GP STRATEGIES CORP
LOAN AGREEMENT
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>ex1011.txt
<DESCRIPTION>LOAN AGREEMENT
<TEXT>
[EXECUTION COPY]                                                Exhibit 10.11







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                  SECOND AMENDED AND RESTATED CREDIT AGREEMENT


                                  by and among


                           GP STRATEGIES CORPORATION,


                          GENERAL PHYSICS CORPORATION,


                                as the BORROWERS,


                            THE LENDERS PARTY HERETO,


                                       and


                              FLEET NATIONAL BANK,


                 as AGENT, as ISSUING BANK and as LEAD ARRANGER,


                          dated as of December 14, 2001


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<PAGE>



                                TABLE OF CONTENTS


1.           DEFINITIONS AND PRINCIPLES OF CONSTRUCTION.......................1
   1.1       Definitions......................................................1
   1.2       Principles of Construction.......................................1

2.           AMOUNT AND TERMS OF LOANS AND LETTERS OF CREDIT..................1
   2.1       Revolving Credit Loans; Revolving Credit Notes...................1
   2.2       Swing Line Loans; Swing Line Notes...............................1
   2.3       Procedure for Borrowing..........................................1
   2.4       Termination or Reduction of Commitments..........................1
   2.5       Prepayments of Loans; Additional Collateral......................1
   2.6       Use of Proceeds..................................................1
   2.7       Letter of Credit Sub-Facility....................................1
   2.8       Letter of Credit Participation and Funding Commitments...........1
   2.9       Absolute Obligation With Respect to Letter of Credit Payments....1
   2.10      Payments.........................................................1
   2.11      Cash Collateral Accounts:........................................1
   2.12      Defaulting Lender................................................1

3.           INTEREST, FEES, YIELD PROTECTIONS, ETC...........................1
   3.1       Interest Rate and Payment Dates..................................1
   3.2       Fees.............................................................1
   3.3       Conversions......................................................1
   3.4       Concerning Interest Periods......................................1
   3.5       Indemnification for Loss.........................................1
   3.6       Capital Adequacy.................................................1
   3.7       Reimbursement for Increased Costs................................1
   3.8       Illegality of Funding............................................1
   3.9       Substituted Interest Rate........................................1
   3.10      Taxes............................................................1
   3.11      Option to Fund...................................................1
   3.12      Replacement of Lenders...........................................1
   3.13      Guaranty Provisions..............................................1

4.           REPRESENTATIONS AND WARRANTIES...................................1
   4.1       Subsidiaries; Capitalization.....................................1
   4.2       Existence and Power..............................................1
   4.3       Authority and Execution..........................................1
   4.4       Binding Agreement; etc...........................................1
   4.5       Litigation.......................................................1
   4.6       Required Consents................................................1
   4.7       Absence of Defaults; No Conflicting Agreements...................1
   4.8       Compliance with Applicable Laws..................................1

<PAGE>

   4.9       Taxes............................................................1
   4.10      Governmental Regulations.........................................1
   4.11      Federal Reserve Regulations; Use of Loan Proceeds................1
   4.12      Plans............................................................1
   4.13      Financial Statements.............................................1
   4.14      Property.........................................................1
   4.15      Authorizations...................................................1
   4.16      Environmental Matters............................................1
   4.17      Solvency.........................................................1
   4.18      Absence of Certain Restrictions..................................1
   4.19      No Misrepresentation.............................................1
   4.20      Intangible Assets................................................1
   4.21      Material Subsidiaries............................................1

5.           CONDITIONS TO EFFECTIVENESS OF SECOND AMENDED AND RESTATED CREDIT
               AGREEMENT......................................................1
   5.1       Evidence of Action...............................................1
   5.2       This Agreement...................................................1
   5.3       Notes; Letter of Credit Documents................................1
   5.4       Absence of Litigation............................................1
   5.5       Approvals and Consents...........................................1
   5.6       Absence of Material Adverse Change...............................1
   5.7       Financial Officer's Certificate..................................1
   5.8       Check-the-Box Status.............................................1
   5.9       Opinion of Counsel to the Borrowers and their Subsidiaries.......1
   5.10      Previous Information.............................................1
   5.11      Borrowers Security Agreement; Subordination Agreement;
               Subsidiary Guaranty and Security Agreement and Related Matters 1
   5.12      Search Reports and Related Documents.............................1
   5.13      Borrowing Base Certificate.......................................1
   5.14      Property, Public Liability and Other Insurance...................1
   5.15      Fees.............................................................1
   5.16      Fees and Expenses of Special Counsel.............................1
   5.17      Closing Date.....................................................1
   5.18      Charge of Shares; Debenture; Deed of Guarantee and Indemnity and
                Related Matters...............................................1

6.           CONDITIONS OF LENDING - ALL LOANS AND LETTERS OF CREDIT..........1
   6.1       Compliance.......................................................1
   6.2       Borrowing Request; Letter of Credit Request; Compliance with
                Borrowing Base................................................1
   6.3       Certain Documents................................................1
   6.4       Other Documents..................................................1
<PAGE>

7.           AFFIRMATIVE COVENANTS............................................1
   7.1       Financial Statements and Information.............................1
   7.2       Certificates; Other Information..................................1
   7.3       Legal Existence..................................................1
   7.4       Taxes............................................................1
   7.5       Insurance........................................................1
   7.6       Performance of Obligations.......................................1
   7.7       Condition of Property............................................1
   7.8       Observance of Legal Requirements.................................1
   7.9       Inspection of Property; Books and Records; Discussions...........1
   7.10      Authorizations...................................................1
   7.11      Financial Covenants..............................................1
   7.12      Additional Subsidiaries..........................................1
   7.13      Mortgages........................................................1
   7.14      Title Reports; Appraisals........................................1

8.           NEGATIVE COVENANTS...............................................1
   8.1       Indebtedness.....................................................1
   8.2       Liens............................................................1
   8.3       Merger, Consolidations and Acquisitions..........................1
   8.4       Dispositions.....................................................1
   8.5       Investments, Loans, Etc..........................................1
   8.6       Restricted Payments..............................................1
   8.7       Capital Expenditures; Leases.....................................1
   8.8       Business and Name Changes........................................1
   8.9       ERISA............................................................1
   8.10      Prepayments of Indebtedness......................................1
   8.11      Amendments, Etc. of Certain Agreements...........................1
   8.12      Transactions with Affiliates.....................................1
   8.13      Issuance of Additional Capital Stock.............................1
   8.14      Limitation on Upstream Dividends by Subsidiaries.................1
   8.15      Limitation on Negative Pledges...................................1
   8.16      Margin Stock.....................................................1
   8.17      Intangible Assets................................................1
   8.18      Hydro Med Subordinated Debt Documents............................1
   8.19      No Prepayment of Subordinated Debt...............................1
   8.20      No Investments, etc. in Certain Subsidiaries.....................1

9.           DEFAULT..........................................................1
   9.1       Events of Default................................................1
   9.2       Contract Remedies................................................1

10.          THE AGENT........................................................1
   10.1      Appointment......................................................1

<PAGE>

   10.2      Delegation of Duties.............................................1
   10.3      Exculpatory Provisions...........................................1
   10.4      Reliance by Agent................................................1
   10.5      Notice of Default................................................1
   10.6      Non-Reliance on Agent and Other Lenders..........................1
   10.7      Indemnification..................................................1
   10.8      Agent in Its Individual Capacity.................................1
   10.9      Successor Agent..................................................1

11.          OTHER PROVISIONS.................................................1
   11.1      Amendments and Waivers...........................................1
   11.2      Notices..........................................................1
   11.3      No Waiver; Cumulative Remedies...................................1
   11.4      Survival of Representations and Warranties and Certain Obligation1
   11.5      Expenses.........................................................1
   11.6      Lending Offices..................................................1
   11.7      Successors and Assigns...........................................1
   11.8      Indemnity........................................................1
   11.9      Limitation of Liability..........................................1
   11.10     Counterparts.....................................................1
   11.11     Adjustments; Set-off.............................................1
   11.12     Construction.....................................................1
   11.13     Governing Law....................................................1
   11.14     Headings Descriptive.............................................1
   11.15     Severability.....................................................1
   11.16     Integration......................................................1
   11.17     Consent to Jurisdiction..........................................1
   11.18     Service of Process...............................................1
   11.19     No Limitation on Service or Suit.................................1
   11.20     WAIVER OF TRIAL BY JURY..........................................1
   11.21     Treatment of Certain Information.................................1
   11.22     Judgment Currency................................................1
   11.23     Pledge to Federal Reserve........................................1
   11.24     Lost Notes.......................................................1
   11.25     Interest Adjustment..............................................1
   11.26     No Set-off or Counterclaim; Loan Documents in Full Effect........1
   11.27     Amendment and Restatement........................................1
   11.28     Re-Allocation of Loans, Letters of Credit Outstandings and
                Commitments...................................................1
   11.29     Certain Collateral Matters.......................................1


<PAGE>


EXHIBITS

Exhibit A....Commitments
Exhibit B-1..Form of Second Amended and Restated Revolving Credit Note
Exhibit B-2..Form of Swing Line Note
Exhibit C-1..Form of Borrowing Request
Exhibit C-2..Form of Letter of Credit Request
Exhibit D....Form of Notice of Conversion
Exhibit E....Form of Compliance Certificate
Exhibit F-1..Form of Opinion - New York counsel to the Obligors
Exhibit F-2..Form of Opinion - UK counsel to GP (UK)
Form F-3.....Form of Opinion - Real Estate counsel to the Obligors
Exhibit G....Form of Assignment and Acceptance Agreement
Exhibit H....Form of Second Amended and Restated Borrowers Security Agreement
Exhibit I....Form of Second Amended and Restated Subsidiary Guaranty
             and Security Agreement
Exhibit J....Form of Amended and Restated Intercompany Demand Note
Exhibit K-1..Form of Amended and Restated Subordination Agreement - Obligors
Exhibit K-2..Form of Amended and Restated Subordination Agreement
         .... - Parent and Physics
Exhibit K-3..Form of Amended and Restated Subordination Agreement
         .... - SGLG and Physics
Exhibit L....Form of Borrowing Base Certificate
Exhibit M....Form of Charge of Shares
Exhibit N....Form of Debenture
Exhibit O....Form of Deed of Guarantee and Indemnity

                                    SCHEDULES

     Schedule 1.1 -....Eligible  Real Estate Schedule 2.7 -....Letters of Credit
Schedule 4.1  -....Subsidiaries  and Authorized,  Issued and  Outstanding  Stock
Schedule 4.5 -....Litigation  Schedule  4.16-....Environmental  Matters Schedule
4.21-....Material   Subsidiaries   and   Foreign   Subsidiaries   Schedule   8.1
-....Indebtedness  and Joint  Ventures  Schedule  8.2  -....Liens  Schedule  8.5
-....Investments  and  Eligible  Securities   Collateral  and  Other  Marketable
Securities Schedule 11.2 ....Contacts




<PAGE>





         SECOND  AMENDED AND  RESTATED  CREDIT  AGREEMENT,  dated as of June 15,
1998, as amended and restated as of August 31, 2000, and as further  amended and
restated as of December 14, 2001,  by and among GP STRATEGIES  CORPORATION  (the
"Parent"), a Delaware corporation and GENERAL PHYSICS CORPORATION ("Physics"), a
Delaware  corporation  (Parent and  Physics  shall  individually  be referred to
herein as a  "Borrower"  and shall  collectively  be  referred  to herein as the
"Borrowers"),  the lenders party hereto (together with their respective assigns,
collectively,  the  "Lenders",  and  individually,  each a  "Lender")  and FLEET
NATIONAL  BANK  ("Fleet"),  as agent  for the  Lenders  (in such  capacity,  the
"Agent"), as issuing bank (in such capacity, the "Issuing Bank") and as the lead
arranger (in such capacity, the "Lead Arranger").

RECITALS:

         (1) The  Borrower,  General  Physics  Canada Ltd.  ("GP  Canada"),  the
Lenders and the Agent entered into a Credit  Agreement,  dated June 15, 1998, as
amended by Amendment No. 1, dated as of July 21, 1998, Amendment No. 2, dated as
of December 31, 1998, Amendment No. 3 dated as of May 7, 1999, and Amendment No.
4, dated as of December 17, 1999 (as amended and modified by the foregoing,  the
"Original Agreement").


         (2) The parties to the Original  Agreement  agreed to amend and restate
the Original  Agreement in its entirety by entering into an Amended and Restated
Credit  Agreement,  dated  as of  August  31,  2000,  as  amended  by the  First
Amendment,  dated as of December 15, 2000, the Second  Amendment,  dated,  as of
March 8,  2001,  the Third  Amendment,  dated as of June 15,  2001,  the  Fourth
Amendment,  dated as of October, 15, 2001, and the Fifth Amendment,  dated as of
December  14, 2001 (as amended and  modified  by the  foregoing,  the  "Existing
Credit Agreement").

         (3) The Borrowers  have  requested,  among other  things,  to amend and
restate the Existing  Credit  Agreement,  to combine the existing term loans and
revolving loans into a single revolving credit loan facility which will be used,
among other things,  to repay the GP Canada Facility (as defined in the Existing
Credit  Agreement)  and to provide a revolving  credit loan facility for working
capital and general corporate purposes of the Borrowers and their  Subsidiaries,
and the Issuing Bank, the Swing Line Loan Lender,  the Lenders and the Agent are
willing  to  amend  the   Existing   Credit   Agreement   and  to  provide  such
accommodations on the terms and conditions set forth herein.

         (4) The parties  hereto agree that  effective on the Closing Date (such
capitalized term, and other  capitalized  terms used in these recitals,  to have
the definitions set forth in Section 1.1 below),  the Existing Credit  Agreement
is hereby amended and restated in its entirety.


<PAGE>

         (5) Pursuant to the Existing Credit  Agreement,  the Parent and certain
of its Subsidiaries  granted to the Agent for the benefit of the Lenders certain
guaranties and first priority,  perfected pledges and security  interests and/or
liens in the Collateral  delivered pursuant to certain Collateral  Documents and
in certain other Loan Documents, all as more particularly set forth in such Loan
Documents.

         (6) In order to induce the Issuing  Bank,  the Swing Line Loan  Lender,
the Lenders and the Agent to amend and restate the Existing Credit Agreement and
to make any Loans or issue any Letter of Credit  hereunder,  the Parent desires,
and it is a  condition  to the  effectiveness  hereof,  that the  Parent and its
Subsidiaries confirm their respective grants to the Agent for the benefit of the
Lenders of the  aforementioned  first  priority  perfected  pledges and security
interests and/or liens in such collateral to secure all Obligations under and in
connection with this Agreement and the other Loan Documents, confirm all related
guaranties and pledge agreements,  and grant certain additional collateral,  all
as more particularly set forth in this Agreement and the other Loan Documents.

         (7) The  outstanding  Loans and  Commitments  of certain of the Lenders
under the  Existing  Credit  Agreement  have been  reallocated  among the credit
facilities  provided for hereunder,  and certain new Lenders have become parties
to this  Agreement,  so that after  giving  effect  thereto the  Revolving  Loan
Commitment Percentages of all Lenders are as set forth on Exhibit A hereto.

         NOW, THEREFORE,  in consideration for the foregoing  agreements and for
other  good  and  valuable  consideration  whose  receipt  and  sufficiency  are
acknowledged,  the Borrowers, the Lenders, the Issuing Bank, the Swing Line Loan
Lender, the Lead Arranger and the Agent agree to the following terms.

1.       DEFINITIONS AND PRINCIPLES OF CONSTRUCTION

         1.1      Definitions

         As used in this  Agreement,  terms  defined  in the  preamble  have the
meanings therein indicated, and the following terms have the following meanings:

         "ABR  Advances":  collectively,  the  Revolving  Credit  Loans  (or any
portions thereof),  and/or the Swing Line Loans (or any portion thereof) at such
time as they (or such  portions)  are made and/or being  maintained at a rate of
interest based upon the Alternate Base Rate.

         "Account(s)": with respect to any Person: (a) all "accounts" as defined
in the Uniform Commercial Code of the State of New York and, in addition, all of
the accounts,  contract  rights  (including its rights as an unpaid  vendor,  or
lienor, including stoppage in transit,  replevin and reclamation),  instruments,

<PAGE>

documents,  chattel paper,  notes and drafts of such Person,  whether secured or
unsecured,  and whether or not specifically  assigned to the Agent or any Lender
hereunder,  and  including  any right to payment  which has been earned  under a
contract right and all inventory  returned or reclaimed from Account Debtors and
all rights to payment for goods sold or leased or services rendered; and (b) all
products and proceeds  (whether cash  proceeds or  otherwise) of the  foregoing,
whether now owned, held, or hereafter acquired by such Person.

         "Accountants":  KPMG Peat Marwick LLP (or any  successor  thereto),  or
such other firm of certified public accountants of recognized  national standing
selected by Parent and reasonably satisfactory to the Agent.

         "Account  Debtor":  at any  time,  in  addition  to the  definition  of
"account debtor" as contained in the Uniform Commercial Code of the State of New
York,  any Person who is  obligated  under or on account of an  Account,  or any
Person who is represented by any Borrower to be so obligated.

         "Accounts  Receivable  Borrowing Base":  80% of Eligible  Accounts from
time to time outstanding.

         "Accumulated Funding Deficiency": as defined in Section 302 of ERISA.

         "Acquisition":  with  respect  to any  Person,  the  purchase  or other
acquisition by such Person, by any means whatsoever (including through a merger,
amalgamation,  dividend or otherwise and whether in a single transaction or in a
series of related  transactions),  of (i) any Capital  Stock of any other Person
if,  immediately  thereafter,  such other Person would be either a Subsidiary of
such Person or otherwise  under the control of such Person,  (ii) any  business,
going concern or division or segment of any other Person,  or (iii) any Property
of any other  Person other than in the  ordinary  course of business,  provided,
however,  that no acquisition of all or substantially  all of the assets of such
other Person shall be deemed to be in the ordinary course of business.

         "Advance": an ABR Advance or a Eurodollar Advance, as the case may be.

         "Adjustment  Date":  the first day of the month  following the month in
which a Compliance Certificate is delivered by the Borrowers pursuant to Section
7.1(c).

         "Affected Advance": as defined in Section 3.9.

         "Affected  Principal Amount":  in the event that (i) any Borrower shall
fail for any reason to borrow a Loan in respect of which it shall have requested
a  Eurodollar  Advance or convert an Advance to a  Eurodollar  Advance  after it
shall have  notified  the Agent of its  intent to do so, an amount  equal to the
principal  amount of such Eurodollar  Advance;  (ii) a Eurodollar  Advance shall
terminate for any reason prior to the last day of the Interest Period applicable
thereto,  an amount equal to the principal amount of such Eurodollar Advance; or

<PAGE>

(iii) any Borrower shall prepay or repay all or any part of the principal amount
of a Eurodollar  Advance prior to the last day of the Interest Period applicable
thereto,  an amount equal to the principal  amount of such Advance so prepaid or
repaid.

         "Affiliate":  as to any Person,  any other  Person  which,  directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. For purposes of this definition, control of a Person shall mean the
power,  direct or indirect,  (i) to vote 5% or more of the  securities  or other
interests  having  ordinary  voting power for the election of directors or other
Managing Persons  thereof,  other than as a limited partner of such other Person
or (ii) to direct or cause the direction of the  management and policies of such
Person, whether by contract or otherwise.

         "Aggregate  Appraisal Value":  the aggregate value of all Eligible Real
Estate as set forth in Appraisals delivered to the Agent by the Borrowers or any
of its Subsidiaries.

         "Agreement":  this Second Amended and Restated Credit Agreement, as the
same may be amended,  supplemented,  amended and restated or otherwise  modified
from time to time.

         "Alternate  Base  Rate":  on any  date,  a rate of  interest  per annum
(rounded  upward,  if  necessary,  to the next  highest 1/16 of 1%) equal to the
higher of (i) the  Federal  Funds Rate in effect on such date plus 1/2 of 1% and
(ii) the Fleet Rate in effect on such date.

         "Applicable  Margin":  For the period  commencing on an Adjustment Date
through the date  immediately  preceding the next  Adjustment Date (each a "Rate
Adjustment  Period"),  the Applicable  Margin shall be the applicable margin set
forth below with respect to the Leverage  Ratio,  as  determined  for the Fiscal
Quarter  of the  Parent  and its  Subsidiaries  ended  immediately  prior to the
applicable Rate Adjustment Period.




<PAGE>
                                                      Revolving
                                                      Loan          Letter of
                             ABR         Eurodollar   Commitment    Credit
Level    Leverage Ratio      Advances    Advances     Fee           Commissions
---------------------------- ----------- --------------------------- ----------

I        Greater than or     1.50%       3.00%        .50%           3.00%
         equal to
         2.00:1.00
---------------------------- ----------- --------------------------- ----------
II       Greater than or     1.25%       2.50%        .50%           2.50%
         equal to
         1.50:1.00 but
         less than
         2.00:1.00
---------------------------- ----------- --------------------------- ----------
III      Greater than or     1.00%       2.00%        .375%          2.00%
         equal to
         1.00:1.00 but
         less than
         1.50:1.00
---------------------------- ----------- --------------------------- ----------
IV       Less than           .75%        1.75%        .25%           1.75%
         1.00:1.00
---------------------------- ----------- --------------------------- ----------


         Notwithstanding the foregoing,  the Applicable Margin for ABR Advances,
Eurodollar  Advances,  Revolving  Loan  Commitment  Fees and  Letter  of  Credit
Commissions  payable  during the period  commencing  on the Closing Date through
(and  including) the First  Adjustment  Date shall be the Applicable  Margin set
forth in Level I above. Changes in the Applicable Margin resulting from a change
in the Leverage Ratio shall become  effective upon delivery by the Parent to the
Agent of a new Compliance  Certificate pursuant to Section 7.1(c). If the Parent
shall fail to deliver a Compliance  Certificate  within 45 days after the end of
any Fiscal Quarter (or within 90 days, in the case of the last Fiscal Quarter of
the Fiscal Year), the Applicable Margin from and including the 46th (or 91st, as
the case may be) day after the end of such Fiscal  Quarter to but not  including
the date the  Parent  delivers  to the  Agent a  Compliance  Certificate,  shall
conclusively equal (a) in the case of ABR Advances or Eurodollar  Advances,  the
highest  Applicable Margin for such Advances,  (b) in the case of Revolving Loan
Commitment  Fees,  the  highest   Applicable  Margin  for  such  Revolving  Loan
Commitment  Fees set  forth  above,  and (c) in the  case of  Letter  of  Credit
Commissions, the highest Applicable Margin for such Letter of Credit Commissions
set forth above.

<PAGE>

         "Appraisal":  an  appraisal  delivered  by  the  Parent  or  any of its
Subsidiaries  to the Agent by an appraiser  selected by the Agent and using such
methodology as is satisfactory to the Agent in its sole discretion.

         "Appraisal  Date":  the earlier of (a) each  anniversary of the Closing
Date or (b) any date selected by the Agent in its sole discretion.

         "Approved Bank": any bank whose (or whose parent  company's)  unsecured
non-credit  supported  short-term  commercial  paper  rating from (i) Standard &
Poor's is at least A-1 or the equivalent thereof or (ii) Moody's is at least P-1
or the equivalent thereof.

         "Arbitration":  That certain arbitration and/or legal action proceeding
initiated by the Parent against MCI, an operating subsidiary of WorldCom, Inc.

         "Assignment": as defined in Section 11.7(c).

         "Assignment  and  Acceptance  Agreement":  an assignment and acceptance
agreement executed by an assignor and an assignee,  substantially in the form of
Exhibit G hereto.

         "Authorized  Signatory":  as to (i) any Person which is a  corporation,
the  chairman  of the  board,  the  president,  any vice  president,  the  chief
financial officer or any other officer thereof  acceptable to the Agent and (ii)
any Person which is not a  corporation,  the general  partner or other  Managing
Person thereof acceptable to the Agent.

         "Benefited Lender": as defined in Section 11.11(a).

         "Borrower" and "Borrowers" are defined in the preamble.

         "Borrowers  Security  Agreement":   the  Second  Amended  and  Restated
Borrowers  Security  Agreement,  by and  between  the  Borrowers  and the  Agent
substantially in the form of Exhibit H hereto, as amended, supplemented, amended
and restated, or otherwise modified from time to time.

         "Borrowing Base": (i) Accounts Receivable Borrowing Base; plus (ii) the
Marketable Securities Borrowing Base; plus (iii) the Real Estate Borrowing Base.
The  Agent  shall  have the  right to review  such  computations  and if, in its
reasonable  judgment,  such  computations  have not been completed in accordance
with the terms of this Agreement, the Agent shall have the right to correct such
errors.

         "Borrowing Base Account(s)":  those accounts  receivable arising out of
the sale or lease of goods or the rendition of services by Parent,  Physics,  or
MXL and with respect to each such Person:  (a) all  "accounts" as defined in the
Uniform  Commercial  Code of the State of New York and, in addition,  all of the
accounts,  contract rights (including its rights as an unpaid vendor, or lienor,
including   stoppage  in  transit,   replevin  and  reclamation),   instruments,
documents,  chattel paper,  notes and drafts of such Person,  whether secured or
unsecured,  and whether or not specifically  assigned to the Agent or any Lender
hereunder,  and  including  any right to payment  which has been earned  under a
contract right and all inventory  returned or reclaimed from Account Debtors and
all rights to payment for goods sold or leased or services rendered; and (b) all
products and proceeds  (whether cash  proceeds or  otherwise) of the  foregoing,
whether now owned, held, or hereafter acquired by such Person.

<PAGE>

         "Borrowing Base Certificate":  a certificate  substantially in the form
of Exhibit L hereto,  together  with such changes  thereto as the Agent may from
time to time  reasonably  request for the purpose of monitoring  the  Borrowers'
compliance with the limitations on the amount of the Revolving Credit Loans that
may be outstanding at any time hereunder.

         "Borrowing  Date":  any  Business  Day on which  (a) the  Lenders  make
Revolving  Credit Loans to the  Borrowers,  (b) the Swing Line Loan Lender makes
Swing Line Loans to the  Borrowers  or (c) the  Issuing  Bank issues a Letter of
Credit for the account of the Borrowers.

         "Borrowing  Request": a request for Revolving Credit Loans and/or Swing
Line Loans in the form of Exhibit C-1 hereto.

         "Business Day": for all purposes other than as set forth in clause (ii)
below, (i) any day other than a Saturday,  a Sunday or a day on which commercial
banks  located  in New York  City are  authorized  or  required  by law or other
governmental  action  to  close,  and  (ii)  with  respect  to all  notices  and
determinations  in connection  with,  and payments of principal and interest on,
Eurodollar  Advances,  any day which is a Business  Day  described in clause (i)
above and which is also a day on which  eurodollar  funding between banks may be
carried on in London, England.

         "Capital Expenditures":  with respect to any Person for any period, the
aggregate of all expenditures  incurred by such Person during such period which,
in accordance  with GAAP, are required to be included in "Additions to Property,
Plant or  Equipment"  or similar  items  reflected on the balance  sheet of such
Person,  provided,  however,  that "Capital  Expenditures" shall not include (i)
operating leases,  or (ii) expenditures of proceeds of insurance  settlements in
respect of lost, destroyed or damaged assets, equipment or other property to the
extent such  expenditures are made to replace or repair such lost,  destroyed or
damaged assets,  equipment or other property within six months of the receipt of
such proceeds.

         "Capital Lease Obligations": with respect to any Person, obligations of
such Person with  respect to leases  which are  required to be  capitalized  for
financial reporting purposes in accordance with GAAP.

         "Capital Stock": as to any Person, all shares,  interests,  partnership
interests,  limited liability company  interests,  participations,  rights in or
other  equivalents   (however  designated)  of  such  Person's  equity  (however
designated) and any rights,  warrants or options exchangeable for or convertible
into such shares, interests, participations, rights or other equity, whether now
outstanding or issued after the Closing Date.


<PAGE>

         "Cash Collateral": as defined in Section 2.11.

         "Cash  Collateralize"  means,  with respect to a Letter of Credit,  the
deposit  of  immediately  available  funds  into  the Cash  Collateral  Accounts
maintained  with (or on behalf of) the Agent on terms  satisfactory to the Agent
in an amount equal to the Stated Amount of such Letter of Credit.

         "Cash Collateral Accounts": as defined in Section 2.11.

         "Cash  Equivalents":  (i)  securities  issued  or  directly  and  fully
guaranteed  or  insured  by the  United  States  of  America  or any  agency  or
instrumentality  thereof  (provided that the full faith and credit of the United
States of America is pledged in full support  thereof) having  maturities of not
more than twelve months from the date of  acquisition,  (ii) Dollar  denominated
time deposits, certificates of deposit and bankers acceptances of (x) any Lender
or (y) any  Approved  Bank,  in any such case with  maturities  of not more than
twelve months from the date of acquisition, (iii) commercial paper issued by any
Approved Bank or by the parent company of any Approved Bank and commercial paper
issued by, or  guaranteed  by,  any  industrial  or  financial  company  with an
unsecured non-credit  supported  short-term  commercial paper rating of at least
A-1 or the  equivalent by Standard & Poor's or at least P-1 or the equivalent by
Moody's,  or guaranteed by any industrial or financial  company with a long term
unsecured  non-credit supported senior debt rating of at least A or A- 2, or the
equivalent,  by  Standard & Poor's or  Moody's,  as the case may be, and in each
case  maturing  within  twelve  months  after  the  date  of  acquisition,  (iv)
marketable  direct  obligations  issued  by any  state of the  United  States of
America  or  any  political   subdivision  of  any  such  state  or  any  public
instrumentality   thereof  maturing  within  twelve  months  from  the  date  of
acquisition  thereof  and,  at the time of  acquisition,  having  one of the two
highest  ratings  obtainable  from  either  Standard & Poor's or Moody's and (v)
investments  in money  market funds with a daily right of  redemption  and a net
asset  value of $1.00 per share and  substantially  all the  assets of which are
comprised  of  securities  of the types  described  in clauses (i) through  (iv)
above.

         "Change in Control":  Should (i) any two of Scott N. Greenberg,  Jerome
I. Feldman or John C. McAuliffe  cease  (whether due to retirement,  disability,
death or  otherwise)  to hold the office,  serve in the capacity or exercise the
managerial  policy-making  responsibilities  which on the date hereof he/she now
holds,  serves  in or  exercises  with  or on  behalf  of the  Borrowers  and/or
Subsidiary  Guarantor  in which  he/she now  holds,  serves or  exercises  and a
replacement  therefor reasonably  satisfactory to the Agent has not been elected
and assumed such responsibilities  within 120 days of such cessation or (ii) any
person or group  (within  the  meaning  of  Sections  13(d) and 14(d)  under the
Exchange Act), shall become the ultimate "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the  Exchange  Act),  directly or  indirectly,  of Capital
Securities  representing  more than 20% of the Capital  Stock of the Parent on a
fully  diluted  basis or (iii)  during  any  period  of 24  consecutive  months,
individuals  who at the  beginning  of such  period  constituted  the  Board  of
Directors of the Parent  (together with any new directors whose election to such
Board or whose  nomination  for election by the  stockholders  of the Parent was
approved by a vote of a majority of the directors  then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was  previously  so approved)  cease for any reason to constitute a
majority  of the Board of  Directors  of the  Parent  then in office or (iv) the
occurrence  of any "Change of Control"  (or similar  term) under (and as defined
in) any Subordinated Debt.


