borrower and its Subsidiaries in
a form and in such details as is reasonably  satisfactory to the Agent, updating
the prior cash flow  projection  and,  for prior  periods  ending up to one week
prior to the date of the report, showing actual performance and any variances of
actual performance from projected performance;

                           (x)  promptly  upon  receipt  thereof,  copies of all
management letters and accountants' letters received by the Loan Parties;

                           (xi) promptly  after  submission to any  Governmental
Authority,   all  documents  and  information  furnished  to  such  Governmental
Authority  in  connection  with any  investigation  of any Loan Party other than
routine inquiries by such Governmental Authority;

                           (xii) as soon as possible  and in any event  within 5
days  after  execution,  receipt or  delivery  thereof,  copies of any  material
notices that any Loan Party executes or receives in connection with any Material
Indebtedness (including,  without limitation,  the Senior Subordinated Notes and
the Working Capital Indebtedness);

                           (xiii) as soon as possible  and in any event within 5
days  after  execution,  receipt or  delivery  thereof,  copies of any  material
notices that any Loan Party executes or receives in connection  with the sale or
other  Disposition of the Capital Stock of, or all or  substantially  all of the
assets of, any Loan Party;

                           (xiv) promptly  after the sending or filing  thereof,
copies of all statements,  reports and other information any Loan Party sends to
any holders of its  Indebtedness  or its securities or files with the SEC or any
national (domestic or foreign) securities exchange;

                           (xv) promptly  following any request  therefor,  such
other  information  regarding  the  operations,  business  affairs and financial
condition of the Loan Parties,  or compliance  with the terms of this Agreement,
as the Agent or any Lender may reasonably request.

                  (b) NOTICES OF MATERIAL EVENTS.  The Loan Parties will furnish
to the Agent and each Lender prompt written notice of the following:

                           (i) the  occurrence  of any Default  hereunder or any
default or event of default under any Working Capital Loan Document;

                           (ii) the filing or commencement  of any action,  suit
or proceeding by or before any arbitrator or Governmental  Authority  against or
affecting any Loan Party or Affiliate (A) with respect to any claim in excess of
$100,000 or (B) that, if adversely  determined,  could reasonably be expected to
have a Material Adverse Effect;

                           (iii) the  occurrence  of any ERISA Event  related to
the Plan of any Loan Party or  knowledge  after due  inquiry of any ERISA  Event
related to a Plan of any other ERISA Affiliate that,  alone or together with any


                                     - 66 -

<PAGE>

other ERISA Events that have occurred, could reasonably be expected to result in
liability of the Loan Parties in an aggregate amount exceeding $100,000;

                           (iv)  any  other   development  that  has,  or  could
reasonably be expected to have, a Material Adverse Effect.

Each notice  delivered  under this Section  7.01(b)  shall be  accompanied  by a
statement of a Designated  Financial  Officer  setting  forth the details of the
event or  development  requiring such notice and any action taken or proposed to
be taken with respect thereto.

                  (c) EXISTENCE;  CONDUCT OF BUSINESS.  The Borrower and each of
its Subsidiaries  shall do or cause to be done all things necessary to preserve,
renew and keep in full  force and  effect its legal  existence  and the  rights,
licenses,  permits,  privileges  and  franchises  material to the conduct of its
business;   PROVIDED  that  the   foregoing   shall  not  prohibit  any  merger,
consolidation,  liquidation,  dissolution or any  discontinuance or sale of such
business permitted under Section 7.02(d).

                  (d)  PAYMENT  OF  OBLIGATIONS.  The  Borrower  and each of its
Subsidiaries shall pay its obligations  (including Tax liabilities) in an amount
in excess of $100,000,  before the same shall become  delinquent  or in default,
except where (i) the validity or amount thereof is being contested in good faith
by  appropriate  proceedings,  so long as such  contest  operates to suspend the
enforcement  of  compliance   therewith,   the  collection  thereof  and/or  the
imposition of any penalty,  fine or Lien with respect thereto,  (ii) such Person
has set aside on its books adequate  reserves with respect thereto in accordance
with GAAP, which reserves shall be acceptable to Agent.

                  (e)  MAINTENANCE  OF PROPERTIES;  INSURANCE.  The Borrower and
each of its  Subsidiaries  shall (i) keep and maintain all property  material to
the conduct of its business in good working order and  condition,  ordinary wear
and tear  excepted,  and (ii) maintain  insurance,  with  financially  sound and
reputable  insurance  companies,  as  may be  required  by law  and  such  other
insurance in such amounts and against such risks as are  customarily  maintained
by companies engaged in the same or similar businesses  operating in the same or
similar locations,  including,  without  limitation,  business  interruption and
product  liability  insurance.  Such insurance  shall be in such minimum amounts
that such  Person will not be deemed a  co-insurer  under  applicable  insurance
laws,  regulations and policies and otherwise shall be in such amounts,  contain
such  terms,  be in such  forms  and be for such  periods  as may be  reasonably
satisfactory to the Agent. Without limiting the generality of the foregoing, the
Borrower and each of its  Subsidiaries  will  maintain or cause to be maintained
replacement  value casualty  insurance on the Collateral  under such policies of
insurance,  in each case with such insurance  companies,  in such amounts,  with
such  deductibles,  and  covering  such  terms  and  risks  as are at all  times
satisfactory to the Agent in its commercially  reasonable judgment.  All general
liability  and other  liability  policies with respect to the Loan Parties shall
name  the  Agent  for  the  benefit  of the  Lenders  as an  additional  insured
thereunder  as its  interests  may appear,  and all  business  interruption  and
casualty  insurance  policy shall contain a loss payable clause or  endorsement,
satisfactory  in form and  substance to the Agent,  that names the Agent for the
benefit of the Lenders as the loss payee  thereunder.  All policies of insurance
shall  provide  for at least 30 days  prior  written  notice to the Agent of any
modifications or cancellation of such policy.


                                     - 67 -

<PAGE>

                  (f) BOOKS AND  RECORDS;  INSPECTION  RIGHTS.  The Borrower and
each of its Subsidiaries  shall keep proper books of record and account in which
entries are made of all  dealings and  transactions  in relation to its business
and  activities  which  fairly  record such  transactions  and  activities.  The
Borrower  and  each  of  its  Subsidiaries  shall  permit  any   representatives
designated  by the Agent or any Lender to visit and inspect its  properties,  to
examine  and make  extracts  from its  books and  records,  to  conduct  audits,
physical  counts,  valuations,  appraisals or examinations  (whether by internal
commercial finance examiners or independent  auditors) of all Collateral and the
Borrower and each of its Subsidiaries,  and to discuss its affairs, finances and
condition with its officers and independent  accountants at any reasonable times
and as frequently as the Agent deems  appropriate  provided  that, so long as no
Default  has  occurred  and is  continuing,  (i) all  such  visits  shall  be on
reasonable prior notice,  at reasonable times during regular business hours, and
(ii) the Agent and the Lenders  shall not conduct any such audit,  valuation  or
appraisal,  in each  case,  more than once each year.  The  Borrower  shall,  in
accordance with Section 4.01,  reimburse the Agent and the Lenders for all costs
incurred in connection with such audits, physical counts, valuations, appraisals
or  examinations.  Each  of the  Loan  Parties  authorizes  the  Agent  and,  if
accompanied  by the Agent,  the Lenders to  communicate  directly with such Loan
Party's independent certified public accountants and authorizes such accountants
to disclose to the Agent and the Lenders any and all  financial  statements  and
other  supporting  financial  documents  and schedules  including  copies of any
management letters with respect to the business,  financial  condition and other
affairs of the Borrower or any of its Subsidiaries. At the request of the Agent,
each Loan Party shall deliver a letter addressed to such accountants instructing
them to comply with the provisions of this Section 7.01(f). The Loan Parties, in
consultation with the Agent, will arrange for a meeting to be held at least once
every year (and after the  occurrence  and during the  continuance of a Default,
more  frequently,  if requested by the Agent or the Required  Lenders)  with the
Lenders and the Agent hereunder at which the business and operations of the Loan
Parties are discussed.  The Loan Parties will permit  environmental  consultants
selected by the Agent to visit the  properties  of the Loan  Parties and perform
examinations  of the Real Property  Assets of the Loan Parties at such times and
with such  frequencies  as the Agent or any  Lender  shall  reasonably  request;
PROVIDED that, so long as no Default has occurred and is  continuing,  the Agent
and the Lenders  shall not  request  that the Real  Property  Assets of the Loan
Parties be examined by environmental consultants more frequently than once every
year  commencing on the first  anniversary  of the Effective  Date. The Borrower
shall  reimburse  the Agent and the  Lenders  for all fees,  costs and  expenses
charged by such environmental consultants for each such examination.

                  (g)  FISCAL   YEAR.   To  enable  the  ready  and   consistent
determination  of compliance  with the  covenants  set forth in Section  7.02(j)
hereof,  the Borrower and each of its Subsidiaries  shall maintain their current
Fiscal Year and current  method of  determining  the last day of the first three
fiscal quarters in each Fiscal Year.


                  (h)  COMPLIANCE  WITH  LAWS.  The  Borrower  and  each  of its
Subsidiaries  shall  comply  in all  material  respects  with  (i) all  permits,
licenses  and  authorizations,   including,  without  limitation,  environmental
permits,  licenses and authorizations,  issued by a Governmental Authority, (ii)
all  laws,  rules,   regulations  and  orders  including,   without  limitation,
Environmental  Laws, of any  Governmental  Authority  and (iii) all  contractual
obligations, in each case applicable to it or its property.


                                     - 68 -

<PAGE>


                  (i) USE OF  PROCEEDS.  The  proceeds  of the Term Loan will be
used  only for (i) the  refinancing  of  Existing  Indebtedness,  (ii)  fees and
expenses  incurred in  connection  with the  transactions  contemplated  by this
Agreement,  the  Canadian  Financing  Agreement  and the  Working  Capital  Loan
Agreement,  and (iii) for general  corporate and working capital purposes of the
Loan  Parties.  No part of the  proceeds of the Term Loan will be used,  whether
directly or  indirectly,  for any purpose that entails a violation of any of the
Regulations of the Board, including Regulations T, U and X.

                  (j) CERTAIN  OBLIGATIONS  RESPECTING  SUBSIDIARIES.  Each Loan
Party will,  and will cause each of its  Subsidiaries  to, take such action from
time to time as shall be necessary to ensure that the  percentage  of the issued
and outstanding shares of Capital Stock of any class or character owned by it in
any of its  Subsidiaries on the date hereof is not at any time decreased,  other
than by reason of transfers to another Loan Party.

                  (k) ERISA. The Loan Parties (i) will maintain,  and cause each
ERISA  Affiliate  to  maintain,  each  Plan  in  material  compliance  with  the
provisions  of such Plans and all  applicable  requirements  of ERISA and of the
Internal  Revenue Code and with all applicable  rulings and  regulations  issued
under the provisions of ERISA and of the Internal Revenue Code and (ii) will not
and, to the extent  authorized,  will not permit any of the ERISA  Affiliates to
(A) engage in any  transaction  with respect to any Plan which would subject any
Loan Party to either a civil  penalty  assessed  pursuant  to Section  502(i) of
ERISA or a tax imposed by Section 4975 of the Internal Revenue Code, (B) fail to
make full payment when due of all amounts  which,  under the  provisions  of any
Plan, any Loan Party or any ERISA Affiliate is required to pay as  contributions
thereto,  or permit to exist any accumulated funding deficiency (as such term is
defined in Section 302 of ERISA and Section 412 of the Internal  Revenue  Code),
whether or not waived,  with respect to any Pension Plan or (C) fail to make any
payments  to any  Multiemployer  Plan  that any Loan  Party or any of the  ERISA
Affiliates  may be  required  to  make  under  any  agreement  relating  to such
Multiemployer Plan or any law pertaining thereto.

                  (l) ENVIRONMENTAL MATTERS; REPORTING AND ASSESSMENTS.

                           (i) The Loan  Parties  will observe and comply in all
material  respects  with,  and cause each of their  Subsidiaries  to observe and
comply in all material respects with, all Environmental Laws and all permits and
authorizations  issued by any  Governmental  Authority  under  Governmental  Law
(collectively,  "ENVIRONMENTAL  PERMITS").  The Loan Parties will give the Agent
prompt written  notice of (A) any presence,  Release or threat of Release of any
Hazardous  Materials  at or from any Real  Property  Asset,  (B) any  actual  or
alleged  violation as to any  Environmental  Law or Environmental  Permit by any
Loan Party, (C) the commencement of any Environmental  Action or Remedial Action
or other communication to it or of which it has knowledge,  or with the exercise
of due diligence,  should have had knowledge regarding the presence or suspected
presence of any Hazardous Material at, on about,  under, within or in connection
with any Real  Property  Asset or any  migration  thereof  from or to such  Real
Property  Asset,  (D) the  discovery of any  occurrence or condition on any real
property  adjoining  or in the  vicinity of any Real  Property  Asset that could
cause  such  Real  Property  Asset  or any part  thereof  to be  subject  to any
restrictions on ownership,  occupancy,  transferability,  or use, or subject the
owner or any  Person  having any  interest  in such Real  Property  Asset to any
liability,  penalty,  or  disability  under any  Environmental  Law, and (E) the
receipt of any notice or  discovery  of any  information  regarding  any actual,


                                     - 69 -

<PAGE>

alleged,  or potential  Release,  disposal or any other presence or existence of
any Hazardous Material at, on, about, under,  within, near or in connection with
any Real Property Asset; in each case,  which (x) would have a material  adverse
effect on any  Environmental  Permits  held by any Loan Party,  (y) will,  or is
likely  to,  have a  Material  Adverse  Effect,  or (z) will  require a material
expenditure by such Loan Party to cure such alleged problem or violation.

                           (ii)  The  Agent  may,  from  time  to  time,  in its
reasonable discretion, obtain one or more environmental assessments or audits of
any Real Property Asset prepared by a hydrogeologist, an independent engineer or
other  qualified  consultant  or expert  approved  by the Agent to  evaluate  or
confirm (A) whether any Hazardous  Materials are present in the soil,  sediment,
air or water at such Real  Property  Asset and (B) whether the use and operation
of such Real Property Asset complies with all Environmental Laws; PROVIDED that,
so long as no  Default  has  occurred  and is  continuing,  the Agent  shall not
request any such environmental  assessments or audits of any Real Property Asset
more  frequently  than once every  other  year.  Environmental  assessments  may
include,  without limitation,  detailed visual inspections of such Real Property
Asset, including any and all storage areas, storage tanks, drains, dry wells and
leaching areas, and the taking of soil samples, surface water samples and ground
water  samples,  as well as such other  investigations  or analyses as the Agent
deems  appropriate.  All such  environmental  assessments shall be conducted and
made at the sole expense of the Borrower.

                  (m) MATTERS RELATING TO ADDITIONAL REAL PROPERTY COLLATERAL.

                           (i) In the event  that any Loan  Party  acquires  any
Material Owned Property after the Effective Date that the Agent determines is an
Additional Mortgaged Property or in the event that the Agent determines that any
Real  Property  Asset  existing on the  Effective  Date has become an Additional
Mortgaged  Property after the Effective  Date, the Borrower shall deliver to the
Agent,  as soon as  practicable  after the Agent has notified the Borrower  that
such Real Property Asset is an Additional Mortgaged Property, fully executed and
notarized Mortgages  ("ADDITIONAL  MORTGAGES"),  in proper form for recording in
all appropriate places in all applicable jurisdictions, encumbering the interest
of the applicable Loan Party in such  Additional  Mortgaged  Property,  together
with  Title  Insurance  Policies  or  commitments  therefor,  and  copies of all
surveys,  deeds, title exception documents,  flood hazard certificates and other
documents as the Agent may reasonably require, together with copies of all deeds
with respect to such Additional Mortgaged Property.

                           (ii) In the event that any Loan Party enters into any
Lease with respect to any Material  Leasehold Property after the Effective Date,
the Borrower shall deliver to the Agent copies of the Lease,  and all amendments
thereto,  between  the Loan Party and the  landlord or tenant,  together  with a
Landlord's  Waiver and Consent  with respect  thereto and where  required by the
terms of any such Lease,  the consent of the  mortgagee,  ground lessor or other
party.