<PAGE>

         "Charge of Shares": the Charge of Shares, by and among Physics, GP (UK)
and the  Agent  substantially  in the form of  Exhibit  M  hereto,  as  amended,
supplemented, amended and restated, or otherwise modified from time to time.

         "Check-the-Box  Status":  A Foreign  Subsidiary that is classified as a
partnership  for U.S.  Federal  income tax purposes  under  Treasury  Reg.  sec.
301.7701-3.

         "Closing Date": December 14, 2001.

         "Code":  the Internal  Revenue Code of 1986, as the same may be amended
from time to time,  or any  successor  thereto,  and the  rules and  regulations
issued thereunder, as from time to time in effect.

         "Collateral":  the  Property  in which a security  interest  is granted
under the Borrowers  Security  Agreement,  the Subsidiary  Guaranty and Security
Agreement, the Mortgages or under any of the other Loan Documents.

         "Collateral  Documents":  (i) upon the execution and delivery  thereof,
the  Borrowers  Security   Agreement,   the  Subsidiary  Guaranty  and  Security
Agreement,  Charge of Shares, Debenture, Deed of Guaranty and Indemnity and each
of the Mortgages,  as each may be amended,  supplemented  or otherwise  modified
from time to time,  (ii) the  Intercompany  Demand Loan  Documents and (iii) all
documents executed or delivered in connection with any of the foregoing.

         "Commitment":  collectively, the Revolving Loan Commitment or the Swing
Line Loan Commitment.

         "Commitment  Amounts":  the Revolving  Loan  Commitment  Amount and the
Swing Line Loan Commitment Amount.

         "Compensatory Interest Payment": as defined in Section 3.1(c).

         "Compliance  Certificate":  a certificate  substantially in the form of
Exhibit E hereto.

         "Confidential Information": as described in Section 11.21.
<PAGE>

         "Consolidated": the Parent and its Subsidiaries on a consolidated basis
in accordance with GAAP.

         "Consolidated   Debt  Service":   for  any  period,   the  sum  of  (i)
Consolidated Interest Expense for such period and (ii) all scheduled payments of
principal on Consolidated Funded Debt during such period.

         "Consolidated  EBITDA":  for any  period  shall mean net income (or net
loss) of the Parent and its Subsidiaries,  determined on a Consolidated basis in
accordance  with GAAP for such period plus (i) the sum of, without  duplication,
(a) Consolidated  Interest Expense, (b) provision for income taxes of the Parent
and its Subsidiaries, (c) depreciation,  amortization and other non-cash charges
of the Parent and its Subsidiaries,  (d) any reductions in selling,  general and
administrative  expenses  incurred in connection with the deferred  compensation
plan of the Parent,  (e)  extraordinary  losses from sales,  exchanges and other
dispositions  of Property  not in the ordinary  course of business,  each to the
extent utilized in determining  such net income for such period;  minus (ii) the
sum of,  without  duplication,  each of the following with respect to the Parent
and its Subsidiaries,  to the extent utilized in determining such net income (or
net loss): (a) extraordinary gains from sales,  exchanges and other dispositions
of Property  not in the  ordinary  course of business  (other than cash gains on
sales of publicly  traded Capital Stock;  provided,  that,  with respect to such
cash gains of publicly  traded Capital Stock and the calculation of Consolidated
EBITDA for any Fiscal  Quarter in any  calendar  year,  the amount of cash gains
from the sale of  publicly  traded  Capital  Stock that may be  included  in the
calculation of  Consolidated  EBITDA shall not exceed an amount that, when added
to the amount of cash gains from the sale of publicly  traded  Capital Stock for
all other Fiscal  Quarters in such  calendar  year (even if prior to the Closing
Date),  exceeds  $6,000,000),  (b) interest income, (c) investment income (other
than  investment  income in an amount not in excess of  $100,000 on account of a
promissory  note  made by Five  Star to the  order  of  Parent)  (d)  cash in an
aggregate  amount not to exceed  $750,000 in  connection  with any wind down and
dissolution  of Hydro Med  Sciences,  Inc. and taken  during the Fiscal  Quarter
ending  December 31, 2001 (e) non-cash  charges for investments by the Parent in
Five Star and GSE Systems, and (f) other non-recurring items.

         "Consolidated  Fixed  Charges":  for any  period,  the sum of,  without
duplication,  all  scheduled  repayments  and  prepayments  of  principal on any
Indebtedness plus,  Consolidated  Interest Expense plus,  dividends plus, income
taxes, each paid during such period by the Parent and its Subsidiaries.

         "Consolidated Funded Debt": at any date of determination, the aggregate
funded  indebtedness  (as determined in accordance  with GAAP) and Capital Lease
Obligations  of the Parent and its  Subsidiaries,  determined on a  Consolidated
basis in accordance with GAAP, on such date.

         "Consolidated Interest Expense": for any period, interest expense (both
accrued  and  paid)  of  the  Parent  and  its  Subsidiaries   determined  on  a
Consolidated  basis in  accordance  with  GAAP,  but  excluding  costs  and fees
incurred in connection with extensions of the Existing Credit  Agreement for the
period ending December 31, 2001.


<PAGE>

         "Consolidated Net Worth": at any date of determination,  the sum of all
amounts which would be included  under  "Shareholders'  Equity" or any analogous
entry on a  Consolidated  balance  sheet of the Parent  determined in accordance
with GAAP as of such date.

         "Consolidated  Tangible  Net  Worth":  Consolidated  Net  Worth  minus,
without  duplication,  deferred charges (excluding deferred assets in connection
with  the  GP  Strategies   Corporation   Millennium  Cell,  LLC  Option  Plan),
intangibles and treasury stock, all determined in accordance with GAAP.

         "Consolidating": the Parent and its Subsidiaries each taken separately.

         "Contingent Obligation":  as to any Person (a "secondary obligor"), any
obligation of such secondary obligor (i) guaranteeing or in effect  guaranteeing
any return on any investment made by another Person,  or (ii) guaranteeing or in
effect  guaranteeing any  Indebtedness,  lease,  dividend or other obligation (a
"primary  obligation") of any other Person (a "primary  obligor") in any manner,
whether  directly or  indirectly,  including any  obligation  of such  secondary
obligor,  whether  contingent,  (a) to purchase  any primary  obligation  or any
Property  constituting  direct or indirect security therefor,  (b) to advance or
supply funds (A) for the purchase or payment of any primary obligation or (B) to
maintain  working  capital or equity capital of the primary obligor or otherwise
to  maintain  the net worth or solvency  of a primary  obligor,  (c) to purchase
Property,  securities  or services  primarily  for the  purpose of assuring  the
beneficiary  of any primary  obligation  of the ability of a primary  obligor to
make payment of a primary  obligation,  (d) otherwise to assure or hold harmless
the beneficiary of a primary obligation against loss in respect thereof, and (e)
in respect of the liabilities of any partnership in which a secondary obligor is
a  general  partner,  except  to  the  extent  that  such  liabilities  of  such
partnership are nonrecourse to such secondary obligor and its separate Property,
provided,  however, that the term "Contingent  Obligation" shall not include the
indorsement of instruments  for deposit or collection in the ordinary  course of
business. The amount of any Contingent Obligation of a Person shall be deemed to
be an amount equal to the stated or determinable  amount of a primary obligation
in  respect  of which such  Contingent  Obligation  is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith.

         "Control Person": as defined in Section 3.6.

         "Covered Event": (i) any Disposition by any Obligor (other than sale of
the  common  stock of  Millenium  Cell,  Inc.) and (ii) any and all  issuance(s)
and/or equity offering(s) of Capital Stock by any Obligor.  For the avoidance of
doubt,  any cash  received by Hydro Med Sciences,  Inc.  solely from the sale of
securities  issued  by Hydro  Med  Sciences,  Inc.  shall be  excluded  from the
definition of Covered Event.


<PAGE>

         "Conversion  Date":  the date on which:  (i) a  Eurodollar  Advance  is
converted  to an ABR  Advance,  (ii) an ABR Advance is converted to a Eurodollar
Advance or (iii) a Eurodollar Advance is converted to a new Eurodollar Advance.

         "Credit  Exposure":  at any  time,  the  sum at  such  time  of (i) the
outstanding  principal balance of the Revolving Credit Loans of all Lenders plus
Swing Line Loans made by the Swing Line Loan  Lender,  plus (ii) an amount equal
to the Letter of Credit Outstandings.

         "Debenture":  the  Debenture,  by and  between  Physics  and the  Agent
substantially in the form of Exhibit N hereto, as amended, supplemented, amended
and restated, or otherwise modified from time to time.

         "Deed of Guarantee and Indemnity": the Deed of Guarantee and Indemnity,
by and  between  Physics,  GP (UK) and the  Agent  substantially  in the form of
Exhibit O hereto, as amended,  supplemented,  amended and restated, or otherwise
modified from time to time.

         "Default": any event or condition which, with the giving of notice, the
lapse of time, or any other condition, would, unless cured or waived, constitute
an Event of Default.

         "Defaulting Lender": as defined in Section 2.12.

         "Disposition":  with  respect  to any  Person,  any  sale,  assignment,
transfer or other  disposition by such Person,  by any means, of (i) the Capital
Stock of any other  Person,  including  without  limitation  with respect to the
Borrowers  or any  Subsidiary  Guarantor,  the  Capital  Stock of any  direct or
indirect Subsidiary (including pursuant to a Hydro Med Sale), (ii) any business,
going concern or division or segment  thereof,  (iii) any other Property of such
Person  other than in the  ordinary  course of business  (other than  inventory,
except to the extent subject to a bulk sale),  provided,  however,  that no such
sale,  assignment,  transfer or other disposition of Property shall be deemed to
be in the  ordinary  course of business if the fair market  value  thereof is in
excess of $2,000,000,  or (iv) the sale, assignment,  transfer or disposition of
all or  substantially  all of  the  Property  of (a)  such  Person,  or (b)  any
Operating Entity.

         "Dollars" and "$": lawful currency of the United States.

         "Domestic  Subsidiary":  a Subsidiary of the Parent organized under the
laws of the United States or a state thereof.


<PAGE>

         "Effective  Date": the date on which all conditions in Section 5 and in
Section 6 have been satisfied.

         "Eligible  Accounts":  Borrowing Base Accounts payable to other than GP
(UK) (i) which are  General  Eligible  Accounts,  (ii) which are owed by account
debtors  located within the United States of America and (iii) which are due and
payable within 90 days from the original date of invoice, except with respect to
Government  Assigned  Receivables which shall be due and payable within 120 days
from the original date of invoice.

         "Eligible Real Estate":  each Mortgaged Property as to which the Parent
or any of its Subsidiaries has delivered an Appraisal in compliance with Section
7.15 as set forth in  Schedule  1.1 (as such  Schedule  is amended or  otherwise
modified from time to time pursuant to Section 7.15). Notwithstanding any of the
foregoing, no Mortgaged Property shall be deemed Eligible Real Estate if,

         (a) the Borrowers or any Subsidiary does not have sole lawful, absolute
     and marketable fee simple title to such Mortgaged Property;

         (b) such Mortgaged  Property is not subject to title  insurance in form
     and substance satisfactory to the Agent;

         (c) such Mortgaged Property is not located in the United States;

         (d) such  Mortgaged  Property  is subject to any Liens other than Liens
     permitted pursuant to Sections 8.2 (i), (ii), (iv) through (vii) and (xv);

         (e) such  Mortgaged  Property is the subject of  proceedings  under the
     United States  bankruptcy  laws, any state  insolvency  laws or any similar
     law; or

         (f) such  Mortgaged  Property is not in compliance  with all applicable
     laws.

         "Eligible  Securities  Collateral":  The following  types of marketable
securities that are subject to a first priority  perfected  security interest in
favor of the Agent for the  ratable  benefit of the  Lenders and for which there
can be obtained a publicly quoted fair market value: U.S. Treasury  Obligations;
Municipal Bonds; stocks and bonds listed on the New York Stock Exchange;  stocks
and bonds  listed on  NASDAQ;  and over the  counter  listed  stocks  and bonds;
provided,  however,  that (a) no bond  shall  come  within  this  definition  of
"Eligible  Securities  Collateral" unless it is of investment grade; which shall
mean such bond has a BBB or better rating from  Standard and Poor's  Corporation
or a BAA or better rating from Moody's  Investment  Services,  Inc.;  and (b) no
stock shall come within this definition of "Eligible Securities  Collateral" (i)
unless it is publicly  traded and has a publicly  reported fair market value and
may be freely  traded by the owner  thereof;  (ii) if it is stock of a financial

<PAGE>

institution  or stock of a  securities  firm (the  determination  of whether the
applicable stock is stock of a financial  institution or a securities firm shall
be in the sole  discretion  of the Agent) and (iii) if all or any part of a Loan
was made for the purpose of "purchasing" or "carrying" any "margin stock" within
the  respective  meanings of each of the quoted terms under  Regulation U of the
Board of  Governors of the Federal  Reserve  System as now and from time to time
hereafter in effect.

         "Employee Benefit Plan": an employee benefit plan within the meaning of
Section 3(3) of ERISA maintained,  sponsored or contributed to by the Borrowers,
any of their Subsidiaries or any ERISA Affiliate.

         "ERISA":  the  Employee  Retirement  Income  Security  Act of 1974,  as
amended from time to time, and the rules and regulations issued  thereunder,  as
from time to time in effect.

         "ERISA Affiliate":  when used with respect to an Employee Benefit Plan,
ERISA, the PBGC or a provision of the Code pertaining to employee benefit plans,
any Person which is a member of any group of organizations within the meaning of
Sections  414(b)  or (c) of the Code  (or,  solely  for  purposes  of  potential
liability under Section  302(c)(11) of ERISA and Section  412(c)(11) of the Code
and the lien created  under  Section  302(f) of ERISA and Section  412(n) of the
Code,  Sections  414(m) or (o) of the  Code) of which  the  Parent or any of its
Subsidiaries is a member.

         "Eurodollar  Advances":  the  Revolving  Credit  Loans (or any portions
thereof)  at such  time  as they  (or  such  portions)  are  made  and/or  being
maintained at a rate of interest based upon the Eurodollar Rate.

         "Eurodollar  Rate":  with respect to each  Eurodollar  Advance for each
Interest  Period  thereof,  a rate of interest per annum,  as  determined by the
Agent,  obtained by dividing the rate  computed by  paragraph  (a) by the amount
computed  under  paragraph (b) (and then rounding to the nearest 1/100 of 1% or,
if there is no nearest 1/100 of 1%, then to the next higher 1/100 of 1%):

            (a) the rate,  as  determined  on the basis of the offered rates for
deposits  in U.S.  Dollars,  for a period of time  comparable  to such  Interest
Period for such Eurodollar Advance which appears on the Telerate page 3750 as of
11:00 a.m.  London time on the day that is two Business Days preceding the first
day of such Eurodollar Advance;  provided,  however, if the rate described above
does not appear on the Telerate System on any applicable interest  determination
date, the Eurodollar Rate shall be the rate (rounded upwards as described above,
if necessary)  for deposits in Dollars for a period  substantially  equal to the
Interest  Period on the  Reuters  Page "LIBO" (or such other page as may replace
the LIBO Page on that service for the purpose of displaying  such rates),  as of
11:00 a.m.  (London Time), on the day that is two (2) Business Days prior to the
beginning of such Interest Period; and


<PAGE>

         If both the Telerate and Reuters system are unavailable, then the rate
for that date will be determined on the basis of the offered rates for deposits
in U.S. Dollars for a period of time comparable to such Interest Period for such
Eurodollar Advance which are offered by four major banks in the London interbank
market at approximately 11:00 a.m. London time, on the day that is two (2)
Business Days preceding the first day of such Eurodollar Advance as selected by
the Agent. The principal London office of each of the four major London banks
will be requested to provide a quotation of its U.S. Dollar deposit offered
rate. If at least two such quotations are provided, the rate for that date will
be the arithmetic mean of the quotations. If fewer than two quotations are
provided as requested, the rate for that date will be determined on the basis of
the rates quoted for loans in U.S. Dollars to leading European banks for a
period of time comparable to such Eurodollar Advance offered by major banks in
New York City at approximately 11:00 a.m. New York City time, on the day that is
two Business Days preceding the first day of such Eurodollar Advance. In the
event that the Agent is unable to obtain any such quotation as provided above,
it will be deemed that the Eurodollar Rate pursuant to a Eurodollar Advance
cannot be determined.

            (b) a number  equal to 1.00 minus the  aggregate  of the then stated
maximum rates during such Interest Period of all reserve requirements (including
marginal, emergency, supplemental and special reserves), expressed as a decimal,
established  by the Board of  Governors  of the Federal  Reserve  System and any
other  banking  authority  to which Fleet and other major  United  States  money
center banks are subject, in respect of eurocurrency funding (currently referred
to as  "Eurocurrency  Liabilities"  in Regulation D of the Board of Governors of
the Federal Reserve System), without benefit of credit for proration, exceptions
or offsets which may be available from time to time to Fleet.

The Agent shall use its reasonable commercial efforts to advise the Borrowers of
the Eurodollar Rate as soon as practicable after each change in the Eurodollar
Rate; provided however, that the failure of the Agent to so advise the Borrowers
on any one or more occasions shall not result in any liability of the Agent or
affect the rights of the Lenders or the Agent or the obligations of the
Borrowers under this Agreement or any other Loan Document.

         "Event of Default": as defined in Section 9.1.

         "Existing Bank Debt": collectively,  the Indebtedness of the Parent and
GP Canada and certain Subsidiary  Guarantors under the Existing Credit Agreement
and the documents,  instruments and agreements  executed  pursuant thereto or in
connection therewith,  including all outstanding  principal,  unpaid and accrued
interest,  unpaid and accrued  fees and other  unpaid sums  thereunder,  as such
Indebtedness is reallocated among the credit facilities  provided for under this
Agreement.

         "Existing  Credit  Agreement":  shall have the meaning set forth in the
recitals hereto.


<PAGE>

         "Federal  Funds Rate":  for any day, a rate per annum  (expressed  as a
decimal, rounded upwards, if necessary, to the next higher 1/100 of 1%) equal to
the weighted average of the rates on overnight  federal funds  transactions with
members of the Federal  Reserve System arranged by federal funds brokers on such
day, as  published  by the Federal  Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if the day for which such rate is to
be  determined  is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on such preceding Business Day as so published
on the next  succeeding  Business Day, and (ii) if such rate is not so published
for any day,  the  Federal  Funds Rate for such day shall be the  average of the
quotations for such day on such transactions  received by Fleet as determined by
Fleet and reported to the Agent.

         "Fees": as defined in Section 2.10.

         "Fee Letter": The confidential amended and restated fee letter dated as
of December 10, 2001 by and among the parties thereto.

         "Financial  Officer":  as to any Person, the chief financial officer of
such Person or such other officer as shall be satisfactory to the Agent.

         "Financial Statements": as defined in Section 4.13.

         "Fiscal Quarter" means any quarter of a Fiscal Year.

         "First Adjustment Date": means the date of delivery to the Agent of the
December 31, 2001 financial statements and the related Compliance Certificate.

         "Fiscal Year":  means any 12 consecutive  calendar months ending on the
31st day of December.  Reference to a Fiscal Year with a number corresponding to
a calendar  year (e.g.,  "Fiscal  Year  2001")  refers to the Fiscal Year ending
during such calendar year.

         "Five Star": Five Star Group, Inc.

         "Fixed Charge Coverage  Ratio":  as at any date of  determination,  the
ratio of (a) Consolidated EBITDA less Capital Expenditures of the Parent and its
Subsidiaries  for the  applicable  Fiscal  Quarter  ending on such date for such
Fiscal  Quarter to (b) the sum of  Consolidated  Fixed  Charges  for such Fiscal
Quarter.

         "Fleet": Fleet National Bank.

         "Fleet  Rate":  the variable  per annum rate of interest so  designated
from time to time by Fleet as its prime commercial lending rate, such rate to be
adjusted  automatically  (without notice) on the effective date of any change in
such  designated  rate.  The Fleet Rate is a reference  rate set by Fleet and is

<PAGE>

based upon various factors including  Fleet's costs and desired return,  general
economic  conditions and other factors and used as a reference point for pricing
loans and does not  necessarily  represent the lowest or best rate being charged
to any customer.

         "Foreign   Subsidiaries":   any  Subsidiary,   other  than  a  Domestic
Subsidiary, which becomes a Material Subsidiary and any other Foreign Subsidiary
that has not obtained Check-the-Box Status.

         "Funded Current Liability Percentage": as defined in Section 401(a)(29)
of the Code.

         "GAAP":  generally  accepted  accounting  principles  set  forth in the
opinions and pronouncements of the Accounting  Principles Board and the American
Institute  of  Certified   Public   Accountants   and  in  the   statements  and
pronouncements  of the  Financial  Accounting  Standards  Board or in such other
statement  by such other entity as may be approved by a  significant  segment of
the accounting  profession,  which are applicable to the circumstances as of the
date of determination, consistently applied.

         "General  Eligible  Accounts":  Borrowing  Base Accounts that have been
validly assigned to the Agent and in which the Agent, for the ratable benefit of
the Lenders,  has a first  priority  perfected  security  interest and otherwise
comply with all of the terms, conditions, warranties and representations made to
Agent and the  Lenders,  but  General  Eligible  Accounts  shall not include the
following:  (a) Accounts with respect to which the account debtor is an officer,
director,  employee,  or agent of Parent or an affiliate of Parent; (b) Accounts
with  respect  to  which  the  sale is on an  installment  sale,  lease or other
extended  payment  basis;  (c) all Accounts owing by any account debtor if fifty
percent  (50%) or more of the Accounts  due from such account  debtor are deemed
not to be General  Eligible  Accounts  hereunder;  (d) Accounts  with respect to
which the  account  debtor  is a  subsidiary  of,  affiliate  of, or has  common
officers or directors with Parent;  (e) Accounts with respect to which the Agent
does not for any reason (other than Agent's failure to perfect) have a perfected
first  priority Lien; (f) Accounts with respect to which Parent is or may become
liable to the account debtor for goods sold or services  rendered by the account
debtor to Parent, to the extent of Parent's  existing or potential  liability to
such account  debtor;  (g) Accounts with respect to which the account debtor has
disputed any liability, or the account debtor has made any claim with respect to
any other  Account  due to Parent,  or the Account is  otherwise  subject to any
right of setoff,  deduction,  breach of  warranty or other  defense,  dispute or
counterclaim by the account debtor; (h) that portion of the Accounts owed by any
single  Account  Debtor which  exceeds  twenty five percent  (25%) of all of the
Accounts;  (i) that  portion of any  Accounts  representing  late fees,  service
charges or interest,  but only to the extent of such portion; (j) Accounts of an
account  debtor  where the account  debtor is located in Minnesota or New Jersey
unless the payee with  respect to such  account (1) with  respect to such state,
has received a  Certificate  of Authority to do business and is in good standing
in such state, or (2) has filed a Notice of Business  Activities Report with the
applicable  state authority in such state,  as applicable,  for the then current
year;  (k)  Accounts  owed by any account  debtor  which is  insolvent or is the

<PAGE>

subject  of  an  insolvency  proceeding;   (l)  that  portion  or  any  Accounts
represented by contract rights, documents, instruments, chattel paper or general
intangibles;   (m)  any  and  all   Accounts   of  an   account   debtor   whose
creditworthiness  is not  satisfactory  to the Agent in its sole credit judgment
based on information  available to the Agent; (n) Accounts that have been billed
but are not yet earned and (o) Accounts with respect to which the Account Debtor
is a federal governmental authority unless such Accounts are Government Assigned
Receivables.  References  to  percentages  of all  Accounts  are based on dollar
amount of Accounts, and not number of Accounts.

         "Governmental  Authority":  any foreign,  federal,  state,  provincial,
municipal or other government,  or any department,  commission,  board,  bureau,
agency, public authority or instrumentality thereof, or any court or arbitrator.

         "Government  Assigned  Receivables":  Borrowing Base Accounts where the
Account  Debtor is the United  States of America  or any  department,  agency or
instrumentality of the United States and for which Parent,  Physics, and MXL, as
the case may be, has  complied  with the  Assignment  of Claims Act of 1940,  as
amended (31 U.S.C. Section 203 et seq.).

         "GP Canada": shall have the meaning set forth in the recitals hereto.

         "GP (UK)": means General Physics Corporation (UK) Limited.

         "Highest  Lawful  Rate":  as to any  Lender or the  Issuing  Bank,  the
maximum rate of interest,  if any,  that at any time or from time to time may be
contracted for, taken, charged or received by such Lender on the Note held by it
or by the Issuing Bank on the Reimbursement  Agreements,  as the case may be, or
which  may be owing to such  Lender or the  Issuing  Bank  pursuant  to the Loan
Documents  under the laws applicable to such Lender or the Issuing Bank and this
transaction.

         "Hydro Med Sale": any sale,  assignment,  transfer or other disposition
by the Parent of any of the  Capital  Stock of Hydro Med  Sciences,  Inc. to any
other  Person,  in an aggregate  amount not less than  $5,000,000  or such other
amount  agreed  to in  writing  by  the  Agent,  all  on  terms  and  conditions
satisfactory to the Agent.

         "Hydro Med Subordinated Debt": $2,640,000 in aggregate principal amount
of Indebtedness owing by Parent under its 6% Convertible  Exchangeable Notes due
June 30, 2003, (the "Notes") which Notes at the option of the purchasers thereof
may be converted into approximately  19.99% of the fully diluted equity of Hydro
Med Sciences, Inc.

         "Indebtedness": as to any Person, at a particular time, all items which
constitute,  without  duplication,  (i)  indebtedness  for borrowed money,  (ii)
indebtedness  in respect of the deferred  purchase price of Property or services

<PAGE>

(other than trade payables  incurred in the ordinary course of business),  (iii)
indebtedness evidenced by notes, bonds, debentures or similar instruments,  (iv)
obligations with respect to any conditional  sale or title retention  agreement,
(v) indebtedness arising under acceptance facilities and the amount available to
be drawn under all letters of credit  issued for the account of such Person and,
without duplication, all drafts drawn thereunder to the extent such Person shall
not have reimbursed the issuer in respect of the issuer's payment thereof,  (vi)
all  liabilities  secured by any Lien on any Property  owned by such Person even
though such Person has not assumed or  otherwise  become  liable for the payment
thereof (other than carriers', warehousemen's,  mechanics', repairmen's or other
like non-consensual statutory Liens arising in the ordinary course of business),
(vii)  Capital  Lease  Obligations,  (viii) all  obligations  of such  Person in
respect of Capital  Stock  subject to mandatory  redemption or redemption at the
option of the holder thereof, in whole or in part, (ix) indebtedness owing under
Interest  Rate  Protection  Agreements  (on a net basis with respect to all such
Interest Rate Protection  Agreements) and (x) all Contingent Obligations of such
Person in respect of any of the foregoing.

         "Indemnified Liabilities": as defined in Section 11.5.

         "Indemnified Person": as defined in Section 11.8.

         "Indemnified Tax": as defined in Section 3.10(a).

         "Indemnified Tax Person": as defined in Section 3.10(a).

         "Intercompany  Demand Loan Collateral":  all of the accounts receivable
and inventory of each Foreign Subsidiary, now or hereafter acquired.

         "Intercompany Demand Loan Documents": the Intercompany Demand Note, the
Intercompany Demand Loan Security Documents and each other document,  instrument
and agreement  executed  pursuant to or in connection with any of the foregoing,
each as amended,  supplemented  or modified from time to time, as pledged to the
Agent pursuant to the Borrowers Security  Agreement and/or Subsidiary  Guarantee
and Security Agreement.

         "Intercompany Demand Loan Security  Documents":  the security documents
executed by each Foreign Subsidiary in favor of Parent or a Subsidiary of Parent
in order to grant  such  Person a first  Lien in the  Intercompany  Demand  Loan
Collateral.

         "Intercompany  Demand Note": one or more negotiable  demand  promissory
notes  made by a  Foreign  Subsidiary  to the  order of  Parent,  or a  Domestic
Subsidiary of Parent evidencing loans by the Parent or such Domestic  Subsidiary
to such Foreign Subsidiary, substantially in the form of Exhibit J hereto.


<PAGE>

         "Intercompany Indebtedness":  loans which are made by (i) the Borrowers
to any Subsidiary Guarantor or to any Foreign Subsidiary, or (ii) any Subsidiary
Guarantor to any other Subsidiary Guarantor.

         "Interest  Coverage Ratio": as at any date of determination,  the ratio
of (i) Consolidated EBITDA of the Parent and its Subsidiaries for the applicable
Fiscal Quarter ending on such date to (ii) Consolidated  Interest Expense of the
Parent and its Subsidiaries for such Fiscal Quarter.

         "Interest  Payment  Date":  (i) as to any ABR Advance,  the last day of
each month  commencing on the first of such days to occur after such ABR Advance
is made or any Eurodollar Advance is converted to an ABR Advance, (ii) as to any
Eurodollar  Advance,  the last day of such  Interest  Period and (iii) as to all
Advances, the Revolving Loan Commitment Termination Date.

         "Interest Period":  with respect to any Eurodollar Advance requested by
the Borrowers,  the period commencing on, as the case may be, the Borrowing Date
or  Conversion  Date  with  respect  to such  Eurodollar  Advance  and one month
thereafter, as selected by the Borrowers in its irrevocable Borrowing Request or
its  irrevocable  Notice  of  Conversion,  provided,  however,  that  (i) if any
Interest  Period would  otherwise end on a day which is not a Business Day, such
Interest Period shall be extended to the next succeeding Business Day unless the
result of such  extension  would be to carry such  Interest  Period into another
calendar month, in which event such Interest Period shall end on the immediately
preceding  Business  Day,  (ii) any  Interest  Period  which  begins on the last
Business Day of a calendar  month (or on a day for which there is no numerically
corresponding  day in the  calendar  month at the end of such  Interest  Period)
shall end on the last Business Day of the appropriate subsequent calendar month.
Interest Periods shall be subject to the provisions of Section 3.4.

         "Interest Rate Protection Arrangement":  any interest rate swap, cap or
collar arrangement,  or any currency foreign exchange transaction,  or any other
derivative  or capital  markets  product  customarily  offered by banks or other
financial  institutions  to their  customers  in order to reduce the exposure of
such  customers to interest  rate or currency  fluctuations,  as the same may be
amended,  supplemented or otherwise  modified from time to time, in each case on
terms and conditions  satisfactory to the Agent; provided,  however, in no event
shall any Interest Rate  Protection  Arrangement be entered into for speculative
purposes.

         "Issuing Bank":  means,  collectively,  Fleet or the Person issuing the
Letters  of Credit  hereunder  as  designated  by the Agent in its  capacity  as
Issuing Bank of the Letters of Credit.

         "Investments": as defined in Section 8.5.

         "Killingly Property": as defined under "Mortgages."


<PAGE>

         "Letters of Credit": as defined in Section 2.7.


         "Letter of Credit Commissions": as defined in Section 3.2(b).

         "Letter of Credit  Commitment":  the  commitment of the Issuing Bank to
issue  Letters  of  Credit  for  the  account  of  Parent  having  an  aggregate
outstanding face amount up to the Letter of Credit  Commitment  Amount,  and the
commitment of the Lenders to  participate  in such Letter of Credit as set forth
in Section 2.8.

         "Letter of Credit Commitment  Amount":  Five Million and 00/100 Dollars
($5,000,000.00), as such amount may be reduced from time to time.

         "Letter of Credit  Outstandings":  at any time,  an amount equal to the
sum of (a) the then  aggregate  amount which is undrawn and available  under all
issued and outstanding  Letters of Credit,  and (b) the then aggregate amount of
all unpaid and outstanding Reimbursement Obligations.

         "Letter of Credit  Participation":  with  respect to each  Lender,  its
obligations to the Issuing Bank hereunder.

         "Letter  of Credit  Request":  a  request  in the form of  Exhibit  C-2
hereto.

         "Leverage  Ratio":  at any  date of  determination,  the  ratio  of (i)
Consolidated  Funded Debt of the Parent and its  Subsidiaries for the applicable
Fiscal Quarter ending on such date to (ii) Consolidated EBITDA of the Parent and
its Subsidiaries for the such Fiscal Quarter.

         "Lien": any mortgage,  pledge,  hypothecation,  assignment,  deposit or
preferential  arrangement,  encumbrance,  lien  (statutory  or other),  or other
security  agreement  or  security  interest  of any kind or  nature  whatsoever,
including  any  conditional  sale or other  title  retention  agreement  and any
capital or financing lease having  substantially the same economic effect as any
of the foregoing.

         "Loan Documents":  collectively,  this Agreement,  the Revolving Credit
Notes, the Swing Line Note, the Fee Letter,  the Subordination  Agreement,  each
Reimbursement  Agreement,  the Interest  Rate  Protection  Arrangements  (to the
extent such Interest  Rate  Protection  Arrangements  are entered into by a Rate
Protection  Lender),   the  Collateral   Documents  and  all  other  agreements,
instruments and documents executed or delivered in connection herewith,  in each
case as amended, supplemented or otherwise modified from time to time.

         "Loans": the Revolving Credit Loans and the Swing Line Loans.

         "Loan Value": shall apply to only Eligible Securities Collateral, shall
be  determined  based on the  publicly  quoted  fair  market  value of  Eligible

<PAGE>

Securities  Collateral at the time of  calculation  of each  Borrowing  Base and
shall mean the percentages  indicated below for the type of Eligible  Securities
Collateral based on such publicly quoted fair market value:

                 Type Of Security                                    Loan Value

  Cash and Cash Equivalents                                               100%
  U.S. Treasury Obligations with maturities of less than 1 year           95%
  U.S. Treasury Obligations with maturities of 1 year or more             90%
  Municipal Bonds                                                         80%
  A1/P1 Commercial Paper                                                  80%
  Bonds listed on the New York Stock Exchange                             70%
  Bonds listed on the American Stock Exchange                             70%
  Publicly Traded Stocks (including Millennium Cell, Inc.)                50%


         "Managing   Person":   with  respect  to  any  Person  that  is  (i)  a
corporation, its board of directors, (ii) a limited liability company, its board
of control, managing member or members, (iii) a limited partnership, its general
partner,  (iv) a general  partnership or a limited  liability  partnership,  its
managing  partner or executive  committee or (v) any other Person,  the managing
body thereof or other Person analogous to the foregoing.

         "Margin Stock":  any "margin stock",  as defined in Regulation U of the
Board of Governors of the Federal  Reserve System,  as amended,  supplemented or
otherwise modified from time to time.

         "Marketable  Securities  Borrowing  Base":  The Loan Value of  Eligible
Securities Collateral.


         "Material  Adverse  Change":  a  material  adverse  change  in (i)  the
financial condition, operations, business, performance, prospects or Property of
the  Parent  and its  Subsidiaries  taken as a whole,  (ii) the  ability  of the
Borrowers or any Obligor to perform their obligations under any Loan Document or
(iii) the ability of the Agent and the Lenders to enforce the Loan Documents.

         "Material  Adverse  Effect":  a  material  adverse  effect  on (i)  the
financial condition, operations, business, performance, prospects or Property of
the  Parent  and its  Subsidiaries  taken as a whole,  (ii) the  ability  of the
Borrowers  or any other  Obligor to  perform  their  obligations  under any Loan
Document  or (iii) the  ability of the Agent and the Lenders to enforce the Loan
Documents.

         "Material Subsidiary":  means each of the Subsidiary Guarantors and any
other Subsidiary of the Parent which (i) as at the end of the most recent Fiscal
Quarter of Parent,  held 5% or more of the Consolidated assets of Parent and its
Subsidiaries,  or (ii) for the four most recently  completed  Fiscal Quarters of
Parent  accounted for more than 5% of the Consolidated  EBITDA,  as shown on the

<PAGE>

financial statements of Parent and its Subsidiaries,  provided that for purposes
of  determining  whether any  Subsidiary  acquired or  organized  after the date
hereof is a Material Subsidiary,  the financial statements of the Parent and its
Subsidiaries shall be adjusted to include such Subsidiary  acquired or organized
after the date hereof as if such  Subsidiary  had been a Subsidiary at all times
during such four Fiscal Quarters or, if shorter,  during the period after it was
organized.

         "Maturity Date": December 14, 2004.

         "Minimum Net Worth  Amount:" As at September  30, 2001 and the last day
of each Fiscal Quarter  thereafter,  90% of the Parent's  Consolidated Net Worth
plus, (A) 80% of the Parent's  Consolidated  net income (on a cumulative  basis)
for each Fiscal  Quarter  commencing  December 31, 2001 plus, (B) 80% of the Net
Cash  Proceeds (on a cumulative  basis)  resulting  from any equity  issuance by
Parent or any of its Subsidiaries.

         "Moody's": Moody's Investors Service, Inc., or any successor thereto.

         "Mortgage  Amendment":  collectively,  (i) the first  amendment  to the
Mortgage on the Pawling  Property,  dated as of December 14,  2001,  between the
Parent and the Agent,  (ii) the first amendment to the Mortgage on the Reservoir
Property,  dated as of December 14, 2001,  between Chestnut Hill Reservoir Corp.
and the Agent,  and (iii) the first  amendment to the Mortgage on the  Killingly
Property, dated as of December 14, 2001, between the Parent and the Agent.

         "Mortgages":  a mortgage on (i) Property owned by Parent and located in
Pawling, New York (the "Pawling Property"), pursuant to which the Agent shall be
granted a first priority  mortgage Lien for the ratable  benefit of the Lenders,
to  secure  the  Obligations,  which  Mortgage  shall be in form  and  substance
satisfactory  to the Agent and (ii) Property  owned by Chestnut  Hill  Reservoir
Corp. and located in Connecticut (the "Reservoir  Property"),  pursuant to which
the  Agent  shall be  granted a first  priority  mortgage  Lien for the  ratable
benefit of the Lenders, to secure the guarantee of Chestnut Hill Reservoir Corp.
under the Subsidiary Guaranty and Security Agreement, which Mortgage shall be in
form and substance  satisfactory  to the Agent and (iii)  Property  owned by the
Parent  and  located  in  Killingly,  Connecticut  (the  "Killingly  Property"),
pursuant to which the Agent shall be granted a first priority  mortgage Lien for
the ratable benefit of the Lenders,  to secure the  Obligations,  which Mortgage
shall be in form and substance satisfactory to the Agent.

         "Mortgaged Property": any Real Estate which is subject to any Mortgage.

         "Multi-employer Plan": a Pension Plan which is a multi-employer plan as
defined in Section 4001(a)(3) of ERISA.

         "MXL": MXL Industries, Inc.


<PAGE>

         "Net Cash  Proceeds":  with respect to any Covered Event or Disposition
by any Obligor,  the aggregate gross sales proceeds received by such Obligor, in
cash in  connection  with such Covered Event less all  reasonable  out of pocket
fees,  commissions  and  taxes  paid  as a  result  of  such  Covered  Event  or
Disposition,  and other  reasonable  expenses  incurred in connection  with such
Covered Event or Disposition.

         "Notes":  means, as the context may require, a Revolving Credit Note or
a Swing Line Note.

         "Notice of Conversion":a notice substantially in the form of Exhibit D.

         "Obligations": all of the Indebtedness,  liabilities and obligations of
the Borrowers and each other Obligor to the Lenders, the Issuing Bank, the Swing
Line Loan Lender and the Agent arising under the Loan  Documents  (including any
Reimbursement Obligations), including Obligations under Interest Rate Protection
Arrangements  with a  Rate  Protection  Lender,  in  each  case  whether  fixed,
contingent,  now existing or hereafter arising,  created,  assumed,  incurred or
acquired,  direct or indirect,  matured or  unmatured,  absolute or  contingent,
whether or not currently  contemplated  (including any interest  accruing during
the pendency of any proceeding of the type described in Section 9.1(i),  whether
or not  allowed  in such  proceeding),  as such  Indebtedness,  obligations  and
liabilities  may be amended,  increased,  modified,  renewed,  refinanced by the
Agent and the Lenders, refunded or extended from time to time.

         "Obligor":  means,  as the context may require,  the Borrowers and each
other Person (other than a Lender) obligated under any Loan Document  (including
each Subsidiary Guarantor).

         "Operating  Entity":  any Person or any business or operating unit of a
Person  which is, or could be,  operated  separate  and apart from (i) the other
businesses and operations of such Person,  or (ii) any other line of business or
business segment.

         "Original Agreement":  shall have the meaning set forth in the recitals
hereto.

         "Organizational   Documents":   as  to  any  Person   which  is  (i)  a
corporation,  the certificate or articles of  incorporation  and by-laws of such
Person,  (ii)  a  limited  liability  company,  the  limited  liability  company
agreement  or  similar  agreement  of  such  Person,  (iii) a  partnership,  the
partnership  agreement or similar  agreement  of such Person,  or (iv) any other
form of entity or organization,  the organizational  documents  analogous to the
foregoing.

         "Other Taxes": as defined in Section 3.10(c).

         "Pawling Property": as defined under "Mortgages."


<PAGE>

         "PBGC": the Pension Benefit Guaranty  Corporation  established pursuant
to Subtitle A of Title IV of ERISA, or any Governmental  Authority succeeding to
the functions thereof.

         "Pension Plan": at any date of determination, any Employee Benefit Plan
(including a  Multi-employer  Plan),  the funding  requirements  of which (under
Section  302 of ERISA or Section 412 of the Code) are, or at any time within the
six  years  immediately  preceding  such  date,  were in whole  or in part,  the
responsibility of the Parent, any of its Subsidiaries or any ERISA Affiliate.

         "Permitted Lien": a Lien permitted to exist under Section 8.2.


         "Person": any individual, firm, partnership, limited liability company,
joint  venture,  corporation,  association,  business  enterprise,  joint  stock
company,  unincorporated association, trust, Governmental Authority or any other
entity, whether acting in an individual,  fiduciary,  or other capacity, and for
the purpose of the definition of "ERISA Affiliate", a trade or business.

         "Physics": General Physics Corporation.

         "Prohibited  Transaction":  a  transaction  which is  prohibited  under
Section  4975 of the Code or Section 406 of ERISA and not exempt  under  Section
4975 of the Code or Section 408 of ERISA.

         "Property": all types of real, personal, tangible,  intangible or mixed
property.


         "Proposed Lender": as defined in Section 3.12.

         "Rate Protection Lenders": collectively, the Lenders and any Affiliates
of the Lenders  which from time to time enter or have entered into Interest Rate
Protection Arrangements with Parent.

         "Real Estate": all real property at any time owned or leased (as lessee
or sublessee) by the Borrowers or any of their Subsidiaries.

         "Real Estate Borrowing Base": the Real Estate Borrowing Base Percentage
for the applicable  Fiscal Year of the  Borrowers,  multiplied by, the Aggregate
Appraisal Value.



<PAGE>

         "Real Estate  Borrowing Base  Percentage":  for each Fiscal Year of the
Borrowers, the percentages set forth below:


                 Calendar           Real Estate Borrowing Base Percentage
                 --------           -------------------------------------
                   Year
                   ----
                   2002                              50%
                   2003                              25%
           2004 and thereafter                        0%

         "Reference Period": as of any date of determination, the period of four
(4) consecutive Fiscal Quarters of the Borrowers and their  Subsidiaries  ending
on such date,  or if such date is not a Fiscal  Quarter end date,  the period of
four (4)  consecutive  Fiscal Quarters most recently ended (in each case treated
as a single accounting period).

         "Refunded Swing Line Loans": as defined in Section 2.3(b)(ii).

         "Regulatory  Change":  (i) the  introduction  or phasing in of any law,
rule or regulation  after the Relevant Date,  (ii) the issuance or  promulgation
after  the  Relevant  Date of any  directive,  guideline  or  request  from  any
Governmental  Authority  (whether or not having the force of law),  or (iii) any
change after the Relevant Date in the  interpretation of any existing law, rule,
regulation,  directive,  guideline  or  request  by any  Governmental  Authority
charged with the administration  thereof.  For purposes of this definition,  the
term  "Relevant  Date" shall mean (i) in the case of each  Lender  listed on the
signature  pages hereof,  the Effective  Date, or (ii) in the case of each other
Lender,  the effective date of the Assignment and Acceptance  Agreement or other
document pursuant to which it became a Lender.

         "Reimbursement    Agreement":    as   defined   in   Section    2.7(b).


         "Reimbursement  Obligation":  the joint and several  obligation  of the
Borrowers  to  reimburse  the Issuing  Bank for amounts  drawn under a Letter of
Credit.

         "Remaining Interest Period":  (i) in the event that the Borrowers shall
fail for any  reason to borrow a  Revolving  Credit  Loan in respect of which it
shall have requested a Eurodollar  Advance or convert an Advance to a Eurodollar
Advance  after it shall have notified the Agent of its intent to do so, a period
equal to the  Interest  Period  that the  Borrowers  elected  in respect of such
Eurodollar  Advance;  or (ii)  in the  event  that a  Eurodollar  Advance  shall
terminate for any reason prior to the last day of the Interest Period applicable
thereto, a period equal to the remaining portion of such Interest Period if such
Interest  Period  had not been so  terminated;  or (iii) in the  event  that the
Borrowers  shall  prepay or repay all or any part of the  principal  amount of a
Eurodollar  Advance  prior  to the last day of the  Interest  Period  applicable
thereto,  a period  equal to the  period  from  and  including  the date of such
prepayment or repayment to but excluding the last day of such Interest Period.


<PAGE>

         "Reportable Event": with respect to any Pension Plan, (i) any event set
forth in Sections  4043(c) (other than a Reportable Event as to which the 30 day
notice requirement is waived by the PBGC under applicable regulations),  4062(c)
or 4063(a) of ERISA or the regulations  thereunder,  (ii) an event requiring the
Borrowers,  any of their Subsidiaries or any ERISA Affiliate to provide security
to a Pension Plan under Section  401(a)(29) of the Code, or (iii) any failure to
make any payment required by Section 412(m) of the Code.

         "Required Lenders": means, at any time, Lenders holding greater than 66
2/3% of the Revolving Credit Loan Commitments;  provided,  however,  that if any
Lender shall be a Defaulting  Lender at such time,  then there shall be excluded
from the  determination  of Required  Lenders at such time,  the Revolving  Loan
Commitment of such Defaulting Lender.

         "Required Reduction Amount": (a) with respect to Covered Events that do
not involve the sale of assets that were included in the Borrowing Base, 100% of
the Net Cash  Proceeds and (b) with  respect to Covered  Events that involve the
sale of assets that were included in the Borrowing  Base, the amount equal to an
amount that when added to the amount of the reduction in the Borrowing  Base (as
a result of the sold  assets no longer  being  included in the  Borrowing  Base)
equals 100% of the total Net Cash  Proceeds  (for the  avoidance  of doubt,  the
Required  Reduction  Amount  is  determined  in  accordance  with the  following
formula: x + reduction in Borrowing Base = (1.00)(Net Cash Proceeds)); provided,
that, if same would result in a negative  number the Required  Reduction  Amount
shall be deemed zero.

         "Reservoir Property": as defined under "Mortgages".

         "Restricted  Payment":  as to any  Person  (i) any  dividend  or  other
distribution,  direct or indirect,  on account of any shares of Capital Stock in
such Person now or hereafter  outstanding  (other than a dividend payable solely
in shares of such  Capital  Stock to the  holders of such  shares)  and (ii) any
redemption,  retirement,  sinking  fund or similar  payment,  purchase  or other
acquisition,  direct or indirect, of any shares of any class of Capital Stock in
such Person now or hereafter outstanding.

         "Revolving  Credit Loan" and "Revolving  Credit  Loans":  as defined in
Section 2.1(a).

         "Revolving  Credit Note" and "Revolving  Credit  Notes":  as defined in
Section 2.1(b).

         "Revolving Loan  Commitment":  in respect of any Lender,  such Lender's
undertaking during the Revolving Loan Commitment Period to make Revolving Credit
Loans  (including  Revolving  Credit Loans pursuant to Section  2.3(b)(ii))  and
purchase   participations  in  Letters  of  Credit  subject  to  the  terms  and
conditions,  hereof,  in an  aggregate  outstanding  amount  not  exceeding  the
commitment amount of such Lender.


<PAGE>

         "Revolving Loan Commitment Amount": means, on any date, $40,000,000, as
such amount may be reduced from time to time.

         "Revolving Loan Commitment Fee": as defined in Section 3.2(a).

         "Revolving Loan Commitment Percentage":  means, relative to any Lender,
the applicable  percentage set forth opposite its name on Exhibit A hereto under
the  Revolving  Loan  Commitment  column  or  set  forth  in an  Assignment  and
Acceptance  Agreement  under  the  Revolving  Loan  Commitment  column,  as such
percentage  may be  adjusted  from time to time  pursuant to an  Assignment  and
Acceptance  Agreement  executed  by such  Lender  and its  Assignee  Lender  and
delivered  pursuant to Section  11.7(c).  A Lender shall not have any  Revolving
Loan Commitment if its percentage under the Revolving Loan Commitment  column is
zero.

         "Revolving Loan Commitment Period": means the period from the Effective
Date through the Revolving Loan Commitment Termination Date.

         "Revolving  Loan  Commitment  Termination  Date":  the  earlier  of the
Business Day  immediately  preceding  the Maturity  Date or such earlier date on
which the Commitments  shall have been terminated in accordance  herewith or the
Loans shall become due and payable, whether by acceleration or otherwise.

         "SEC":  the United  States  Securities  and Exchange  Commission or any
Governmental Authority succeeding to the functions thereof.

         "Solvent":  with  respect  to any  Person  on a  particular  date,  the
condition  that on such date,  (i) the fair value of the Property of such Person
is  greater  than  the  total  amount  of  liabilities,   including   contingent
liabilities,  of such Person,  (ii) the present fair salable value of the assets
of such  Person is not less than the  amount  that will be  required  to pay the
probable  liability  of such  Person on its debts as they  become  absolute  and
matured,  (iii) such  Person  does not intend to, and does not  believe  that it
will,  incur debts or  liabilities  beyond such Person's  ability to pay as such
debts and liabilities mature, and (iv) such Person is not engaged in business or
a  transaction,  and is not about to engage in  business or a  transaction,  for
which such Person's  Property would  constitute an unreasonably  small amount of
capital. For purposes of this definition, the amount of any contingent liability
at any time shall be computed as the amount that,  in light of all the facts and
circumstances  existing at such time,  represents the amount that can reasonably
be expected to become an actual or matured  liability  after taking into account
probable payments by co-obligors.

         "Special Counsel": Bingham Dana LLP, counsel to the Agent.

         "Standby Letters of Credit": as defined in Section 2.7(a).

<PAGE>

         "Standard & Poor's":  Standard & Poor's Ratings Services, a division of
The McGraw Hill Companies, Inc., or any successor thereto.

         "Stated  Amount"  means,  on any date and with  respect to a particular
Letter of Credit,  the total amount then available to be drawn under such Letter
of Credit.

         "Subordinated  Debt":  the  Hydro Med  Subordinated  Debt and all other
Indebtedness  of a Obligor which is subordinated to the Obligations on terms and
conditions  at  least  as  favorable  to the  Lenders  as are  contained  in the
Subordination Agreement or on other terms and conditions acceptable to the Agent
and the  Required  Lenders,  provided  that,  notwithstanding  the  terms of the
Subordination  Agreement,  in order for such Indebtedness  (other than the Hydro
Med  Subordinated  Debt) to be  considered  "Subordinated  Debt",  the principal
amount of such  Indebtedness  shall not be payable until at least 180 days after
the Revolving Loan Commitment  Termination Date, and no principal of or interest
on or other amounts in respect to such Indebtedness shall be payable at any time
after the occurrence and during the continuance of any Event of Default.

         "Subordination  Agreement":  the subordination agreements substantially
in the forms of Exhibits K-1, K-2 and K-3 hereto.

         "Subsidiary":   as  to  any  Person,   any  corporation,   association,
partnership,  limited liability company,  joint venture or other business entity
of which such Person or any  Subsidiary of such Person,  directly or indirectly,
either (i) in respect of a  corporation,  owns or controls  more than 50% of the
outstanding  Capital Stock having  ordinary  voting power to elect a majority of
the Managing  Person,  irrespective of whether a class or classes shall or might
have voting  power by reason of the  happening  of any  contingency,  or (ii) in
respect of an association, partnership, limited liability company, joint venture
or other business  entity,  is entitled to share in more than 50% of the profits
and losses, however determined.

         "Subsidiary Guarantor": MXL, GP (UK), GP e-Learning Technologies, Inc.,
The  Chestnut  Hill  Reservoir  Company,  and each  present and future  Material
Subsidiary of Parent that is a Domestic  Subsidiary and each Foreign  Subsidiary
provided, that the delivery of such guarantee by such Foreign Subsidiary,  would
not have a material adverse tax consequence on the Parent and its  Subsidiaries,
taken as a whole or on such Foreign Subsidiary.

         "Subsidiary Guaranty and Security  Agreement":  collectively the Second
Amended and Restated  Subsidiary  Guaranty and Security  Agreements by and among
each applicable Subsidiary Guarantor and the Agent, substantially in the Form of
Exhibit I hereto,  as further  amended,  supplemented,  amended and  restated or
otherwise modified from time to time.

         "Swing Line Loan": as defined in Section 2.2(a).


<PAGE>

         "Swing Line Loan  Commitment":  the  commitment  of the Swing Line Loan
Lender to make Swing Line Loans for the account of the Borrowers in an aggregate
amount up to the Swing Line Loan  Commitment  Amount,  and the commitment of the
Lenders to  participate  in the Swing Line Loan Exposure as set forth in Section
2.3(b).

         "Swing Line Loan  Commitment  Amount":  One Million and 00/100  Dollars
($1,000,000.00), as such amount may be reduced from time to time.

         "Swing  Line  Loan  Commitment  Period":  means  the  period  from  the
Effective Date through the Revolving Loan Commitment Termination Date.

         "Swing Line Loan Credit Exposure":  with respect to the Swing Line Loan
Lender,  as of any date, the same as of such date of the  outstanding  principal
balances of the Swing Line Loans.

         "Swing  Line  Loan  Lender":  means,  subject  to  the  terms  of  this
Agreement, Fleet.


         "Synthetic  Lease":  any obligation of any Person under a lease treated
as an operating lease under generally  accepted  accounting  principles and as a
loan of financing under United States income tax purposes.

         "Taxes": as defined in Section 3.10(a).


         "Tax on the Income": as defined in Section 3.10(a).


         "Termination  Date" means the date on which all  Obligations  have been
paid in full in cash,  all  Letters of Credit have been  terminated,  expired or
cash collateralized and all Commitments have been permanently terminated.

         "Termination Event": with respect to any Pension Plan, (i) a Reportable
Event,  (ii) the  termination  of a Pension  Plan,  or the filing of a notice of
intent to terminate a Pension Plan, or the treatment of a Pension Plan amendment
as a  termination  under  Section  4041(c) of ERISA,  (iii) the  institution  of
proceedings to terminate a Pension Plan under Section 4042 of ERISA, or (iv) the
appointment  of a trustee to  administer  any Pension Plan under Section 4042 of
ERISA.

         "Total Consolidated Liabilities":  defined and determined in accordance
with GAAP.


         "Trade Letters of Credit": as defined in Section 2.7(a).


         "Type":  with respect to any Loan, the character of such Loan as an ABR
Advance or a Eurodollar Advance, each of which constitutes a type of loan.


<PAGE>

         "Unfunded  Pension  Liabilities":  with respect to any Pension Plan, at
any date of  determination,  the amount  determined  by taking  the  accumulated
benefit  obligation,  as disclosed in  accordance  with  Statement of Accounting
Standards No. 87,  "Employers'  Accounting for  Pensions",  over the fair market
value of Pension Plan assets.

         "United  States":  the United States of America  (including  the States
thereof and the District of Columbia).

         "Unqualified Amount": as defined in Section 3.1(c).

         "Unrecognized Retiree Welfare Liability":  with respect to any Employee
Benefit Plan that provides post retirement benefits other than pension benefits,
the amount of the  transition  obligation,  as  determined  in  accordance  with
Statement of Financial Accounting Standards No. 106, "Employers'  Accounting for
Post Retirement  Benefits Other Than Pensions," as of the most recent  valuation
date, that has not been  recognized as an expense in an income  statement of the
Parent and its  Subsidiaries,  provided that prior to the date such Statement is
applicable to the  Borrowers,  such amount shall be based on an estimate made in
good faith of such transition obligation.

         "Updated Borrowing Base Certificate": a Borrowing Base Certificate that
(i) is updated to include a current  calculation  of the  Marketable  Securities
Borrowing Base as of a date which is not more than one Business Day prior to the
preparation  of such  Updated  Borrowing  Base  Certificate,  (ii)  includes the
calculation  of the Accounts  Receivable  Borrowing  Base  contained in the most
recent  Borrowing  Base  Certificate  furnished  pursuant  to the  terms of this
Agreement,  (iii) is updated to include a current calculation of the Real Estate
Borrowing Base as of a date which is not more than one Business Day prior to the
preparation  of such Updated  Borrowing  Base  Certificate  and (iv)  contains a
certification from an Authorized  Signatory that such Authorized Signatory knows
of no  material  adverse  change  in the  Accounts  Receivable  Borrowing  Base,
Marketable Securities Borrowing Base or the Real Estate Borrowing Base from that
reflected in the most recent  Borrowing Base Certificate  furnished  pursuant to
the terms of this Agreement.

         "Upstream Dividends": as defined in Section 8.14.

         "U.S.   Person":  a  citizen  or  resident  of  the  United  States,  a
corporation,  partnership  or other entity  created or organized in or under any
laws of the  United  States,  or any  estate or trust  that is subject to United
States federal income taxation regardless of the source of its income.

         1.2 Principles of Construction

             (a) All terms  defined in a Loan  Document  shall have the meanings
given  such  terms  therein  when  used  in  the  other  Loan  Documents  or any

<PAGE>

certificate,  opinion or other  document  made or  delivered  pursuant  thereto,
unless otherwise defined therein.

             (b) As used in the Loan Documents and in any  certificate,  opinion
or other  document  made or delivered  pursuant  thereto,  accounting  terms not
defined in Section 1.1, and  accounting  terms partly defined in Section 1.1, to
the extent not defined,  shall have the respective  meanings given to them under
GAAP.  If at any time any change in GAAP would  affect  the  computation  of any
financial  ratio or  requirement  set forth in this  Agreement,  the Agent,  the
Lenders and the Borrowers  shall  negotiate in good faith to amend such ratio or
requirement  to reflect  such  change in GAAP  (subject  to the  approval of the
Required  Lenders),   provided  that,  until  so  amended,  (i)  such  ratio  or
requirement  shall continue to be computed in accordance with GAAP prior to such
change therein and (ii) the Borrowers shall provide to the Agent and the Lenders
financial  statements  and other  documents  required under this Agreement or as
reasonably   requested   hereunder   setting  forth  a  reconciliation   between
calculations of such ratio or requirement made before and after giving effect to
such  change  in  GAAP.  Unless  otherwise  expressly  provided,  all  financial
covenants and defined financial terms shall be computed on a consolidated  basis
for the Parent and its Subsidiaries, in each case without duplication.

             (c) The words  "hereof",  "herein",  "hereto" and  "hereunder"  and
similar words when used in a Loan Document  shall refer to such Loan Document as
a whole and not to any particular provision thereof,  and Section,  schedule and
exhibit  references  contained  therein  shall  refer  to  Sections  thereof  or
schedules or exhibits thereto unless otherwise expressly provided therein.

             (d) The phrase "may not" is prohibitive and not permissive.

             (e) Unless the context  otherwise  requires,  words in the singular
number include the plural, and words in the plural include the singular.

             (f)  Unless  specifically  provided  in  a  Loan  Document  to  the
contrary, any reference to a time shall refer to such time in New York.

             (g)  Unless  specifically  provided  in  a  Loan  Document  to  the
contrary, in the computation of periods 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".

             (h)  References in any Loan Document to a fiscal period shall refer
to that fiscal period of the Parent.

             (i) The words  "include"  and  "including",  when used in each Loan
Document,  shall  mean that the same  shall be  included  "without  limitation",
unless otherwise expressly provided therein.


<PAGE>

2.       AMOUNT AND TERMS OF LOANS AND LETTERS OF CREDIT

         2.1 Revolving Credit Loans; Revolving Credit Notes

             (a)  Subject  to the  terms  and  conditions  hereof,  each  Lender
severally  (and not  jointly)  agrees to make  revolving  credit  loans  (each a
"Revolving  Credit Loan" and, as the context may require,  collectively with all
other Revolving  Credit Loans of such Lender and with the Revolving Credit Loans
of all other Lenders,  the "Revolving  Credit Loans") to the Borrowers from time
to time during the Revolving Loan Commitment Period,  provided, that immediately
after giving effect thereto, (i) the aggregate  outstanding  principal amount of
the Revolving Credit Loans of any Lender,  together with such Lender's Revolving
Loan Commitment  Percentage of the aggregate  amount of all Swing Line Loans and
Letter of Credit  Outstandings,  shall not exceed such Lender's  Revolving  Loan
Commitment  Percentage of the lesser of the (x) then existing Borrowing Base and
(y)  Revolving  Loan  Commitment  Amount and (ii) the Credit  Exposure  does not
exceed the lesser of (x) the then existing Borrowing Base, and (y) the Revolving
Loan  Commitment  Amount.  During the  Revolving  Loan  Commitment  Period,  the
Borrowers  may  borrow,  prepay  in  whole  or in part and  reborrow  under  the
Revolving Loan  Commitment,  all in accordance  with the terms and conditions of
this Agreement. Subject to the provisions of Sections 2.3 and 3.3, at the option
of the  Borrowers,  Revolving  Credit  Loans  may be made as one or more (i) ABR
Advances, (ii) Eurodollar Advances or (iii) any combination thereof.

             (b)  The  Revolving  Credit  Loans  made by each  Lender  shall  be
evidenced by a promissory  note of the Borrowers,  each of which shall amend and
restate in its  entirety  the  Revolving  Credit Note payable to such Lender and
provided in  connection  with the Existing  Credit  Agreement  and each of which
shall be  substantially  in the form of Exhibit  B-1  hereto,  with  appropriate
insertions  therein  as to date and  principal  amount  (each,  as  indorsed  or
modified from time to time, a "Revolving Credit Note" and, collectively with the
Revolving  Credit Notes of all other  Lenders,  the "Revolving  Credit  Notes"),
payable to the order of such Lender,  dated the Closing Date,  and in the stated
principal amount equal to such Lender's  Revolving Loan Commitment  Amount.  The
outstanding  principal  balance of the  Revolving  Credit Loans shall be due and
payable on the Revolving Loan Commitment Termination Date.