                           (iii) If  requested  by the Agent,  the Loan  Parties
shall permit an independent  real estate  appraiser  satisfactory  to the Agent,
upon reasonable  notice, to visit and inspect any Additional  Mortgaged Property
for the purpose of preparing an appraisal of such Additional  Mortgaged Property


                                     - 70 -

<PAGE>

satisfying the requirements of all applicable laws and regulations (in each case
to the extent  required  under such laws and  regulations  as  determined by the
Agent in its sole discretion).

                  (n) CASH DEPOSITS/BANK  ACCOUNTS.  The Loan Parties shall take
all actions necessary to maintain, preserve and protect the rights and interests
of the Agent with respect to all cash deposits of the Loan Parties and all other
proceeds of Collateral and shall not, without the Agent's prior written consent,
open any deposit or other bank account,  or instruct any Account  Debtor to make
payment to any account other than to an established  dominion  account,  lockbox
account or other  controlled  account under the Working Capital Agent's control;
PROVIDED  that so long as no Default or Event of Default shall have occurred and
be  continuing,  the Loan  Parties  shall be  permitted  to maintain (i) payroll
accounts and other accounts not subject to the Working  Capital  Agent's control
so long as the aggregate amount of funds on deposit in all such payroll accounts
does not materially  exceed estimated  payroll for the next payroll period,  and
(ii) local bank accounts not subject to the Working  Capital  Agent's control so
long as (x) the  aggregate  amount of funds on  deposit  in all such  local bank
accounts  does not exceed  $500,000,  and (y) the  aggregate  amount of funds on
deposit in any such local bank account does not exceed $50,000.

                  (o) NEW GUARANTORS.  The Loan Parties will cause each Domestic
Subsidiary  created,  acquired or otherwise  existing on or after the  Effective
Date to  immediately  become a Guarantor  and a Loan Party  hereunder  and shall
execute and deliver,  and cause such Domestic Subsidiary to execute and deliver,
to the  Agent,  for the  benefit  of the  Agent and the  Lenders,  all such Loan
Documents  and  other  documents,  and take all such  actions,  and  cause  such
Domestic Subsidiary to take all such actions, as may be required by the Agent in
connection therewith.

                  (p)  PUNCTUAL   PAYMENT.   The  Loan  Parties  will  duly  and
punctually  pay or cause to be paid the principal and interest on the Term Loan,
all fees and expenses,  and all other  Obligations  under this Agreement and the
other Loan  Documents  to which the  Borrower  or any of its  Subsidiaries  is a
party,  all in accordance  with the terms of this  Agreement and such other Loan
Documents.

                  (q) FURTHER ASSURANCES.  The Loan Parties will, and will cause
each of their  Subsidiaries  to, take such action and execute,  acknowledge  and
deliver, at their sole cost and expense,  such agreements,  instruments or other
documents  as the Agent may require  from time to time in order (i) to carry out
more  effectively  the purposes of this Agreement and the other Loan  Documents,
(ii) to subject to valid and perfected  Liens any of the Collateral or any other
property of any Loan Party and its Subsidiaries, (iii) to establish and maintain
the validity and  effectiveness  of any of the Loan  Documents and the validity,
perfection and priority of the Liens intended to be created thereby, and (iv) to
better assure,  convey,  grant, assign,  transfer and confirm unto the Agent and
each Lender the rights now or hereafter  intended to be granted to it under this
Agreement or any other Loan Document.

                  (r) FOREIGN PLEDGE  AGREEMENTS.  The Loan Parties will, within
20 days of the Effective Date, deliver to the Agent:


                                     - 71 -

<PAGE>

                           (i) a  pledge  and  security  agreement,  in form and
substance  satisfactory  to the  Agent,  duly  executed  by  certain of the Loan
Parties, with respect to the pledge of the common stock of each of the following
Subsidiaries of such Loan Parties:

                                    (A)  Societe   d'Exploitation  des  Raccords
Gautier;

                                    (B) Univeyor Electronic A/S;

                                    (C)  Columbus  McKinnon  de Mexico,  S.A. de
C.V.; and

                                    (D) Yale Industrial Products GmbH; and

                           (ii) an opinion from each of the following counsel to
such Loan Parties,  in form and substance  satisfactory to the Agent, as to such
matters as the Agent may reasonably request:

                                    (A)  Stephen  d'Errico,  French  counsel  to
Societe d'Exploitation des Raccords Gautier;

                                    (B)  Advokatfirmaet  Borge  Nielsen,  Danish
counsel to Univeyor Electronic A/S;

                                    (C)  Enrique  Lumen,   Mexican   counsel  to
Columbus McKinnon De Mexico, S.A. de C.V.; and

                                    (D) Donahue & Partners LLP,  German  counsel
to Yale Industrial Products GmbH.

                  (s) MOTOR VEHICLE COLLATERAL. The Loan Parties will, within 90
days of the Effective  Date,  take such actions as may be necessary to cause the
Agent's  Lien on each titled  motor  vehicle  (the fair market value of which is
greater  than  $5,000) of the Loan  Parties to be noted on all  certificates  of
title with  respect  to such  vehicle,  including,  without  limitation,  filing
applications for new certificates of title with respect thereto.

                  (t) PERMITTED CORPORATE RESTRUCTURING.  The Loan Parties will,
and will cause each of their Subsidiaries, within 14 days of the Effective Date,
to consummate each of the  transactions  contemplated  in Schedule  7.02(d)(iii)
with respect to each of Spreckels  Land  Company,  Inc.,  Spreckels  Development
Company,   Inc.,  Spreckels  Water  Company,  Inc.  and  Spreckels  Consolidated
Industries, Inc.

         Section  7.02  NEGATIVE  COVENANTS.  So  long  as any  principal  of or
interest  on the Term Loan or any other  Obligation  (whether  or not due) shall
remain  unpaid,  each Loan Party  covenants  and  agrees  with the Agent and the
Lenders that:

                  (a)  INDEBTEDNESS.  The Loan  Parties  will not,  and will not
permit any of their  Subsidiaries to, create,  incur,  assume or permit to exist
any Indebtedness, except:

                           (i)  Indebtedness  created  hereunder  and  under the
Canadian Financing Agreement;


                                     - 72 -

<PAGE>


                           (ii)  Existing  Indebtedness  on the  Effective  Date
which is set forth in Schedule  7.02(a) and has been designated on such schedule
as Indebtedness that will remain  outstanding  following the funding of the Term
Loan,  and  any  extension,  renewal,  refunding  or  replacement  of  any  such
Indebtedness;  PROVIDED, HOWEVER, that (A) such extension, renewal, refunding or
replacement is pursuant to terms that are not less favorable to the Loan Parties
and the Lenders  than the terms of the  Indebtedness  being  extended,  renewed,
refunded or replaced and (B) after  giving  effect to such  extension,  renewal,
refunding or  replacement,  the amount of such  Indebtedness is not greater than
the amount of  Indebtedness  outstanding  immediately  prior to such  extension,
renewal, refunding or replacement;

                           (iii)  Intercompany loans among the Borrower and Loan
Parties which are Guarantors; PROVIDED, that (A) the Investment corresponding to
such  Indebtedness  is  permitted  pursuant  Section  7.02(e)  hereof,  (B) such
intercompany loan is evidenced by a promissory note, (C) such promissory note is
pledged  to the  Working  Capital  Agent  and the  Agent,  and (D)  there are no
restrictions  whatsoever  on the ability of the  applicable  Loan Party to repay
such loan;

                           (iv) Guaranties permitted under Section 7.02(c);

                           (v)  Indebtedness  of any foreign  Subsidiary  of the
Borrower (other than the Canadian Borrowers) in an aggregate amount for all such
Indebtedness  not to exceed the local currency  equivalent (as determined by the
Agent) of  $20,000,000  in the aggregate at any one time  outstanding;  PROVIDED
that (A) the proceeds of such  Indebtedness  are transferred to the Borrower and
applied  to the  Working  Capital  Loans  and the Term Loan in  accordance  with
Section  2.05(c)(iii)  and Section  2.05(d),  (B) such  Indebtedness is incurred
solely by such foreign Subsidiary,  (C) such Indebtedness is either unsecured or
secured  only by the assets of such foreign  Subsidiary,  and (D) no guaranty or
other credit support of any kind is provided by any Person  (including,  without
limitation,  any Loan Party) of or for such  Indebtedness or any holder thereof;
and PROVIDED,  FURTHER,  that the Borrower  shall notify the Agent in writing in
advance  prior  to  permitting   any  such  foreign   Subsidiary  to  incur  any
Indebtedness under this Section 7.02(a)(v); and

                           (vi)  Working  Capital  Indebtedness  in an aggregate
principal amount not to exceed at any time outstanding the sum of (A) the lesser
of (1) $67,000,000  and (2) 100% of the Working  Capital  Borrowing Base and (B)
the outstanding principal amount of the term loan under the Working Capital Loan
Agreement as reduced from time to time by the scheduled  principal  payments and
prepayments of such term loan as set forth in the Working Capital Loan Agreement
as in effect on the date hereof,  PROVIDED,  that Working  Capital  Indebtedness
other  than in  respect  of the  Canadian  Letter of Credit  (as  defined in the
Working Capital Loan Agreement as in effect on the date hereof) shall not exceed
at any time  outstanding  the sum of (x) the lesser of (I)  $67,000,000 and (II)
100% of the  Domestic  Borrowing  Base (as defined in the Working  Capital  Loan
Agreement  as in effect on the date  hereof) and (y) the  outstanding  principal
amount of the term loan under the Working Capital Loan Agreement as reduced from
time to time by the scheduled  principal  payments and  prepayments of such term
loan as set forth in the Working Capital Loan Agreement as in effect on the date
hereof,  PROVIDED,  FURTHER, that the Working Capital Agent, the Working Capital
Lenders and the Loan Parties  shall have executed and delivered to the Agent the
Intercreditor Agreement; and the extension of maturity, replacement, refinancing


                                     - 73 -

<PAGE>

or modification of the terms thereof, provided that such extension, replacement,
refinancing  or  modification  (xx) is  pursuant  to  terms  that  are not  less
favorable  to the Loan  Parties  and the  Lenders  than the terms of the Working
Capital Indebtedness being so extended,  replaced,  refinanced or modified, (yy)
is subject to the Intercreditor Agreement or a similar intercreditor  agreement,
in  form  and  substance  satisfactory  to the  Agent  and the  Lenders,  having
substantially the same terms and conditions as the  Intercreditor  Agreement and
(zz) in the  case of the  Working  Capital  Term  Loan,  shall  not  exceed  the
principal amount of the Working Capital Term Loan then outstanding.

                  (b) LIENS.  The Loan Parties will not, and will not permit any
of their Subsidiaries to, create,  incur,  assume or permit to exist any Lien on
any Property or asset now owned or  hereafter  acquired by it, or assign or sell
any income or revenues (including  Accounts  Receivable) or rights in respect of
any thereof, except (the following being called "PERMITTED LIENS"):

                           (i) Liens  created  under the Loan  Documents and the
Canadian Loan Documents;

                           (ii)  any Lien on any  property  or asset of any Loan
Party  existing  on the  Effective  Date  and  set  forth  in  Schedule  7.02(b)
(excluding,  however, following the making of the Term Loan hereunder, the Liens
in favor of any Person other than the Agent securing Indebtedness not designated
on said schedule as Indebtedness to remain outstanding  following the funding of
the Term Loan),  but not the extension of coverage  thereof to other property or
the  extension  of  maturity,  refinancing  or other  modification  of the terms
thereof or the increase of the Indebtedness secured thereby;

                           (iii) Liens imposed by any Governmental Authority for
Taxes, assessments or charges in respect of obligations not yet delinquent or in
the case of Taxes and assessments on Properties other than Mortgaged  Properties
not  exceeding  $250,000 in the  aggregate  more than 90 days overdue  which are
being  contested in good faith and by appropriate  proceedings,  so long as such
contest operates to suspend the enforcement of compliance with and/or collection
thereof, and so long as adequate reserves with respect thereto are maintained on
the  books of the  applicable  Loan  Party in  accordance  with  GAAP and  which
reserves shall be acceptable to the Agent;

                           (iv)    landlords',    carriers',     warehousemen's,
mechanics',  materialmen's,  repairmen's or other like Liens on Properties other
than Mortgaged  Properties,  and vendors' Liens imposed by statute or common law
not securing the repayment of  Indebtedness,  arising in the ordinary  course of
business  which are not  overdue  for a period of more than 60 days or which are
being contested in good faith and by appropriate  proceedings promptly initiated
and diligently conducted,  and a reserve or other appropriate provision, if any,
as shall be required by GAAP shall have been made therefor,  and so long as such
contest operates to suspend the enforcement of compliance with and/or collection
thereof,   and  Liens  securing  judgments   (including,   without   limitation,
pre-judgment  attachments)  the  existence of which do not result in an Event of
Default under Section 9.01(j) hereof;


                                     - 74 -

<PAGE>

                           (v) pledges or deposits under worker's  compensation,
unemployment  insurance  and other social  security  legislation  and pledges or
deposits to secure the performance of bids, tenders, trade contracts (other than
for borrowed  money),  leases  (other than  capital  leases),  utility  purchase
obligations,  statutory obligations,  surety and appeal bonds, performance bonds
and other  obligations  of a like  nature  incurred  in the  ordinary  course of
business;

                           (vi)  encumbrances  on any Real Property  Asset other
than  a  Mortgaged  Property  consisting  of  easements,  rights-of-way,  zoning
restrictions,  easements, licenses,  restrictions and other similar encumbrances
incurred in the ordinary course of business, restrictions on the use of Property
or minor  imperfections  in  title  thereto  which,  in the  aggregate,  are not
material in amount, and which do not, in the aggregate,  materially detract from
the value of such Real Property Asset or materially  interfere with the ordinary
conduct of the business of any Loan Party;

                           (vii) Liens  consisting of bankers'  liens and rights
of setoff,  in each case,  arising by  operation  of law, and Liens on documents
presented in letter of credit drawings;

                           (viii) the  replacement,  extension or renewal of any
Lien permitted by clauses (ii) and (vii) of this Section  7.02(b) upon or in the
same property  theretofore  subject thereto in connection with the  replacement,
extension or renewal (without increase in the amount or any change in any direct
or contingent obligor) of the Indebtedness secured thereby; and

                           (ix) the Liens granted under the Working Capital Loan
Documents  to secure the  Working  Capital  Indebtedness  permitted  pursuant to
Section  7.02(a)(vi),  provided  that, the Working  Capital  Agent,  the Working
Capital  Lenders and the Loan Parties  shall have  executed and delivered to the
Agent the Intercreditor Agreement.

                  (c)  CONTINGENT  LIABILITIES.  The Loan  Parties will not, and
will not permit any of their  Subsidiaries  to,  guarantee the  Indebtedness  or
other  obligations of any Person, or guarantee the payment of dividends or other
distributions upon the stock of, or the earnings of, any Person, except:

                           (i) guarantees  issued  pursuant to the terms of this
Agreement,  the  Canadian  Financing  Agreement  and the  Working  Capital  Loan
Agreement;

                           (ii)  endorsements  of  negotiable   instruments  for
deposit  or  collection  or  similar  transactions  in the  ordinary  course  of
business;

                           (iii)  guarantees  and letters of credit in effect on
the date hereof which are disclosed in Schedule  7.02(a),  and any  replacements
thereof in amounts not exceeding such guarantees; and

                           (iv)  obligations  in  respect  of  letters of credit
issued under the Working Capital Loan Agreement.


                                     - 75 -

<PAGE>

                  (d) FUNDAMENTAL CHANGES; ASSET SALES.

                           (i) The Loan  Parties  will not,  and will not permit
any  of  their  Subsidiaries  to,  enter  into  any  transaction  of  merger  or
consolidation  or  amalgamation,  or liquidate,  wind up or dissolve  itself (or
suffer any liquidation or dissolution),  except that any Loan Party may, so long
as no Default or Event of Default shall have occurred or be continuing or result
therefrom,  be merged or combined  with or into any other Loan  Party,  PROVIDED
that if such merger  involves the  Borrower or a Guarantor,  (x) the Borrower or
such Guarantor shall be the surviving  entity and (y) no Change of Control shall
result  therefrom.  The Loan  Parties will not form any  Subsidiary  without the
prior  written  consent of the Agent.  The Loan  Parties  will not  acquire  any
business or property from, or Capital Stock of, or other equity interests in, or
be a party to any acquisition of, any Person except for purchases of property to
be used in the ordinary course of business,  Investments permitted under Section
7.02(e) and Capital Expenditures.