         2.2 Swing Line Loans; Swing Line Notes

             (a) Subject to the terms and conditions hereof, the Swing Line Loan
Lender  agrees to make  Swing Line  Loans  (each a "Swing  Line Loan" and as the
context may require,  collectively  with all other Swing Line Loans of the Swing
Line Loan  Lender,  the "Swing Line Loans") to the  Borrowers  from time to time
during the Swing Line Loan Commitment  Period,  equal to the amount of the Swing
Line Loan requested by the Borrowers to be made on such day. The Swing Line Loan
Lender  shall not be  permitted  or required to make Swing Line Loans if,  after
giving effect thereto,  (i) the aggregate  outstanding  principal  amount of all
Swing  Line Loans  would  exceed the then  existing  Swing Line Loan  Commitment

<PAGE>

Amount or (ii) unless otherwise agreed to by the Swing Line Loan Lender,  in its
sole discretion, the sum of all Swing Line Loans and Revolving Credit Loans made
by the Swing Line Loan Lender, plus, the Swing Line Loan Lender's Revolving Loan
Commitment   Percentage  of  the  aggregate  amount  of  all  Letter  of  Credit
Outstandings would exceed the Swing Line Loan Lender's Revolving Loan Commitment
Percentage of the then existing Revolving Loan Commitment Amount. All Swing Line
Loans shall be made as ABR Advances and shall not be entitled to be converted in
Eurodollar Advances.

             (b) The Swing Line Loans made by the Swing Line Loan  Lender  shall
be evidenced  by a promissory  note,  of the  Borrowers,  each of which shall be
substantially  in the form of Exhibit B-2 hereto,  with  appropriate  insertions
therein as to date an principal  amount (each as indorsed or modified  from time
to time, a "Swing Line Loan Note"),  payable to the order of the Swing Line Loan
Lender,  dated the Closing Date, and in the stated principal amount equal to the
Swing Line Loan Lender's  Swing Line Loan  Commitment  Amount.  The  outstanding
principal  amount  of the  Swing  Line  Loans  shall be due and  payable  on the
Revolving Loan Commitment Termination Date.

         2.3 Procedure for Borrowing.  Loans (other than Swing Line Loans) shall
be made by the Lenders in accordance with  subsection (a) below,  and Swing Line
Loans shall be made by the Swing Line Loan Lender in accordance  with subsection
(b) below.

             (a) Revolving  Credit Loans. (i) The Borrowers may borrow under the
applicable  Revolving Loan  Commitment on any Business Day during the applicable
Revolving Loan Commitment  Period provided the applicable  Borrower shall notify
the Agent by the  delivery  of a  Borrowing  Request  signed  by the  applicable
Borrower (together with an Updated Borrowing Base Certificate delivered pursuant
to Section 6.2).  The  Borrowing  Request shall be sent by telecopy and shall be
irrevocable  (confirmed promptly, and in any event within five Business Days, by
the  delivery  to the  Agent  of a  Borrowing  Request  manually  signed  by the
applicable Borrower) no later than: 11:00 a.m., three Business Days prior to the
requested  Borrowing Date, in the case of Eurodollar  Advances,  or either 11:00
a.m., one Business Day prior to the requested  Borrowing  Date, or 10:00 a.m. on
the requested  Borrowing  Date in the case of ABR Advances,  specifying  (A) the
aggregate  principal  amount to be borrowed under the Revolving Loan Commitment,
(B) the requested  Borrowing  Date,  (C) whether such borrowing is to consist of
one or more Eurodollar Advances,  ABR Advances, or a combination thereof, (D) if
the borrowing is to consist of one or more  Eurodollar  Advances,  the length of
the Interest Period for each such Eurodollar  Advance and (E) if all or any part
of the applicable  Revolving Credit Loan will directly or indirectly be used by,
or be for the benefit of, any Subsidiary Guarantor,  the name of such Subsidiary
Guarantor. With respect to the Borrowers, each (i) Eurodollar Advance to be made
on a Borrowing  Date,  when  aggregated  with all amounts to be  converted  to a
Eurodollar  Advance  on such date and having  the same  Interest  Period as such
first Eurodollar Advance,  shall equal no less than $500,000 or such amount plus
a whole multiple of $100,000 in excess  thereof,  and (ii) each ABR Advance made

<PAGE>

on each  Borrowing  Date shall equal no less than $500,000 or such amount plus a
whole  multiple of $100,000 in excess  thereof or, if less,  the Revolving  Loan
Commitment Amount.

             (ii) Upon  receipt  of each  Borrowing  Request,  the  Agent  shall
promptly  notify  each  Lender  thereof.  Subject  to its  receipt of the notice
referred to in the preceding  sentence,  each Lender will make  available to the
Agent for the  account of each  Borrower at the office of the Agent set forth in
Section 11.2 not later than 12:00 noon on the relevant  Borrowing Date requested
by the applicable Borrower,  in funds immediately available to the Agent at such
office, the amount of its Revolving Loan Commitment  Percentage of the requested
Revolving  Credit  Loans.  The  amounts so made  available  to the Agent on such
Borrowing  Date  will  then,  subject  to  the  satisfaction  of the  terms  and
conditions of this  Agreement,  as determined by the Agent, be made available on
such date to the  applicable  Borrower  by the Agent at the  office of the Agent
specified in Section 11.2 by crediting an account of the applicable  Borrower on
the books of such  office with the  aggregate  of said  amounts  received by the
Agent.

             (iii)  Unless the Agent  shall have  received  prior  notice from a
Lender (by  telephone  or  otherwise,  such notice to be promptly  confirmed  by
telecopy or other writing) that such Lender will not make available to the Agent
such Lender's applicable Revolving Loan Commitment  Percentage of the applicable
Loans  requested  by the  applicable  Borrower,  the Agent may assume  that such
Lender  has made such  share  available  to the Agent on the  Borrowing  Date in
accordance  with this Section,  provided that such Lender received notice of the
requested  Loans  from the  Agent,  and the Agent  may,  in  reliance  upon such
assumption,   make   available  to  the  Borrowers  on  the  Borrowing   Date  a
corresponding  amount.  If and to the extent such Lender  shall not have so made
its applicable  Revolving Loan Commitment  Percentage of such Loans available to
the Agent,  such Lender and the  Borrowers  severally  agree to pay to the Agent
forthwith on demand such corresponding amount (to the extent not previously paid
by the other),  together with  interest  thereon for each day from the date such
amount is made available to the Borrowers to the date such amount is paid to the
Agent,  at a rate  per  annum  equal  to,  in the  case  of the  Borrowers,  the
applicable  interest rate set forth in the  Applicable  Margin for ABR Advances,
and, in the case of such  Lender,  at a rate of interest  per annum equal to the
Federal  Funds Rate for the first three days after the due date of such  payment
until the date such payment is received by the Agent and the Federal  Funds Rate
plus 2%  thereafter.  Such payment by the Borrowers,  however,  shall be without
prejudice to its rights  against  such  Lender.  If such Lender shall pay to the
Agent such  corresponding  amount,  such  amount so paid shall  constitute  such
Lender's  Revolving  Credit  Loan as  part of the  Revolving  Credit  Loans  for
purposes of this Agreement, which such Loan shall be deemed to have been made by
such Lender on the Borrowing Date applicable to such Loans.

             (iv) If a Lender makes a new Revolving  Credit Loan to any Borrower
on a Borrowing  Date on which such Borrower is to repay a Revolving  Credit Loan

<PAGE>

from such Lender,  such Lender  shall apply the  proceeds of such new  Revolving
Credit Loan to make such repayment,  and only the excess of the proceeds of such
new Revolving  Credit Loan over the  Revolving  Credit Loan being repaid need be
made available to the Agent.

             (b) Swing Line Loans.  (i) By  telephonic  notice to the Swing Line
Loan  Lender on or before  12:00 noon on a Business  Day  (followed  (within one
Business Day) by the delivery of a confirming Borrowing Request),  the Borrowers
may from time to time  irrevocably  request  Swing  Line  Loans in an  aggregate
minimum  amount of $500,000 an integral  multiple of  $100,000.  The proceeds of
each Swing Line Loan shall be made  available  by the Swing Line Loan  Lender to
the Borrowers by wire transfer to the account the applicable Borrower shall have
specified  in its notice  therefor by the close of business on the  Business Day
telephonic notice is received by the Swing Line Loan Lender.

             (ii) If (A) any Swing Line Loan shall be outstanding  for more than
four (4) Business  Days,  (B) any Swing Line Loan is or will be outstanding on a
date when a Borrower  requests that a Revolving  Credit Loan be made, or (C) any
Default  shall occur and be  continuing,  then each Lender (other than the Swing
Line Loan Lender)  irrevocably  agrees that it will, at the request of the Swing
Line Loan Lender,  make a Revolving Credit Loan (which shall initially be funded
as an ABR Advance in an amount equal to such Lender's  Revolving Loan Commitment
Percentage of the aggregate  principal  amount of all such Swing Line Loans then
outstanding (such  outstanding  Swing Line Loans hereinafter  referred to as the
"Refunded Swing Line Loans")). On or before 11:00 a.m. on the first Business Day
following  receipt by each Lender of a request to make Revolving Credit Loans as
provided in the  preceding  sentence,  each Lender  shall  deposit in an account
specified  by the Swing Line Loan  Lender the  amount so  requested  in same day
funds and such funds shall be applied by the Swing Line Loan Lender to repay the
Refunded  Swing Line Loans.  At the time the Lenders  make the above  referenced
Revolving Credit Loans, the Swing Line Loan Lender shall be deemed to have made,
in  consideration  of the making of the  Refunded  Swing Line  Loans,  Revolving
Credit Loans in an amount equal to the Swing Line Loan Lender's  Revolving  Loan
Commitment  Percentage of the aggregate  principal  amount of the Refunded Swing
Line  Loans.  Upon the making (or deemed  making,  in the case of the Swing Line
Loan Lender) of any Revolving  Credit Loans pursuant to this clause,  the amount
so funded shall become outstanding under such Lender's Revolving Credit Note and
shall no longer be owed under the Swing Line Note.  All  interest  payable  with
respect to any  Revolving  Credit Loans made (or deemed made, in the case of the
Swing Line Loan Lender) pursuant to this clause shall be appropriately  adjusted
to  reflect  the  period of time  during  which the Swing  Line Loan  Lender has
outstanding  Swing Line Loans in respect of which such  Revolving  Credit  Loans
were made. Each Lender's  obligation to make Revolving  Credit Loans referred to
in this clause shall be absolute and  unconditional and shall not be affected by
any circumstance,  including (i) any set-off, counterclaim,  recoupment, defense
or other right which such  Lender may have  against the Swing Line Loan  Lender,

<PAGE>

any  Obligor or any Person for any reason  whatsoever;  (ii) the  occurrence  of
continuance of any Default; (iii) any adverse change in the condition (financial
or  otherwise)  of  any  Obligor;  (iv)  the  acceleration  or  maturity  of any
Obligation  or the  termination  of any  commitment  after making the Swing Line
Loan;  (v) any  breach  of any Loan  Document  by any  Person  or (vi) any other
circumstance,  happening  or event  whatsoever,  whether  or not  similar to the
foregoing.

         2.4 Termination or Reduction of Commitments

             (a) Voluntary  Reductions.  Any Borrower shall have the right, upon
at least three Business Days' prior written notice to the Agent, (i) at any time
when the Credit  Exposure  shall be zero or at any time such Borrower  elects to
pay or to prepay the Loans in their  entirety,  to terminate the Revolving  Loan
Commitments  of all of the  Lenders,  and (ii) at any time and from time to time
when the Revolving Loan Commitment  Amount shall exceed the Credit Exposure,  to
permanently  reduce the Revolving  Loan  Commitment  Amount by a sum not greater
than the  amount of such  excess,  provided,  however,  that  each such  partial
reduction  shall be in the  amount of  $1,000,000  or such  amount  plus a whole
multiple of $500,000 in excess thereof.

             (b) Mandatory Reductions Relating to Insurance.  The Revolving Loan
Commitment Amount of each Lender shall be permanently reduced by the amounts, at
the times and to the extent, required by Section 7.5(b).

             (c) Mandatory Reduction Relating to Mandatory Prepayments. Upon the
receipt of mandatory prepayments made pursuant to Section 2.5(d) below.

             (d) In General. (i) Each reduction of the Revolving Loan Commitment
Amount,  shall be made by  reducing  each  Lender's  applicable  Revolving  Loan
Commitment Amount by an amount equal to such Lender's applicable  Revolving Loan
Commitment Percentage. Any optional or mandatory reduction of the Revolving Loan
Commitment  Amount  pursuant to the terms of this  Agreement  which  reduces the
Revolving  Loan  Commitment  Amount  below  the  sum of  the  Letter  of  Credit
Commitment  Amount and the Swing Line Loan Commitment  Amount shall result in an
automatic and corresponding reduction of the Letter of Credit Commitment and the
Swing Line Loan  Commitment  (as  specified  by the  Borrowers  if, after giving
effect to such reduction in the Revolving Loan Commitment  Amount, the Revolving
Loan  Commitment  Amount  exceeds the Swing Line Loan  Commitment  Amount) to an
aggregate  amount not in excess of the then current  Revolving  Loan  Commitment
Amount, as so reduced without any further action on the part of the Issuing Bank
or the Swing Line Loan Lender.

             (ii)  Simultaneously  with each reduction of the Commitment  Amount
under this Section,  the Borrowers  shall pay the Revolving Loan  Commitment Fee
accrued on the amount by which the  Revolving  Loan  Commitment  Amount has been
reduced.


<PAGE>

             (ii)  Notwithstanding  anything contained in Sections 2.4(b),  (c),
(d)(i) or (d)(ii)  above,  the  Borrowers  shall not be  required  to reduce the
Revolving  Loan  Commitment   Amount  below  $35,000,000  as  a  result  of  any
prepayments of the Loans required by Sections  2.5(d) or 7.5 other than pursuant
to a voluntary reduction of the Revolving Loan Commitment Amount.

         2.5 Prepayments of Loans; Additional Collateral

             (a)  Voluntary  Prepayments.  (i) Any Borrower  may, at its option,
prepay its  Revolving  Credit Loans  without  premium or penalty (but subject to
Section  3.5), in full at any time or in part from time to time by notifying the
Agent in  writing at least one  Business  Day prior to the  proposed  prepayment
date,  in the case of Revolving  Credit Loans  consisting of ABR Advances and at
least three Business Days prior to the proposed  prepayment date, in the case of
Revolving Credit Loans consisting of Eurodollar Advances, specifying whether the
Revolving  Credit  Loans  to be  prepaid  consist  of ABR  Advances,  Eurodollar
Advances, or a combination thereof, the Revolving Credit Loan to be prepaid, the
amount to be  prepaid  and the date of  prepayment.  Each such  notice  shall be
irrevocable  and the  amount  specified  in each  such  notice  shall be due and
payable on the date  specified,  together  with accrued  interest to the date of
such payment on the amount prepaid. Upon receipt of such notice, the Agent shall
promptly notify each Lender thereof. Each partial prepayment of Revolving Credit
Loans pursuant to this subsection  shall be in an aggregate  principal amount of
$500,000 or such amount plus a whole multiple of $100,000 in excess thereof, or,
if less, the outstanding  principal balance of the Revolving Credit Loans. After
giving  effect to any partial  prepayment  with respect to  Eurodollar  Advances
which were made  (whether as the result of a  borrowing  or a  conversion)  to a
Borrower  on the  same  date  and  which  had  the  same  Interest  Period,  the
outstanding  principal balance of such Eurodollar Advances shall exceed (subject
to Section 3.3)  $1,000,000 or such amount plus a whole  multiple of $100,000 in
excess thereof.

             (ii) Any Borrower  may, at its option,  prepay its Swing Line Loans
without  premium  or penalty in full at any time or in part from time to time by
prior telephonic  notice to the Swing Line Loan Lender on or before 1:00 p.m. on
the day before such prepayment  (such notice to be confirmed in writing 24 hours
thereafter).  Each such notice shall be irrevocable and the amount  specified in
each such notice shall be due and payable on the date  specified,  together with
accrued  interest to the date of such  payment on the amount  prepaid.  All such
voluntary partial prepayments shall be in a aggregate minimum amount of $500,000
and an integral multiple of $100,000.

             (b) Mandatory  Prepayments  of Loans Relating to Termination of the
Revolving Loan  Commitments.  Upon the  termination of the Commitments of all of
the Lenders, the Borrowers shall prepay the outstanding principal balance of all
Loans and deposit into the Cash Collateral  Accounts an amount which would cause
the  balance on deposit in the Cash  Collateral  Accounts  to equal or exceed an
amount  equal  to  105%  of  the  aggregate  amount  of  all  Letter  of  Credit

<PAGE>

Outstandings  of  the  Lenders.  Upon  each  reduction  of  the  Revolving  Loan
Commitment  Amount, if the Credit Exposure exceeds the Revolving Loan Commitment
Amount as so  reduced,  the  Borrowers  shall  either (i) prepay the  applicable
Revolving  Credit  Loans or Swing Line  Loans (or both),  or (ii) make a deposit
into  the  Cash  Collateral  Accounts,  or  both,  so that  the  Revolving  Loan
Commitment  Amount  as so  reduced  plus  the  balance  on  deposit  in the Cash
Collateral Accounts exceeds the Credit Exposure.

             (c) Mandatory  Borrowing Base Prepayment of Loans;  Contribution to
Cash Collateral  Accounts.  If on any day prior to the Revolving Loan Commitment
Termination  Date,  the Credit  Exposure  shall exceed the Borrowing Base as set
forth on the most recent  Borrowing Base  Certificate or Updated  Borrowing Base
Certificate,  as the case may be, the Borrowers  shall,  within ten (10) days of
such day (but in no event later than the Revolving Loan  Commitment  Termination
Date),  prepay the  Revolving  Credit  Loans or Swing Line Loans (or both) in an
amount equal to the lesser of such excess and the outstanding  principal balance
of the Loans, provided,  however, that if after giving effect to such prepayment
the  aggregate  principal  balance of  outstanding  Loans is zero and the Credit
Exposure still exceeds the Borrowing  Base, the Borrowers  shall deposit as Cash
Collateral  (into the Cash Collateral  Accounts) an amount equal to 105% of such
excess.  Until such excess has been prepaid and such deposit,  if required,  has
been made, the Borrowers  shall not be entitled to borrow  additional  Revolving
Credit  Loans or Swing  Line  Loans or  request  the  issuance  of any Letter of
Credit.

             (d) Mandatory Prepayment from Covered Events and Other Events.

             (i) With respect to each Covered  Event,  (A) the  Borrowers  shall
within one Business Day of the consummation of each such Covered Event,  deliver
to the Agent  the  Required  Reduction  Amount  of such  Covered  Event and such
Required  Reduction Amount shall be applied by the Borrowers to make a mandatory
prepayment of the Revolving Credit Loans and (B) the Borrowers shall, within one
Business  Day of the  consummation  of each such Covered  Event,  deliver to the
Agent 100% of the  non-cash  consideration,  if any,  with  respect to each such
Covered Event to be held as additional collateral for the Obligations.

             (ii) Within two Business  Days of receipt of the Net Cash  Proceeds
from the sale of the common stock of Millenium Cell, Inc. by the Borrowers,  75%
of the amount of such Net Cash  Proceeds  shall be applied by the  Borrowers  to
make a mandatory prepayment of the Revolving Credit Loans.

             (iii)  Within  two  Business  Days of receipt  of any  recovery  in
connection with the Arbitration by the Borrowers,  75% of the amount of the such
recovery shall be applied by the Borrowers to make a mandatory prepayment of the
Revolving Credit Loans.


<PAGE>

             (e) In General.  Simultaneously with each prepayment of a Loan, the
Borrowers  shall prepay all accrued  interest on the amount prepaid  through the
date of  prepayment  and any amount  required  pursuant to Section  3.10 hereto.
Unless  otherwise  specified by the  Borrowers,  each  prepayment of Loans shall
first be applied to ABR Advances. If any prepayment or any other payment is made
in respect of any Eurodollar Advance, in whole or in part, prior to the last day
of the applicable  Interest  Period,  the Borrowers,  jointly and severally,  as
applicable, agree to indemnify the Lenders in accordance with Section 3.5.

         2.6 Use of Proceeds

             The Borrowers agree that the proceeds of the Revolving Credit Loans
Swing  Line  Loans or  Letters  of  Credit  shall be used  solely,  directly  or
indirectly,  to (i) pay all of the Fees of the Borrowers due hereunder, (ii) pay
the  reasonable  out-of-pocket  fees and  expenses  incurred by the  Obligors in
connection with the Loan  Documents,  (iii) refinance all Existing Bank Debt and
(iv) for the Borrowers' and their  Subsidiaries,  other than Hydro Med Sciences,
Inc.,  working capital and general corporate  purposes not inconsistent with the
provisions  hereof.  Notwithstanding  anything to the contrary  contained in any
Loan Document, the Borrowers agree that no part of the proceeds of any Revolving
Credit  Loan,  Swing Line Loan or Letters of Credit  will be used,  directly  or
indirectly,  for a purpose which  violates any law,  including the provisions of
Regulations T, U or X of the Board of Governors of the Federal  Reserve  System,
as amended.

         2.7 Letter of Credit Sub-Facility

             (a)  Subject to the terms and  conditions  of this  Agreement,  the
Issuing Bank agrees, in reliance on the agreement of the other Lenders set forth
in Section  2.8, to issue  standby  letters of credit (the  "Standby  Letters of
Credit") or commercial  (trade) letters of credit (the "Trade Letters of Credit"
and,  together  with the  Standby  Letters of Credit,  and the letters of credit
currently  outstanding (the "Existing L/C's") and issued by the Issuing Bank for
the account of the Borrowers described on Schedule 2.7 hereto, collectively, the
"Letters of Credit") denominated in Dollars during the Revolving Loan Commitment
Period for the account of the Borrowers,  provided that,  immediately  after the
issuance of each Letter of Credit, (i) the Letter of Credit  Outstandings of all
Lenders  (whether or not the  conditions  for drawing under any Letter of Credit
have or may be  satisfied)  would not  exceed  the  Letter of Credit  Commitment
Amount,  and (ii) the  Credit  Exposure  would  not  exceed  the  lesser  of the
Borrowing Base (as reflected in an Updated  Borrowing Base  Certificate) and the
Revolving Loan  Commitment  Amount.  Each Standby Letter of Credit shall have an
expiration  date which shall be not later than the earlier of (i) 365 days after
the date of  issuance  thereof  or (ii) sixty days  before  the  Revolving  Loan
Commitment  Termination  Date.  Each  Trade  Letter  of  Credit  shall  have  an
expiration  date which shall be not later than the earlier of (i) 180 days after
the date of  issuance  thereof  (although  any such  Letter of  Credit  shall be

<PAGE>

renewable  for an  additional  365 day  period  but in no event  later  than the
Revolving  Loan  Commitment  Termination  Date) or (ii)  sixty  days  before the
Revolving Loan Commitment  Termination Date. No Letter of Credit shall be issued
if the Agent,  or any Lender by notice to the Agent no later than 1:00 p.m.  one
Business Day prior to the  requested  date of issuance of such Letter of Credit,
shall have  determined  that any  condition set forth in Sections 5 or 6 has not
been satisfied.

             (b) Each  Letter of Credit  shall be issued for the  account of the
Borrowers in support of an  obligation of the Borrowers or a Subsidiary in favor
of a  beneficiary  who has  requested the issuance of such Letter of Credit as a
condition to a transaction  entered into in connection with the  Borrowers',  or
Subsidiary's ordinary course of business. The applicable Borrower shall give the
Agent a Letter of Credit  Request  for the  issuance of each Letter of Credit by
11:00 a.m.,  three  Business  Days prior to the requested  date of issuance.  No
Letter of Credit  Request  shall be  honored  unless  such  Borrower  shall have
delivered  to the  Issuing  Bank  (x) the  Issuing  Bank's  standard  Continuing
Agreement  for Letters of Credit (the  "Reimbursement  Agreement")  and (y) with
respect to each Letter of Credit Request,  the Issuing Bank's standard Letter of
Credit  application,  in each case executed by an  Authorized  Signatory of such
Borrower,  and  each  Letter  of  Credit  Request  shall  also  specify  (i) the
beneficiary of such Letter of Credit and the  obligations of such Borrower or of
a  Subsidiary  Guarantor  in  respect  of which  such  Letter of Credit is to be
issued, (ii) such Borrower's proposal as to the conditions under which a drawing
may be made under such Letter of Credit and the  documentation to be required in
respect  thereof,  (iii) the maximum amount to be available under such Letter of
Credit, and (iv) the requested dates of issuance and expiration. Upon receipt of
such Letter of Credit Request from any Borrower, the Agent shall promptly notify
the Issuing Bank and each other Lender  thereof.  Each Letter of Credit shall be
in form and substance  reasonably  satisfactory  to the Issuing Bank,  with such
provisions  with  respect to the  conditions  under  which a drawing may be made
thereunder  and the  documentation  required  in respect of such  drawing as the
Issuing  Bank shall  reasonably  require.  Each  Letter of Credit  shall be used
solely for the  purposes  described  therein.  The Issuing  Bank  shall,  on the
proposed  date of  issuance  and  subject  to the  terms and  conditions  of the
Reimbursement Agreement and to the other terms and conditions of this Agreement,
issue the requested Letter of Credit.

             (c) Each  payment  by the  Issuing  Bank of a draft  drawn  under a
Letter of Credit shall give rise to an  obligation  on the part of the Borrowers
to reimburse the Issuing Bank immediately for the amount thereof.

             (d) Notwithstanding anything to the contrary contained herein or in
any  Reimbursement  Agreement,  to the extent  that the terms of this  Agreement
shall be inconsistent with the terms of such Reimbursement  Agreement, the terms
of this Agreement shall govern.

             (e)  It  is  expressly  agreed  that  as  to  the  Existing  L/C's,
notwithstanding  the fact that some of such  L/C's may have been  issued for the

<PAGE>

account of Physics and were executed in connection  with the Existing Bank Debt,
and  notwithstanding the fact that such Existing L/C's were issued in connection
with the Existing  Bank Debt,  for purposes of this  Agreement,  Parent shall be
obligated,  jointly and severally with Physics,  for all reimbursement and other
obligations  in  connection  therewith  as if such  Existing  L/C's were  issued
pursuant  to this  Agreement.  To the  extent  the  Agent  or the  Issuing  Bank
determines that the provisions of any documents  executed in connection with the
Existing  Bank Debt would be required to effect the intent of this  subparagraph
2.7(e),  such documents and provisions  (but only such documents and provisions)
shall  remain in full force and effect as long as the Agent or the Issuing  Bank
deems necessary to effect the provisions of this subparagraph 2.7(e).

         2.8 Letter of Credit Participation and Funding Commitments

             (a) Each Lender hereby  unconditionally,  irrevocably and severally
(and not jointly) for itself only and without any notice to or the taking of any
action  by  such  Lender,  takes  an  undivided  participating  interest  in the
obligations  of the  Issuing  Bank under and in  connection  with each Letter of
Credit in an amount equal to such Lender's Revolving Loan Commitment  Percentage
of the  amount of such  Letter of  Credit.  Each  Lender  shall be liable to the
Issuing Bank for its Revolving Loan  Commitment  Percentage of the  unreimbursed
amount of any draft drawn and honored  under each Letter of Credit.  Each Lender
shall also be liable for an amount  equal to the product of its  Revolving  Loan
Commitment  Percentage and any amounts paid by the Borrowers pursuant to Section
2.7(c) and 2.9 that are subsequently  rescinded or avoided, or must otherwise be
restored or returned. Such liabilities shall be unconditional and without regard
to the  occurrence  of any Default or Event of Default or the  compliance by the
Borrowers with any of its obligations under the Loan Documents.

             (b) The Issuing Bank will promptly notify the Agent,  and the Agent
will promptly  notify each Lender  (which notice shall be promptly  confirmed in
writing) of the date and the amount of any draft  presented  under any Letter of
Credit with  respect to which full  reimbursement  of payment is not made by the
Borrowers  as provided in Section  2.7(c),  and  forthwith  upon receipt of such
notice,  such Lender  (other than the Issuing  Bank in its capacity as a Lender)
shall  make  available  to the Agent for the  account  of the  Issuing  Bank its
Revolving Loan Commitment Percentage of the amount of such unreimbursed draft at
the office of the Agent specified in Section 11.2, in lawful money of the United
States and in  immediately  available  funds,  before 4:00 p.m., on the day such
notice was given by the Agent,  if the relevant notice was given by the Agent at
or prior to 1:00 p.m.,  on such day, and before 12:00 noon, on the next Business
Day, if the relevant notice was given by the Agent after 1:00 p.m., on such day.
The Agent shall distribute the payments made by each such Lender (other than the
Issuing Bank in its capacity as a Lender) pursuant to the immediately  preceding
sentence to the Issuing  Bank  promptly  upon  receipt  thereof in like funds as
received.  Each such Lender shall  indemnify and hold harmless the Agent and the
Issuing  Bank  from  and  against  any and all  losses,  liabilities  (including
liabilities  for  penalties),  actions,  suits,  judgments,  demands,  costs and

<PAGE>

expenses   (including   reasonable   attorneys'   fees  and   expenses   and  an
administration  fee of not less than $100  payable  to the  Issuing  Bank as the
issuer of the relevant Letter of Credit)  resulting from any failure on the part
of such Lender to provide,  or from any delay in providing,  the Agent with such
Lender's Revolving Loan Commitment  Percentage of the amount of any payment made
by the Issuing Bank under a Letter of Credit in accordance  with this subsection
(b) (except in respect of losses,  liabilities or other obligations  suffered by
the Issuing Bank  resulting from the gross  negligence or willful  misconduct of
the Issuing  Bank).  If a Lender does not make  available  to the Agent when due
such Lender's Revolving Loan Commitment  Percentage of any unreimbursed  payment
made by the Issuing Bank under a Letter of Credit  (other than  payments made by
the Issuing Bank by reason of its gross negligence or willful misconduct),  such
Lender  shall be  required  to pay  interest to the Agent for the account of the
Issuing Bank on such  Lender's  Revolving  Loan  Commitment  Percentage  of such
payment at a rate of interest per annum equal to the Federal  Funds Rate for the
first three days after the due date of such payment  until the date such payment
is  received  by the Agent and the Federal  Funds Rate plus 2%  thereafter.  The
Agent shall  distribute such interest  payments to the Issuing Bank upon receipt
thereof in like funds as received.

             (c)  Whenever the Agent is  reimbursed  by the  Borrowers,  for the
account of the Issuing  Bank,  for any payment under a Letter of Credit and such
payment  relates  to an amount  previously  paid by a Lender in  respect  of its
Revolving  Loan  Commitment  Percentage of the amount of such payment under such
Letter of Credit,  the Agent (or the Issuing  Bank, to the extent that the Agent
has paid the same to the Issuing Bank) will pay over such payment to such Lender
(i) before 4:00 p.m. on the day such payment from the Borrowers is received,  if
such  payment is  received  at or prior to 1:00 P.M. on such day, or (ii) before
12:00  noon on the  next  succeeding  Business  Day,  if such  payment  from the
Borrowers is received after 12:00 p.m. on such day.

         2.9 Absolute Obligation With Respect to Letter of Credit Payments

             (a) The payment of drafts  under any Letter of Credit shall be made
in  accordance  with the  terms of such  Letter of  Credit  and (i) the  Uniform
Customs  and  Practice  for  Documentary  Credits  of  International  Chamber of
Commerce No. 500, as adopted or amended from time to time,  in the case of Trade
Letters  of Credit and (ii) the  International  Standby  Practices  1998 or most
recent revision thereof or successor  thereto which shall be in effect from time
to time,  in the case of Standby  Letters of Credit.  The Issuing  Bank shall be
entitled  to honor any drafts and accept any  documents  presented  to it by the
beneficiary of such Letter of Credit in accordance with the terms of such Letter
of Credit and  believed  by the Issuing  Bank in good faith to be  genuine.  The
Issuing  Bank  shall  not  have  any  duty  to  inquire  as to the  accuracy  or
authenticity  of any draft or other drawing  documents which may be presented to
it, but shall be  responsible  only to determine in  accordance  with  customary
commercial  practices  that the  documents  which are  required to be  presented
before  payment or  acceptance  of a draft  under any Letter of Credit have been

<PAGE>

delivered  and that they  comply on their  face  with the  requirements  of that
Letter of Credit.

             (b) The  Borrowers'  obligation  to  reimburse  the  Agent  for the
account of the  Issuing  Bank in respect of a Letter of Credit for each  payment
under or in respect of such Letter of Credit shall be absolute and unconditional
under any and all circumstances and irrespective of any set-off, counterclaim or
defense  to  payment  which  the  Borrowers  may  have or have had  against  the
beneficiary of such Letter of Credit,  the Agent, the Issuing Bank, as issuer of
such Letter of Credit,  any Lender or any other  Person,  including  any defense
based on the  failure of any  drawing to conform to the terms of such  Letter of
Credit,  its lack of  knowledge  of the  issuance of such Letter of Credit,  any
drawing document proving to be forged,  fraudulent or invalid,  or the legality,
validity, regularity or enforceability of such Letter of Credit; provided, that,
with  respect to any Letter of  Credit,  the  foregoing  shall not  relieve  the
Issuing  Bank of any  liability  it may  have to the  Borrowers  for any  actual
damages  sustained by the Borrowers  arising from a wrongful  payment under such
Letter of Credit  made as a result of the Issuing  Bank's  gross  negligence  or
willful misconduct.

             (c) At any time when an Event of Default  exists,  upon demand made
by the Agent acting at the request of the Required Lenders,  the Borrowers shall
be obligated  forthwith to deposit in the Cash Collateral  Accounts an amount in
immediately  available funds equal to the sum of (x) the aggregate  undrawn face
amount of the outstanding  Letters of Credit, (y) the aggregate amount of unpaid
drafts  drawn  on  all  Letters  of  Credit,   and  (z)  the  aggregate   unpaid
Reimbursement  Obligations  (after giving  effect to any Revolving  Credit Loans
made on such date to pay any such Reimbursement Obligations).

         2.10 Payments

             (a) Each  payment,  including  each  prepayment,  of principal  and
interest on the Loans,  of the  Revolving  Loan  Commitment  Fee,  the Letter of
Credit  Commissions and of all of the other fees to be paid to the Agent and the
Lenders in connection  with this Agreement (the Revolving Loan  Commitment  Fee,
the Letter of Credit  Commissions,  the additional Letter of Credit fees and the
Letter of Credit fronting fees referred to in Section 3.2(b),  together with all
of such other fees, being sometimes hereinafter  collectively referred to as the
"Fees")  shall be made by the  Borrowers  prior to 12:00  noon on the date  such
payment  is due to the Agent for the  account of the  applicable  Lenders at the
Agent's  office  specified in Section  11.2, in each case in lawful money of the
United  States,   in  immediately   available   funds  and  without  set-off  or
counterclaim.  As between  the  Borrowers  and the  Lenders,  any payment by the
Borrowers  to the Agent for the  account  of the  Lenders  shall be deemed to be
payment by the  Borrowers to the Lenders.  The failure of the  Borrowers to make
any such  payment by such time shall not  constitute a Default,  provided,  that
such  payment is made on such due date,  but any such  payment  made after 12:00
noon on such due date shall be deemed to have been made on the next Business Day

<PAGE>

for the purpose of  calculating  interest on amounts  outstanding  on the Loans.
Subject to Section  9.2(b),  promptly upon receipt by the Agent of each payment,
including each prepayment,  pursuant to this Section, the Agent shall remit such
payment in like funds as received as follows:  (i) in the case of the  Revolving
Loan  Commitment  Fees and the  Letter of  Credit  Commissions,  to each  Lender
according to its Revolving Loan Commitment  Percentage,  and (ii) in the case of
principal  and interest on the Loans,  to each Lender pro rata  according to its
Revolving Loan Commitment  Percentage of the amount of principal or interest, as
the case may be,  which is then due and payable to the Lenders on account of the
Loans.

             (b)  If any  payment  hereunder,  under  the  Notes  or  under  any
Reimbursement  Agreement  shall  be due  and  payable  on a day  which  is not a
Business  Day,  the due  date  thereof  (except  as  otherwise  provided  in the
definition  of Interest  Period)  shall be extended to the next Business Day and
(except  with  respect to  payments  in respect of the Fees)  interest  shall be
payable at the applicable rate specified herein during such extension, provided,
however that if such next  Business Day is after the Revolving  Loan  Commitment
Termination  Date,  any such payment shall be due on the  immediately  preceding
Business Day.

         2.11 Cash  Collateral  Accounts:  (i) The  Agent  shall  establish  and
maintain at its offices at 1185 Avenue of the Americas, New York, NY in the name
of the Parent and Physics but under the sole  dominion and control of the Agent,
two  separate  cash  collateral   accounts  designated  as  (a)  "GP  Strategies
Corporation Cash Collateral  Account" and (b) "General Physics  Corporation Cash
Collateral  Account"  (collectively,   the  "Cash  Collateral  Accounts").   The
Borrowers hereby pledge to the Agent for its benefit, the benefit of the Issuing
Bank and the pro rata benefit of the Lenders, a Lien on and security interest in
the Cash  Collateral  Accounts and all sums at any time and from time to time on
deposit therein (the Cash Collateral Accounts, together with all sums on deposit
therein,  being  sometimes  hereinafter  collectively  referred  to as the "Cash
Collateral"),  as first priority  collateral  security for the prompt payment in
full when due, whether at stated  maturity,  by acceleration or otherwise of all
the  Obligations.  The Borrowers agree that at any time and from time to time at
its  expense,  it will  promptly  execute  and  deliver to the Agent any further
instruments and documents,  and take any further actions,  that may be necessary
or that the Agent may  reasonably  request,  in order to perfect and protect any
first priority  security  interest  granted or purported to be granted hereby or
enable the Agent to exercise and enforce its rights and remedies  hereunder with
respect to any Cash Collateral.  The Borrowers agree that they will not (i) sell
or otherwise  dispose of any of the Cash  Collateral or (ii) create or permit to
exist any Lien upon any of the Cash  Collateral.  The Borrowers hereby authorize
the Agent,  at any time any  Obligations  shall be required to be paid, to apply
any and all cash on deposit in the Cash  Collateral  Accounts  towards  all such
Obligations which shall then be due and owing.

         2.12 Defaulting Lender

             (a)  Notwithstanding  anything to the contrary herein, in the event
any Lender (x) has refused (which refusal constitutes a breach by such Lender of
its obligations  under this Agreement) to make available its portion of any Loan
or (y)  notifies  either the Agent or the  Borrowers  that it does not intend to
make available its portion of any Loan (if the actual refusal would constitute a
breach by such Lender of its obligations  under this Agreement)  (each a "Lender
Default"),  all rights and  obligations  hereunder of such Lender (a "Defaulting
Lender")  as to which a Lender  Default  is in effect  and of the other  parties
hereto shall be modified to the extent of the express provisions of this Section
2.12 while such Lender Default remains in effect.

             (b)  Loans  shall  be   incurred   pro  rata  from   Lenders   (the
"Non-Defaulting  Lenders")  which  are not  Defaulting  Lenders  based  on their
respective Revolving Loan Commitment Percentages with respect to such Loans, and
no Revolving Loan  Commitment  Percentage of any Lender or any pro rata share of
any Loans  required to be advanced by any Lender  shall be increased as a result
of such Lender Default.  Amounts received in respect of principal of any type of
Loans  shall be applied to reduce the  applicable  Loans of each Lender pro rata
based  on  the  Revolving  Loan  Commitment  Percentage  at  the  time  of  such
application;  provided,  that such amount shall not be applied to any Loans of a
Defaulting Lender at any time when, and to the extent that, the aggregate amount
of Loans of any  Non-Defaulting  Lender  exceeds  such  Non-Defaulting  Lender's
Revolving Loan Commitment Percentage of all Loans then outstanding.

             (c) A Defaulting  Lender shall not be entitled to give instructions
to the  Agent  or to  approve,  disapprove,  consent  to or vote on any  matters
relating to this Agreement and the other Loan Documents. All amendments, waivers
and other  modifications  of this  Agreement and the other Loan Documents may be
made without  regard to a Defaulting  Lender and, for purposes of the definition
of "Required  Lenders",  a Defaulting  Lender shall be deemed not to be a Lender
and not to have Loans outstanding.

             (d) Other than as  expressly  set forth in this Section  2.12,  the
rights and obligations of a Defaulting Lender  (including,  without  limitation,
the obligation to indemnify the Agent) and the other parties hereto shall remain
unchanged.  To the extent any  Borrower  incur any costs  directly  related to a
repayment  under  Section  2.3,  such  Defaulting  Lender shall  reimburse  such
Borrower  for all such costs.  Nothing in this  Section  2.12 shall be deemed to
release any Defaulting  Lender from its obligations under this Agreement and the
other Loan Documents, shall alter such obligations, shall operate as a waiver of
any default by such Defaulting Lender  hereunder,  or shall prejudice any rights
which the any Borrower,  the Agent or any Lender may have against any Defaulting
Lender as a result of any default of such Defaulting Lender hereunder.

             In the event a Defaulting  Lender cures to the  satisfaction of the
Agent,  which shall not be  unreasonably  withheld,  the breach  which  caused a

<PAGE>

Lender to become a Defaulting Lender,  such Defaulting Lender shall no longer be
a Defaulting Lender and shall be treated as a Lender under this Agreement.

3.       INTEREST, FEES, YIELD PROTECTIONS, ETC.

         3.1 Interest Rate and Payment Dates

             (a) Prior to  Maturity.  Except as  otherwise  provided  in Section
3.1(b) and 3.1(c), prior to the Revolving Loan Commitment  Termination Date, (i)
the  Revolving  Credit Loans shall bear  interest on the  outstanding  principal
balance  thereof (A) in the case of ABR Advances,  at the  Alternate  Base Rate,
plus, the Applicable Margin for ABR Advances,  and (B) in the case of Eurodollar
Advances,  at the Eurodollar  Rate,  plus, the Applicable  Margin for Eurodollar
Advances,  and (ii) the Swing Line Loans shall bear interest on the  outstanding
principal  balance  thereof at the  Alternative  Base Rate plus,  the Applicable
Margin for ABR Advances.

             (b) Late Charges. Upon the occurrence and during the continuance of
an Event of Default,  the unpaid principal balance of the Revolving Credit Loans
and the Swing Line Loans shall bear interest,  payable on demand,  at a rate per
annum (whether before or after the entry of a judgment thereon) equal to 2% plus
the interest rate  (including  the Applicable  Margin) which would  otherwise be
applicable  under  Section  3.1(a),  and any overdue  Reimbursement  Obligation,
interest or other amount payable under the Loan  Documents  shall bear interest,
payable on demand,  at a rate per annum (whether  before or after the entry of a
judgment  thereon) equal to the Alternate Base Rate, plus, the Applicable Margin
for ABR Advances, plus, 2%.

             (c) Highest Lawful Rate. At no time shall the interest rate payable
on the Loans of any Lender, together with the Fees and all other amounts payable
under the Loan Documents to such Lender, to the extent the same are construed to
constitute  interest,  exceed the Highest Lawful Rate applicable to such Lender.
If with respect to any Lender for any period during the term of this  Agreement,
any amount paid to such Lender under the Loan Documents,  to the extent the same
shall  (but for the  provisions  of this  Section)  constitute  or be  deemed to
constitute  interest,  would exceed the maximum amount of interest  permitted by
the Highest  Lawful Rate  applicable  to such  Lender  during such period  (such
amount being hereinafter referred to as an "Unqualified Amount"),  then (i) such
Unqualified Amount shall be applied or shall be deemed to have been applied as a
prepayment  of the Loans of such Lender,  and (ii) if in any  subsequent  period
during the term of this Agreement,  all amounts payable under the Loan Documents
to such Lender in respect of such period which  constitute or shall be deemed to
constitute  interest shall be less than the maximum amount of interest permitted
by the Highest  Lawful Rate  applicable to such Lender during such period,  then
the  Borrowers  shall pay to such  Lender,  as interest  and not in repayment of
principal,  in respect of such period an amount (each a  "Compensatory  Interest
Payment")  equal  to the  lesser  of (x) a sum  which,  when  added  to all such
amounts,  would equal the maximum  amount of interest  permitted  by the Highest
Lawful Rate  applicable  to such Lender  during such  period,  and (y) an amount

<PAGE>

equal to the Unqualified  Amount less all other  Compensatory  Interest Payments
made in respect thereof.

             (d) In General. Interest on ABR Advances and on Eurodollar Advances
shall be calculated on the basis of a 360-day year, in each case, for the actual
number of days elapsed. Except as otherwise provided in Section 3.1(b), interest
shall be payable in arrears on each Interest  Payment Date and upon each payment
(including  prepayment)  of the Loans.  Any change in the  interest  rate on the
Loans resulting from a change in the Alternate Base Rate or reserve requirements
shall  become  effective  as of the opening of business on the day on which such
change shall become effective.  The Agent shall, as soon as practicable,  notify
the Borrowers and the Lenders of the effective  date and the amount of each such
change in the Fleet Rate,  but any failure to so notify  shall not in any manner
affect the  obligation  of the  Borrowers  to pay  interest  on the Loans in the
amounts and on the dates required. Each determination of the Alternate Base Rate
or a Eurodollar Rate by the Agent pursuant to this Agreement shall be conclusive
and  binding  on  all  parties  hereto  absent  manifest  error.  The  Borrowers
acknowledge  that to the extent interest payable on ABR Advances is based on the
Fleet Rate,  such rate is only one of the bases for computing  interest on loans
made by the Lenders, and by basing interest payable on ABR Advances on the Fleet
Rate,  the Lenders have not committed to charge,  and the Borrowers  have not in
any way bargained for, interest based on a lower or the lowest rate at which the
Lenders may now or in the future make loans to other borrowers.

         3.2 Fees

             (a)  Revolving  Loan  Commitment  Fee. Each  Borrower,  jointly and
severally,  agrees  to pay to the  Agent,  for the  account  of the  Lenders  in
accordance with each Lender's Revolving Loan Commitment  Percentage,  a fee (the
"Revolving Loan Commitment Fee"),  during the Revolving Loan Commitment  Period,
at a rate per annum equal to the Applicable  Margin for  Commitment  Fees on the
average daily unused  portion of the Revolving  Loan  Commitment  Amount (net of
Letter of Credit  Outstandings).  The  Revolving  Loan  Commitment  Fee shall be
payable quarterly in arrears on the last day of each March, June,  September and
December of each year,  commencing on the first such day following the Effective
Date,  and  ending  on the  Revolving  Loan  Commitment  Termination  Date.  The
Revolving Loan Commitment Fee shall be calculated on the basis of a 360 day year
for the actual number of days elapsed.  The making of Swing Line Loans shall not
constitute   usage  of  the  Revolving  Loan  Commitment  with  respect  to  the
calculation of the Revolving Loan  Commitment Fee to be paid by the Borrowers to
the Lenders.

             (b)  Letter of Credit  Commissions;  Fronting  Fees and  Additional
Fees. The Borrowers,  jointly and severally,  agree to pay to (i) the Agent, for
the account of the  Lenders in  accordance  with each  Lender's  Revolving  Loan
Commitment  Percentage,  commissions (the "Letter of Credit  Commissions")  with

<PAGE>

respect to the Letters of Credit for the period from and  including  the date of
issuance of each thereof to and including the expiration date thereof, at a rate
per annum equal to (x) with respect to Standby Letters of Credit, the Applicable
Margin  applicable  thereto in effect on the date of issuance  thereof,  and (y)
with respect to Trade Letters of Credit the Applicable Margin applicable thereto
(but in no event less than $75) in effect on the date of  issuance  thereof,  in
each case on the average daily maximum amount available under any contingency to
be drawn under such Letter of Credit,  and (ii) to the Issuing  Bank for its own
account,  (x) a Letter of Credit  fronting  fee as set forth in the Fee  Letter,
payable upon  issuance of each such Letter of Credit,  and (y) its standard fees
and charges  customarily  charged to  customers  similar to the  Borrowers  with
respect to any Letter of Credit.  The Letter of Credit  Commissions shall be (A)
calculated  on the basis of a 360-day year for the actual number of days elapsed
and (B)  payable  quarterly  in  arrears  on the last day of each  March,  June,
September  and  December  of each  year  and on the  Revolving  Loan  Commitment
Termination Date.

             (c) Agent's Fees. Each Borrower,  jointly and severally,  agrees to
pay to the Agent, for its own account, such other fees as have been agreed to in
the Fee Letter.

         3.3 Conversions

             (a) The  Borrowers  may elect from time to time to  convert  one or
more of its Eurodollar Advances to ABR Advances by giving the Agent at least one
Business Day's prior irrevocable notice of such election, specifying the Advance
to be converted, provided, that any such conversion of Eurodollar Advances shall
only be made on the last  day of the  Interest  Period  applicable  thereto.  In
addition,  any  Borrower  may  elect  from time to time to  convert  its (i) ABR
Advances to Eurodollar  Advances and (ii) Eurodollar  Advances to new Eurodollar
Advances by selecting a new Interest Period therefor, in each case by giving the
Agent at least three Business Days' prior  irrevocable  notice of such election,
in the case of a conversion to Eurodollar Advances,  specifying the amount to be
so converted and the initial Interest Period relating thereto, provided that any
such  conversion of ABR Advances to Eurodollar  Advances shall only be made on a
Business Day and any such  conversion of Eurodollar  Advances to new  Eurodollar
Advances shall only be made on the last day of the Interest Period applicable to
the  Eurodollar  Advances  which  are to be  converted  to such  new  Eurodollar
Advances.  Each  such  notice  shall be  irrevocable  and  shall be given by the
delivery by telecopy of a Notice of Conversion  (confirmed promptly,  and in any
event within five  Business  Days),  by the delivery to the Agent of a Notice of
Conversion manually signed by the applicable  Borrower.  The Agent shall provide
the applicable  Lenders with, prompt but no later than two Business Days, notice
of each such  election.  Advances may be  converted  pursuant to this Section in
whole or in part,  provided  that the amount to be converted  by the  applicable
Borrower to each Eurodollar Advance, when aggregated with any Eurodollar Advance
to be made to the  applicable  Borrower on such date in accordance  with Section
2.3 and having the same Interest Period as such first Eurodollar Advance,  shall

<PAGE>

equal no less than  $1,000,000 or such amount plus a whole  multiple of $100,000
in excess thereof.

             (b)  Notwithstanding  anything in this  Agreement to the  contrary,
upon the  occurrence  and  during  the  continuance  of a Default or an Event of
Default, the Borrowers shall not have any right to elect to convert any existing
ABR Advance to a new  Eurodollar  Advance or to convert any existing  Eurodollar
Advance to a new Eurodollar  Advance.  In such event,  all ABR Advances shall be
automatically  continued as ABR Advances and all  Eurodollar  Advances  shall be
automatically  converted to ABR Advances on the last day of the Interest  Period
applicable to such Eurodollar Advance.

             (c) Each conversion  shall be effected by each Lender by reflecting
the Type of Loan from the  Advance  being  converted  to the new ABR  Advance or
Eurodollar  Advance,  as the case may be,  (it  being  understood  that any such
conversion shall not constitute a borrowing.  Each conversion of an Advance does
not reflect a repayment of the converted Advance or an additional borrowing, but
a continuation of the original obligation in full force and effect.

         3.4 Concerning Interest Periods

             Notwithstanding any other provision of any Loan Document:

             (a) If any Borrower shall have failed to elect a Eurodollar Advance
under  Section  2.3(a)  or 3.3,  as the  case  may be,  in  connection  with any
borrowing of new Revolving Credit Loans or expiration of an Interest Period with
respect to any existing Eurodollar  Advance,  the amount of the Revolving Credit
Loans  subject to such  borrowing  or such  existing  Eurodollar  Advance  shall
thereafter be a Eurodollar Advance for one or more Interest Periods of one month
until such time,  if any, as a new  Eurodollar  Advance  shall have been elected
pursuant to Section 3.3.

             (b) No  Interest  Period  selected in respect of the  borrowing  or
conversion  of any  Eurodollar  Advance  shall  end  after  the  Revolving  Loan
Commitment Date.

             (c) The  Borrowers  shall  not be  permitted  to have more than ten
Eurodollar  Advances  outstanding  at any one time,  it being  agreed  that each
borrowing of a Eurodollar  Advance pursuant to a single Borrowing  Request shall
constitute the making of one  Eurodollar  Advance for the purpose of calculating
such limitation.

         3.5 Indemnification for Loss

             Notwithstanding  anything contained herein to the contrary,  if any
Borrower shall fail to borrow or convert on a Borrowing Date or Conversion  Date
after it shall have given  notice to do so in which it shall  have  requested  a
Eurodollar  Advance,  or if a Eurodollar  Advance  shall be  terminated  for any

<PAGE>

reason prior to the last day of the Interest Period applicable  thereto,  or if,
while a Eurodollar  Advance is outstanding,  any repayment or prepayment of such
Eurodollar Advance is made for any reason (including as a result of acceleration
or illegality)  on a date which is prior to the last day of the Interest  Period
applicable  thereto,  the Borrowers agree,  jointly and severally,  to indemnify
each Lender against,  and to pay on demand directly to such Lender,  any loss or
expense  suffered  by such  Lender  as a result  of such  failure  to  borrow or
convert, termination,  repayment or prepayment,  including an amount, if greater
than zero, equal to:

                  A  x  (B-C)  x   D
                                  ---
                                  360

where:

"A" equals such Lender's pro rata share of the Affected Principal Amount;

"B" equals the  Eurodollar  Rate  (expressed  as a decimal),  applicable to such
Eurodollar Advances;

"C" equals the Eurodollar Rate  (expressed as a decimal),  in effect on or about
the  first  day  of the  applicable  Remaining  Interest  Period,  based  on the
applicable  rates offered or bid, as the case may be, on or about such date, for
deposits in an amount equal approximately to such Lender's pro rata share of the
Affected  Principal  Amount with an Interest Period equal  approximately  to the
applicable Remaining Interest Period, as determined by such Lender;

"D" equals the number of days from and including the first day of the applicable
Remaining  Interest  Period  to but  excluding  the last  day of such  Remaining
Interest Period;

and any other  out-of-pocket loss or expense (including any internal  processing
charge customarily charged by such Lender) suffered by such Lender in connection
with such  Eurodollar  Advance,  including in liquidating or employing  deposits
acquired to fund or maintain  the funding of its pro rata share of the  Affected
Principal  Amount,  or  redeploying  funds  prepaid or repaid,  in amounts which
correspond  to its  pro  rata  share  of the  Affected  Principal  Amount.  Each
determination  by the  Agent  or a  Lender  pursuant  to this  Section  shall be
conclusive and binding on the Borrowers absent manifest error.

         3.6 Capital Adequacy

             If the amount of capital  required or expected to be  maintained by
any Lender,  or the Issuing Bank or any Person directly or indirectly  owning or
controlling such Lender, or the Issuing Bank (each a "Control Person"), shall be
affected  by the  occurrence  of a  Regulatory  Change and such  Lender,  or the
Issuing Bank shall have determined that such Regulatory Change shall have had or
will  thereafter  have the  effect  of  reducing  (i) the rate of return on such

<PAGE>


Lender's, the Issuing Bank's or such Control Person's capital, or (ii) the asset
value to such Lender,  the Issuing Bank or such Control Person of the Loans made
or  maintained  by  such  Lender,  or of the  Reimbursement  Obligations  or any
participation  therein, in any case to a level below that which such Lender, the
Issuing Bank or such Control  Person could have achieved or would  thereafter be
able to achieve but for such  Regulatory  Change (after taking into account such
Lender's, the Issuing Bank's or such Control Person's policies regarding capital
adequacy) by an amount deemed by such Lender, or the Issuing Bank to be material
to such Lender, the Issuing Bank or Control Person,  then, within ten days after
demand by such  Lender or the  Issuing  Bank,  the  Borrowers  shall pay to such
Lender,  the  Issuing  Bank or such  Control  Person such  additional  amount or
amounts as shall be sufficient to  compensate  such Lender,  the Issuing Bank or
such Control Person, as the case may be, for such reduction.

         3.7 Reimbursement for Increased Costs

             If any Lender, the Agent or the Issuing Bank shall determine that a
Regulatory Change:

             (a) does or shall  subject  it to any Taxes of any kind  whatsoever
with respect to any Eurodollar  Advances or its obligations under this Agreement
to make Eurodollar  Advances,  or change the basis of taxation of payments to it
of principal,  interest or any other amount payable  hereunder in respect of its
Eurodollar Advances, or impose on the Agent, the Issuing Bank or such Lender any
other condition  regarding the Letters of Credit including any Taxes required to
be withheld from any amounts  payable under the Loan  Documents  (except for, in
each  case,  imposition  of, or change in the rate of, Tax on the Income of such
Lender); or

             (b) does or shall impose,  modify or make  applicable  any reserve,
special  deposit,  compulsory  loan,  assessment,   increased  cost  or  similar
requirement  against assets held by, or deposits of, or advances or loans by, or
other credit  extended by, or any other  acquisition  of funds by, any office of
such  Lender  in  respect  of its  Eurodollar  Advances  which is not  otherwise
included in the  determination  of a Eurodollar  Rate, or against any Letters of
Credit issued by the Issuing Bank or participated in by any Lender;

and the result of any of the foregoing is to increase the cost to such Lender of
making,  renewing,  converting or  maintaining  its  Eurodollar  Advances or its
commitment to make such Eurodollar Advances,  or to reduce any amount receivable
hereunder in respect of its Eurodollar Advances,  or to increase the cost to the
Issuing Bank of issuing or maintaining  the Letters of Credit or the cost to any
Lender of participating  therein or the cost to the Agent or the Issuing Bank of
performing  its  respective  functions  hereunder with respect to the Letters of
Credit,  then, in any such case, the Borrowers shall pay such Lender, the Agent,
or the Issuing Bank, as the case may be, within ten days after demand  therefor,
such additional  amounts as is sufficient to compensate such Lender, the Issuing
Bank or the Agent,  as the case may be, for such additional cost or reduction in
such amount receivable which such Lender,  the Issuing Bank or the Agent, as the
case may be, deems to be material as determined by such Lender, the Issuing Bank

<PAGE>

or the  Agent,  as the case may be;  provided,  however,  that  nothing  in this
Section shall require the Borrowers to indemnify the Lenders,  the Agent, or the
Issuing  Bank, as the case may be, with respect to  withholding  Taxes for which
the Borrowers have no obligation under Section 3.10. No failure by any Lender or
the  Agent,  or  the  Issuing  Bank  to  demand,  and  no  delay  in  demanding,
compensation  for any increased  cost shall  constitute a waiver of its right to
demand such compensation at any time. A statement setting forth the calculations
of any  additional  amounts  payable  pursuant to this  Section  submitted  by a
Lender,  the Agent or the  Issuing  Bank,  as the case may be, to the  Borrowers
shall be conclusive absent manifest error.

         3.8 Illegality of Funding

             Notwithstanding  any other  provision  hereof,  if any Lender shall
reasonably  determine  that any law,  regulation,  treaty or  directive,  or any
change therein or in the  interpretation or application  thereof,  shall make it
unlawful  for  such  Lender  to make  or  maintain  any  Eurodollar  Advance  as
contemplated by this Agreement,  such Lender shall promptly notify the Borrowers
and the  Agent  thereof,  and (i) the  commitment  of such  Lender  to make such
Eurodollar  Advances  or convert  ABR  Advances  to  Eurodollar  Advances  shall
forthwith  be  suspended,  (ii)  such  Lender  shall  fund its  portion  of each
requested Eurodollar Advance as an ABR Advance and (iii) such Lender's Revolving
Credit Loans then  outstanding  as such  Eurodollar  Advances,  if any, shall be
converted  automatically  to ABR  Advances  on the last day of the then  current
Interest Period applicable thereto or at such earlier time as may be required by
law. If the  commitment  of any Lender with  respect to  Eurodollar  Advances is
suspended  pursuant to this Section and such Lender shall have  obtained  actual
knowledge  that it is once  again  legal  for such  Lender  to make or  maintain
Eurodollar  Advances,  such  Lender  shall  promptly  notify  the  Agent and the
Borrowers  thereof and, upon receipt of such notice by each of the Agent and the
Borrowers,  such  Lender's  commitment to make or maintain  Eurodollar  Advances
shall be reinstated.

         3.9 Substituted Interest Rate

             In the  event  that (i) the  Agent  shall  have  determined  (which
determination shall be conclusive and binding upon the Borrowers) that by reason
of circumstances  affecting the interbank  eurodollar market either adequate and
reasonable  means do not exist for  ascertaining  the Eurodollar Rate applicable
pursuant to Section 3.1 or (ii) the  Required  Lenders  shall have  notified the
Agent that they have  determined  (which  determination  shall be conclusive and
binding  on  the  Borrowers)  that  the  applicable  Eurodollar  Rate  will  not
adequately and fairly reflect the cost to such Lenders of maintaining or funding
loans  bearing  interest  based on such  Eurodollar  Rate,  with  respect to any
portion of the Loans  that the  applicable  Borrower  has  requested  be made as

<PAGE>

Eurodollar  Advances or Eurodollar  Advances that will result from the requested
conversion of any portion of the Advances into or of Eurodollar  Advances (each,
an "Affected  Advance"),  the Agent shall promptly  notify such Borrower and the
Lenders (by telephone or otherwise, to be promptly confirmed in writing) of such
determination,  on or,  to  the  extent  practicable,  prior  to  the  requested
Borrowing Date or Conversion Date for such Affected Advances. If the Agent shall
give such notice,  (a) any Affected Advances shall be made as ABR Advances,  (b)
the  Advances  (or any  portion  thereof)  that were to have been  converted  to
Affected  Advances  shall be converted  to ABR Advances and (c) any  outstanding
Affected  Advances  shall be  converted,  on the  last  day of the then  current
Interest Period with respect  thereto,  to ABR Advances.  Until any notice under
clauses (i) or (ii),  as the case may be, of this Section has been  withdrawn by
the Agent (by notice to the Borrowers  promptly upon either (x) the Agent having
determined that such circumstances  affecting the interbank eurodollar market no
longer exist and that adequate and reasonable means do exist for determining the
Eurodollar Rate pursuant to Section 3.1 or (y) the Agent having been notified by
such Required  Lenders that  circumstances no longer render the Advances (or any
portion thereof) Affected  Advances),  no further  Eurodollar  Advances shall be
required to be made by the Lenders,  nor shall the  Borrowers  have the right to
convert all or any portion of the Loans to or as Eurodollar Advances.