                           (ii) The Loan  Parties  will not, and will not permit
any of their Subsidiaries to, convey, sell, lease, transfer or otherwise dispose
(including any  Disposition) of, in one transaction or a series of transactions,
any part of their business or property,  whether now owned or hereafter acquired
(including, without limitation, receivables and leasehold interests), except:

                                    (A) obsolete property  (including  leasehold
interests),  tools or equipment no longer used or useful in their  business,  or
worn  out or in need of  replacement  and  that  are  replaced  with  assets  of
reasonably  equivalent  value or utility or which are  otherwise  productive  or
useful in the conduct of such Loan Party's business;

                                    (B) any Inventory or other  property sold or
disposed of in the ordinary course of business and on ordinary business terms;

                                    (C) sales of  property  from a Loan Party to
another Loan Party permitted pursuant to Section 7.02(g);

                                    (D)  sales  by  the  Borrower  or any of its
Subsidiaries of the assets listed on Schedule 7.02(d)(ii) hereto in an aggregate
amount for all such sales not to exceed $5,000,000, so long as (1) no Default or
Event of Default has occurred and is continuing or would result from the sale of
any such  asset,  (2)  each  such  sale is on  arm's-length  terms  for fair and
reasonable  consideration,  (3) not less than 85% of the proceeds  from any such
sale is in the form of cash,  (4) the Net Cash Proceeds  received from each such
sale  are  not  less  than,  with  respect  to  each  such  asset,   the  amount
corresponding  to such asset set forth on Schedule  7.02(d)(ii)  and (5) the Net
Cash  Proceeds  of each  such  sale  are  applied  in  accordance  with  Section
2.05(c)(ii); and

                                    (E)  sales  by  the  Borrower  or any of its
Subsidiaries  of any other  assets so long as (1) no Default or Event of Default
has occurred and is continuing or would result from the sale of such asset,  (2)
such sale is on arm's-length  terms for fair and reasonable  consideration,  (3)
not less than 85% of the proceeds from such sale is in the form of cash, (4) the
Net Cash Proceeds are applied in accordance  with Section  2.05(c)(ii),  and (5)


                                     - 76 -

<PAGE>

the aggregate fair market value of all such assets sold during any calendar year
does not exceed $500,000.

                           (iii)   Notwithstanding   anything  to  the  contrary
                  contained  in this Section  7.02(d),  so long as no Default or
                  Event of Default shall have occurred or be continuing or would
                  result  therefrom,  the Loan  Parties  shall be  permitted  to
                  consummate    the    transactions    described   on   Schedule
                  7.02(d)(iii).

                  (e) INVESTMENTS; HEDGING AGREEMENTS.

                           (i) The Loan  Parties  will not,  and will not permit
any of  their  Subsidiaries  to,  make  or  permit  to  remain  outstanding  any
Investment, except:

                                    (A)  Investments  consisting  of  guarantees
permitted by Section 7.02(c);

                                    (B)  Investments by the Borrower  and/or its
Subsidiaries in the Borrower or any Guarantor;

                                    (C)  Investments of the Borrower  and/or its
Subsidiaries  in any of the  Borrower's  Subsidiaries  which  are  not  Domestic
Subsidiaries;  provided that the aggregate amount of such Investments made after
the Effective Date does not exceed $1,000,000;

                                    (D)  Investments  existing on the  Effective
Date and described on Schedule 7.02(e);

                                    (E) Permitted Investments; and

                                    (F) Checking and deposit accounts with banks
used in the ordinary course of business.

                           (ii) The Loan  Parties  will not, and will not permit
any of their  Subsidiaries  to,  enter into any  Hedging  Agreement,  other than
Hedging  Agreements  entered  into in the ordinary  course of business  with the
prior written  consent of the Agent to hedge or mitigate risks to which the Loan
Parties are exposed in the conduct of their  business or the management of their
liabilities.

                  (f) RESTRICTED JUNIOR PAYMENTS. The Loan Parties will not, and
will not permit  any of their  Subsidiaries,  to declare or make any  Restricted
Junior Payment at any time, other than:

                           (i)  payments of dividends  or  management  fees by a
Subsidiary of the Borrower to the Borrower or another wholly-owned Subsidiary of
the Borrower;

                           (ii) payments of dividends and distributions  payable
solely in common stock of such Person;


                                     - 77 -

<PAGE>

                           (iii) so long as no Default  shall have  occurred and
be  continuing  and no  Default  shall be caused  thereby,  regularly  scheduled
payments of  interest  (but not  principal  or premium) in respect of the Senior
Subordinated  Notes on the dates  and in the  amounts  set  forth in the  Senior
Subordinated Note Documents; and

                           (iv)  payments  with  respect to  intercompany  loans
permitted under Section 7.02(a)(iii).

                  (g)  TRANSACTIONS   WITH   AFFILIATES.   Except  as  expressly
permitted by this Agreement,  the Loan Parties will not, and will not permit any
of their  Subsidiaries  to, directly or indirectly (i) make any Investment in an
Affiliate;  (ii)  transfer,  sell,  lease,  assign or  otherwise  dispose of any
property to an Affiliate;  (iii) merge into or consolidate with an Affiliate, or
purchase or acquire  property  from an  Affiliate;  or (iv) enter into any other
transaction  directly  or  indirectly  with or for the  benefit of an  Affiliate
(including, without limitation,  guarantees and assumptions of obligations of an
Affiliate); PROVIDED that:

                                    (A) any Affiliate  who is an individual  may
serve as a director,  officer, employee or consultant of any Loan Party, receive
reasonable  compensation  for his or her  services in such  capacity and benefit
from  Permitted  Investments  to  the  extent  specified  in  clause  (e) of the
definition thereof;

                                    (B)  the  Loan  Parties  may  engage  in and
continue  the  transactions  with or for the  benefit  of  Affiliates  which are
described in Schedule  7.02(g) or are referred to in Sections 7.02(e) or 7.02(f)
(but only to the extent specified in such Sections); and

                                    (C)  the  Loan   Parties   may   engage   in
transactions  with  Affiliates in the ordinary course of business on terms which
are no less favorable to the Loan Parties than those likely to be obtained in an
arms' length transaction between a Loan Party and a non-affiliated third party.

                  (h) RESTRICTIVE  AGREEMENTS;  RESTRICTIONS ON NEGATIVE PLEDGES
AND UPSTREAM  LIMITATION.  The Loan Parties will not, and will not permit any of
their  Subsidiaries  to, directly or indirectly,  enter into, incur or permit to
exist  any  agreement  or other  arrangement  (other  than this  Agreement,  the
Canadian  Financing  Agreement  and the Working  Capital  Loan  Agreement)  that
prohibits,  restricts or imposes any condition  upon (i) the ability of any such
Person to create,  incur or permit to exist any Lien upon any of its property or
assets,  or  (ii)  the  ability  of  such  Person  to  pay  dividends  or  other
distributions  with  respect to any shares of its Capital  Stock or other equity
interests  or to make or repay  loans or  advances  to any  other  Person  or to
guarantee the Indebtedness of any other Person;  PROVIDED that (A) the foregoing
shall not apply to restrictions and conditions imposed by law, (B) the foregoing
shall not apply to  restrictions  and  conditions  existing  on the date  hereof
identified on Schedule  7.02(h) (but shall apply to any extension or renewal of,
or any amendment or modification expanding the scope of, any such restriction or
condition),  (C) the  foregoing  shall not apply to customary  restrictions  and
conditions  contained in agreements relating to the sale of stock or assets of a
Subsidiary  pending such sale,  provided such  restrictions and conditions apply
only to the Subsidiary that is to be sold and such sale is permitted  hereunder,
(D) clause (i) of the foregoing  shall not apply to  restrictions  or conditions
imposed by any  agreement  relating to secured  Indebtedness  permitted  by this


                                     - 78 -

<PAGE>

Agreement  if such  restrictions  or  conditions  apply only to the  property or
assets securing such Indebtedness, and (E) clause (i) of the foregoing shall not
apply to customary  provisions in leases and other contracts  (excluding license
agreements) restricting the assignment thereof.

                  (i) SALE-LEASEBACK  TRANSACTIONS.  No Loan Party or any of its
Subsidiaries  will directly or indirectly,  enter into any arrangements with any
Person whereby such Person shall sell or transfer (or request  another Person to
purchase) any property, real, personal or mixed, used or useful in its business,
whether  now owned or  hereafter  acquired,  and  thereafter  rent or lease such
property from any Person.

                  (j) CERTAIN FINANCIAL COVENANTS.

                           (i) CAPITAL EXPENDITURES. The Borrower will not make,
or permit  any of its  Subsidiaries  to make,  Capital  Expenditures  during any
Reference  Period  ending  during any Fiscal Year set forth in the table  below,
that exceed,  in the  aggregate,  the amounts  listed below opposite such Fiscal
Year:

         ---------------------------------------------------------------------
                           FISCAL YEAR                        MAXIMUM AMOUNT
         -------------------------------------------------- ------------------
                        2003 Fiscal Year                         $6,000,000
         -------------------------------------------------- ------------------
                        2004 Fiscal Year                         $8,000,000
         -------------------------------------------------- ------------------
          2005 Fiscal Year and each Fiscal Year thereafter      $10,000,000
         ---------------------------------------------------------------------

                           (ii)  MAXIMUM  SENIOR  LEVERAGE  RATIO.  The Borrower
shall not permit the  Senior  Leverage  Ratio for any  Reference  Period  ending
during a period  set forth in the  table  below,  to exceed  the ratio set forth
opposite such period in such table:

         ---------------------------------------------------------------------
                             PERIOD                                RATIO
         -------------------------------------------------- ------------------
             Effective Date through September 30, 2003          3.25 to 1.00
         -------------------------------------------------- ------------------
           December 31, 2003 through September 30, 2004         3.00 to 1.00
         -------------------------------------------------- ------------------
           December 31, 2004 and each fiscal quarter
                ending thereafter                               2.75 to 1.00
         ---------------------------------------------------------------------

                           (iii) FIXED CHARGE COVERAGE RATIO. The Borrower shall
not permit the Fixed  Charge  Coverage  Ratio for any  Reference  Period  ending
during a period  set  forth in the  table  below,  to be less than the ratio set
forth opposite such period in such table:

         ---------------------------------------------------------------------
                             PERIOD                                RATIO
         -------------------------------------------------- ------------------
             Effective Date through March 31, 2004              1.05 to 1.00
         -------------------------------------------------- ------------------


                                     - 79 -

<PAGE>

         -------------------------------------------------- ------------------
            June 30, 2004 and each fiscal quarter ending
                           thereafter                           1.10 to 1.00
         ---------------------------------------------------------------------

                           (iv) MINIMUM NET WORTH. The Borrower shall not permit
Net Worth at any time during a period set forth in the table  below,  to be less
than the amounts set forth opposite such date in such table:

         ---------------------------------------------------------------------
                             PERIOD                           MINIMUM AMOUNT
         -------------------------------------------------- ------------------
                Effective Date through March 31, 2004            $72,500,000
         -------------------------------------------------- ------------------
              June 30, 2004 through September 30, 2004           $74,500,000
         -------------------------------------------------- ------------------
           December 31, 2004 and each fiscal quarter
                        ending thereafter                        $76,500,000
         ---------------------------------------------------------------------

                           (v) MINIMUM EBITDA OF THE LOAN PARTIES.  The Borrower
shall not permit the EBITDA  attributable  to the Loan Parties for any Reference
Period to be less than $30,000,000.

                           (vi) MINIMUM EBITDA.

                                    (A) The Borrower shall not permit EBITDA for
the month of November 2002 to be less than $2,400,000.

                                    (B) The Borrower shall not permit EBITDA for
any Reference  Period ending on the date set forth in the table below to be less
than the amounts set forth opposite such date in such table:

         ---------------------------------------------------------------------
                             PERIOD                           MINIMUM AMOUNT
         -------------------------------------------------- ------------------
                        December 31, 2002                        $44,019,000
         -------------------------------------------------- ------------------
                        January 31, 2003                         $45,605,000
         -------------------------------------------------- ------------------
                        February 28, 2003                        $45,200,000
         -------------------------------------------------- ------------------
              March 31, 2003 through November 30, 2003           $42,620,000
         -------------------------------------------------- ------------------
              December 31, 2003 through March 31, 2004           $45,000,000
         ---------------------------------------------------------------------

                  (k) LINES OF  BUSINESS.  The  Borrower  will not, and will not
permit any of its Subsidiaries to, engage to any substantial  extent in any line
or lines of business activity other than (i) the types of businesses  engaged in
by them as of the Effective Date and businesses  substantially  related thereto,
and (ii) such other lines of business  as may be  consented  to by the Agent and
the Required Lenders.


                                     - 80 -

<PAGE>

                  (l) OTHER  INDEBTEDNESS.  The Borrower  will not, and will not
permit any of its Subsidiaries to, purchase, redeem, retire or otherwise acquire
for value,  or set apart any money for a sinking,  defeasance or other analogous
fund for the purchase,  redemption,  retirement or other acquisition of, or make
any  voluntary  payment or prepayment of the principal of or interest on, or any
other amount owing in respect of any Senior  Subordinated  Notes,  except to the
extent permitted by Section 7.02(f).

                  (m) MODIFICATIONS OF CERTAIN DOCUMENTS;  DESIGNATION OF SENIOR
DEBT.  The Borrower  will not, and will not permit any of its  Subsidiaries  to,
consent to any  modification  of or supplement  to any of the  provisions of any
documents or  agreements  evidencing or governing the  Subordinated  Notes,  the
Working Capital Loans or any other Existing Indebtedness.  The Loan Parties will
designate the  Agreement and the  Obligations  hereunder as  "Designated  Senior
Debt" under the Senior  Subordinated Note Indenture,  and will not designate any
other  Indebtedness  other than the Working Capital Loans as "Designated  Senior
Debt" under the Senior Subordinated Note Indenture.

                  (n) COLUMBUS MCKINNON FINANCE CORPORATION. Except as set forth
in Section  6.01(x) and as  otherwise  permitted  by Section  7.02(d)(iii),  the
Borrower will not permit Columbus McKinnon Finance Corporation to own any asset,
incur any  liabilities  or engage in any business.  The Borrower will not permit
Columbus McKinnon Limited to make, or Columbus  McKinnon Finance  Corporation to
receive,  any payment in respect of that certain  intercompany  promissory  note
issued by  Columbus  McKinnon  Limited  and made to  Columbus  McKinnon  Finance
Corporation in the aggregate face amount of C$3,750,000.

                                  ARTICLE VIII

                      MANAGEMENT, COLLECTION AND STATUS OF
                    ACCOUNTS RECEIVABLE AND OTHER COLLATERAL

         Section  8.01  MANAGEMENT  OF  COLLATERAL.  The Agent (and all  Persons
designated by the Agent for such purpose) may, at any time and from time to time
after the occurrence and during the continuance of an Event of Default,  whether
before or after  notification  to any Account Debtor and whether before or after
the maturity of any of the Obligations,  (i) enforce  collection of any Accounts
Receivable  or contract  rights of the Loan Parties by suit or  otherwise;  (ii)
exercise  all of the rights and  remedies of the Loan  Parties  with  respect to
proceedings brought to collect any Accounts Receivable; (iii) surrender, release
or exchange all or any part of any Accounts  Receivable of the Loan Parties,  or
compromise  or extend or renew for any period  (whether  or not longer  than the
original  period) any Indebtedness  thereunder;  (iv) sell or assign any Account
Receivable of the Loan Parties upon such terms, for such amount and at such time
or times as the Agent deems advisable;  (v) prepare,  file and sign the names of
the Loan Parties on any proof of claim in bankruptcy  or other similar  document
against  any  Account  Debtor  indebted  on an  Account  Receivable  of the Loan
Parties;  and (vi) do all other  acts and  things  which are  necessary,  in the
Agent's sole  discretion,  to fulfill the  Obligations of the Loan Parties under
this  Agreement  and to allow the Agent to collect the Accounts  Receivable.  In
addition to any other  provision  hereof or in any of the other Loan  Documents,
the Agent may at any time on or after the occurrence of an Event of Default,  at
the sole expense of the Loan Parties, notify any parties obligated on any of the


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Accounts Receivable of the Loan Parties to make payment directly to the Agent of
any amounts due or to become due thereunder.

                  (b) Each Loan Party hereby  appoints the Agent or its designee
on  behalf  of the  Agent  as the  Loan  Parties'  attorney-in-fact  with  power
exercisable  during the  continuance  of an Event of Default to endorse any Loan
Party's name upon any notes, acceptances,  checks, drafts, money orders or other
evidences  of payment  relating  to the  Accounts  Receivable,  to sign any Loan
Party's  name on any invoice or bill of lading  relating to any of the  Accounts
Receivable,  drafts against Account Debtors with respect to Accounts Receivable,
assignments  and  verifications  of Accounts  Receivable  and notices to Account
Debtors with respect to Accounts  Receivable,  to send  verification of Accounts
Receivable,  and to notify the Postal Service  authorities to change the address
for  delivery of mail  addressed  to any Loan Party to such address as the Agent
may  designate  and to do all other acts and things  necessary to carry out this
Agreement.  All acts of said  attorney  or  designee  are  hereby  ratified  and
approved,  and said  attorney  or  designee  shall not be liable for any acts of
omission or commission  (other than acts of omission or commission  constituting
gross  negligence or willful  misconduct as determined by a final  judgment of a
court of  competent  jurisdiction),  or for any error of  judgment or mistake of
fact or law; this power being coupled with an interest is irrevocable  until the
Term Loan and the other  Obligations  under the Loan  Documents are paid in full
and all of the Loan Documents are terminated.

                  (c) Nothing herein  contained shall be construed to constitute
the Agent as agent of any Loan Party for any purpose  whatsoever,  and the Agent
shall not be responsible or liable for any shortage,  discrepancy,  damage, loss
or destruction  of any part of the  Collateral  wherever the same may be located
and  regardless  of the cause  thereof  (other  than from  acts of  omission  or
commission  constituting gross negligence or willful misconduct as determined by
a final  judgment of a court of  competent  jurisdiction).  The Agent shall not,
under any  circumstance or in any event  whatsoever,  have any liability for any
error or omission or delay of any kind occurring in the  settlement,  collection
or payment of any of the  Accounts  Receivable  or any  instrument  received  in
payment  thereof  or for any  damage  resulting  therefrom  (other  than acts of
omission or commission  constituting  gross negligence or willful  misconduct as
determined by a final judgment of a court of competent jurisdiction). The Agent,
by anything herein or in any assignment or otherwise, does not assume any of the
obligations under any contract or agreement  assigned to the Agent and shall not
be  responsible  in any way for the  performance by any Loan Party of any of the
terms and conditions thereof.

                  (d) If any  Account  Receivable  includes a charge for any tax
payable to any Governmental Authority, the Agent is hereby authorized (but in no
event  obligated)  in its  discretion  to pay the  amount  thereof to the proper
taxing  authority for the Loan  Parties'  account and to charge the Loan Parties
therefor.  The Loan  Parties  shall  notify the Agent if any Account  Receivable
includes any taxes due to any such Governmental Authority and, in the absence of
such notice,  the Agent shall have the right to retain the full proceeds of such
Account  Receivable  and shall not be  liable  for any taxes  that may be due by
reason of the sale and delivery creating such Account Receivable.

                  (e)  Notwithstanding  any  other  terms  set forth in the Loan
Documents, the rights and remedies of the Agent and the Lenders herein provided,


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and the obligations of the Loan Parties set forth herein, are cumulative of, may
be exercised  singly or  concurrently  with, and are not exclusive of, any other
rights,  remedies  or  obligations  set forth in any other Loan  Document  or as
provided by law.

         Section 8.02 ACCOUNTS RECEIVABLE  DOCUMENTATION.  The Loan Parties will
at such  intervals  as the Agent may require,  execute and deliver  confirmatory
written  assignments  of the Accounts  Receivable  to the Agent and furnish such
further  schedules  and/or  information as the Agent may require relating to the
Accounts  Receivable,  including,  without  limitation,  sales  invoices  or the
equivalent,  credit  memos  issued,  remittance  advices,  reports and copies of
deposit  slips and copies of  original  shipping or  delivery  receipts  for all
merchandise  sold.  In addition,  the Loan Parties shall notify the Agent of any
non-compliance  in  respect of the  representations,  warranties  and  covenants
contained in Section 8.03.  The items to be provided under this Section 8.02 are
to be in form  reasonably  satisfactory  to the Agent and are to be executed and
delivered  to the  Agent  from  time  to time  solely  for  its  convenience  in
maintaining records of the Collateral.  The Loan Parties' failure to give any of
such items to the Agent shall not affect,  terminate,  modify or otherwise limit
the  Agent's  Lien on the  Collateral.  The Loan  Parties  shall not re-date any
invoice or sale or make sales on extended  dating  beyond that  customary in the
Loan Parties'  industry,  and shall not re-bill any Accounts  Receivable without
promptly disclosing the same to the Agent and providing the Agent with a copy of
such re-billing,  identifying the same as such. If the Loan Parties become aware
of  anything  materially  detrimental  to any of the  Loan  Parties'  customers'
credit, the Loan Parties will promptly advise the Agent thereof.

         Section 8.03 STATUS OF ACCOUNTS  RECEIVABLE AND OTHER COLLATERAL.  With
respect  to  Collateral  of any Loan  Party at the time the  Collateral  becomes
subject to the Agent's Lien, each Loan Party covenants, represents and warrants:
(a) such Loan Party shall be the sole owner, free and clear of all Liens (except
for the Liens  granted in the favor of the Agent for the  benefit of the Lenders
and Permitted Liens),  and shall be fully authorized to sell,  transfer,  pledge
and/or grant a security interest in each and every item of said Collateral;  (b)
each  Account  Receivable  shall be a good and  valid  account  representing  an
undisputed bona fide indebtedness incurred or an amount indisputably owed by the
Account  Debtor  therein  named,  for a fixed  sum as set  forth in the  invoice
relating  thereto  with  respect  to an  absolute  sale  and  delivery  upon the
specified  terms of goods sold or services  rendered by such Loan Party;  (c) no
Account  Receivable  shall be  subject  to any  defense,  offset,  counterclaim,
discount or allowance except as may be stated in the invoice  relating  thereto,
discounts and  allowances as may be customary in such Loan Party's  business and
as otherwise  disclosed to the Agent,  and each Account  Receivable will be paid
when due; (d) none of the transactions  underlying or giving rise to any Account
Receivable  shall violate any applicable  state or federal laws or  regulations,
and all documents  relating thereto shall be legally  sufficient under such laws
or regulations and shall be legally  enforceable in accordance with their terms;
(e) no agreement  under which any  deduction  or offset of any kind,  other than
normal  trade  discounts,  may be  granted  or shall have been made by such Loan
Party  at or  before  the time  such  Account  Receivable  is  created;  (f) all
agreements,  instruments and other documents  relating to any Account Receivable
shall be true and correct and in all material  respects what they purport to be;
(g) all  signatures  and  endorsements  that appear on all material  agreements,
instruments  and other  documents  relating to any Account  Receivable  shall be
genuine and all  signatories and endorsers shall have full capacity to contract;
(h) such  Loan  Party  shall  maintain  books  and  records  pertaining  to said
Collateral in such detail, form and scope as the Agent shall reasonably require;
(i) such Loan Party shall immediately notify the Agent if any Account Receivable


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<PAGE>

arises out of contracts with any  Governmental  Authority,  and will execute any
instruments  and take any steps  required  by the Agent in order that all monies
due or to become due under any such contract  shall be assigned to the Agent and
notice thereof given to such Governmental Authority under the Federal Assignment
of Claims  Act or any  similar  state or local law;  (j) such Loan  Party  will,
immediately  upon  learning  thereof,  report to the Agent any material  loss or
destruction of, or substantial  damage to, any of the Collateral,  and any other
matters  affecting the value,  enforceability  or  collectibility  of any of the
Collateral;  (k) if any amount  payable under or in connection  with any Account
Receivable  is  evidenced  by  a  promissory  note  or  other  instrument,  such
promissory note or instrument shall be immediately pledged,  endorsed,  assigned
and  delivered  to the  Agent  for the  benefit  of the  Lenders  as  additional
Collateral;  (l) such Loan Party  shall not  re-date any invoice or sale or make
sales on extended  dating beyond that which is customary in the ordinary  course
of its  business  and in the  industry;  (m) such  Loan  Party  shall  conduct a
physical  count of its Inventory at such  intervals as the Agent may  reasonably
request and such Loan Party shall promptly  supply the Agent with a copy of such
count  accompanied  by a report of the  value  (based on the lower of cost (on a
first in first out basis) and market value) of such Inventory; and (n) such Loan
Party is not and shall not be  entitled  to pledge the  Agent's or any  Lender's
credit on any purchases or for any purpose whatsoever.

         Section 8.04 COLLATERAL  CUSTODIAN.  Upon the occurrence and during the
continuance  of any Default or Event of  Default,  the Agent may at any time and
from time to time  employ  and  maintain  on the  premises  of any Loan  Party a
custodian  selected  by the Agent who shall have full  authority  to do all acts
necessary  to protect the Agent's and the  Lenders'  interests.  Each Loan Party
hereby  agrees to, and to cause its  Subsidiaries  to,  cooperate  with any such
custodian  and to do whatever the Agent may  reasonably  request to preserve the
Collateral.  All  costs  and  expenses  incurred  by the  Agent by reason of the
employment  of the  custodian  shall be the  responsibility  of the Borrower and
charged to the Loan Account.

         Section 8.05 COMPLIANCE  WITH WORKING CAPITAL LOAN AGREEMENT.  The Loan
Parties shall comply with the cash management  provisions of the Working Capital
Loan  Agreement (or any  successor or  replacement  agreement  acceptable to the
Agent),  PROVIDED that, if the Working  Capital Loan  Agreement  shall have been
terminated  and the Loan  Parties  shall not have  entered  into a successor  or
replacement agreement acceptable to the Agent, then the Loan Parties shall enter
into control agreements, lockbox agreements and other similar agreements in form
and substance reasonably satisfactory to the Agent.

                                   ARTICLE IX

                                EVENTS OF DEFAULT

         Section  9.01  EVENTS OF  DEFAULT.  If any of the  following  Events of
Default shall occur and be continuing:

                  (a) the Loan  Parties  shall  fail to pay to the  Agent or the
Lenders,  any principal of or interest on the Term Loan or any other  Obligation
of the Loan  Parties to the Agent or the Lenders  when the same shall become due
and payable,  whether at the due date thereof or at a date fixed for  prepayment


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<PAGE>

thereof, by acceleration of such due or prepayment date, or otherwise;

                  (b) any  representation  or warranty made or deemed made by or
on behalf of any Loan Party or any of its  Subsidiaries  in connection with this
Agreement,  any of the other Loan  Documents or any  amendment  or  modification
hereof or thereof, or in any report,  certificate,  financial statement or other
document furnished pursuant to or in connection with this Agreement,  any of the
other Loan Documents or any amendment or modification  hereof or thereof,  shall
prove to have been incorrect in any material respect when made or deemed made;

                  (c) the Loan  Parties (i) shall fail to observe or perform any
covenant,  condition  or  agreement  contained  in  Sections  7.01(a),  7.01(b),
7.01(c), 7.01(e), 7.01(f), 7.01(g), 7.01(h), 7.01(i), 7.01(j), 7.01(k), 7.01(l),
7.01(n),  7.01(o),  7.01(p) or in Section 7.02 (it being expressly  acknowledged
and agreed  that any Event of  Default  resulting  from the  failure of the Loan
Parties at any measurement  date to satisfy any financial  covenant set forth in
Section  7.02(j)  shall not be  deemed to be  "cured"  or  remedied  by the Loan
Parties'  satisfaction of such financial covenant at any subsequent  measurement
date) or (ii) shall fail to observe or perform any other covenant,  condition or
agreement contained in Sections 7.01(d),  7.01(m),  7.01(q),  7.01(r) or 7.01(s)
and such failure  described in this clause (ii) shall continue  unremedied for a
period of 10 days after the  earlier of (x) the date on which any officer of any
Loan  Party  knows or  should  have  known of such  failure  or (y) the date the
Borrower receives notice thereof from the Agent;

                  (d) the  Borrower  or any of its  Subsidiaries  shall  fail to
observe or perform  any  covenant,  condition  or  agreement  contained  in this
Agreement (other than those specified in clauses (a), (b) or (c) of this Section
9.01) or any other Loan Document, and such failure shall continue unremedied for
a period of 20 days after the  earlier  of (x) the date on which any  officer of
any Loan Party  knows or should  have known of such  failure or (y) the date the
Borrower receives notice thereof from the Agent;

                  (e) the Borrower or any of its Subsidiaries shall fail to make
any payment  (whether of  principal,  interest or otherwise  and  regardless  of
amount)  in  respect  of  any  Material  Indebtedness  or  any  Material  Rental
Obligation,  when and as the same shall  become due and  payable,  after  giving
effect to any grace period with respect thereto;

                  (f) any event or condition  occurs that results in (i) (A) any
Material  Indebtedness of the Borrower or any of its  Subsidiaries  becoming due
prior to its  scheduled  maturity,  (B) that enables or permits (with or without
the  giving of  notice,  the lapse of time or both) the holder or holders of any
Material  Indebtedness  or any trustee or agent on its or their  behalf to cause
such  Material  Indebtedness  to  become  due,  or to  require  the  prepayment,
repurchase,  redemption or defeasance thereof,  prior to its scheduled maturity,
or (C)  requires  the  Borrower  or any of its  Subsidiaries  to offer to repay,
repurchase,  redeem,  or defease such Material  Indebtedness,  or (ii) the Lease
with respect to any  Material  Rental  Obligation  of the Borrower or any of its
Subsidiaries  being  terminated  prior to its scheduled  expiration date or that
enables or permits  (with or without the giving of notice,  the lapse of time or
both) the  counterparty to such Lease to cause such Lease to be terminated prior
to its scheduled expiration date;


                                     - 85 -

<PAGE>

                  (g)  an  involuntary  proceeding  shall  be  commenced  or  an
involuntary  petition shall be filed seeking (i) liquidation,  reorganization or
other relief in respect of the Borrower or any of its Subsidiaries or its debts,
or of a  substantial  part of its assets,  under any  Federal,  state or foreign
bankruptcy,  insolvency,  receivership or similar law now or hereafter in effect
or  (ii)  the  appointment  of a  receiver,  trustee,  custodian,  sequestrator,
conservator or similar  official for the Borrower or any of its  Subsidiaries or
for a substantial part of its assets,  and, in any such case, such proceeding or
petition shall continue  undismissed for 60 days or an order or decree approving
or ordering any of the foregoing shall be entered;

                  (h)  the  Borrower  or  any  of  its  Subsidiaries  shall  (i)
voluntarily  commence any proceeding or file any petition  seeking  liquidation,
reorganization or other relief under any Federal,  state or foreign  bankruptcy,
insolvency, receivership or similar law now or hereafter in effect, (ii) consent
to the institution  of, or fail to contest in a timely and  appropriate  manner,
any proceeding or petition  described in clause (g) of this Section 9.01,  (iii)
apply for or consent  to the  appointment  of a  receiver,  trustee,  custodian,
sequestrator,  conservator  or similar  official  for the Borrower or any of its
Subsidiaries  or for a  substantial  part of its  assets,  (iv)  file an  answer
admitting the material  allegations  of a petition  filed against it in any such
proceeding,  (v) make a general  assignment for the benefit of creditors or (vi)
take any action for the purpose of effecting any of the foregoing;

                  (i)  the  Borrower  or any of its  Subsidiaries  shall  become
unable, admit in writing or fail generally to pay its debts as they become due;

                  (j) a final judgment or judgments for the payment of money (x)
in excess of $1,000,000 in the  aggregate  (exclusive of judgment  amounts fully
covered by insurance where the insurer has admitted liability in respect of such
judgment)  or (y) in  excess  of  $1,000,000  in the  aggregate  (regardless  of
insurance  coverage),  shall be rendered by one or more  courts,  administrative
tribunals or other bodies  having  jurisdiction  over the Borrower or any of its
Subsidiaries  and the same shall not be discharged  (or  provision  shall not be
made for such discharge),  bonded,  or a stay of execution  thereof shall not be
procured,  within 60 days from the date of entry  thereof  and the  Borrower  or
relevant  Subsidiary  shall not,  within said period of 60 days,  or such longer
period  during  which  execution  of the same  shall  have been  stayed,  appeal
therefrom and cause the execution thereof to be stayed during such appeal;

                  (k) an ERISA Event shall have occurred that, in the reasonable
opinion of the Required Lenders, when taken together with all other ERISA Events
that have  occurred,  could  reasonably  be expected to have a Material  Adverse
Effect;