         3.10 Taxes

             (a) Payments to be Free and Clear.  Except as  otherwise  expressly
required  by  applicable  law,  all  payments  by each  Obligor  under  the Loan
Documents to or for the account of the Agent,  the Issuing  Bank,  or any Lender
(each, an "Indemnified Tax Person") shall be made free and clear of, and without
any deduction or withholding for or on account of, any and all present or future
income,  stamp or other  taxes,  levies,  imposts,  duties,  fees,  assessments,
deductions,  withholdings, or other charges of whatever nature, now or hereafter
imposed, levied, collected, withheld, or assessed by any jurisdiction, or by any
department,  agency,  state,  province or other political subdivision thereof or
therein (collectively, "Taxes"), excluding as to any Indemnified Tax Person, (i)
a Tax on the  Income  imposed  on such  Indemnified  Tax  Person  and  (ii)  any
interest,  fees,  additions to tax or penalties  for late payment  thereof (each
such  nonexcluded Tax, an "Indemnified  Tax"). For purposes hereof,  "Tax on the
Income"  shall  mean,  as to any Person,  a Tax imposed by one of the  following
jurisdictions or by any political  subdivision or taxing authority thereof:  (i)
the United States,  (ii) Canada,  (iii) the jurisdiction in which such Person is
organized,  (iv) the  jurisdiction  in which such Person's  principal  office or
lending offices are located; which Tax is an income tax or franchise tax imposed
on all or part of the net  income  or net  profits  of such  Person or which Tax
represents  interest,  fees, or penalties for late payment of such an income tax
or franchise tax.

             (b) Grossing Up of Payments.  If any Obligor or any other Person is
required by any law, rule, regulation,  order, directive, treaty or guideline to

<PAGE>

make  any  deduction  or  withholding  (which  deduction  or  withholding  would
constitute  an  Indemnified  Tax)  from any  amount  required  to be paid by any
Obligor to or on behalf of an  Indemnified  Tax Person under any Loan  Document,
then (i) such Obligor  shall pay such  Indemnified  Tax before the date on which
penalties  attach  thereto,  such payment to be made for its own account (if the
liability to pay is imposed on such  Obligor) or on behalf of and in the name of
such Indemnified Tax Person (if the liability is imposed on such Indemnified Tax
Person),  and (ii) the sum  payable  to such  Indemnified  Tax  Person  shall be
increased as may be necessary so that after making all required  deductions  and
withholdings  (including  deductions and  withholdings  applicable to additional
sums payable under this Section) such  Indemnified Tax Person receives an amount
equal to the sum it would have received had no such  deductions or  withholdings
been made. Notwithstanding the foregoing, no additional amount shall be required
to be paid to any  Indemnified  Tax Person  under  clause (ii) of the  preceding
sentence  except to the extent that the requirement to deduct or withhold or the
amount thereof is attributable to (i) the introduction  after the Effective Date
of any law,  rule or  regulation  requiring any Person to withhold or deduct any
amount from any payment  under the Loan  Documents in respect of an  Indemnified
Tax or (ii)  any  increase  after  the  Effective  Date in the  rate of any such
withholding or deduction.

             (c) Other Taxes.  Each Obligor agrees, to pay any current or future
stamp or  documentary  taxes or any other excise or property  taxes,  charges or
similar levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or any amendment, supplement or modification of, or
any waiver or consent  under or in respect of, the Loan  Documents  or otherwise
with respect to, the Loan Documents (collectively, the "Other Taxes").

             (d)  Evidence  of  Payment.  Within 30 days  after  the  reasonable
request  therefor by the Agent in  connection  with any  payment of  Indemnified
Taxes or Other  Taxes,  each Obligor will furnish to the Agent the original or a
certified copy of an official  receipt from the jurisdiction to which payment is
made  evidencing  payment  thereof  or, if  unavailable,  a  certificate  from a
Financial  Officer  that  states  that such  payment has been made and that sets
forth the date and amount of such payment.

             (e) U.S.  Tax  Certificates.  Each  Indemnified  Tax Person that is
organized under the laws of any jurisdiction other than the United States or any
political  subdivision  thereof  that  is  exempt  from  United  States  federal
withholding  tax,  or that is  subject  to such tax at a reduced  rate  under an
applicable  treaty,  with  respect to payments  under the Loan  Documents  shall
deliver,  to the  extent  that is  legally  entitled  to do so, to the Agent for
transmission to the Borrowers, on or prior to the Effective Date (in the case of
each  Indemnified  Tax Person  listed on the  signature  pages hereof) or on the
effective  date of the  Assignment  and  Acceptance  Agreement or other document
pursuant  to which it  becomes  an  Indemnified  Tax Person (in the case of each
other  Indemnified  Tax  Person),  and at such other times as may be required by
applicable  law,  either (i) two duly  completed  copies of either (x)  Internal
Revenue Service Form W-8BEN  claiming,  to the extent then available,  a reduced

<PAGE>

rate under an applicable  treaty or (y) Internal Revenue Service Form W-8ECI, or
in  either  case  an  applicable  successor  form;  or  (ii)  in the  case of an
Indemnified  Tax Person  that is not  legally  entitled  to deliver  either form
listed in clause  (e)(i) but is legally  entitled  to  deliver  the  certificate
described in clause (e)(ii),  a certificate to the effect that such  Indemnified
Tax Person is not (x) a "bank" within the meaning of Section 881(c)(3)(A) of the
Code,  (y) a "10 percent  shareholder"  of the  Borrowers  within the meaning of
Section  881(c)(3)(B)  of the  Code,  or (z) a  controlled  foreign  corporation
receiving  interest  from  a  related  person  within  the  meaning  of  Section
881(c)(3)(C) of the Code. In addition, each Indemnified Tax Person shall deliver
the forms  described  above promptly upon the  obsolescence or invalidity of any
form previously  delivered by such  Indemnified Tax Person.  No Obligor shall be
required to pay any additional  amount to any such  Indemnified Tax Person under
subsection  (b)(ii)  above if such  Indemnified  Tax Person shall have failed to
satisfy the requirements of the two immediately  preceding  sentences;  provided
that if such  Indemnified  Tax Person shall have satisfied such  requirements on
the  Effective  Date (in the case of each  Indemnified  Tax Person listed on the
signature  pages  hereof)  or on  the  effective  date  of  the  Assignment  and
Acceptance   Agreement  or  other  document  pursuant  to  which  it  became  an
Indemnified  Tax  Person  (in the case of each other  Indemnified  Tax  Person),
nothing in this  subsection  shall relieve any Obligor of its  obligation to pay
any additional  amounts pursuant to subsection  (b)(ii) to the extent that, as a
result of any change in applicable law or treaty, such Indemnified Tax Person is
no longer properly entitled to deliver certificates, documents or other evidence
at a subsequent date  establishing  the fact that such Indemnified Tax Person is
entitled to such exemption or reduced rate.

             (f) In the event  that an  Indemnified  Tax Person is  entitled  to
receive a refund of or credit for or remission or repayment of taxes withheld or
paid  pursuant to this  Section 3.10 ("Tax  Credit"),  which credit or refund is
identifiable by such  Indemnified Tax Person as being a result of taxes withheld
in connection with sums payable hereunder or under any other Loan Document, such
Indemnified  Tax Person shall use  reasonable  efforts to obtain the Tax Credit,
and upon  receipt of such Tax  Credit  shall  promptly  notify the Agent and the
Borrowers  and  shall  remit to the  Borrowers  the  amount  of such Tax  Credit
(without interest)  allocable to payments made hereunder or under the other Loan
Documents.

         3.11 Option to Fund

             Each  Lender  has  indicated  that,  if  any  Borrower  requests  a
Eurodollar  Advance,  such Lender may wish to purchase  one or more  deposits in
order  to  fund  or  maintain  its  funding  of its  Revolving  Loan  Commitment
Percentage of such  Eurodollar  Advance during the Interest  Period with respect
thereto;  it being understood that the provisions of this Agreement  relating to
such  funding  are  included  only for the  purpose of  determining  the rate of
interest to be paid in respect of such Eurodollar  Advance and any amounts owing
under  Sections 3.5 and 3.7.  Each Lender shall be entitled to fund and maintain
its funding of all or any part of each Eurodollar  Advance in any manner it sees

<PAGE>

fit, but all such  determinations  hereunder shall be made as if each Lender had
actually funded and maintained its Revolving Loan Commitment  Percentage of each
Eurodollar Advance during the applicable Interest Period through the purchase of
deposits in the London interbank market in an amount equal to its Revolving Loan
Commitment Percentage of such Eurodollar Advance having a maturity corresponding
to such  Interest  Period.  Any Lender may fund its  Revolving  Loan  Commitment
Percentage of each  Eurodollar  Advance from or for the account of any branch or
office of such Lender as such Lender may choose from time to time.

         3.12 Replacement of Lenders

             Notwithstanding  the  foregoing,  if (i) any Lender  shall  request
compensation  pursuant to Section 3.6 or the Borrowers  shall be required to pay
any additional  amounts  pursuant to Section 3.10 in respect of any Lender in an
aggregate amount in excess of $50,000,  (ii) any Lender shall give any notice to
the  Borrowers or the Agent  pursuant to Section 3.7,  (iii) any Lender shall on
two or more  occasions  give a notice to the Borrowers or the Agent  pursuant to
Section 3.8, or (iv) any Lender shall be an uncured  Defaulting Lender on two or
more  occasions;  then, in each such case,  provided that no Default or Event of
Default shall then exist and be  continuing,  during the 90 day period after the
receipt of such request or notice,  the  Borrowers  may require that such Lender
transfer all of its right,  title and interest  under this Agreement and each of
such  Lender's  Notes to any lender  identified by the Borrowers and approved by
the Agent (such approval not to be unreasonably  withheld) (a "Proposed Lender")
if such Proposed  Lender agrees to assume all of the  obligations of such Lender
for  consideration  equal to the outstanding  principal  amount of such Lender's
Loans  and all  unreimbursed  sums paid by such  Lender  under  Section  2.8(b),
together  with  interest  thereon  to the date of such  transfer  and all  other
amounts  payable under the Loan Documents to such Lender on or prior to the date
of such  transfer  (including  any fees accrued  hereunder and any amounts which
would be payable under  Section 3.5 as if all of such Lender's  Loans were being
prepaid in full on such  date).  Subject to the  execution  and  delivery of new
Notes, an instrument of assignment and  assumption,  and such other documents as
such Lender may reasonably require, such Proposed Lender shall be a "Lender" for
all purposes hereunder. Without prejudice to the survival of any other agreement
of the  Borrowers  hereunder,  the  agreements  of the  Borrowers  contained  in
Sections 3.5, 3.6,  11.5,  11.8 and 11.10  (without  duplication of any payments
made to such Lender by the  Borrowers or the Proposed  Lender) shall survive for
the benefit of any Lender  replaced  under this Section with respect to the time
prior to such replacement.


<PAGE>

         3.13 Guaranty Provisions.  Each Borrower  acknowledges and agrees that,
whether  or  not  specifically  indicated  as  such  in  a  Loan  Document,  all
Obligations shall be joint and several Obligations of each individual  Borrower,
and in furtherance of such joint and several  Obligations,  each Borrower hereby
irrevocably  guarantees the payment of all Obligations of each other Borrower as
set forth below.

             (a)  Guaranty.   Each  Borrower   hereby   jointly  and  severally,
absolutely,  unconditionally  and  irrevocably  guarantees the full and punctual
payment  when  due,  whether  at  stated  maturity,   by  required   prepayment,
declaration,  acceleration,  demand or otherwise, of all Obligations;  provided,
however,  that each Borrower  shall only be liable under this  Agreement for the
maximum amount of such liability that can be hereby incurred  without  rendering
this Agreement,  as it relates to such Borrower,  voidable under  applicable law
relating  to  fraudulent  conveyance  or  fraudulent  transfer,  and not for any
greater amount. This guaranty constitutes a guaranty of payment when due and not
of  collection,  and each  Borrower  specifically  agrees  that it shall  not be
necessary or required  that any Lender  exercise any right,  assert any claim or
demand or enforce any remedy whatsoever  against any Obligor or any other Person
before or as a condition to the obligations of such Borrower hereunder.

             (b) Guaranty  Absolute,  etc. The guaranty agreed to above shall in
all respects be a continuing,  absolute,  unconditional and irrevocable guaranty
of payment,  and shall remain in full force and effect until the Revolving  Loan
Commitment Termination Date. Each Borrower jointly and severally guarantees that
the Obligations  will be paid strictly in accordance with the terms of each Loan
Document under which such Obligations arise,  regardless of any law,  regulation
or order now or hereafter in effect in any  jurisdiction  affecting  any of such
terms or the rights of any Lender with respect  thereto.  The  liability of each
Borrower   under  this   Agreement   shall  be  joint  and  several,   absolute,
unconditional and irrevocable irrespective of (a) any lack of validity, legality
or  enforceability  of any Loan  Document;  (b) the failure of any Lender (i) to
assert any claim or demand or to enforce any right or remedy against any Obligor
or any other Person  (including any other guarantor) under the provisions of any
Loan Document or otherwise,  or (ii) to exercise any right or remedy against any
other  guarantor  (including  any  Obligor)  of,  or  collateral  securing,  any
Obligations;  (c) any change in the time,  manner or place of payment  of, or in
any other term of, all or any part of the  Obligations,  or any other extension,
compromise  or  renewal  of  any  Obligation;  (d)  any  reduction,  limitation,
impairment or termination of any Obligations for any reason, including any claim
of  waiver,  release,  surrender,  alteration  or  compromise,  and shall not be
subject  to (and  each  Borrower  hereby  waives  any  right to or claim of) any
defense or setoff, counterclaim,  recoupment or termination whatsoever by reason
of the invalidity, illegality, irregularity, compromise, unenforceability of, or
any other event or occurrence affecting,  any Obligations or otherwise;  (e) any
amendment to, rescission, waiver, or other modification of, or any consent to or
departure  from,  any of the  terms  of any  Loan  Document;  (f) any  addition,

<PAGE>

exchange,  release,  surrender  or  non-perfection  of  any  collateral,  or any
amendment  to or waiver or release or  addition  of, or consent to or  departure
from, any other guaranty held by any Lender securing any of the Obligations;  or
(g) any other circumstance which might otherwise  constitute a defense available
to,  or a legal or  equitable  discharge  of,  any  Obligor,  any  surety or any
guarantor.

             (c)  Reinstatement,  etc.  Each  Borrower  agrees that its guaranty
shall continue to be effective or be  reinstated,  as the case may be, if at any
time any payment (in whole or in part) of any of the Obligations is rescinded or
must  otherwise be restored by any Lender,  upon the  insolvency,  bankruptcy or
reorganization  of any other  Borrower,  any other Obligor or otherwise,  all as
though such payment had not been made.

             (d) Waiver, etc. Each Borrower hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Obligations
and this Agreement and any requirement that any Lender protect,  secure, perfect
or insure any Lien,  or any property  subject  thereto,  or exhaust any right or
take any action  against any other  Obligor or any other Person  (including  any
other guarantor) or entity or any collateral  securing the  Obligations,  as the
case may be.

             (e) Postponement of Subrogation,  etc. Each Borrower agrees that it
will  not  exercise  any  rights  which  it may  acquire  by way  of  rights  of
subrogation  under  any Loan  Document  to which it is a party,  nor  shall  any
Borrower seek or be entitled to seek any contribution or reimbursement  from any
Obligor, in respect of any payment made hereunder, under any other Loan Document
or otherwise,  until following the Revolving Loan Commitment  Termination  Date.
Any amount paid to any Borrower on account of any such subrogation  rights prior
to the Revolving Loan Commitment Termination Date shall be held in trust for the
benefit of the  Lenders  and shall  immediately  be paid and turned  over to the
Agent for the benefit of the Lenders in the exact form received by such Borrower
(duly endorsed in favor of the Agent,  if required),  to be credited and applied
against the Obligations,  whether matured or unmatured;  provided, however, that
if (a) any  Borrower  has made  payment to the Lenders of all or any part of the
Obligations;  and  (b)  the  Revolving  Loan  Commitment  Termination  Date  has
occurred; then at such Borrower's request, the Agent, (on behalf of the Lenders)
will,  at the expense of such  Borrower,  execute  and deliver to such  Borrower
appropriate documents (without recourse and without  representation or warranty)
necessary  to  evidence  the  transfer  by  subrogation  to such  Borrower of an
interest in the Obligations  resulting from such payment.  In furtherance of the
foregoing, at all times prior to the Revolving Loan Commitment Termination Date,
each Borrower  shall refrain from taking any action or commencing any proceeding
against any Obligor (or its successors or assigns,  whether in connection with a
bankruptcy  proceeding  or  otherwise)  to recover any amounts in the respect of
payments made under any Loan Document to any Lender.

4.       REPRESENTATIONS AND WARRANTIES

         In order to  induce  the  Agent  and the  Lenders  to enter  into  this
Agreement  and to make the Loans and the  Issuing  Bank to issue the  Letters of

<PAGE>

Credit and the  Lenders to  participate  therein,  each  Borrower,  jointly  and
severally,  makes the following representations and warranties to the Agent, the
Issuing Bank and each Lender:

         4.1 Subsidiaries; Capitalization

             As of the Effective Date, the Parent has only the  Subsidiaries set
forth on, and the authorized, issued and outstanding Capital Stock of the Parent
and each such  Subsidiary is as set forth on,  Schedule 4.1. As of the Effective
Date,  and except as set forth on Schedule 4.1, the shares of, or partnership or
other interests in, each Subsidiary of the Parent are owned  beneficially and of
record by the Parent or another  Subsidiary of the Parent, are free and clear of
all Liens and are duly authorized, validly issued, fully paid and nonassessable.
As of the  Effective  Date,  except as set forth on Schedule 4.1, (i) no Obligor
nor any of the Foreign Subsidiaries has issued any securities  convertible into,
or options or warrants for, any common or preferred equity  securities  thereof,
(ii) there are no agreements,  voting trusts or understandings  binding upon the
Parent or any of its Subsidiaries  with respect to the voting  securities of the
Parent or any of its  Subsidiaries or affecting in any manner the sale,  pledge,
assignment or other disposition  thereof,  including any right of first refusal,
option, redemption, call or other right with respect thereto, whether similar or
dissimilar to any of the  foregoing,  and (iii) all of the  outstanding  Capital
Stock of each  Obligor or Foreign  Subsidiary  is owned by the Parent or another
Obligor.

         4.2 Existence and Power

             Each Borrower, each Obligor and each of the Foreign Subsidiaries is
duly  incorporated,  organized or formed and validly  existing in good  standing
under the laws of the jurisdiction of its  incorporation  or formation,  has all
requisite  power and  authority to own its Property and to carry on its business
as now conducted,  and is in good standing and authorized to do business in each
jurisdiction  in which  the  nature of the  business  conducted  therein  or the
Property owned by it therein makes such  qualification  necessary,  except where
such  failure to qualify  could not  reasonably  be  expected to have a Material
Adverse Effect.

         4.3 Authority and Execution

             Each  Borrower,  each Obligor and each of the Foreign  Subsidiaries
has full legal power and authority to enter into,  execute,  deliver and perform
the terms of the Loan  Documents  to which it is a party all of which  have been
duly  authorized by all proper and  necessary  corporate,  partnership  or other
applicable action and is in full compliance with its Organizational Documents.

         4.4 Binding Agreement; etc.

             The Loan  Documents  (other  than the  Notes)  constitute,  and the
Notes,  when  issued and  delivered  pursuant  hereto for value  received,  will

<PAGE>

constitute,  the valid and legally binding  obligations of each Obligor and each
Foreign  Subsidiary,  in  each  case,  to  the  extent  it is a  party  thereto,
enforceable  in  accordance  with  their  respective   terms,   except  as  such
enforceability   may  be   limited   by   applicable   bankruptcy,   insolvency,
reorganization or other similar laws now or hereafter  affecting the enforcement
of  creditors'   rights  generally  and  except  that  the  remedy  of  specific
performance and other equitable remedies are subject to judicial discretion. The
Liens  granted to the Agent in the  Collateral  are first  (subject to Permitted
Liens)  priority (or the local  equivalent  thereof)  security  interests and no
Liens  exist on any of the  Collateral  described  above  other  than the  Liens
created in favor of the Agent  pursuant  to a Loan  Document  and the  Permitted
Liens.

         4.5 Litigation

             Except as set forth on Schedule 4.5, there are no actions, suits or
proceedings  at law or in  equity  or by or before  any  Governmental  Authority
(whether purportedly on behalf of any Borrower,  any other Obligor or any of the
Foreign Subsidiaries)  pending or, to the knowledge of any Borrower,  threatened
against any Borrower,  any other Obligor or any of the Foreign  Subsidiaries  or
maintained  by the  any  Borrower,  any  other  Obligor  or  any of the  Foreign
Subsidiaries  or which may affect the  Property  of any  Borrower,  or any other
Obligor or any of the Foreign Subsidiaries or any of their respective Properties
or rights,  which (i) could  reasonably  be expected to have a Material  Adverse
Effect,  (ii) call into question the validity or enforceability of, or otherwise
seek to invalidate,  any Loan Document,  or (iii) might,  individually or in the
aggregate,  materially and adversely affect any of the transactions contemplated
by any Loan Document.

         4.6 Required Consents

             Except for information  filings required to be made in the ordinary
course of business which are not a condition to the  performance by any Borrower
or any of their Subsidiaries under the Loan Documents to which it is a party, no
consent,  authorization or approval of, filing with, notice to, or exemption by,
stockholders or holders of any other equity interest, any Governmental Authority
or any other Person is required to authorize,  or is required in connection with
the  execution,  delivery  or  performance  of the Loan  Documents  to which any
Borrower or any of their  Subsidiaries  is a party or is required as a condition
to the validity or enforceability of the Loan Documents to which any of the same
is a party. Each Borrower, prior to each borrowing by it hereunder, has obtained
all necessary approvals and consents of, and has filed or caused to be filed all
reports,  applications,  documents,  instruments and information  required to be
filed pursuant to all applicable laws,  rules,  regulations and requests of, all
Governmental Authorities in connection with such borrowing.

         4.7 Absence of Defaults; No Conflicting Agreements

             (a)  None  of  the  Obligors,  the  Foreign  Subsidiaries  nor  the
Borrowers is in default under any mortgage,  indenture, contract or agreement to
which it is a party or by which it or any of its  Property is bound,  the effect
of which default could reasonably be expected to have a Material Adverse Effect.
The execution,  delivery or carrying out of the terms of the Loan Documents will
not constitute a default  under,  or result in the creation or imposition of, or
obligation  to create,  any Lien upon any  Property of any  Borrower,  any other
Obligor or any of the Foreign  Subsidiaries  or result in a breach of or require
the mandatory repayment of or other acceleration of payment under or pursuant to
the terms of any such mortgage, indenture, contract or agreement.

             (b)  Neither the Parent nor any of its  Subsidiaries  is in default
with respect to any judgment, order, writ, injunction, decree or decision of any
Governmental  Authority  which  default  could  reasonably be expected to have a
Material Adverse Effect.

         4.8 Compliance with Applicable Laws

             Each  Borrower,   each  other  Obligor  and  each  of  the  Foreign
Subsidiaries   is  complying  in  all  material   respects  with  all  statutes,
regulations,  rules  and  orders  of  all  Governmental  Authorities  which  are
applicable to such Borrower,  such other Obligor or such Foreign  Subsidiary,  a
violation  of which could  reasonably  be  expected  to have a Material  Adverse
Effect.

         4.9 Taxes

             Each  Borrower,  each  other  Obligor,  and  each  of  the  Foreign
Subsidiaries  has filed or caused to be filed  all tax  returns  required  to be
filed and has paid, or has made adequate provision for the payment of, all taxes
shown to be due and payable on said returns or in any  assessments  made against
it (other than those being  contested as required under Section 7.4) which would
be material to such Borrower,  such other Obligor or such Foreign  Subsidiaries,
and no tax Liens have been filed with respect thereto. The charges, accruals and
reserves  on the  books  of the  Parent,  each  other  Obligor  and  each of the
Subsidiaries  with  respect  to all  taxes  are,  to the best  knowledge  of any
Borrower,  adequate for the payment of such taxes,  and the Parent does not know
of any unpaid  assessment  which is due and payable  against any  Borrower,  any
other Obligor or any of the Foreign  Subsidiaries  or any claims being  asserted
which could  reasonably be expected to have a Material  Adverse  Effect,  except
such thereof as are being contested as required under Section 7.4, and for which
adequate reserves have been set aside in accordance with GAAP.

         4.10 Governmental Regulations

             None of the Obligors,  the Foreign Subsidiaries,  the Borrowers nor
any Person  controlled  by,  controlling,  or under  common  control  with,  any

<PAGE>

Borrower or any of its  Subsidiaries,  is subject to regulation under the Public
Utility  Holding  Company  Act of 1935,  as amended,  the Federal  Power Act, as
amended, or the Investment Company Act of 1940, as amended, or is subject to any
statute  or  regulation   which   prohibits  or  restricts  the   incurrence  of
Indebtedness,  including statutes or regulations  relative to common or contract
carriers or to the sale of electricity, gas, steam, water, telephone,  telegraph
or other public utility services.

         4.11 Federal Reserve Regulations; Use of Loan Proceeds

             None of the  Obligors,  Foreign  Subsidiaries  nor the Borrowers is
engaged principally,  or as one of its important activities,  in the business of
extending  credit for the purpose of  purchasing  or carrying any Margin  Stock.
After giving effect to the making of each Revolving Credit Loan and the issuance
of each  Letter of Credit,  Margin  Stock will  constitute  less than 25% of the
assets (as  determined  by any  reasonable  method) of the  Borrowers  and their
respective Subsidiaries.

         4.12 Plans

             Each  Employee  Benefit  Plan is in  compliance  with ERISA and the
Code, where applicable,  in all material respects,  except where  non-compliance
could not reasonably be expected to have a Material  Adverse  Effect.  As of the
Effective  Date, (i) the amount of all Unfunded  Pension  Liabilities  under the
Pension  Plans,  excluding  any plan which is a  Multi-employer  Plan,  does not
exceed  $250,000,  and (ii) the  amount of the  aggregate  Unrecognized  Retiree
Welfare  Liability under all applicable  Employee  Benefit Plans does not exceed
$250,000.  The  Parent and each of its  Subsidiaries  and ERISA  Affiliates  has
complied  with the  requirements  of Section  515 of ERISA with  respect to each
Pension Plan which is a Multi-employer  Plan, except where  non-compliance could
not  reasonably  be  expected  to  have a  Material  Adverse  Effect.  As of the
Effective Date, neither the Parent nor its Subsidiaries or ERISA Affiliates have
any liability  under Section 4201 or 4204 of ERISA  (including the obligation to
satisfy secondary  liability as a result of purchaser default) and the aggregate
potential annual withdrawal liability payments, as determined in accordance with
Title IV of ERISA, of the Parent and its  Subsidiaries and ERISA Affiliates with
respect to all Pension  Plans which are  Multi-employer  Plans is  approximately
$250,000.  The Parent and its  Subsidiaries and ERISA Affiliates have, as of the
Effective Date, made all contributions or payments to or under each such Pension
Plan  required  by law or the  terms of such  Pension  Plan or any  contract  or
agreement with respect thereto, except where non-compliance could not reasonably
be expected to have a Material Adverse Effect. No material liability to the PBGC
has been, or is expected by the Borrower,  any of its  Subsidiaries or any ERISA
Affiliate to be,  incurred by the  Borrower,  any such  Subsidiary  or any ERISA
Affiliate.  Liability,  as referred to in this  Section  includes  any joint and
several  liability.  Each  Employee  Benefit  Plan which is a group  health plan
within the meaning of Section  5000(b)(1) of the Code is in material  compliance
with the  continuation of health care coverage  requirements of Section 4980B of
the  Code or  applicable  state  law,  except  where  non-compliance  could  not
reasonably be expected to have a Material Adverse Effect.


<PAGE>

4.13     Financial Statements

         The Parent heretofore  delivered to the Agent and the Lenders copies of
the (i) audited  Consolidated  and  unaudited  Consolidating  Balance  Sheets of
Parent as of December 31, 2000 and the related  Consolidated  and  Consolidating
Statements  of  Operations,  Stockholder's  Equity and Cash Flows for the Fiscal
Years then ended and (ii) the unaudited  Consolidated and Consolidating  Balance
Sheets of Parent as of September  30,  2001,  and the related  Consolidated  and
Consolidating Statements of Operations,  Stockholder's Equity and Cash Flows for
the Fiscal  Quarters  then ended  (with the  related  notes and  schedules,  the
"Financial   Statements").   The  Financial   Statements   fairly   present  the
Consolidated and Consolidating financial condition and results of the operations
of Parent and its  Subsidiaries  as of the dates and for the  periods  indicated
therein (subject, in the case of such unaudited  statements,  to normal year-end
adjustments) and have been prepared in conformity with GAAP. Except as reflected
in the Financial  Statements or in the notes thereto,  neither Parent nor any of
its  Subsidiaries  has any  obligation or liability of any kind (whether  fixed,
accrued,  Contingent,  unmatured or otherwise)  which,  in accordance with GAAP,
should have been shown on the Financial  Statements  and was not. Since the date
of the Financial  Statements,  Parent and each of its Subsidiaries has conducted
its business only in the ordinary course and there has been no Material  Adverse
Change.

4.14     Property

         Each  Borrower  and  each  of  the  other  Obligors  and  each  Foreign
Subsidiary has good and marketable  title to, or a valid leasehold  interest in,
all of its real  Property,  and is the owner of,  or has a valid  lease of,  all
personal  property,  in each  case  which  is  material  to the  Parent  and its
Subsidiaries, taken as a whole, subject to no Liens, except Permitted Liens. All
leases  of  Property  to any  Borrower,  any  Obligor  or  any  of  the  Foreign
Subsidiaries are in full force and effect,  such Borrower,  such Obligor or such
Foreign Subsidiary,  as the case may be, enjoys quiet and undisturbed possession
under all leases of real property and none of the  Obligors,  any of the Foreign
Subsidiaries  nor any Borrower is in default beyond any applicable  grace period
of any provision  thereof,  the effect of which could  reasonably be expected to
have a Material Adverse Effect.

4.15     Authorizations

         Each Borrower,  each Obligor and each Foreign  Subsidiary  possesses or
has the right to use all  franchises,  licenses and other rights as are material
and necessary  for the conduct of its business,  and with respect to which it is
in  compliance,  with no known  conflict  with the valid  rights of others which
could  reasonably be expected to have a Material  Adverse  Effect.  No event has
occurred which permits or, to the best knowledge of the Borrowers,  after notice
or the  lapse of time or both,  or any  other  condition,  could  reasonably  be
expected to permit, the revocation or termination of any such franchise, license
or other right which  revocation or termination  could reasonably be expected to
have a Material Adverse Effect.


<PAGE>

         4.16 Environmental Matters

             Except as set forth in Schedule  4.16,  none of the  Obligors,  the
Foreign  Subsidiaries  nor the  Borrowers  (i) has  received  written  notice or
otherwise learned of any claim,  demand,  action,  event,  condition,  report or
investigation  indicating or concerning any potential or actual  liability which
individually or in the aggregate could reasonably be expected to have a Material
Adverse  Effect,  arising  in  connection  with (A) any  non-compliance  with or
violation of the requirements of any applicable  federal,  state,  provincial or
local environmental  health or safety statute or regulation,  or (B) the release
or threatened release of any toxic or hazardous waste, substance or constituent,
or other  substance  into the  environment,  (ii) to the best  knowledge  of any
Borrower,  has any threatened or actual liability in connection with the release
or threatened release of any toxic or hazardous waste, substance or constituent,
or other substance into the environment  which  individually or in the aggregate
could  reasonably  be  expected  to have a Material  Adverse  Effect,  (iii) has
received  notice of any federal,  state or provincial  investigation  evaluating
whether  any  remedial  action is needed to respond  to a release or  threatened
release of any toxic or  hazardous  waste,  substance  or  constituent  or other
substance into the environment for which any Borrower,  any other Obligor or any
of the  Foreign  Subsidiaries  is or  would be  liable,  which  liability  could
reasonably be expected to have a Material  Adverse Effect,  or (iv) has received
notice that any Borrower,  any other Obligor or any of the Foreign  Subsidiaries
is or  may be  liable  to  any  Person  under  the  Comprehensive  Environmental
Response,  Compensation and Liability Act, as amended, 42 U.S.C. Section 9601 et
seq., or any analogous state or foreign law, which liability could reasonably be
expected to have a Material Adverse Effect.  Each Borrower,  each other Obligor,
each  of  the  Foreign   Subsidiaries   is  in  compliance  with  the  financial
responsibility  requirements  of  federal  and state  environmental  laws to the
extent  applicable,  including those contained in 40 C.F.R.,  parts 264 and 265,
subpart H, and any  analogous  state or foreign  law,  except in those  cases in
which the  failure  so to comply  would not  reasonably  be  expected  to have a
Material Adverse Effect.