                  (l) any Loan  Party  shall  be  liable  for any  Environmental
Liabilities  payment of which  could  reasonably  be expected to have a Material
Adverse Effect;

                  (m) there shall occur any Change of Control;

                  (n) any of the  following  shall occur:  (i) the Liens created
hereunder  or under the other Loan  Documents  shall at any time  (other than by
reason of the Agent  relinquishing  such  Lien)  cease to  constitute  valid and
perfected  Liens on any Collateral with an aggregate fair market value in excess
of $100,000 which is intended to be covered thereby;  (ii) except for expiration


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<PAGE>

in accordance  with its terms,  any Loan Document  shall for whatever  reason be
terminated,  or shall  cease  to be in full  force  and  effect;  or  (iii)  the
enforceability of any Loan Document shall be contested by the Borrower or any of
its Subsidiaries;

                  (o) any bank at which any deposit account, blocked account, or
lockbox account of any Loan Party is maintained shall fail to comply with any of
the terms of any deposit account agreement,  blocked account agreement,  control
Agreement or similar  agreement to which such bank is a party or any  securities
intermediary,  commodity intermediary or other financial institution at any time
in custody,  control or possession of any investment  property of any Loan Party
shall fail to comply with any of the terms of any  investment  property  control
agreement to which such Person is a party;

                  (p) any  Loan  Party  is  enjoined,  restrained  or in any way
prevented  by  the  order  of  any  court  or any  Governmental  Authority  from
conducting all or any material part of its business for more than 15 days;

                  (q) any cessation of a substantial part of the business of any
Loan Party for a period which  materially  and adversely  affects the ability of
such Person to continue its business on a profitable basis;

                  (r) the loss,  suspension  or  revocation  of, or  failure  to
renew,  any license or permit now held or hereafter  acquired by any Loan Party,
if such loss,  suspension,  revocation  or failure to renew could  reasonably be
expected to have a Material Adverse Effect;

                  (s) the indictment,  or the threatened  indictment of any Loan
Party under any criminal statute, or commencement or threatened  commencement of
criminal or civil proceedings against any Loan Party,  pursuant to which statute
or proceedings the penalties or remedies sought or available include  forfeiture
to any  Governmental  Authority of any material  portion of the property of such
Person;

                  (t) there shall occur any loss theft, damage or destruction of
any Collateral not fully covered (subject to such reasonable  deductibles as the
Agent  shall  have  approved)  by  insurance  which has or could  reasonably  be
expected to have a Material Adverse Effect;

                  (u) any Guarantor shall assert that its obligations  under any
Loan Document shall be invalid or unenforceable;

                  (v) there  shall  occur any  material  adverse  change (in the
opinion  of the Agent) on the  businesses,  operations,  properties,  conditions
(financial  or  otherwise),  assets,  liabilities,  income or  prospects  of the
Borrower and its Subsidiaries;

                  (w) an  "Event  of  Default"  shall  have  occurred  under the
Canadian Financing Agreement or the Working Capital Loan Agreement;

         then, and in any such event, the Agent may, and shall at the request of
the Required Lenders, by notice to the Borrower,  (i) declare all or any portion
of the Term Loan then  outstanding to be due and payable,  whereupon all or such


                                     - 87 -

<PAGE>

portion of the  aggregate  principal  of the Term Loan,  all  accrued and unpaid
interest  thereon,  all fees and all other amounts  payable under this Agreement
and the other Loan Documents shall become due and payable  immediately,  without
presentment,  demand,  protest or further  notice of any kind,  all of which are
hereby  expressly waived by each Loan Party and (ii) exercise any and all of its
other rights and remedies under  applicable  law,  hereunder and under the other
Loan  Documents;  PROVIDED,  HOWEVER,  that upon the  occurrence of any Event of
Default  described in subsection  (g), (h) or (i) of this Section 9.01,  without
any notice to any Loan Party or any other  Person or any act by the Agent or any
Lender,  the Term Loan,  together with all accrued and unpaid interest  thereon,
all fees and all other  amounts  due under  this  Agreement  and the other  Loan
Documents shall become due and payable  automatically  and immediately,  without
presentment,  demand,  protest or notice of any kind, all of which are expressly
waived by each Loan Party.

                                   ARTICLE X

                                      AGENT

         Section 10.01 APPOINTMENT.  Each Lender hereby irrevocably appoints and
authorizes  the Agent to  perform  the  duties of the Agent as set forth in this
Agreement  including:  (i) to  receive on behalf of each  Lender any  payment of
principal of or interest on the Term Loan  outstanding  hereunder  and all other
amounts accrued  hereunder for the account of the Lenders and paid to the Agent,
and, subject to Section 2.02 of this Agreement,  to distribute  promptly to each
Lender its Pro Rata Share of all payments so  received;  (ii) to  distribute  to
each Lender copies of all material notices and agreements  received by the Agent
and not required to be  delivered  to each Lender  pursuant to the terms of this
Agreement,  provided  that the Agent shall not have any liability to the Lenders
for the Agent's inadvertent failure to distribute any such notices or agreements
to the Lenders;  (iii) to maintain,  in accordance  with its customary  business
practices,  ledgers and records  reflecting the status of the  Obligations,  the
Term Loan, and related matters and to maintain, in accordance with its customary
business practices,  ledgers and records reflecting the status of the Collateral
and related  matters;  (iv) to execute or file any and all  financing or similar
statements   or   notices,   amendments,   renewals,   supplements,   documents,
instruments,  proofs of claim, notices and other written agreements with respect
to this  Agreement  or any other  Loan  Document;  (v) to make the Term Loan and
Agent Advances, for the Agent or on behalf of the applicable Lenders as provided
in this Agreement or any other Loan  Document;  (vi) to perform,  exercise,  and
enforce any and all other rights and remedies of the Lenders with respect to the
Loan Parties, the Obligations, or otherwise related to any of same to the extent
reasonably  incidental  to the  exercise by the Agent of the rights and remedies
specifically  authorized  to be  exercised  by the  Agent  by the  terms of this
Agreement or any other Loan Document; (vii) to incur and pay such fees necessary
or appropriate  for the  performance and fulfillment of its functions and powers
pursuant to this  Agreement or any other Loan  Document;  and (viii)  subject to
Section  10.03  of this  Agreement,  to take  such  action  as the  Agent  deems
appropriate on its behalf to administer the Term Loan and the Loan Documents and
to exercise such other powers  delegated to the Agent by the terms hereof or the
other Loan Documents  (including,  without  limitation,  the power to give or to
refuse to give notices,  waivers,  consents,  approvals and instructions and the
power to make or to refuse to make  determinations  and  calculations)  together
with such powers as are reasonably  incidental thereto to carry out the purposes
hereof  and  thereof.  As to any  matters  not  expressly  provided  for by this
Agreement  and  the  other  Loan  Documents   (including,   without  limitation,


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<PAGE>

enforcement or collection of the Term Loan),  the Agent shall not be required to
exercise any  discretion or take any action,  but shall be required to act or to
refrain  from acting (and shall be fully  protected  in so acting or  refraining
from  acting)  upon  the  instructions  of  the  Required   Lenders,   and  such
instructions of the Required Lenders shall be binding upon all Lenders.

         Section  10.02  NATURE OF  DUTIES.  The Agent  shall  have no duties or
responsibilities  except those  expressly set forth in this  Agreement or in the
other  Loan  Documents.  The  duties  of  the  Agent  shall  be  mechanical  and
administrative  in nature.  The Agent shall not have by reason of this Agreement
or any other Loan  Document a fiduciary  relationship  in respect of any Lender.
Nothing in this  Agreement or any other Loan  Document,  express or implied,  is
intended to or shall be  construed to impose upon the Agent any  obligations  in
respect of this  Agreement or any other Loan  Document  except as expressly  set
forth  herein  or  therein.   Each  Lender   shall  make  its  own   independent
investigation  of the  financial  condition  and affairs of the Loan  Parties in
connection  with the making and the  continuance  of the Term Loan hereunder and
shall make its own appraisal of the creditworthiness of the Loan Parties and the
value of the  Collateral,  and the 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 their possession
before  the Term Loan  hereunder  or at any time or times  thereafter,  provided
that, upon the reasonable  request of a Lender,  the Agent shall provide to such
Lender any  documents  or  reports  delivered  to the Agent by the Loan  Parties
pursuant to the terms of this Agreement or any other Loan Document. If the Agent
seeks  the  consent  or  approval  of the  Required  Lenders  to the  taking  or
refraining from taking any action hereunder, the Agent shall send notice thereof
to each Lender.  The Agent shall  promptly  notify each Lender any time that the
Required  Lenders  have  instructed  the  Agent to act or  refrain  from  acting
pursuant hereto.

         Section 10.03 RIGHTS,  EXCULPATION,  ETC. The Agent and its  directors,
officers,  agents  or  employees  shall not be liable  for any  action  taken or
omitted to be taken by them under or in  connection  with this  Agreement or the
other  Loan  Documents,  except  for  their  own  gross  negligence  or  willful
misconduct  as  determined  by  a  final   judgment  of  a  court  of  competent
jurisdiction.  Without  limiting the generality of the foregoing,  the Agent (i)
may  treat  the  payee of the Term  Loan as the  owner  thereof  until the Agent
receives  written  notice of the  assignment  or transfer  thereof,  pursuant to
Section  12.07  hereof,  signed by such  payee and in form  satisfactory  to the
Agent;  (ii) may consult  with legal  counsel  (including,  without  limitation,
counsel  to the  Agent or  counsel  to the  Loan  Parties),  independent  public
accountants,  and other experts  selected by any of them and shall not be liable
for any  action  taken or  omitted  to be taken in good  faith by any of them in
accordance with the advice of such counsel or experts; (iii) make no warranty or
representation  to any Lender and shall not be responsible to any Lender for any
statements, certificates, warranties or representations made in or in connection
with this Agreement or the other Loan Documents; (iv) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or  conditions  of this  Agreement or the other Loan  Documents on the
part of any Person,  the existence or possible existence of any Default or Event
of Default, or to inspect the Collateral or other property  (including,  without
limitation,  the books and records) of any Person;  (v) shall not be responsible
to any  Lender  for  the  due  execution,  legality,  validity,  enforceability,
genuineness,  sufficiency or value of this Agreement or the other Loan Documents
or any other instrument or document  furnished  pursuant hereto or thereto;  and
(vi) shall not be deemed to have made any  representation or warranty  regarding


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the  existence,  value  or  collectibility  of the  Collateral,  the  existence,
priority or perfection of the Agent's Lien thereon, or any certificate  prepared
by any Loan Party in connection therewith, nor shall the Agent be responsible or
liable to the Lenders for any failure to monitor or maintain  any portion of the
Collateral.  The Agent shall not be liable for any apportionment or distribution
of  payments  made in good  faith  pursuant  to  Section  4.04,  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 which
they  are  determined  to be  entitled.  The  Agent  may  at  any  time  request
instructions  from the Lenders with respect to any actions or approvals which by
the terms of this  Agreement or of any of the other Loan  Documents the Agent is
permitted or required to take or to grant, and if such instructions are promptly
requested,  the Agent shall be  absolutely  entitled to refrain  from taking any
action or to withhold  any  approval  under any of the Loan  Documents  until it
shall  have  received  such  instructions  from the  Required  Lenders.  Without
limiting  the  foregoing,  no Lender  shall have any right of action  whatsoever
against  the Agent as a result of the Agent  acting or  refraining  from  acting
under this Agreement or any of the other Loan  Documents in accordance  with the
instructions of the Required Lenders.

         Section  10.04  RELIANCE.  The Agent shall be entitled to rely upon any
written  notices,  statements,  certificates,  orders or other  documents or any
telephone  message 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 other Loan Documents and its
duties hereunder or thereunder, upon advice of counsel selected by it.

         Section  10.05  INDEMNIFICATION.  To the  extent  that the Agent is not
reimbursed  and  indemnified  by any Loan Party,  the Lenders will reimburse and
indemnify  the Agent  from 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 the Agent in any way relating to or arising out
of this  Agreement  or any of the other Loan  Documents  or any action  taken or
omitted by the Agent under this Agreement or any of the other Loan Documents, in
proportion  to each  Lender's  Pro Rata Share,  including,  without  limitation,
advances and disbursements  made pursuant to Section 10.08;  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  for which there has been a final judicial  determination  that
such liability resulted from the Agent's gross negligence or willful misconduct.
The  obligations  of the Lenders  under this  Section  10.05  shall  survive the
payment in full of the Term Loan and the termination of this Agreement.

         Section 10.06 AGENT INDIVIDUALLY. With respect to its Pro Rata Share of
the Total Term Loan Commitment hereunder and the Term Loan made by it, the Agent
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 "Required  Lenders" or any similar
terms shall, unless the context clearly otherwise  indicates,  include the Agent
in its individual capacity as a Lender or one of the Required Lenders. The Agent
and its Affiliates may accept deposits from, lend money to, and generally engage


                                     - 90 -

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in any kind of banking,  trust or other business with the Borrower as if it were
not acting as the Agent pursuant hereto without any duty to account to the other
Lenders.

         Section  10.07  SUCCESSOR  AGENT.  (a) The  Agent may  resign  from the
performance  of all its functions and duties  hereunder and under the other Loan
Documents at any time by giving at least 30 Business  Days' prior written notice
to the  Borrower and each Lender.  Such  resignation  shall take effect upon the
acceptance by a successor  Agent of appointment  pursuant to clauses (b) and (c)
below or as otherwise provided below.

                  (b) Upon any such notice of resignation,  the Required Lenders
shall appoint a successor Agent. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent,  such successor Agent shall thereupon succeed to
and become  vested with all the  rights,  powers,  privileges  and duties of the
Agent,  and the Agent shall be discharged from its duties and obligations  under
this  Agreement  and the other Loan  Documents.  After the  Agent's  resignation
hereunder  as the Agent,  the  provisions  of this  ARTICLE X shall inure to its
benefit  as to any  actions  taken or omitted to be taken by it while it was the
Agent under this Agreement and the other Loan Documents.

                  (c) If a  successor  Agent  shall not have  been so  appointed
within said 30 Business  Day  period,  the Agent shall then  appoint a successor
Agent who shall  serve as the Agent  until such time,  if any,  as the  Required
Lenders appoint a successor Agent as provided above.

         Section 10.08 COLLATERAL MATTERS.

                  (a) The Agent  may from  time to time make such  disbursements
and advances ("AGENT  ADVANCES") which the Agent, in its sole discretion,  deems
necessary  or  desirable  to  preserve,  protect,  prepare  for sale or lease or
dispose of the Collateral or any portion  thereof,  to enhance the likelihood or
maximize  the amount of repayment by the Borrower of the Term Loan and the other
Obligations  or to pay any other amount  chargeable to the Borrower  pursuant to
the terms of this Agreement,  including,  without  limitation,  costs,  fees and
expenses as described in Section 12.04. The Agent Advances shall be repayable on
demand,  shall bear interest at the rate per annum set forth in Section 2.04 and
shall  be  secured  by the  Collateral.  The  Agent  Advances  shall  constitute
Obligations  hereunder  which may be charged to the Loan  Account in  accordance
with  Section  4.02.  The Agent shall  notify  each  Lender and the  Borrower in
writing of each such Agent Advance,  which notice shall include a description of
the  purpose  of such  Agent  Advance.  Without  limitation  to its  obligations
pursuant to Section  10.05,  each Lender agrees that it shall make  available to
the Agent, upon the Agent's demand,  in Dollars in immediately  available funds,
the amount equal to such Lender's Pro Rata Share of each such Agent Advance.  If
such funds are not made  available to the Agent by such Lender,  the Agent shall
be entitled  to recover  such funds on demand from such  Lender,  together  with
interest  thereon for each day from the date such payment was due until the date
such amount is paid to the Agent,  at the Federal Funds Rate for 3 Business Days
and thereafter at the Reference Rate.

                  (b) The Lenders hereby irrevocably authorize the Agent, at its
option  and in its  discretion,  to release  any Lien  granted to or held by the
Agent upon any Collateral upon payment and satisfaction of the Term Loan and all


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<PAGE>

other  Obligations  which have matured and which the Agent has been  notified in
writing  are  then due and  payable;  or  constituting  property  being  sold or
disposed of in  compliance  with the terms of this  Agreement and the other Loan
Documents;  or constituting property in which the Loan Parties owned no interest
at the time the Lien was  granted  or at any time  thereafter;  or if  approved,
authorized  or ratified in writing by the Lenders.  Upon request by the Agent at
any time,  the Lenders will confirm in writing the Agent's  authority to release
particular types or items of Collateral pursuant to this Section 10.08(b).

                  (c) Without in any manner  limiting  the Agent's  authority to
act without any specific or further  authorization or consent by the Lenders (as
set forth in Section 10.08(b)),  each Lender agrees to confirm in writing,  upon
request by the Agent,  the authority to release  Collateral  conferred  upon the
Agent under Section 10.08(b). Upon receipt by the Agent of confirmation from the
Lenders of its authority to release any particular  item or types of Collateral,
and upon prior written request by any Loan Party, the Agent shall (and is hereby
irrevocably  authorized  by the  Lenders to) execute  such  documents  as may be
necessary  to  evidence  the  release of the Liens  granted to the Agent for the
benefit of the Lenders upon such  Collateral;  PROVIDED,  HOWEVER,  that (i) the
Agent shall not be required to execute any such document on terms which,  in the
Agent's  opinion,  would expose the Agent to liability or create any obligations
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 Lien upon (or  obligations  of any Loan Party in
respect of) all interests in the Collateral retained by any Loan Party.

                  (d) The  Agent  shall  have no  obligation  whatsoever  to any
Lender to assure that the  Collateral  exists or is owned by the Loan Parties or
is cared  for,  protected  or insured  or has been  encumbered  or that the Lien
granted to the Agent  pursuant to this  Agreement or any other Loan Document has
been  properly or  sufficiently  or lawfully  created,  perfected,  protected or
enforced or is entitled to any particular priority,  or to exercise at all or in
any particular manner or under any duty of care,  disclosure or fidelity,  or to
continue  exercising,  any of the  rights,  authorities  and  powers  granted or
available to the Agent in this Section 10.08 or in any other Loan  Document,  it
being  understood  and agreed  that in respect  of the  Collateral,  or any act,
omission or event related  thereto,  the Agent may act in any manner it may deem
appropriate,  in its sole  discretion,  given the  Agent's  own  interest in the
Collateral  as one of the  Lenders  and that  the  Agent  shall  have no duty or
liability whatsoever to any other Lender, except as otherwise provided herein.

         Section 10.09 AGENCY FOR  PERFECTION.  The Agent and each Lender hereby
appoints  the Agent and each other Lender as agent and bailee for the purpose of
perfecting  the security  interests in and liens upon the  Collateral  in assets
which,  in  accordance  with Article 9 of the Uniform  Commercial  Code,  can be
perfected  only by  possession  or control (or where the security  interest of a
secured party with possession or control has priority over the security interest
of another secured party) and the Agent and each Lender hereby acknowledges that
it holds possession of or otherwise controls any such Collateral for the benefit
of the  Agent and the  Lenders  as  secured  party.  Should  any  Lender  obtain
possession or control of any such Collateral, such Lender shall notify the Agent
thereof,  and,  promptly upon the Agent's  request  therefor  shall deliver such
Collateral to the Agent or in  accordance  with the Agent's  instructions.  Each
Loan Party by its execution and delivery of this  Agreement  hereby  consents to
the foregoing.


                                     - 92 -

<PAGE>

                                   ARTICLE XI

                                    GUARANTY

         Section 11.01  GUARANTY.  Each  Guarantor  hereby  unconditionally  and
irrevocably  guarantees  the  punctual  payment  when  due,  whether  at  stated
maturity,  by acceleration or otherwise,  of all Obligations of the Borrower now
or hereafter existing under any Loan Document,  whether for principal,  interest
(including, without limitation, all interest that accrues after the commencement
of any  Insolvency  Proceeding  of the  Borrower),  fees,  commissions,  expense
reimbursements,  indemnifications or otherwise (such obligations,  to the extent
not paid by the Borrower, being the "GUARANTEED OBLIGATIONS"), and agrees to pay
any and all expenses  (including  reasonable counsel fees and expenses) incurred
by the Agent and the Lenders in  enforcing  any rights  under the  guaranty  set
forth in this ARTICLE XI. Without limiting the generality of the foregoing, each
Guarantor's  liability  shall extend to all amounts that  constitute part of the
Guaranteed  Obligations  and would be owed by the  Borrower to the Agent and the
Lenders under any Loan Document but for the fact that they are  unenforceable or
not allowable due to the  existence of an  Insolvency  Proceeding  involving the
Borrower.

         Section 11.02 GUARANTY  ABSOLUTE.  Each Guarantor  guarantees  that the
Guaranteed Obligations will be paid strictly in accordance with the terms of the
Loan Documents,  regardless of any law,  regulation or order now or hereafter in
effect in any  jurisdiction  affecting  any of such  terms or the  rights of the
Agent or the Lenders with respect  thereto.  The  obligations  of each Guarantor
under this  ARTICLE XI are  independent  of the  Guaranteed  Obligations,  and a
separate action or actions may be brought and prosecuted  against each Guarantor
to enforce  such  obligations,  irrespective  of  whether  any action is brought
against any Loan Party or whether any Loan Party is joined in any such action or
actions.  The  liability  of each  Guarantor  under  this  ARTICLE  XI  shall be
irrevocable,  absolute and  unconditional  irrespective  of, and each  Guarantor
hereby  irrevocably  waives any defenses it may now or hereafter have in any way
relating to, any or all of the following:

                  (a)  any  lack  of  validity  or  enforceability  of any  Loan
Document or any agreement or instrument relating thereto;

                  (b) any change in the time,  manner or place of payment of, or
in any other term of,  all or any of the  Guaranteed  Obligations,  or any other
amendment  or waiver of or any  consent  to  departure  from any Loan  Document,
including,  without  limitation,  any  increase  in the  Guaranteed  Obligations
resulting  from  the  extension  of  additional  credit  to any  Loan  Party  or
otherwise;

                  (c) any taking,  exchange,  release or  non-perfection  of any
Collateral,  or any  taking,  release  or  amendment  or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed Obligations;

                  (d) any change, restructuring or termination of the corporate,
limited  liability  company or  partnership  structure  or existence of any Loan
Party; or


                                     - 93 -

<PAGE>


                  (e) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any representation by
the Agent or the Lenders that might otherwise constitute a defense available to,
or a discharge of, any Loan Party or any other guarantor or surety.

This ARTICLE XI shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Agent, the Lenders or any other Person upon
the insolvency,  bankruptcy or reorganization of the Borrower or otherwise,  all
as though such payment had not been made.

         Section  11.03  WAIVER.   Each  Guarantor  hereby  waives   promptness,
diligence,  notice of acceptance and any other notice with respect to any of the
Guaranteed Obligations and this ARTICLE XI and any requirement that the Agent or
the Lenders  exhaust any right or take any action  against any Loan Party or any
other Person or any Collateral. Each Guarantor acknowledges that it will receive
direct and indirect benefits from the financing arrangements contemplated herein
and  that the  waiver  set  forth in this  Section  11.03 is  knowingly  made in
contemplation of such benefits. Each Guarantor hereby waives any right to revoke
this ARTICLE XI, and  acknowledges  that this ARTICLE XI is continuing in nature
and  applies  to all  Guaranteed  Obligations,  whether  existing  now or in the
future.

         Section 11.04 CONTINUING  GUARANTY;  ASSIGNMENTS.  This ARTICLE XI is a
continuing  guaranty  and shall (a) remain in full  force and  effect  until the
later of the cash  payment in full of the  Guaranteed  Obligations  (other  than
indemnification  obligations  as to which no claim has been  made) and all other
amounts  payable  under this  ARTICLE  XI and the Final  Maturity  Date,  (b) be
binding upon each  Guarantor,  its  successors  and assigns and (c) inure to the
benefit of and be enforceable by the Agent and the Lenders and their successors,
pledgees,  transferees  and  assigns.  Without  limiting the  generality  of the
foregoing clause (c), any Lender may pledge, assign or otherwise transfer all or
any  portion of its  rights and  obligations  under this  Agreement  (including,
without  limitation,  all or any portion of its Term Loan) to any other  Person,
and such other Person  shall  thereupon  become  vested with all the benefits in
respect  thereof  granted  such  Lender  herein  or  otherwise,  in each case as
provided in Section 12.07.

         Section 11.05  SUBROGATION.  No Guarantor will exercise any rights that
it may now or hereafter  acquire  against any Loan Party or any other  guarantor
that arise from the  existence,  payment,  performance  or  enforcement  of such
Guarantor's  obligations under this ARTICLE XI, including,  without  limitation,
any  right  of   subrogation,   reimbursement,   exoneration,   contribution  or
indemnification and any right to participate in any claim or remedy of the Agent
and the Lenders against any Loan Party or any other guarantor or any Collateral,
whether or not such claim,  remedy or right arises in equity or under  contract,
statute  or common  law,  including,  without  limitation,  the right to take or
receive from any Loan Party or any other guarantor,  directly or indirectly,  in
cash or other property or by set-off or in any other manner, payment or security
solely on account of such  claim,  remedy or right,  unless and until all of the
Guaranteed Obligations and all other amounts payable under this ARTICLE XI shall
have been paid in full in cash and the Final  Maturity Date shall have occurred.
If any amount shall be paid to any  Guarantor  in  violation of the  immediately
preceding sentence at any time prior to the later of the payment in full in cash
of the Guaranteed  Obligations  and all other amounts payable under this ARTICLE
XI and the  Final  Maturity  Date,  such  amount  shall be held in trust for the


                                     - 94 -

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benefit of the Agent and the  Lenders and shall  forthwith  be paid to the Agent
and the Lenders to be credited and applied to the Guaranteed Obligations and all
other amounts  payable under this ARTICLE XI, whether  matured or unmatured,  in
accordance with the terms of this Agreement, or to be held as Collateral for any
Guaranteed Obligations or other amounts payable under this ARTICLE XI thereafter
arising. If (i) any Guarantor shall make payment to the Agent and the Lenders of
all or any  part  of the  Guaranteed  Obligations,  (ii)  all of the  Guaranteed
Obligations and all other amounts payable under this ARTICLE XI shall be paid in
full in cash and (iii) the Final  Maturity Date shall have  occurred,  the Agent
and the Lenders  will,  at such  Guarantor's  request and  expense,  execute and
deliver to such Guarantor  appropriate  documents,  without recourse and without
representation or warranty, necessary to evidence the transfer by subrogation to
such Guarantor of an interest in the Guaranteed  Obligations resulting from such
payment by such Guarantor.

         Section 11.06 AUDUBON EUROPE.  Notwithstanding anything to the contrary
contained in this Agreement,  the maximum aggregate  liability of Audubon Europe
under  this  Guaranty  in respect of the  Guaranteed  Obligations  and under the
Working Capital Loan Agreement in respect of its guarantee  thereunder shall not
exceed  95%  of the  aggregate  of its  net  equity  and  its  preferred  equity
certificates, as stated in its most recently approved financial statements.

                                  ARTICLE XII

                                 MISCELLANEOUS

         Section  12.01  NOTICES,  ETC.  All  notices  and other  communications
provided for  hereunder  shall be in writing and shall be mailed,  telecopied or
delivered, if to any Loan Party, at the following address:

         Columbus McKinnon Corporation
         140 John James Audubon Parkway
         Amherst, New York  14228
         Attention:  Robert L. Montgomery, Jr.
         Telephone:  716-689-5405
         Telecopier:  716-689-5598

         with a copy to:

         Phillips, Lytle, Hitchcock, Blaine & Huber
         3400 HSBC Center
         Buffalo, New York  14203-2887
         Attention:  Raymond H. Seitz, Esq.
         Telephone:  716-847-7065
         Telecopier:  716-852-6100




                                     - 95 -

<PAGE>


         if to the Agent, to it at the following address:

         Regiment Capital III, L.P.
         70 Federal Street, 7th Floor
         Boston, Massachusetts  02110
         Attention:  Richard T. Miller
         Telephone:  617-488-1617
         Telecopier:  617-488-1668

         with a copy to:

         Schulte Roth & Zabel LLP
         919 Third Avenue
         New York, New York  10022
         Attention:  Frederic L. Ragucci, Esq.
         Telephone:  212-756-2000
         Telecopier:  212-593-5955

         or, as to each party,  at such other  address as shall be designated by
such party in a written  notice to the other  parties  complying  as to delivery
with the terms of this Section 12.01. All such notices and other  communications
shall be effective,  (i) if mailed,  when received or 3 days after  deposited in
the mails,  whichever  occurs first,  (ii) if telecopied,  when  transmitted and
confirmation received, or (iii) if delivered, upon delivery, except that notices
to the Agent pursuant to ARTICLE II shall not be effective until received by the
Agent.

         Section 12.02 AMENDMENTS,  ETC. No amendment or waiver of any provision
of this Agreement,  and no 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 the  Required  Lenders  or by the  Agent  with the  consent  of the  Required
Lenders, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given,  PROVIDED,  HOWEVER, that
no  amendment,  waiver or consent shall (i) reduce the principal of, or interest
on, the Term Loan  payable to any  Lender,  reduce the amount of any fee payable
for the  account of any  Lender,  or  postpone  or extend any date fixed for any
payment of  principal  of, or interest  or fees on, the Term Loan,  in each case
without the written  consent of any Lender affected  thereby,  (ii) increase the
Total Term Loan  Commitment  without the written  consent of each Lender,  (iii)
change the percentage of the Term Loan  Commitments  or of the aggregate  unpaid
principal  amount of the Term Loan that is  required  for the  Lenders or any of
them to take any  action  hereunder,  (iv)  amend the  definition  of  "Required
Lenders" or "Pro Rata Share",  (v) release all or a  substantial  portion of the
Collateral  (except as otherwise  provided in this  Agreement and the other Loan
Documents),  subordinate  any Lien granted in favor of the Agent for the benefit
of the Lenders, or release the Borrower or any Guarantor,  or (vi) amend, modify
or waive  Section 4.04 or this Section  12.02 of this  Agreement,  in each case,
without the written consent of each Lender.  Notwithstanding  the foregoing,  no
amendment,  waiver or consent shall,  unless in writing and signed by the Agent,
affect the rights or duties of the Agent (but not in its  capacity  as a Lender)
under this Agreement or the other Loan Documents.


                                     - 96 -

<PAGE>

         Section 12.03 NO WAIVER;  REMEDIES,  ETC. No failure on the part of the
Agent or any Lender to exercise, and no delay in exercising, any right hereunder
or under any other Loan Document  shall operate as a waiver  thereof;  nor shall
any single or partial exercise of any right under any Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The rights
and remedies of the Agent and the Lenders  provided herein and in the other Loan
Documents  are  cumulative  and are in addition  to, and not  exclusive  of, any
rights or  remedies  provided  by law.  The rights of the Agent and the  Lenders
under  any Loan  Document  against  any party  thereto  are not  conditional  or
contingent  on any attempt by the Agent and the Lenders to exercise any of their
rights  under any other Loan  Document  against  such party or against any other
Person.