         4.17 Solvency

             Immediately after giving effect to the transactions contemplated by
the Loan  Documents,  each  Borrower  is and will be Solvent  and the  Borrowers
together  with the other  Obligors  and each of the  Foreign  Subsidiaries  on a
consolidated basis is and will be Solvent.

         4.18 Absence of Certain Restrictions

             No indenture,  certificate  of  designation  for  preferred  stock,
agreement or instrument  to which any Borrower,  any other Obligor or any of the
Foreign Subsidiaries is a party (other than this Agreement), prohibits or limits
in any way,  directly  or  indirectly  the  ability  of any  Obligor  or Foreign
Subsidiary to make Restricted Payments or repay any Indebtedness to any Borrower
or to another Subsidiary of the Parent.


<PAGE>

         4.19 No Misrepresentation

             No representation or warranty contained in any Loan Document and no
certificate  or report from time to time  furnished  by any  Borrower nor any of
their  Subsidiaries in connection with the  transactions  contemplated  thereby,
contains or will contain a  misstatement  of material fact or omits or will omit
to state a material fact  required to be stated in order to make the  statements
therein contained not misleading in the light of the  circumstances  under which
made, provided that any projections or pro-forma financial information contained
therein  are based upon good faith  estimates  and  assumptions  believed by the
Borrowers to be reasonable  at the time made, it being  recognized by the Agent,
the Issuing Bank, and the Lenders that such  projections as to future events are
not to be viewed as facts,  and that actual results during the period or periods
covered thereby may differ from the projected results.  There are no liabilities
of any  Borrower  or any of its  Subsidiaries  of any kind  whatsoever,  whether
accrued, contingent, absolute, determined,  determinable or otherwise, and there
is no  existing  condition,  situation  or set  of  circumstances,  which  could
reasonably be expected to result in a Material Adverse Effect,  other than those
liabilities  provided for or disclosed in the most recently delivered  financial
statements

         4.20 Intangible Assets.

             The only  registered  patents,  registered  trademarks,  registered
service marks, registered trade names, or registered copyrights,  or rights with
respect to the foregoing or any pending applications  therefor of any Obligor or
any Foreign  Subsidiary  are (i) the registered  trade name "GP General  Physics
Corporation" owned by Physics,  (ii) two registered trademarks owned by MXL that
are not used in the  ongoing  business  operations  of any  Obligor  or  Foreign
Subsidiary,  (iii)  registered  trademarks  owned by certain of the  Obligors or
Foreign  Subsidiaries that relate solely to businesses being  terminated,  which
trademarks  are not used in the ongoing  business  operations  of any Obligor or
Foreign  Subsidiary and (iv) the registered  trade name "GP" appearing inside an
oval. Except for the registered trade name "GP General Physics  Corporation" and
the registered trade name "GP" appearing  inside an oval, no registered  patent,
registered  trademark,  registered  service  mark,  registered  trade  name,  or
registered  copyright,  or rights with respect to the foregoing are necessary to
conduct the business of any Obligor or Foreign Subsidiary as now conducted or as
proposed to be conducted.

         4.21 Material Subsidiaries.


             Each  Material  Subsidiary  is  either  an  Obligor  or  a  Foreign
Subsidiary and is listed on Schedule 4.21 hereto.


<PAGE>

5.       CONDITIONS TO EFFECTIVENESS OF SECOND AMENDED AND RESTATED CREDIT
         AGREEMENT

         The conditions precedent fulfilled in connection with the obligation of
each Lender to extend credit under the Existing  Credit  Agreement are set forth
in Section 5 of the Existing Credit Agreement and the Parent, the Agent and each
of the Lenders  has copies of the  documents  referred to in such  Section 5. In
addition  to the  conditions  precedent  set  forth in  Section  6  herein,  the
effectiveness  of this Agreement as an amendment and restatement of the Existing
Credit Agreement, and the obligation of each Lender to make Loans or the Issuing
Bank to issue  Letters  of Credit in  connection  herewith  and the  Lenders  to
participate  therein,  shall be  subject  to the  fulfillment  of the  following
conditions precedent:

         5.1 Evidence of Action

             The Agent  shall have  received a  certificate,  dated the  Closing
Date, of the Secretary or Assistant Secretary or other analogous  counterpart of
each Obligor (i)  attaching a true and complete copy of the  resolutions  of its
Managing  Person  and of  all  documents  evidencing  all  necessary  corporate,
partnership or similar action (in form and substance  satisfactory to the Agent)
taken by it to  authorize  the  Loan  Documents  to which it is a party  and the
transactions  contemplated  thereby,  (ii) attaching a true and complete copy of
its Organizational Documents (or a certificate of an authorized officer that the
Organizational Documents have not changed from those provided in connection with
the Original  Agreement,  (iii) setting  forth the  incumbency of its officer or
officers  or other  analogous  counterpart  who may  sign  the  Loan  Documents,
including  therein a  signature  specimen of such  officer or officers  and (iv)
attaching  a  certificate  of  good  standing  of the  appropriate  Governmental
Authority of the jurisdiction of its formation and of each other jurisdiction in
which  it is  qualified  to do  business,  except,  in the  case of  such  other
jurisdiction, when the failure to be in good standing in such jurisdiction could
not have a Material Adverse Effect.

         5.2 This Agreement

             The Agent shall have received counterparts of this Agreement signed
by each of the parties  hereto (or receipt by the Agent from a party hereto of a
telecopy signature page signed by such party which shall have agreed to promptly
provide the Agent with originally executed counterparts hereof).

         5.3 Notes; Letter of Credit Documents

             (i) The Agent shall have  received the  Revolving  Credit Notes and
the Swing Line Note,  duly executed by an Authorized  Signatory of the Borrowers
and (ii) the Agent and the  Issuing  Bank  shall have  received a  Reimbursement
Agreement, each duly executed by an Authorized Signatory of Parent.


<PAGE>

         5.4 Absence of Litigation

             There shall be no injunction,  writ, preliminary  restraining order
or other order of any nature issued by any Governmental Authority in any respect
affecting the  transactions  provided for in the Loan Documents and no action or
proceeding by or before any  Governmental  Authority  has been  commenced and is
pending or, to the knowledge of the Borrowers, threatened, seeking to prevent or
delay the  transactions  contemplated  by the Loan Documents or challenging  any
other  terms  and  provisions  hereof or  thereof  or  seeking  any  damages  in
connection  therewith,  and the Agent shall have received a certificate,  in all
respects satisfactory to the Agent, of an executive officer of the Parent to the
foregoing effects.

         5.5 Approvals and Consents

             All approvals  and consents of all Persons  required to be obtained
in connection with the consummation of the transactions contemplated by the Loan
Documents  shall have been  obtained and shall be in full force and effect,  and
all required notices have been given and all required waiting periods shall have
expired  and the Agent  shall  have  received  a  certificate,  in all  respects
satisfactory  to  the  Agent,  of an  executive  officer  of the  Parent  to the
foregoing effects.

         5.6 Absence of Material Adverse Change

             No material  adverse change in the business,  assets,  liabilities,
financial condition or results of operations of the Borrowers has occurred since
the filing  with the SEC of  Parent's  Form 10-Q for the Fiscal  Quarter  ending
September  30,  2001 and the Agent  shall have  received a  certificate,  in all
respects satisfactory to the Agent, of an executive officer of the Parent to the
foregoing effect.

         5.7 Financial Officer's Certificate

             The Agent shall have received a certificate of a Financial  Officer
of the Borrowers,  dated the Closing Date, in all respects  satisfactory  to the
Agent certifying that with respect to all extensions of credit outstanding as of
the Closing  Date, to the best  knowledge of each such  Financial  Officer,  the
Borrowers are and will be Solvent and the  Borrowers  together with each Obligor
and each Foreign Subsidiary are Solvent.

         5.8 Check-the-Box Status

             GP (UK) shall be deemed to have obtained Check-the-Box Status.

         5.9 Opinion of Counsel to the Borrowers and their Subsidiaries

             The Agent shall have received opinions from Morgan, Lewis & Bockius
LLP as (i) special New York counsel to the Borrowers and the domestic  Obligors,
(ii) special English counsel to GP (UK) and (iii) special Real Estate counsel to

<PAGE>

the Obligors.  Each opinion shall be addressed to the Agent and the Lenders, and
shall be dated the  Closing  Date,  and shall be  substantially  in the forms of
Exhibits F-1, F-2 and F-3 hereto.  It is understood that such opinions are being
delivered to the Agent and the Lenders upon the  direction of the  Borrowers and
their  Subsidiaries and that the Agent and the Lenders may and will rely on such
opinions.

         5.10 Previous Information

             All of the information provided by or on behalf of the Borrowers or
any of  their  Subsidiaries  to the  Agent  and/or  the  Lenders  prior to their
commitment to extend credit to the Borrowers (the "Pre-Commitment  Information")
shall be true and correct in all material aspects;  and no development or change
shall  have  occurred,  and no  additional  information  shall  have come to the
attention  of the  Agent  or any  Lender,  that  (i) has  resulted  in or  could
reasonably be expected to result in a material change in, or material  deviation
from,  the  Pre-Commitment  Information  or (ii) has had or could  reasonably be
expected to have a Material Adverse Effect.

         5.11 Borrowers Security Agreement;  Subordination Agreement; Subsidiary
Guaranty and Security Agreement and Related  Matters

             (a) The Agent shall have  received a Second  Amended  and  Restated
Borrowers Security Agreement substantially in the form of Exhibit H hereto, duly
executed,  by an  Authorized  Signatory of each of the  Borrowers  and dated the
Closing  Date  together  with (i)  executed  notices  required by the  Borrowers
Security  Agreement  to comply  with the  Federal  Assignment  of Claims Act and
relevant provincial legislation to the extent not heretofore provided,  (ii) one
or more share  certificates  (or a  "control  agreement"  in form and  substance
satisfactory  to the Agent with respect  thereto),  representing  (x) all of the
issued and outstanding Capital Stock of each Subsidiary Guarantor and all of the
issued and outstanding Capital Stock owned by the Parent in respect of (A) Hydro
Med  Sciences,  Inc. and (B) any and every other Person  (unless the  applicable
share  certificate  is already  in the  possession  of the Agent or a  "control"
agreement  satisfactory  to the Agent has  theretofore  been fully  executed and
delivered to the Agent with respect to such shares),  (y) 100% of all the issued
and  outstanding  Capital Stock owned by the Borrowers in respect of GP (UK) and
each Foreign  Subsidiary that is a Material  Subsidiary  that has  Check-the-Box
Status (unless the applicable share  certificate is already in the possession of
the Agent  with  respect to such  shares),  and (z) 65% of all of the issued and
outstanding  Capital  Stock owned by the  Borrowers  in respect of each  Foreign
Subsidiary  that  is  a  Material   Subsidiary   (unless  the  applicable  share
certificate  is already  in the  possession  of the Agent  with  respect to such
shares),  together, in each case, with an undated stock power, executed in blank
by an  Authorized  Signatory of the owner of such Capital  Stock,  in respect of
each such certificate,  (iii) such UCC Financing Statements (or other comparable
documents  with respect to  Collateral  located  outside of the United  States),

<PAGE>

executed  by the  Parent  and  Physics,  as  required,  as shall  be  reasonably
requested  by the  Agent  in order  to  perfect  the  security  interest  in any
collateral  security  granted under its  Borrowers  Security  Agreement,  (iv) a
Federal  Reserve  Form  U-1 in form  and  substance  satisfactory  to the  Agent
executed by each pledgor of Capital  Stock,  (v) each  Intercompany  Demand Note
payable to the Borrowers, duly executed by the applicable Foreign Subsidiary and
duly  endorsed  in blank by Parent to the Agent,  the  originals  of each of the
Intercompany Demand Documents and assignments of financing  statements (or other
similar mechanism  required to perfect security  interests under applicable law)
from the  Borrowers to the Agent and (vi) such other  documents as the Agent may
require in connection with the perfection of its security interests therein.

             (b) (i) Each  Obligor  shall have  executed an amended and restated
subordination  agreement  in favor of the  Agent  in  substantially  the form of
Exhibit K-1 hereto  providing for the  subordination  of all  obligations to the
other Obligors to the Obligations (the "Subordination  Agreement"),  (ii) Parent
and Physics shall have executed an amended and restated Subordination  Agreement
in favor of the Agent in  substantially  the form of Exhibit K-2 hereto relating
to the 6% Subordinated Debentures Due 2004 dated as of August 31, 1994 issued by
Physics  (including  non-payment of such obligations at all times) to the Parent
Obligations  and (iii) SGLG, Inc. and Physics shall have executed an amended and
restated Subordination Agreement in favor of the Agent in substantially the form
of Exhibit K-3 hereto providing for the subordination of Physics  obligations to
SGLG,  Inc.  (including  non-payment of such  obligations  at all times,  except
payments  of  $50,000  in  each  three-month  period  may  be  made  in  certain
circumstances set forth therein) to the Obligations.

             (c) The  Agent  shall  have  received  a  Subsidiary  Guaranty  and
Security Agreement  substantially in the form of Exhibit I hereto, duly executed
by an  Authorized  Signatory  of each  Subsidiary  Guarantor  together  with (i)
executed notices required by the Subsidiary  Guaranty and Security  Agreement to
comply  with  the   Federal   Assignment   of  Claims  Act  and  the   Financial
Administration  Act (Canada) and relevant  provincial  legislation to the extent
not  heretofore  provided,  (ii) one or more share  certificates  (or a "control
agreement"  in  form  and  substance  satisfactory  to the  Agent  with  respect
thereto), representing (x) all of the issued and outstanding Capital Stock owned
by any  and/or  each  Subsidiary  of the  Borrowers  in respect of (A) Hydro Med
Sciences,  Inc. and (B) any and every other Person (unless the applicable  share
certificate is already in the  possession of the Agent or a "control"  agreement
satisfactory to the Agent has  theretofore  been fully executed and delivered to
the  Agent  with  respect  to such  shares),  (y)  100% of all  the  issued  and
outstanding  Capital Stock owned by the Borrowers in respect of GP (UK) and each
Foreign Subsidiary that is a Material  Subsidiary that has Check-the-Box  Status
(unless the  applicable  share  certificate  is already in the possession of the
Agent  with  respect  to such  shares),  and (z)  65% of all of the  issued  and
outstanding  Capital  Stock owned by the  Borrowers  in respect of each  Foreign
Subsidiary  that  is  a  Material   Subsidiary   (unless  the  applicable  share
certificate  is already  in the  possession  of the Agent  with  respect to such
shares),  together, in each case, with an undated stock power, executed in blank

<PAGE>

by an  Authorized  Signatory of the owner of such Capital  Stock,  in respect of
each such  certificate,  (iii) such UCC Financing  Statements,  executed by each
Subsidiary  Guarantor  where required,  as shall be reasonably  requested by the
Agent in order to perfect  the  security  interest  in any  collateral  security
granted  under  the  Subsidiary  Guaranty  and  Security  Agreement,  (iv)  each
Intercompany  Demand  Note  payable  to  a  Subsidiary,  duly  executed  by  the
applicable  Foreign  Subsidiary and duly endorsed in blank by such Subsidiary to
the Agent,  the  originals  of each of the  Intercompany  Demand  Documents  and
assignments  of financing  statements  (or other similar  mechanism  required to
perfect security interests under applicable law) from the applicable  Subsidiary
to the  Agent  and  (v) a  Federal  Reserve  Form  U-1  in  form  and  substance
satisfactory  to the Agent  executed by each  pledgor of Capital  Stock and (vi)
such other  documents as the Agent may require in connection with the perfection
of its security interests therein.

             (d) The Agent shall have  received each  original  promissory  note
endorsed to the Agent with respect to all  extensions of credit made pursuant to
Section 8.5(k).

             (e) The Agent shall have received the Mortgage  Amendment  relating
to the Pawling Property and the Reservoir Property.

         5.12 Search Reports and Related Documents

             The Agent shall have received (i) UCC, tax and judgment lien search
reports and other search reports in all respects  satisfactory to the Agent with
respect  to each  applicable  public  office  where  Liens  are or may be  filed
disclosing that there are no Liens of record in such official's  office covering
any Property of the Borrowers or any of the Material Subsidiaries or showing the
Borrowers or Material  Subsidiary  as debtor  thereunder  (other than  Permitted
Liens) and (ii) a certificate  of the Parent  signed by an Authorized  Signatory
thereof,  dated the first  Borrowing Date,  certifying  that, upon the making of
Loans and the issuance of Letters of Credit on the first Borrowing  Date,  there
will exist no Liens on any Property of the Borrowers or any Material  Subsidiary
other than Permitted Liens.

         5.13 Borrowing Base Certificate

             The  Agent  shall  have   received  the  initial   Borrowing   Base
Certificate,  dated the Closing Date,  and the sum of the Credit  Exposure shall
not exceed the Borrowing Base as reflected in such  Borrowing Base  Certificate;
provided,  that, the  information  set forth in such Borrowing Base  Certificate
with respect to (i) Eligible  Securities  Collateral  shall be based on the fair
market value of the applicable Eligible Securities  Collateral as at a date that
is not more than three Business Days prior to the Closing Date and (ii) Eligible
Real  Estate  shall be  based  on the  Aggregate  Appraisal  Value by  Valuation
Consultant, Inc. that is not more than $4,340,000 prior to the Closing Date.


<PAGE>

         5.14 Property, Public Liability and Other Insurance

             The Agent shall have received (A) copies of, or certificates of the
brokers with respect to, each policy of  insurance  owned by the  Borrowers or a
Subsidiary Guarantor in form and substance satisfactory to the Agent, naming the
Agent,  in its  capacity as such,  as  additional  insured and loss payee as its
interests  may  appear;  and  (B)  evidence  of the  Borrowers'  and  Subsidiary
Guarantor's  liability insurance  policies,  each together with the endorsements
required by Section 7.5.

         5.15 Fees

             All fees and  expenses  payable to the Agent,  the Issuing Bank and
the Lenders on the first Borrowing Date shall have been paid.

         5.16 Fees and Expenses of Special Counsel

             The fees and  expenses of Special  Counsel in  connection  with the
preparation, negotiation and closing of the Loan Documents shall have been paid.

         5.17 Closing Date

             The Closing Date shall occur no later than December 21, 2001.

         5.18 Charge of Shares;  Debenture;  Deed of Guarantee and Indemnity and
Related Matters.

             The Agent  shall have  received a Charge of Shares,  Debenture  and
Deed of Guarantee and Indemnity,  each  substantially  in the form of Exhibit M,
Exhibit N and Exhibit O, respectively  hereto,  duly executed,  by an Authorized
Signatory  of each of  Physics  and GP (UK),  as the case may be,  and dated the
Closing Date together with (i) all of the issued and  outstanding  Capital Stock
of each GP (UK), together,  with an undated stock power, executed in blank by an
Authorized  Signatory of Physics as owner of such Capital  Stock,  in respect of
each such certificate, and (ii) such other documents as the Agent may require in
connection with the perfection of its security interests therein.

6. CONDITIONS OF LENDING - ALL LOANS AND LETTERS OF CREDIT


         The  obligation  of each Lender to make any Loan or the Issuing Bank to
issue any Letter of Credit on a Borrowing  Date and each  Lender to  participate
therein is subject to the satisfaction of the following  conditions precedent as
of the date of such Loan or the  issuance of such Letter of Credit,  as the case
may be:

         6.1 Compliance

             On each  Borrowing  Date and after giving effect to the Loans to be
made and the  Letters of Credit to be issued  thereon  (i) there  shall exist no

<PAGE>

Default or Event of Default,  (ii) the representations and warranties  contained
in the Loan  Documents  shall be true and correct with the same effect as though
such representations and warranties had been made on such Borrowing Date, except
to the extent such  representations  and  warranties  specifically  relate to an
earlier date, in which case such  representations and warranties shall have been
true and correct on and as of such earlier date, and (iii) each Obligor and each
Foreign  Subsidiary shall be in compliance with all of the terms,  covenants and
conditions  of the  Loan  Documents  to  which  it is a  party.  Each  borrowing
(including  with respect to Swing Line Loans) by the  Borrowers and each request
by the  Borrowers  for the  issuance of a Letter of Credit  shall  constitute  a
certification  by the  Borrowers  as of such  Borrowing  Date  that  each of the
foregoing matters is true and correct in all respects.

         6.2  Borrowing  Request;  Letter of  Credit  Request;  Compliance  with
Borrowing Base

             With respect to the Revolving  Credit Loans and Swing Line Loans to
be made, and the Letters of Credit to be issued, (i) on each Borrowing Date, the
Agent shall have received,  (a) in the case of Revolving  Credit Loans and Swing
Line Loans, a Borrowing Request,  (b) in the case of Letters of Credit, a Letter
of Credit  Request  and an  application  with  respect  to the  Letter of Credit
requested, (c) in the case of Swing Line Loans, telephonic notice (followed by a
Borrowing  Request) in  accordance  with Section  2.3(b)  herein and (d) in each
case, an Updated  Borrowing Base  Certificate,  in each case duly executed by an
Authorized  Signatory  of the  Borrowers  and (ii)  after  giving  effect to the
Revolving Credit Loan(s) to be made and/or the Letter(s) of Credit to be issued,
the  Credit  Exposure  does not  exceed  the  lesser  of (i) the  then  existing
Borrowing Base and (ii) the Revolving Loan Commitment Amount as reflected in the
updated Borrowing Base Certificate.

         6.3 Certain Documents

             All documents  required by the  provisions of the Loan Documents to
be executed or delivered to the Agent or any Lender on or before the  applicable
Borrowing  Date shall have been so  executed  and  delivered  on or before  such
Borrowing Date.

         6.4 Other Documents

             Each of the Agent,  the Issuing  Bank,  and the Lenders  shall have
received  such  other   documents,   each  in  form  and  substance   reasonably
satisfactory to it, as it shall reasonably require in connection with the making
of the Loans and the issuance of the Letters of Credit on such Borrowing Date.

7. AFFIRMATIVE COVENANTS

         Each  Borrower  agrees,  jointly and  severally,  that, so long as this
Agreement is in effect,  any Loan or  Reimbursement  Obligation  (contingent  or

<PAGE>

otherwise) in respect of any Letter of Credit remains outstanding and unpaid, or
any other  amount is owing under any Loan  Document  to any Lender,  the Issuing
Bank or the Agent, the Borrowers shall:

         7.1 Financial Statements and Information

             Maintain,  and  cause  each  of its  Subsidiaries  to  maintain,  a
standard  system of accounting in accordance  with GAAP, and furnish or cause to
be furnished to the Agent and each Lender:

             (a) As soon as  available,  but in any event  within 105 days after
the  end  of  each  Fiscal  Year,  a  copy  of  the  Parent's  Consolidated  and
Consolidating  Balance  Sheets as at the end of such Fiscal Year,  together with
the  related  Consolidated  and  Consolidating   Statements  of  Operations  and
Stockholders'  Equity and  Consolidated  Cash Flows as of and through the end of
such Fiscal Year, setting forth in each case in comparative form the figures for
the preceding  Fiscal Year. The  Consolidated  Balance  Sheets and  Consolidated
Statements of Operations,  Stockholders'  Equity and Cash Flows (as well as like
separate consolidated Balance Sheets and Consolidated  Statements of Operations,
Stockholders'  Equity and Cash Flows of Physics)  shall be audited and certified
without  qualification by the Accountants,  which  certification shall (i) state
that the examination by such  Accountants in connection  with such  Consolidated
financial  statements  has  been  made in  accordance  with  generally  accepted
auditing  standards  and,  accordingly,  included  such tests of the  accounting
records and such other auditing  procedures as were considered  necessary in the
circumstances,  and (ii)  include  the  opinion  of such  Accountants  that such
Consolidated  financial statements have been prepared in accordance with GAAP in
a manner consistent with prior fiscal periods,  except as otherwise specified in
such opinion. The Consolidating  Balance Sheets and Consolidating  Statements of
Operations,  Stockholders'  Equity  and  Cash  Flows  shall  be  certified  by a
Financial  Officer of the Parent,  as being complete and correct in all material
respects and as presenting fairly the Consolidating  financial condition and the
Consolidating  results  of  operations  of  the  Parent  and  its  Subsidiaries.
Notwithstanding  any of the foregoing,  the Parent may satisfy its obligation to
furnish Consolidated  Balance Sheets and Consolidated  Statements of Operations,
Stockholders'  Equity and Cash Flows by furnishing copies of the Parent's annual
report on Form 10-K in respect of such Fiscal Year,  together with the financial
statements  required to be attached thereto,  provided the Parent is required to
file such  annual  report on Form 10-K with the SEC and such  filing is actually
made.

             (b) As soon as available, but in any event within 50 days after the
end of each of the first three  Fiscal  Quarters of each Fiscal  Year, a copy of
the  Consolidated  and  Consolidating  Balance  Sheets  of the  Parent  and  its
Consolidated  Subsidiaries as at the end of each such quarterly period, together
with the related  Consolidated  and  Consolidating  Statements of Operations and
Consolidated Statement of Cash Flows for such period and for the elapsed portion
of the Fiscal Year through such date,  setting forth in each case in comparative

<PAGE>

form the figures for the  corresponding  periods of the  preceding  Fiscal Year,
certified by a Financial Officer of the Parent, as being complete and correct in
all  material   respects  and  as  presenting   fairly  the   Consolidated   and
Consolidating financial condition and the Consolidated and Consolidating results
of operations  of the Parent and its  Subsidiaries.  Notwithstanding  any of the
foregoing,   the  Parent  may  satisfy  its  obligation  to  furnish   quarterly
Consolidated  Balance Sheets and  Consolidated  Statement of Operations and Cash
Flows by  furnishing  copies of the  Parent's  quarterly  report on Form 10-Q in
respect of such Fiscal Quarter,  together with the financial statements required
to be attached  thereto,  provided the Parent is required to file such quarterly
report on Form 10-Q with the SEC and such filing is actually made.

             (c) Within 50 days after the end of each of the first three  Fiscal
Quarters  (105 days  after the end of the last  Fiscal  Quarter),  a  Compliance
Certificate, certified by a Financial Officer of the Parent.

             (d) As soon as available, but not later than 30 days after the last
day of each Fiscal  Year,  budgets for the Parent and its  Subsidiaries  for the
coming Fiscal Year, in form and substance reasonably satisfactory to the Agent.

             (e) Monthly, and not later than the 25th day following the last day
of each month,  (i) with  respect to the Parent and its  Subsidiaries,  separate
accounts receivable aging reports for the Borrowers,  GP Canada, GP (UK) and MXL
as of the last day of the  immediately  preceding  month,  in form and substance
reasonably satisfactory to the Agent, (ii) a certification as to the outstanding
principal  balance of each  Intercompany  Demand  Note as of the last day of the
immediately  preceding month,  (iii) a Borrowing Base Certificate  together with
statements of accounts  payable as of the last day of the immediately  preceding
month, (iv) a report in a format  satisfactory to the Agent comparing the actual
results of Physics,  GP Canada,  GP (UK) and MXL, each  separately,  against its
respective  projections,  both for the  immediately  preceding month and for the
year to date  and (v)  separate  internally  prepared  financial  statements  of
Physics, GP Canada, GP (UK) and MXL.

             (f) Not less than one and not more than  three  days  prior to each
Borrowing Date, an Updated Borrowing Base Certificate.

             (g) Not less than one and not more than  three  days  prior to each
Covered  Event,  an Updated  Borrowing  Base  Certificate  giving  effect to the
transactions contemplated by such Covered Event.

             (h) Within 25 days of the last day of each Fiscal Quarter, a report
in a format  satisfactory to the Agent comparing Parent's actual results against
its  projections  (on a consolidated  and  consolidating  basis),  both for such
immediately preceding Fiscal Quarter and for the year to date.


<PAGE>

             (i)  Such  other  information  as  the  Agent  or  any  Lender  may
reasonably request from time to time.

         7.2 Certificates; Other Information

             Furnish to the Agent and each Lender:

             (a) Prompt written notice if: (i) any Indebtedness of the Parent or
any of its Subsidiaries in an aggregate amount in excess of $500,000 is declared
or shall become due and payable prior to its stated  maturity,  or is called and
not paid when due, (ii) a default shall have occurred under any note (other than
the Notes),  certificate,  security  or other  evidence  of  Indebtedness  in an
aggregate  amount in excess of  $500,000,  or the  holder or obligee of any note
(other than the Notes), certificate, security or other evidence of Indebtedness,
with respect to any other  Indebtedness of the Parent or any of its Subsidiaries
has the  right to  declare  Indebtedness  in an  aggregate  amount  in excess of
$500,000 due and payable prior to its stated  maturity,  (iii) there shall occur
and be  continuing  a Default or an Event of Default or (iv) a Change in Control
should occur;

             (b) Prompt written notice of: (i) any citation,  summons, subpoena,
order  to  show  cause  or  other  document  naming  the  Parent  or  any of its
Subsidiaries a party to any proceeding  before any Governmental  Authority which
could  reasonably be expected to have a Material  Adverse  Effect or which calls
into question the validity or enforceability  of any of the Loan Documents,  and
include with such notice a copy of such citation,  summons,  subpoena,  order to
show cause or other document,  and (ii)(A) any lapse or other termination of any
material license,  permit, franchise or other authorization issued to the Parent
or any of its Subsidiaries by any Person or Governmental Authority,  and (B) any
refusal  by any  Person or  Governmental  Authority  to renew or extend any such
material  license,  permit,  franchise  or  other  authorization,  which  lapse,
termination,  refusal or dispute could reasonably be expected to have a Material
Adverse Effect;

             (c)  Promptly   upon   becoming   available,   copies  of  all  (i)
registration  statements,  regular,  periodic or special reports,  schedules and
other material which the Parent or any of its  Subsidiaries may now or hereafter
be required to file with or deliver to any  securities  exchange or the SEC, and
(ii) material news releases and annual reports  relating to the Parent or any of
its Subsidiaries;

             (d) Prompt written notice in the event that the Parent,  any of its
Subsidiaries or any ERISA  Affiliate  knows, or has reason to know, that (i) any
Termination  Event with  respect to a Pension  Plan has  occurred or will occur,
(ii) any  condition  exists  with  respect to a Pension  Plan  which  presents a
material risk of termination  of the Pension Plan,  imposition of an excise tax,
requirement  to provide  security to the Pension Plan or other  liability on the
Parent, any of its Subsidiaries or any ERISA Affiliate, (iii) the Parent, any of
its  Subsidiaries or any ERISA Affiliate has applied for a waiver of the minimum
funding  standard  under Section 412 of the Code with respect to a Pension Plan,
(iv) the aggregate amount of the Unfunded Pension  Liabilities under all Pension

<PAGE>

Plans is in excess  of  $1,000,000,  (v) the  aggregate  amount of  Unrecognized
Retiree  Welfare  Liability  under all applicable  Employee  Benefit Plans is in
excess of  $1,000,000,  (vi) the Parent,  any of its  Subsidiaries  or any ERISA
Affiliate  has engaged in a Prohibited  Transaction  with respect to an Employee
Benefit Plan, (vii) the imposition of any tax under Section 4980B(a) of the Code
or (viii) the  assessment  of a civil  penalty  under  Section  502(c) of ERISA,
together with a certificate  of a Financial  Officer of the Parent setting forth
the details of such event and the action which the Parent,  such  Subsidiary  or
such ERISA Affiliate proposes to take with respect thereto, together with a copy
of all  notices  and  filings  with  respect  thereto,  and which in the case of
clauses (vi)  through  (viii)  could  reasonably  be expected to have a Material
Adverse Effect.