         Section 12.04 EXPENSES;  TAXES;  ATTORNEYS' FEES. The Borrower will pay
on demand, all costs and expenses incurred by or on behalf of the Agent and each
Lender,   regardless  of  whether  the  transactions   contemplated  hereby  are
consummated,  including,  without  limitation,  reasonable fees,  costs,  client
charges and expenses of counsel for the Agent and each Lender,  accounting,  due
diligence,  periodic field audits, physical counts, valuations,  investigations,
searches and filings,  monitoring  of assets,  appraisals of  Collateral,  title
searches and reviewing environmental assessments,  miscellaneous  disbursements,
examination,  travel,  lodging and meals,  arising  from or relating to: (a) the
negotiation, preparation, execution, delivery, performance and administration of
this Agreement and the other Loan Documents (including,  without limitation, the
preparation of any additional  Loan Documents  pursuant to Sections  7.01(m) and
7.01(o),  or the  review of any of the  agreements,  instruments  and  documents
referred to in Sections  7.01(f) and  7.01(l)),  (b) any  requested  amendments,
waivers or consents to this Agreement or the other Loan Documents whether or not
such  documents  become  effective  or  are  given,  (c)  the  preservation  and
protection of any of the Lenders'  rights under this Agreement or the other Loan
Documents,  (d) the defense of any claim or action  asserted or brought  against
the Agent or any  Lender by any  Person  that  arises  from or  relates  to this
Agreement,  any other Loan Document,  the Agent's or the Lenders' claims against
any  Loan  Party,  or any and  all  matters  in  connection  therewith,  (e) the
commencement or defense of, or  intervention  in, any court  proceeding  arising
from or related to this Agreement or any other Loan Document,  (f) the filing of
any petition,  complaint,  answer,  motion or other pleading by the Agent or any
Lender,  or the  taking of any  action in  respect  of the  Collateral  or other
security, in connection with this Agreement or any other Loan Document,  (g) the
protection, collection, lease, sale, taking possession of or liquidation of, any
Collateral or other security in connection with this Agreement or any other Loan
Document,  (h) any  attempt  to enforce  any Lien or  security  interest  in any
Collateral or other security in connection with this Agreement or any other Loan
Document,  (i) any attempt to collect from any Loan Party,  (j) all  liabilities
and  costs  arising  from or in  connection  with the  past,  present  or future
operations of any Loan Party  involving any damage to real or personal  property
or natural resources or harm or injury alleged to have resulted from any Release
of Hazardous  Materials on, upon or into such  property,  (k) any  Environmental
Liabilities  incurred in connection  with the  investigation,  removal,  cleanup
and/or  remediation  of any  Hazardous  Materials  present or arising out of the
operations of any facility of any Loan Party, (l) any Environmental  Liabilities
incurred in connection  with any  Environmental  Lien, or (m) the receipt by the
Agent or any Lender of any advice from  professionals with respect to any of the
foregoing.  Without  limitation of the  foregoing or any other  provision of any
Loan Document:  (x) the Borrower  agrees to pay all stamp,  document,  transfer,
recording  or filing  taxes or fees and  similar  impositions  now or  hereafter


                                     - 97 -

<PAGE>

determined  by the Agent or any  Lender to be payable  in  connection  with this
Agreement or any other Loan Document,  and the Borrower agrees to save the Agent
and each Lender  harmless from and against any and all present or future claims,
liabilities  or losses with respect to or resulting  from any omission to pay or
delay in paying any such taxes, fees or impositions,  (y) the Borrower agrees to
pay all  broker  fees that may become due in  connection  with the  transactions
contemplated  by this  Agreement  and the other Loan  Documents,  and (z) if the
Borrower fails to perform any covenant or agreement  contained  herein or in any
other Loan Document,  the Agent may itself perform or cause  performance of such
covenant or  agreement,  and the  expenses of the Agent  incurred in  connection
therewith shall be reimbursed on demand by the Borrower.

         Section  12.05 RIGHT OF  SET-OFF.  Upon the  occurrence  and during the
continuance of any Event of Default,  the Agent or any Lender may, and is hereby
authorized  to,  at any time and from time to time,  without  notice to any Loan
Party (any such notice being  expressly  waived by the Loan  Parties) and to the
fullest extent permitted by law, set off and apply any and all deposits (general
or  special,  time or demand,  provisional  or final) at any time held and other
Indebtedness  at any time owing by the Agent or such Lender to or for the credit
or the  account of any Loan Party  against any and all  obligations  of the Loan
Parties either now or hereafter  existing under any Loan Document,  irrespective
of whether or not the Agent or such Lender shall have made any demand  hereunder
or thereunder and although such obligations may be contingent or unmatured.  The
Agent and each Lender agrees to notify such Loan Party  promptly  after any such
set-off  and  application  made by the Agent or such  Lender  provided  that the
failure to give such notice  shall not affect the  validity of such  set-off and
application.  The rights of the Agent and the Lenders  under this Section  12.05
are in addition to the other  rights and  remedies  (including  other  rights of
set-off)  which the Agent and the Lenders may have under this  Agreement  or any
other Loan Documents of law or otherwise.

         Section 12.06  SEVERABILITY.  Any provision of this Agreement  which is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining  portions  hereof  or  affecting  the  validity  or
enforceability of such provision in any other jurisdiction.

         Section 12.07  ASSIGNMENTS AND  PARTICIPATIONS.  (a) This Agreement and
the other Loan Documents  shall be binding upon and inure to the benefit of each
Loan Party and the Agent and each  Lender and their  respective  successors  and
assigns; PROVIDED, HOWEVER, that none of the Loan Parties may assign or transfer
any of its rights hereunder without the prior written consent of each Lender and
any such assignment without the Lenders' prior written consent shall be null and
void.

                  (b) Each  Lender may,  with the written  consent of the Agent,
assign to one or more other  lenders or other  entities  all or a portion of its
rights and obligations under this Agreement (including,  without limitation, all
or a portion of its Term Loan);  PROVIDED,  HOWEVER, that (i) such assignment is
in an amount which is at least  $5,000,000 or a multiple of $1,000,000 in excess
thereof (or the  remainder  of such  Lender's  Term Loan)  (except  such minimum
amount  shall not apply to an  assignment  by a Lender to an  Affiliate  of such
Lender or a fund or  account  managed  by such  Lender or an  Affiliate  of such
Lender or its  investment  manager),  (ii) the  parties to each such  assignment
shall execute and deliver to the Agent,  for its  acceptance,  an Assignment and
Acceptance,  together with any  promissory  note subject to such  assignment and


                                     - 98 -

<PAGE>

such parties  shall  deliver to the Agent a processing  and  recordation  fee of
$5,000 (except the payment of such fee shall not be required in connection  with
an  assignment  by a Lender to an  Affiliate of such Lender or a fund or account
managed by such Lender or an Affiliate of such Lender or its investment manager)
and (iii) no written  consent of the Agent shall be required in connection  with
any  assignment  by a Lender to an Affiliate of such Lender or a fund or account
managed by such Lender or an Affiliate of such Lender or its investment manager.
Upon such execution,  delivery and acceptance, from and after the effective date
specified in each  Assignment and  Acceptance,  which effective date shall be at
least 3 Business  Days after the delivery  thereof to the Agent (or such shorter
period as shall be agreed to by the Agent and the  parties to such  assignment),
(A) the assignee  thereunder shall become a "Lender"  hereunder and, in addition
to the rights and  obligations  hereunder held by it  immediately  prior to such
effective  date,  have the  rights  and  obligations  hereunder  that  have been
assigned to it pursuant to such  Assignment and Acceptance and (B) the assigning
Lender  thereunder  shall, to the extent that rights and  obligations  hereunder
have been assigned by it pursuant to such Assignment and Acceptance,  relinquish
its rights and be released from its  obligations  under this Agreement  (and, in
the case of an Assignment and Acceptance  covering all or the remaining  portion
of an assigning  Lender's  rights and  obligations  under this  Agreement,  such
Lender shall cease to be a party  hereto).  The Agent shall provide the Borrower
with notice of each  assignment by a Lender which  requires the Agent's  consent
pursuant to this  Section  12.07(b)  promptly  after the  effectiveness  of such
assignment.

                           (i) By executing and  delivering  an  Assignment  and
Acceptance,  the  assigning  Lender and the assignee  thereunder  confirm to and
agree with each other and the other parties hereto as follows: (A) other than as
provided in such  Assignment  and  Acceptance,  the  assigning  Lender  makes no
representation  or warranty  and assumes no  responsibility  with respect to any
statements,  warranties or  representations  made in or in connection  with this
Agreement  or any other Loan  Document  or the  execution,  legality,  validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Document  furnished  pursuant  hereto;  (B) the  assigning  Lender makes no
representation  or warranty  and assumes no  responsibility  with respect to the
financial  condition  of any  Loan  Party  or any  of  its  Subsidiaries  or the
performance or observance by any Loan Party of any of its obligations under this
Agreement  or any  other  Loan  Document  furnished  pursuant  hereto;  (C) such
assignee  confirms  that it has received a copy of this  Agreement and the other
Loan Documents, together with such other documents and information it has deemed
appropriate  to make its own credit  analysis  and  decision  to enter into such
Assignment and  Acceptance;  (D) such assignee will,  independently  and without
reliance  upon the assigning  Lender,  the Agent or any Lender and based on such
documents and information as it shall deem appropriate at the time,  continue to
make its own  credit  decisions  in  taking  or not  taking  action  under  this
Agreement  and  the  other  Loan  Documents;  (E)  such  assignee  appoints  and
authorizes  the Agent to take such action as agent on its behalf and to exercise
such powers under this  Agreement and the other Loan  Documents as are delegated
to the Agent by the terms hereof and thereof,  together  with such powers as are
reasonably  incidental hereto and thereto;  and (F) such assignee agrees that it
will perform in accordance with their terms all of the obligations  which by the
terms  of this  Agreement  and the  other  Loan  Documents  are  required  to be
performed by it as a Lender.

                           (ii) The Agent  shall,  on  behalf  of the  Borrower,
maintain,  or cause  to be  maintained  at the  Payment  Office,  a copy of each


                                     - 99 -

<PAGE>

Assignment  and  Acceptance  delivered to and accepted by it and a register (the
"REGISTER")  for the  recordation  of the names and addresses of the Lenders and
the  principal  amount of the Term Loan (the  "REGISTERED  LOANS")  from time to
time.  The  entries in the  Register  shall be  conclusive  and  binding for all
purposes,  absent  manifest error,  and the Borrower,  the Agent and the Lenders
shall  treat each  Person  whose name is  recorded  in the  Register as a Lender
hereunder for all purposes of this  Agreement.  The Register  shall be available
for  inspection by the Borrower and any Lender at any  reasonable  time and from
time to  time  upon  reasonable  prior  notice.  In the  case of any  assignment
pursuant  to  Section  12.07(b)(iii),  the  assigning  Lender  shall  maintain a
comparable register on behalf of the Borrower.

                           (iii)  Upon  its   receipt  of  an   Assignment   and
Acceptance  executed by an assigning  Lender and an assignee,  together with any
promissory  notes  subject to such  assignment,  the Agent  shall,  if the Agent
consents to such  assignment  and if such  Assignment  and  Acceptance  has been
completed  (i)  accept  such  Assignment  and  Acceptance  and (ii)  record  the
information contained therein in the Register.

                           (iv) A Registered  Loan (and the registered  note, if
any,  evidencing  the same) may be  assigned or sold in whole or in part only by
registration  of such  assignment or sale on the Register  (and each  registered
note shall expressly so provide).  Any assignment or sale of all or part of such
Registered  Loan (and the registered  note, if any,  evidencing the same) may be
effected  only by  registration  of  such  assignment  or sale on the  Register,
together with the surrender of the registered note, if any,  evidencing the same
duly endorsed by (or  accompanied by a written  instrument of assignment or sale
duly executed by) the holder of such registered note, whereupon,  at the request
of the designated assignee(s) or transferee(s), one or more new registered notes
in the same  aggregate  principal  amount  shall  be  issued  to the  designated
assignee(s) or transferee(s). Prior to the registration of assignment or sale of
any Registered Loan (and the registered note, if any,  evidencing the same), the
Agent  shall  treat the  Person  in whose  name  such  Registered  Loan (and the
registered note, if any, evidencing the same) is registered as the owner thereof
for the purpose of receiving  all payments  thereon and for all other  purposes,
notwithstanding notice to the contrary.

                           (v) In the event that any Lender sells participations
in a Registered  Loan,  such Lender shall maintain a register on which it enters
the  name  of  all  participants  in  the  Registered  Loans  held  by  it  (the
"PARTICIPANT  REGISTER").  A Registered  Loan (and the registered  note, if any,
evidencing  the  same)  may  be  participated  in  whole  or  in  part  only  by
registration  of  such  participation  on the  Participant  Register  (and  each
registered  note  shall  expressly  so  provide).   Any  participation  of  such
Registered  Loan (and the registered  note, if any,  evidencing the same) may be
effected  only by the  registration  of such  participation  on the  Participant
Register.

                           (vi) Any foreign  Person who purchases or is assigned
or  participates  in any portion of such Registered Loan shall provide the Agent
and  the  Lender  with  a  completed   Internal   Revenue  Service  Form  W-8BEN
(Certificate  of  Foreign  Status)  or a  substantially  similar  form  for such
purchaser,  participant  or any other  affiliate  who is a holder of  beneficial
interests in the Registered Loan.


                                     - 100 -

<PAGE>

                  (c) Each Lender may sell  participations  to one or more banks
or other entities in or to all or a portion of its rights and obligations  under
this Agreement and the other Loan Documents (including,  without limitation, all
or a portion of its Term Loan);  provided,  that (i) such  Lender's  obligations
under this Agreement (including without limitation,  its Commitments  hereunder)
and the other Loan  Documents  shall  remain  unchanged;  (ii) such Lender shall
remain solely  responsible  to the other parties  hereto for the  performance of
such  obligations,  and the  Borrower,  the Agent and the  other  Lenders  shall
continue to deal solely and directly  with such Lender in  connection  with such
Lender's  rights  and  obligations  under  this  Agreement  and the  other  Loan
Documents;  and (iii) a participant shall not be entitled to require such Lender
to take or  omit  to take  any  action  hereunder  except  (A)  action  directly
effecting an extension of the maturity dates or decrease in the principal amount
of the Term Loan, (B) action directly effecting an extension of the due dates or
a decrease in the rate of interest  payable on the Term Loan or the fees payable
under this Agreement,  or (C) actions  directly  effecting a release of all or a
substantial  portion of the Collateral or any Loan Party (except as set forth in
Section 10.08 of this  Agreement or any other Loan  Document).  The Loan Parties
agree that each  participant  shall be entitled to the  benefits of Section 2.08
and Section  4.05 of this  Agreement  with respect to its  participation  in any
portion of the Term Loan as if it was a Lender.

         Section  12.08  COUNTERPARTS.  This  Agreement  may be  executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement. Delivery of an executed counterpart
of this Agreement by telecopier  shall be equally as effective as delivery of an
original  executed  counterpart  of this  Agreement.  Any  party  delivering  an
executed  counterpart  of this  Agreement by  telecopier  also shall  deliver an
original  executed  counterpart  of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this  Agreement.  The foregoing shall apply to each other Loan
Document MUTATIS MUTANDIS.

         Section  12.09  GOVERNING  LAW.  THIS  AGREEMENT  AND  THE  OTHER  LOAN
DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN
RESPECT OF SUCH OTHER LOAN  DOCUMENT)  SHALL BE GOVERNED  BY, AND  CONSTRUED  IN
ACCORDANCE  WITH, THE LAW OF THE STATE OF NEW YORK  APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED IN THE STATE OF NEW YORK.

         Section  12.10 CONSENT TO  JURISDICTION;  SERVICE OF PROCESS AND VENUE.
ANY LEGAL ACTION OR PROCEEDING  WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT  MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF
NEW YORK OR OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND, BY EXECUTION AND DELIVERY OF THIS  AGREEMENT,  EACH LOAN PARTY HEREBY
IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY,  GENERALLY AND  UNCONDITIONALLY,
THE  JURISDICTION OF THE AFORESAID  COURTS.  EACH LOAN PARTY HEREBY  IRREVOCABLY
APPOINTS  THE  SECRETARY  OF STATE OF THE  STATE  OF NEW YORK AS ITS  AGENT  FOR
SERVICE  OF PROCESS IN RESPECT  OF ANY SUCH  ACTION OR  PROCEEDING  AND  FURTHER
IRREVOCABLY  CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED


                                     - 101 -

<PAGE>

COURTS AND IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES  THEREOF BY
REGISTERED OR CERTIFIED MAIL,  POSTAGE  PREPAID,  TO THE BORROWER AT ITS ADDRESS
FOR NOTICES AS SET FORTH IN SECTION  12.01 AND TO THE  SECRETARY OF STATE OF THE
STATE OF NEW YORK, SUCH SERVICE TO BECOME  EFFECTIVE 10 DAYS AFTER SUCH MAILING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT AND THE LENDERS TO SERVICE OF
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE  PROCEED AGAINST ANY LOAN PARTY IN ANY OTHER  JURISDICTION.  EACH LOAN
PARTY HEREBY EXPRESSLY AND IRREVOCABLY  WAIVES,  TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE  JURISDICTION OR
LAYING OF VENUE OF ANY SUCH  LITIGATION  BROUGHT IN ANY SUCH COURT  REFERRED  TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.  TO THE  EXTENT  THAT ANY LOAN PARTY 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 OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY,  EACH LOAN PARTY
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.

         Section 12.11 WAIVER OF JURY TRIAL, ETC. EACH LOAN PARTY, THE AGENT AND
EACH LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR  COUNTERCLAIM  CONCERNING  ANY RIGHTS UNDER THIS  AGREEMENT OR THE OTHER LOAN
DOCUMENTS,  OR UNDER ANY AMENDMENT,  WAIVER,  CONSENT,  INSTRUMENT,  DOCUMENT OR
OTHER AGREEMENT  DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION
THEREWITH,  OR ARISING FROM ANY  FINANCING  RELATIONSHIP  EXISTING IN CONNECTION
WITH  THIS  AGREEMENT,   AND  AGREES  THAT  ANY  SUCH  ACTION,   PROCEEDINGS  OR
COUNTERCLAIM  SHALL BE TRIED  BEFORE A COURT  AND NOT  BEFORE A JURY.  EACH LOAN
PARTY CERTIFIES THAT NO OFFICER, REPRESENTATIVE,  AGENT OR ATTORNEY OF THE AGENT
OR ANY LENDER HAS  REPRESENTED,  EXPRESSLY OR  OTHERWISE,  THAT THE AGENT OR ANY
LENDER WOULD NOT, IN THE EVENT OF ANY ACTION,  PROCEEDING OR COUNTERCLAIM,  SEEK
TO ENFORCE THE FOREGOING WAIVERS.  EACH LOAN PARTY HEREBY ACKNOWLEDGES THAT THIS
PROVISION IS A MATERIAL  INDUCEMENT FOR THE AGENT AND THE LENDERS  ENTERING INTO
THIS AGREEMENT.

         Section  12.12  CONSENT BY THE AGENT AND  LENDERS.  Except as otherwise
expressly  set  forth  herein  to  the  contrary,  if  the  consent,   approval,
satisfaction,   determination,   judgment,  acceptance  or  similar  action  (an
"ACTION") of the Agent or any Lender shall be permitted or required  pursuant to
any provision  hereof or any provision of any other  agreement to which any Loan
Party is a party and to which the Agent or any  Lender  has  succeeded  thereto,
such Action  shall be required to be in writing and may be withheld or denied by
the Agent or such Lender,  in its sole  discretion,  with or without any reason,
and without  being  subject to question or  challenge  on the grounds  that such
Action was not taken in good faith.


                                     - 102 -

<PAGE>

         Section  12.13 NO PARTY  DEEMED  DRAFTER.  Each of the  parties  hereto
agrees that no party hereto shall be deemed to be the drafter of this Agreement.

         Section 12.14  REINSTATEMENT;  CERTAIN  PAYMENTS.  If any claim is ever
made upon the Agent or any Lender for  repayment  or  recovery  of any amount or
amounts  received by the Agent or such Lender in payment or on account of any of
the Obligations, the Agent or such Lender shall give prompt notice of such claim
to each other Lender and the  Borrower,  and if the Agent or such Lender  repays
all or part of such amount by reason of (i) any judgment, decree or order of any
court or administrative  body having  jurisdiction over the Agent or such Lender
or any of its property,  or (ii) any good faith  settlement or compromise of any
such claim effected by the Agent or such Lender with any such claimant, then and
in such event each Loan Party agrees that (A) any such judgment,  decree, order,
settlement  or  compromise  shall  be  binding  upon  it   notwithstanding   the
cancellation of any Indebtedness  hereunder or under the other Loan Documents or
the termination of this Agreement or the other Loan Documents,  and (B) it shall
be and remain  liable to the Agent or such  Lender  hereunder  for the amount so
repaid or  recovered  to the same extent as if such amount had never  originally
been received by the Agent or such Lender.

         Section 12.15 INDEMNIFICATION.

                  (a) GENERAL INDEMNITY.  In addition to each Loan Party's other
Obligations  under this  Agreement,  each Loan  Party  agrees  to,  jointly  and
severally,  defend,  protect,  indemnify  and hold  harmless  the Agent and each
Lender and all of their respective officers,  directors,  employees,  attorneys,
consultants and agents  (collectively called the "INDEMNITEES") from and against
any  and  all  losses,  damages,  liabilities,   obligations,  penalties,  fees,
reasonable  costs  and  expenses  (including,  without  limitation,   reasonable
attorneys' fees, costs and expenses) incurred by such Indemnitees, whether prior
to  or  from  and  after  the  Effective  Date,  whether  direct,   indirect  or
consequential,  as a result of or arising  from or relating to or in  connection
with  any of the  following:  (i) the  negotiation,  preparation,  execution  or
performance or enforcement of this Agreement,  any other Loan Document or of any
other document executed in connection with the transactions contemplated by this
Agreement,  (ii) the Agent's or any Lender's furnishing of funds to the Borrower
under this Agreement or the other Loan Documents, including, without limitation,
the  management  of the Term Loan,  (iii) any matter  relating to the  financing
transactions  contemplated  by this  Agreement or the other Loan Documents or by
any document  executed in connection with the transactions  contemplated by this
Agreement  or  the  other  Loan  Documents,  or  (iv)  any  claim,   litigation,
investigation or proceeding relating to any of the foregoing, whether or not any
Indemnitee  is  a  party  thereto  (collectively,  the  "INDEMNIFIED  MATTERS");
PROVIDED,  HOWEVER,  that the Loan Parties shall not have any  obligation to any
Indemnitee  under this subsection (a) for any  Indemnified  Matter caused by the
gross negligence or willful  misconduct of such  Indemnitee,  as determined by a
final judgment of a court of competent jurisdiction.

                  (b) ENVIRONMENTAL INDEMNITY. Without limiting Section 12.15(a)
hereof, each Loan Party agrees to, jointly and severally, defend, indemnify, and
hold harmless the Indemnitees against any and all Environmental  Liabilities and
all  other  claims,  demands,  penalties,  fines,  liability  (including  strict
liability),  losses,  damages, costs and expenses (including without limitation,
reasonable  legal  fees and  expenses,  consultant  fees and  laboratory  fees),


                                     - 103 -

<PAGE>

arising  out of (i) any  Releases or  threatened  Releases  (x) at any  property
presently or formerly  owned or operated by any Loan Party or any  Subsidiary of
any  Loan  Party,  or any  predecessor  in  interest,  or  (y) of any  Hazardous
Materials  generated and disposed of by any Loan Party or any  Subsidiary of any
Loan Party, or any predecessor in interest; (ii) any violations of Environmental
Laws;  (iii)  any  Environmental  Action  relating  to  any  Loan  Party  or any
Subsidiary of any Loan Party, or any predecessor in interest;  (iv) any personal
injury (including  wrongful death) or property damage (real or personal) arising
out of exposure to Hazardous Materials used, handled, generated,  transported or
disposed  by  any  Loan  Party  or any  Subsidiary  of any  Loan  Party,  or any
predecessor  in interest;  and (v) any breach of any warranty or  representation
regarding  environmental  matters made by the Loan Parties in Section 6.01(f) or
the  breach  of any  covenant  made by the  Loan  Parties  in  Section  7.01(l).
Notwithstanding the foregoing, the Loan Parties shall not have any obligation to
any Indemnitee  under this subsection (b) regarding any potential  environmental
matter  covered  hereunder  which is caused by the gross  negligence  or willful
misconduct of such  Indemnitee,  as determined by a final judgment of a court of
competent jurisdiction.

                  (c)  The  indemnification  for  all of the  foregoing  losses,
damages,  fees, costs and expenses of the Indemnitees are chargeable against the
Loan Account.  To the extent that the  undertaking  to  indemnify,  pay and hold
harmless  set forth in this  Section  12.15 may be  unenforceable  because it is
violative  of any law or public  policy,  each Loan  Party  shall,  jointly  and
severally,  contribute  the maximum  portion  which it is  permitted  to pay and
satisfy under applicable law, to the payment and satisfaction of all Indemnified
Matters incurred by the  Indemnitees.  The indemnities set forth in this Section
12.15 shall survive the repayment of the  Obligations and discharge of any Liens
granted under the Loan Documents.

         Section 12.16 RECORDS. The unpaid principal of and interest on the Term
Loan,  the  interest  rate or rates  applicable  to such  unpaid  principal  and
interest, the duration of such applicability,  the Commitments,  and the accrued
and unpaid fees  payable  pursuant to Section 2.06  hereof,  including,  without
limitation,  the Closing Fee, Loan Servicing Fee and the Anniversary  Fee, shall
at all times be  ascertained  from the  records  of the  Agent,  which  shall be
conclusive and binding absent manifest error.

         Section 12.17 BINDING  EFFECT.  This Agreement  shall become  effective
when it shall have been  executed by each Loan Party,  the Agent and each Lender
and when the  conditions  precedent  set forth in Section  5.01 hereof have been
satisfied  or waived in writing by the Agent,  and  thereafter  shall be binding
upon and inure to the benefit of each Loan Party, the Agent and each Lender, and
their respective successors and assigns,  except that the Loan Parties shall not
have the right to assign their rights  hereunder or any interest  herein without
the prior written consent of each Lender, and any assignment by any Lender shall
be governed by Section 12.07 hereof.

         Section 12.18 INTEREST.  It is the intention of the parties hereto that
the Agent and each Lender shall conform strictly to usury laws applicable to it.
Accordingly,  if the  transactions  contemplated  hereby  or by any  other  Loan
Document  would be usurious as to the Agent or any Lender under laws  applicable
to it  (including  the laws of the United States of America and the State of New
York or any other jurisdiction  whose laws may be mandatorily  applicable to the
Agent or such Lender  notwithstanding  the other  provisions of this Agreement),


                                     - 104 -

<PAGE>

then, in that event,  notwithstanding anything to the contrary in this Agreement
or any other Loan Document or any agreement  entered into in connection  with or
as security for the Obligations,  it is agreed as follows:  (i) the aggregate of
all consideration  which constitutes  interest under law applicable to the Agent
or any Lender that is contracted  for, taken,  reserved,  charged or received by
the Agent or such  Lender  under this  Agreement  or any other Loan  Document or
agreements  or  otherwise  in  connection  with the  Obligations  shall under no
circumstances  exceed the maximum  amount  allowed by such  applicable  law, any
excess shall be canceled automatically and if theretofore paid shall be credited
by the Agent or such Lender on the principal  amount of the Obligations  (or, to
the extent that the principal amount of the Obligations shall have been or would
thereby be paid in full, refunded by the Agent or such Lender, as applicable, to
the  Borrower);  and (ii) in the event that the maturity of the  Obligations  is
accelerated by reason of any Event of Default under this Agreement or otherwise,
or in the event of any required or permitted prepayment, then such consideration
that  constitutes  interest  under law applicable to the Agent or any Lender may
never include more than the maximum amount allowed by such  applicable  law, and
excess  interest,  if any,  provided for in this Agreement or otherwise shall be
canceled  automatically  by the Agent or such Lender,  as applicable,  as of the
date of such  acceleration  or prepayment  and, if  theretofore  paid,  shall be
credited by the Agent or such Lender, as applicable,  on the principal amount of
the Obligations  (or, to the extent that the principal amount of the Obligations
shall have been or would thereby be paid in full,  refunded by the Agent or such
Lender to the Borrower).  All sums paid or agreed to be paid to the Agent or any
Lender for the use, forbearance or detention of sums due hereunder shall, to the
extent  permitted by law  applicable to the Agent or such Lender,  be amortized,
prorated,  allocated and spread  throughout the full term of the Term Loan until
payment  in full so that the rate or amount of  interest  on account of the Term
Loan hereunder  does not exceed the maximum  amount  allowed by such  applicable
law. If at an time and from time to time (x) the amount of  interest  payable to
the Agent or any Lender on any date shall be computed at the Highest Lawful Rate
applicable to the Agent or such Lender pursuant to this Section 12.18 and (y) in
respect of any  subsequent  interest  computation  period the amount of interest
otherwise  payable to the Agent or such Lender  would be less than the amount of
interest payable to the Agent or such Lender computed at the Highest Lawful Rate
applicable to the Agent or such Lender,  then the amount of interest  payable to
the Agent or such  Lender in respect  of such  subsequent  interest  computation
period shall  continue to be computed at the Highest  Lawful Rate  applicable to
the Agent or such Lender until the total amount of interest payable to the Agent
or such Lender  shall equal the total  amount of interest  which would have been
payable to the Agent or such  Lender if the total  amount of  interest  had been
computed without giving effect to this Section 12.18.

         For purposes of this Section  12.18,  the term  "applicable  law" shall
mean that law in effect from time to time and applicable to the loan transaction
between the  Borrower,  on the one hand,  and the Agent and the Lenders,  on the
other,  that  lawfully  permits  the  charging  and  collection  of the  highest
permissible,  lawful  non-usurious rate of interest on such loan transaction and
this  Agreement,  including  laws of the  State of New York and,  to the  extent
controlling, laws of the United States of America.

         The  right to  accelerate  the  maturity  of the  Obligations  does not
include the right to accelerate any interest that has not accrued as of the date
of acceleration.


                                     - 105 -

<PAGE>


         Section  12.19  CONFIDENTIALITY.  The Agent and each Lender  agrees (on
behalf of itself and each of its affiliates,  directors, officers, employees and
representatives)  to  use  reasonable  precautions  to  keep  confidential,   in
accordance with its customary procedures for handling  confidential  information
of this nature and in  accordance  with safe and sound  practices of  comparable
commercial finance companies,  any non-public  information supplied to it by the
Loan Parties  pursuant to this  Agreement or the other Loan  Documents  which is
identified in writing by the Loan Parties as being  confidential at the time the
same is  delivered  to such Person  (and which at the time is not,  and does not
thereafter  become,  publicly available or available to such Person from another
source not known to be subject to a  confidentiality  obligation  to such Person
not to disclose such information),  PROVIDED that nothing herein shall limit the
disclosure of any such information (i) to the extent required by statute,  rule,
regulation  or  judicial  process,  (ii) to counsel for the Agent or any Lender,
(iii) to examiners,  auditors,  accountants or Securitization  Parties,  (iv) in
connection  with any  litigation  to which the Agent or any Lender is a party or
(v) to any assignee or participant (or  prospective  assignee or participant) so
long as such assignee or participant  (or  prospective  assignee or participant)
first agrees, in writing,  to be bound by confidentiality  provisions similar in
substance to this Section  12.19.  The Agent and each Lender  agrees that,  upon
receipt  of a  request  or  identification  of the  requirement  for  disclosure
pursuant to clause (iv) hereof, it will make reasonable efforts to keep the Loan
Parties informed of such request or identification;  PROVIDED that the each Loan
Party  acknowledges  that the  Agent  and each  Lender  may make  disclosure  as
required or requested by any Governmental  Authority or  representative  thereof
and that the Agent and each  Lender may be  subject to review by  Securitization
Parties or other  regulatory  agencies  and may be  required  to provide  to, or
otherwise make available for review by, the  representatives  of such parties or
agencies any such non-public information.

         Section 12.20 INTEGRATION. This Agreement, together with the other Loan
Documents,  reflects the entire understanding of the parties with respect to the
transactions  contemplated  hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.

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                                     - 106 -

<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.

                                    BORROWER:
                                    ---------

                                    COLUMBUS MCKINNON CORPORATION

                                    By: /s/ Robert L. Montgomery
                                        --------------------------
                                        Name: Robert L. Montgomery
                                        Title: Executive Vice President


                                    GUARANTORS:
                                    -----------

                                    AUDUBON EUROPE S.A.R.L.

                                    By: /s/ Robert L. Montgomery
                                        --------------------------
                                        Name: Robert L. Montgomery
                                        Title: Manager


                                    AUDUBON WEST, INC.

                                    By: /s/ Robert L. Montgomery
                                        --------------------------
                                        Name: Robert L. Montgomery
                                        Title: Treasurer


                                    CRANE EQUIPMENT & SERVICE, INC.

                                    By: /s/ Robert L. Montgomery
                                        --------------------------
                                        Name: Robert L. Montgomery
                                        Title: Treasurer


                                    LICO STEEL, INC.

                                    By: /s/ Robert L. Montgomery
                                        --------------------------
                                        Name: Robert L. Montgomery
                                        Title: Treasurer


                                    YALE INDUSTRIAL PRODUCTS, INC.

                                    By: /s/ Robert L. Montgomery
                                        --------------------------
                                        Name: Robert L. Montgomery
                                        Title: Treasurer




<PAGE>


                                    AGENT AND LENDER:
                                    ----------------

                                    REGIMENT CAPITAL III, L.P.

                                    By: Regiment Capital Management, L.L.C.,
                                        its General Partner

                                    By: Regiment Capital Advisors, L.L.C.,
                                        its Manager


                                    By: /s/ Richard T. Miller
                                        ---------------------
                                        Name: Richard T. Miller
                                        Title: Vice President


                                    LENDER:
                                    -------

                                    ABLECO FINANCE LLC


                                    By: /s/ Kevin Genda
                                        ---------------
                                        Name: Kevin Genda
                                        Title: Vice President


</TEXT>
</DOCUMENT>