             (e) Prompt written notice in the event that the Parent,  any of its
Subsidiaries  or any ERISA Affiliate shall receive a demand letter from the PBGC
notifying  the Parent,  such  Subsidiary  or such ERISA  Affiliate  of any final
decision  finding  liability and the date by which such  liability must be paid,
together with a copy of such letter and a certificate of a Financial  Officer of
the Parent  setting forth the action which the Parent,  such  Subsidiary or such
ERISA Affiliate proposes to take with respect thereto.

             (f) Promptly upon the same becoming available,  and in any event by
the date such  amendment is adopted,  a copy of any Pension Plan  amendment that
the Parent,  any of its  Subsidiaries or any ERISA  Affiliate  proposes to adopt
which would  require the posting of security  under  Section  401(a)(29)  of the
Code,  together with a certificate of a Financial  Officer of the Parent setting
forth the reasons for the  adoption of such  amendment  and the action which the
Parent,  such Subsidiary or such ERISA  Affiliate  proposes to take with respect
thereto.

             (g) As soon as possible and in any event by the tenth day after any
required  installment  or other  payment under Section 412 of the Code owed to a
Pension  Plan  shall have  become due and owing and remain  unpaid a copy of the
notice of failure to make  required  contributions  provided  to the PBGC by the
Parent,  any of its  Subsidiaries or any ERISA Affiliate under Section 412(n) of
the Code,  together with a certificate of a Financial  Officer setting forth the
action which the Parent,  such  Subsidiary or such ERISA  Affiliate  proposes to
take with respect thereto.

             (h) Promptly upon the same becoming available,  and in any event by
15th day of each  month,  (i) a listing of all  Government  Receivables  created
since  the last  such  report  provided  and (ii) a duly  executed  Confirmatory
Assignment  of  Contract  and Notice of  Assignment  of Accounts  Receivable  as
Security, substantially in the form of Exhibit A and Exhibit B, respectively, to
the  Subsidiary  Guaranty  and Security  Agreement  and the  Borrowers  Security
Agreement.

             (i) Prompt  written  notice of any change in the budgets  furnished
pursuant to Section 7.1(d) with respect to any Fiscal Year  subsequent to Fiscal
Year 2001.


<PAGE>

             (j) Promptly after completed, consolidated projections prepared, as
revised from time to time,  with respect to the  Obligors;  provided,  that,  if
consolidating  projections  are  prepared  with  respect to any  Obligor  (which
preparation  shall  be in the  sole  discretion  of  the  Obligors),  then  such
projections shall also be furnished to the Agent promptly after completed.

             (k)  Such  other  information  as the  Agent  or any  Lender  shall
reasonably request from time to time.

         7.3 Legal Existence

             Except as may  otherwise  be  permitted  by  Sections  8.3 and 8.4,
maintain,  and  cause  each  Obligor  and each of its  Foreign  Subsidiaries  to
maintain, its corporate, partnership or analogous existence, as the case may be,
in good standing in the  jurisdiction of its  incorporation  or formation and in
each  other  jurisdiction  in which the  failure  so to do could  reasonably  be
expected to have a Material Adverse Effect.

         7.4 Taxes

             Pay and discharge  when due, and cause each Obligor and each of its
Foreign  Subsidiaries so to do, all Taxes upon or with respect to the Borrowers,
any Obligor and any Foreign  Subsidiary  and all Taxes upon the income,  profits
and Property of the Borrowers, any Obligor and any Foreign Subsidiary,  which if
unpaid, could reasonably be expected to have a Material Adverse Effect or become
a Lien on Property  of any  Borrower,  any  Obligor  and any Foreign  Subsidiary
(other than a Lien described in Section  8.2(i)),  unless and to the extent only
that such Taxes shall be contested in good faith and by appropriate  proceedings
diligently  conducted by the Borrowers,  the  applicable  Obligor or the Foreign
Subsidiary  and provided that any such  contested Tax shall not  constitute,  or
create,  a Lien on any  Property  of any  Borrower,  any Obligor and any Foreign
Subsidiary  senior to the Liens, if any, granted to the Agent and the Lenders by
the  Collateral  Documents on such Property,  and,  provided  further,  that the
Borrowers,  the applicable  Obligor and the applicable  Foreign Subsidiary shall
give the Agent  prompt  notice of such  contest  and that such  reserve or other
appropriate provision as shall be required by the Accountants in accordance with
GAAP shall have been made therefor.

         7.5 Insurance

             (a)  Insurance.  Maintain,  and cause each  Obligor and each of the
Foreign  Subsidiaries to maintain,  insurance with  financially  sound insurance
carriers on such of its Property,  against at least such risks,  and in at least
such amounts,  as are usually insured against by similar  businesses,  including
public  liability  (bodily  injury  and  property  damage),  fidelity,  business

<PAGE>

interruption, and workers' compensation with deductibles which are customary for
companies  engaged in similar  businesses,  and which,  in the case of  property
insurance,  shall be (i) in amounts  sufficient to prevent such Borrower or such
Subsidiary from becoming a co-insurer, and (ii) against all risks; and file with
the Agent  within  ten days  after  request  therefor  a  detailed  list of such
insurance then in effect,  stating the names of the carriers thereof, the policy
numbers, the insureds thereunder,  the amounts of insurance, dates of expiration
thereof, and the Property and risks covered thereby, together with a certificate
of the  Financial  Officer (or such other  officer as shall be acceptable to the
Agent) of each  Borrower  certifying  that in the opinion of such  officer  such
insurance is adequate in nature and amount,  complies  with the  obligations  of
such Borrower under this Section, and is in full force and effect.

             (b) Insurance Covering Collateral.  Promptly upon request therefor,
deliver or cause to be delivered to the Agent  originals or duplicate  originals
of all such policies of insurance  covering the  Collateral.  All such insurance
policies in respect of property  insurance and business  interruption  insurance
shall  contain a standard  loss payable  clause and shall be endorsed to provide
that,  in respect of the  interests  of the Agent,  the  Issuing  Bank,  and the
Lenders:  (i) the Agent  shall be an  additional  insured,  (ii) 30 days'  prior
written notice of any cancellation, reduction of amounts payable, or any changes
and amendments  shall be given to the Agent,  and (iii) the Agent shall have the
right, but not the obligation,  to pay any premiums due or to acquire other such
insurance  upon the failure of such Borrower or such  Subsidiary to pay the same
or to so insure.  All property  insurance  policies shall name the Agent as sole
loss payee in respect of each claim  relating to the Collateral and resulting in
a payment under any such insurance policy exceeding $1,000,000. Provided that no
Default or Event of Default  shall exist,  the Agent  agrees,  promptly upon its
receipt  thereof,  to pay over to the Borrowers,  the applicable  Obligor or the
applicable Foreign Subsidiary that owns the applicable  Property the proceeds of
such payment to enable the Borrowers,  the applicable  Obligor or the applicable
Foreign  Subsidiary to repair,  restore or replace the Property  subject to such
claim.  To the  extent  that such the  Borrowers,  any  Obligor  or the  Foreign
Subsidiary fails to repair, restore or replace such Property subject to a claim,
an amount equal to such  proceeds  shall be  immediately  applied as a permanent
reduction of the Revolving Loan Commitment Amount pursuant to Section 2.4(b). If
a Default or Event of Default  shall then  exist,  the Agent  shall (i) hold the
proceeds of such  payment as  Collateral  until such Default or Event of Default
shall no longer exist and then pay over the same to the  Borrowers or Obligor to
enable the  Borrowers  or  Obligor to repair,  restore or replace or cause to be
repaired,  restored or replaced the Property subject to the claim which resulted
in such payment or (ii) hold such proceeds as  Collateral  and apply the same to
the  obligations  of the Borrowers or Obligor  under the Loan  Documents in such
order,  in such  amounts  and at such  times as the Agent,  with the  consent of
Required Lenders, shall decide.

             (c)  Concurrent  Insurance.  Neither  the  Parent  nor  any  of its
Subsidiaries   shall  take  out  separate   insurance   concurrent  in  form  or

<PAGE>

contributing  in the event of loss with that required to be maintained  pursuant
to  subsection  (b) above unless the Agent has approved the carrier and the form
and content of the insurance policy, including naming the Agent as an additional
insured and sole loss payee thereunder.

         7.6 Performance of Obligations

             Pay and discharge  when due, and cause each Obligor and each of the
Foreign Subsidiaries so to do, all lawful  Indebtedness,  obligations and claims
for  labor,  materials  and  supplies  or  otherwise  which,  if  unpaid,  could
reasonably be expected to (i) have a Material  Adverse Effect,  or (ii) become a
Lien  upon  Property  of  the  Parent,  any  Obligor,  or  any  of  the  Foreign
Subsidiaries other than a Permitted Lien, unless and to the extent only that the
validity of such  Indebtedness,  obligation  or claim shall be contested in good
faith and by  appropriate  proceedings  diligently  conducted  and that any such
contested Indebtedness, obligations or claims shall not constitute, or create, a
Lien  on any  Property  of the  Borrower,  any  Obligor,  or any of the  Foreign
Subsidiaries  senior  to the  Lien,  if any,  granted  to the  Agent  under  the
Collateral Documents on such Property, and provided that the Borrowers,  Obligor
or Foreign Subsidiary shall give the Agent prompt notice of any such contest and
that such  reserve or other  appropriate  provision  as shall be required by the
Accountants in accordance with GAAP shall have been made therefor.

         7.7 Condition of Property

             At all times,  maintain,  protect and keep in good repair,  working
order and condition  (ordinary  wear and tear  excepted),  and cause each of the
Obligors  and  Foreign  Subsidiaries  so to do, all  Property  necessary  to the
operation of any Obligor's or such Foreign Subsidiary's business.

         7.8 Observance of Legal Requirements

             Observe  and  comply  in  all  respects,  and  cause  each  of  its
Subsidiaries  so to do, with all laws,  ordinances,  orders,  judgments,  rules,
regulations,  certifications,  franchises,  permits,  licenses,  directions  and
requirements of all Governmental Authorities, which now or at any time hereafter
may be  applicable  to it, a violation of which could  reasonably be expected to
have a Material  Adverse  Effect,  except such  thereof as shall be contested in
good faith and by appropriate  proceedings  diligently conducted by it, provided
that each  Borrower  shall give the Agent prompt notice of such contest and that
such  reserve  or  other  appropriate  provision  as shall  be  required  by the
Accountants in accordance with GAAP shall have been made therefor.

         7.9 Inspection of Property; Books and Records; Discussions

             At all  reasonable  times,  upon  reasonable  prior notice,  at the
Lenders'  expense  (unless a Default or an Event of Default has  occurred and is
continuing  in  which  case  it  shall  be at  the  Borrowers'  expense)  permit
representatives  of the Agent  and each  Lender  to visit  the  offices  of each
Borrower,  each other Obligor and each Foreign Subsidiary,  to examine the books

<PAGE>

and records  thereof and  Accountants'  reports  relating  thereto,  and to make
copies or extracts  therefrom,  to discuss the  affairs of each  Borrower,  each
other Obligor and each Foreign Subsidiary with the respective  officers thereof,
and to examine and inspect the Property of each Borrower, each other Obligor and
each Foreign  Subsidiary  and to meet and discuss the affairs of each  Borrower,
each other Obligor and each Foreign Subsidiary with the Accountants.

         7.10 Authorizations

             Maintain,  and cause each of its Subsidiaries to maintain,  in full
force  and  effect,  all  material  licenses,  franchises,   permits,  licenses,
authorizations  and  other  rights  as are  necessary  for  the  conduct  of its
business.

         7.11 Financial Covenants

             (a) Fixed  Charge  Coverage  Ratio.  Maintain as of the last day of
each  Reference  Period  set  forth  below a Fixed  Charge  Coverage  Ratio in a
proportion not less than that set forth below opposite each such Fiscal Quarter:


                 Reference Period                            Ratio
                 ----------------                            -----
                12/31/01 - 9/30/02                         1.45:1.00
             12/31/02 and thereafter                       1.50:1.00


             (b) Leverage  Ratio.  Maintain as of the last day of each Reference
Period set forth below,  a Leverage  Ratio in a proportion  not greater than the
ratios set forth below opposite each such Fiscal Quarter:


                 Reference Period                            Ratio
                 ----------------                            -----
                12/31/01 - 9/30/02                         3.00:1.00
                12/31/02 -9/30/02                          2.50:1.00
             12/31/03 and thereafter                       2.25:1.00


             (c) Minimum Consolidated Net Worth. Maintain at all times as of the
last day of each Fiscal  Quarter,  Consolidated  Net Worth in an amount not less
than the Minimum Net Worth Amount for such Fiscal Quarter.


<PAGE>

             (d) Interest  Coverage  Ratio.  Maintain as of the last day of each
Reference Period set forth below an Interest  Coverage Ratio in a proportion not
less than set forth opposite such Fiscal Quarter:


                 Reference Period                           Ratio
                 ----------------                           -----
                 12/31/01 - 9/30/02                        2.90:1.00
                 12/31/02 - 9/30/03                        3.50:1.00
              12/31/03 and thereafter                      3.75:1.00


         7.12 Additional Subsidiaries

             Not allow any  Subsidiary  to be  acquired  or  established  by any
Obligor  after the Closing Date without the prior  written  consent of the Agent
and the Required Lenders and to the extent such consent is furnished, the Parent
shall:

             (i) On or prior to each date  hereafter  upon which a Person  shall
have become a Material  Subsidiary of the Parent, (a) deliver such certificates,
stock  powers and other  documents  as would be required by Section  5.11(a)(ii)
and/or  Section  5.11(c)(ii)  as if such  Material  Subsidiary  were a  Material
Subsidiary as of the first Borrowing Date or as otherwise may be required hereby
and/or by the Borrowers Security Agreement and/or by the Subsidiary Guaranty and
Security  Agreement  and  such  other  documents  as the  Agent  shall  request;
provided,  that, to the extent such new Material  Subsidiary is not a Subsidiary
of a Obligor,  the owner of the Capital  Stock of such new  Material  Subsidiary
shall execute all  documentation  reasonably  requested by the Agent in order to
effect the pledge to the Agent,  for the ratable benefit of the Lenders,  of (A)
100% of the issued and outstanding Capital Stock of such new Material Subsidiary
to the  extent it is a  Domestic  Subsidiary  or a Foreign  Subsidiary  that has
Check-the-Box  Status and (B) 65% of the issued and outstanding Capital Stock of
such new Material  Subsidiary to the extent it is a Foreign  Subsidiary  that is
not does not have Check-the Box Status, (b) cause each such Material  Subsidiary
that is a Domestic  Subsidiary to become a party to the Subsidiary  Guaranty and
Security Agreement and provide and execute all documents  requested by the Agent
to perfect a Lien in Collateral  granted thereunder (to the extent such Material
Subsidiary  owns Property of the type described as Collateral in such Subsidiary
Guaranty and Security  Agreement)  and (c) cause each such  Material  Subsidiary
that is not a Domestic  Subsidiary to execute an Intercompany Demand Note to the
order of the Parent or a  Subsidiary  of the Parent,  as the case may be,  shall
endorse  such  note in  blank  and  deliver  same,  together  with  any  related
Intercompany Demand Loan Documents, to the Agent (for the ratable benefit of the
Lenders),  together  with all of the other  documents  necessary  to perfect the
Agent's first Lien therein.


<PAGE>

             (ii) On or prior to each  date  hereafter  upon  which  two or more
Subsidiaries (which are not individually Material Subsidiaries) hold 15% or more
of the  Consolidated  assets of the Parent or  account  for more than 15% of the
Consolidated   EBIDTA,  as  shown  on  the  most  recently  delivered  financial
statements  of the Parent and its  Subsidiaries  (a) deliver such  certificates,
stock  powers and other  documents  as would be required by Section  5.11(a)(ii)
and/or Section  5.11(c)(ii) as if one or more such  Subsidiaries were a Material
Subsidiary as of the first Borrowing Date or as otherwise may be required hereby
and/or by the Borrowers Security Agreement and/or by the Subsidiary Guaranty and
Security  Agreement  and such other  documents as the Agent shall  request,  (b)
cause one or more of such Subsidiaries that is a Domestic Subsidiary to become a
party to the Subsidiary  Guaranty and Security Agreement and provide and execute
all  documents  requested by the Agent to perfect a Lien in  Collateral  granted
thereunder  (to the extent such  Material  Subsidiary  owns Property of the type
described as Collateral in such Subsidiary  Guaranty and Security Agreement) and
(c) cause one or more of such Subsidiaries that is not a Domestic  Subsidiary to
execute an  Intercompany  Demand Note to the order of the Parent or a Subsidiary
of the Parent  and the  Parent,  or its  Subsidiary,  as the case may be,  shall
endorse  such  note in  blank  and  deliver  same,  together  with  any  related
Intercompany Demand Loan Documents, to the Agent (for the ratable benefit of the
Lenders),  together  with all of the other  documents  necessary  to perfect the
Agent's  first Lien  therein so that,  after the delivery of the  documents  and
other items required under  sub-sections  (i), (ii) and (iii), not more than 10%
of the  Consolidated  assets of the  Parent is held by, and not more than 10% of
the Consolidated  EBITDA is attributable to any two or more  Subsidiaries  which
are not Material Subsidiaries.

         7.13 Mortgages

             Within 30 days  after the  acquisition  by the Parent or any of its
Subsidiaries  of any  real  property  owned in fee  with a value  in  excess  of
$100,000, the Parent or such Subsidiary shall take all steps necessary, at their
own cost and expense,  to (a) grant the Agent a first priority  mortgage Lien on
such real  property,  fixtures and  buildings and  improvements  thereon and (b)
obtain title insurance  coverage on such property in an amount,  containing such
terms and exceptions and issued by an insurance company, acceptable to the Agent
in the  Agent's  reasonable  discretion  (together  with  such  favorable  legal
opinions with respect thereto as the Agent may reasonably request).

         7.14 Title Reports; Appraisals

             (a) The Borrowers shall take all reasonable action requested by the
Agent and (i)  cooperate  fully  with the Agent in order to enable  the Agent to
procure an amended title report from a title company reasonably  satisfactory to
the Agent with respect to each  property  covered by a Mortgage  (other than the
Reservoir Property) and (ii) in respect of any Real Estate constituting Eligible
Real Estate, deliver to the Agent an Appraisal prior to the Appraisal Date, and,

<PAGE>

with  respect to any  additional  Real Estate to be  included  as Eligible  Real
Estate, an Appraisal,  in form and substance satisfactory to the Agent (together
with an updated  Schedule 1.1) no less than ten (10) days prior to any Borrowing
Date on which such Property is to be included as Eligible Real Estate.

             (b) The Borrowers shall deliver to the Agent on or prior to 30 days
after the Closing Date a new Appraisal covering the Eligible Real Estate (to the
extent  such  properties  are  still  owned  by an  Obligor),  each in form  and
substance satisfactory to the Agent.

             (c) The Borrowers shall take all other  reasonable  action required
by the Agent to enable the Agent to determine the Aggregate Appraisal Value.

8. NEGATIVE COVENANTS

         Each  Borrower  agrees,  jointly and  severally,  that, so long as this
Agreement is in effect,  any Loan or  Reimbursement  Obligation  (contingent  or
otherwise) in respect of any Letter of Credit remains outstanding and unpaid, or
any other  amount is owing under any Loan  Document  to any Lender,  the Issuing
Bank or the Agent, the Borrowers shall not:

         8.1 Indebtedness

             Create,  incur,  assume  or  suffer  to  exist  any  liability  for
Indebtedness,  or permit any other  Obligor or any Foreign  Subsidiary so to do,
except:

             (a)  Indebtedness  of each  Borrower  to the  Lenders and the Agent
under this Agreement and the Loan Documents;

             (b) Current liabilities incurred in the ordinary course of business
not incurred through (i) the borrowing of money, or (ii) the obtaining of credit
except for credit on an open  account  basis  customarily  extended  and in fact
extended in connection with purchases of goods and services;

             (c)  Indebtedness  in respect of taxes,  assessments,  governmental
charges or levies and claims for labor;  materials  and  supplies  to the extent
that payment therefor shall not at the time be required to be made;

             (d)  Indebtedness  in respect of  judgments  or awards  that do not
constitute an Event of Default under Section 9.1(j);

             (e) Intercompany Indebtedness;

             (f) Other unsecured  Indebtedness in an aggregate  principal amount
not in excess of $500,000 at any one time outstanding;

             (g) Indebtedness in respect of deferred  liabilities other than for
deferred taxes and other than for borrowed money,  including without limitation,
deferred  compensation (other than deferred  compensation incurred in connection
with the Millennium Cell, Inc.  deferred  compensation  plan in an amount not to
exceed $10,000,000 in the aggregate), provided that the aggregate amount of such
Indebtedness  of the  Obligors  shall  not  exceed  $1,000,000  at any one  time
outstanding;

<PAGE>

             (h) Indebtedness in respect of deferred taxes;

             (i) Indebtedness  secured by the security  interests referred to in
subsection  8.2(viii)  hereof and Capitalized  Lease  Obligations,  in each case
incurred only if, after giving effect thereto, the limit on Capital Expenditures
set forth in Section 8.7 hereof would not be breached;

             (j) Subordinated Debt;

             (k)  Indebtedness  existing  on the  date  hereof  as set  forth on
Schedule 8.1 hereto and other Indebtedness described in Schedule 8.1 hereto; and

(l) (i) Contingent Obligations set forth on Schedule 8.1 hereto and renewals,
extensions or replacements of Contingent Obligations set forth on Schedule 8.1
hereto in respect of obligations in amounts not exceeding the amount guaranteed
under the Contingent Obligation set forth in Schedule 8.1; (ii) other Contingent
Obligations if (A) at the time of entering into any such Contingent Obligation,
the Borrowers shall be in compliance with all of the terms and conditions of
this Agreement and (B) the aggregate amount outstanding of all Contingent
Obligations entered into pursuant to this subsection 8.1(l)(ii) (whether
guarantees of payment or performance) shall at no time exceed $1,000,000. For
the purposes hereof, if the Borrowers and/or Material Subsidiary shall have a
Contingent Obligation of the same obligations of another Person, the amount of
only one of such Contingent Obligation shall be counted for purposes of this
Section 8.1(l)(ii), and (iii) Contingent Obligations in respect of the
Indebtedness described in Section 8.1(m).

         8.2 Liens

             Create,  incur,  assume or suffer to exist any Lien upon any of its
Property,  whether now owned or hereafter acquired,  or permit any other Obligor
or any Foreign Subsidiary so to do, except

             (i) Liens for Taxes in the  ordinary  course of business  which are
not  delinquent  or which are being  contested in  accordance  with Section 7.4,
provided that enforcement of such Liens is stayed pending such contest,

             (ii) Liens in connection with workers'  compensation,  unemployment
insurance or other social security obligations (but not ERISA),


<PAGE>

             (iii) deposits or pledges to secure bids, tenders, contracts (other
than contracts for the payment of money), leases, statutory obligations,  surety
and appeal bonds and other  obligations  of like nature  arising in the ordinary
course of business,

             (iv) zoning  ordinances,  easements,  rights of way, minor defects,
irregularities,  and other similar restrictions affecting real Property which do
not adversely affect the value of such real Property or the financial  condition
of the  Borrowers or any  Subsidiary  or impair its use for the operation of the
business of the Borrowers or any Subsidiary,

             (v)  Liens  arising  by  operation  of  law  such  as   mechanics',
materialmen's,  carriers',  warehousemen's liens incurred in the ordinary course
of  business  which are not  delinquent  by more than 90 days or which are being
contested in  accordance  with Section 7.6,  provided that  enforcement  of such
Liens is stayed pending such contest,

             (vi) Liens  arising  out of  judgments  or decrees  which are being
contested in  accordance  with Section 7.6,  provided that  enforcement  of such
Liens is stayed pending such contest,

             (vii)  Liens in favor of the Agent and the  Lenders  under the Loan
Documents and Liens in connection with the Intercompany Demand Loan Documents,

             (viii)  Liens  under  other  capital  leases and Liens on  Property
(including,  in the event such  Property  constitutes  capital  stock of a newly
acquired  Subsidiary,  Liens on the Property of such Subsidiary) acquired by any
Borrower or a Material  Subsidiary  after the Effective Date within the terms of
this Agreement and either  existing on such Property when  acquired,  or created
contemporaneously  with such  acquisition  to secure the payment or financing of
the  purchase  price  thereof,  provided  that (w) such Liens attach only to the
Property so purchased or acquired, (x) the Indebtedness secured by such Liens is
permitted by Section 8.1(i), (y) the Indebtedness secured or covered by any such
Lien  shall  not  exceed  the  lesser  of the cost or fair  market  value of the
Property  acquired  and shall not be renewed  or  extended  or prepaid  from the
proceeds of any borrowing by the  Borrowers and (z) the aggregate  amount of all
Indebtedness  secured  by  Liens  of  the  type  permitted  by  this  subsection
8.2(viii),  on a Consolidated basis shall not at any time exceed $700,000 at any
one time  outstanding in the aggregate with respect to all the Obligors taken as
a whole,

             (ix) Liens on Margin Stock to the extent that a prohibition on such
Liens would result in the Agent and the Lenders  being deemed to be  "indirectly
secured" by Margin  Stock under  Regulation  U of the Board of  Governors of the
Federal  Reserve  System,  as amended,  taking into  account the value of Margin
Stock owned by the Parent and its  Subsidiaries and any other relevant facts and
circumstances,


<PAGE>

             (x) Liens on Property of any Obligor or Foreign Subsidiary existing
on the Effective Date as set forth on Schedule 8.2, but not any increases in the
amounts secured thereby or extensions thereof to additional Property,

             (xi)  Liens  on  Property  of any  Obligor  or  Foreign  Subsidiary
acquired prior to the Effective Date provided that such Liens are limited to the
Property so acquired and were not created in contemplation of such acquisition,

             (xii) any  interest or title of a lessor in assets  being leased by
any of the Borrowers or any Material Subsidiary under an operating lease,

             (xiii)  the  right  reserved  to  or  vested  in  any  Governmental
Authority by any  statutory  provision,  or by the terms of any lease,  license,
franchise, grant or permit of such Person, to terminate any such lease, license,
franchise, grant or permit or to require annual or other payments as a condition
to the continuance thereof, and

             (xiv) any Lien resulting from security given to a public utility or
Governmental  Authority  when  required  by such  utility  or such  Governmental
Authority in connection with the operation of the business of any Borrower.

         8.3 Merger, Consolidations and Acquisitions

             Consolidate  with,  or permit any Obligor or Foreign  Subsidiary to
consolidate with, be acquired by, amalgamate with, merge or wind up into or with
any Person,  or make any  Acquisition or enter into any binding  agreement to do
any of the  foregoing  which is not  contingent  on obtaining the consent of the
Required  Lenders  or the  consent  of all of the  Lenders  in the  case  of any
Acquisition, except:

             (a) Capital Expenditures permitted by Section 8.7;

             (b) provided that (i) the Agent shall have received ten days' prior
written  notice  thereof and (ii)  immediately  before and after  giving  effect
thereto  no  Default or Event of Default  shall  exist,  any direct or  indirect
wholly-owned  Subsidiary  of any  Borrower  may  merge or  consolidate  with any
Borrower  or any  other  direct  or  indirect  wholly-owned  Subsidiary  of such
Borrower, provided that in the event of a merger or amalgamation of any Borrower
and such wholly-owned Subsidiary, the applicable Borrower shall be the survivor;

             (c) mergers or amalgamations involving any Borrower or a Subsidiary
Guarantor as long as the applicable Borrower or the Subsidiary  Guarantor is the
surviving entity; and

             (d) Investments permitted by Section 8.5 provided, that no Borrower
shall be permitted to make any equity Investment in any other Person.


<PAGE>

         8.4 Dispositions

         Make any  Disposition,  or permit  any  other  Obligor  or any  Foreign
Subsidiary so to do, except:

             (a)  Dispositions  by any  Borrower  and/or  any other  Obligor  or
Foreign  Subsidiary  other  than  GP  Canada  of  any  Investments  (other  than
marketable securities) permitted under Section 8.5(a);  provided,  that, 100% of
the proceeds  thereof are applied in accordance  with Section 2.5(d) hereof and,
provided,  further within ten Business Days prior to each such Disposition,  the
Agent and the  Lenders  shall have  received a  certificate  in respect  thereto
signed by an Authorized  Signatory of the applicable  Borrower  identifying  the
Property to be sold or otherwise disposed of and stating the total consideration
to be paid in respect of such  Disposition,  together with estimates of items to
be deducted  therefrom  in arriving at the Net Cash  Proceeds and if at the time
such  Investment(s)  was included in the Borrowing Base as reflected in the most
recent  Borrowing  Base  Certificate,  an  Updated  Borrowing  Base  Certificate
demonstrating  compliance  with the  Borrowing  Base after giving  effect to the
applicable Disposition;

             (b)  Dispositions of Property  which, in the reasonable  opinion of
each Borrower,  any Obligor or any Foreign Subsidiary,  is obsolete or no longer
useful in the conduct of its business;

             (c)  Dispositions  by any  Borrower  and/or  any other  Obligor  or
Foreign Subsidiary other than GP Canada of marketable  securities by the Parent;
provided,  that, the Borrowers shall apply 100% of the Net Cash Proceeds thereof
within one Business Day of the receipt  thereof in accordance  with the terms of
Section 2.5(d) hereof and, provided, further that within ten Business Days prior
to each such  Disposition,  the Agent and the  Lenders  shall  have  received  a
certificate  in  respect  thereto  signed  by an  Authorized  Signatory  of  the
applicable Borrower identifying the Property to be sold or otherwise disposed of
and stating the total  consideration to be paid in respect of such  Disposition,
together with estimates of items to be deducted therefrom in arriving at the Net
Cash Proceeds and if at the time any of such marketable securities were included
in  the  Borrowing  Base  as  reflected  in  the  most  recent   Borrowing  Base
Certificate, an Updated Borrowing Base Certificate demonstrating compliance with
the Borrowing Base after giving effect to the applicable Disposition;

             (d)  Dispositions by the Parent in connection with the consummation
of the Hydro Med Sale; and

             (e) Other Dispositions by the Borrowers and/or any other Obligor or
Foreign Subsidiary as to which the following conditions have been satisfied:


<PAGE>

             (i) no Default or Event of Default shall exist  immediately  before
or after giving effect thereto,

             (ii) the total consideration received or to be received therefor by
any Borrower, any Obligor or any of the Foreign Subsidiaries shall be payable in
cash, or if there should be non-cash consideration,  such non-cash consideration
shall not exceed  $500,000 (as determined on or before the closing  thereof) and
such total  consideration  received or to be received therefor shall not be less
than the fair market  value  thereof as  reasonably  determined  by the Managing
Person of such Borrower, such Obligor or such Foreign Subsidiary,

             (iii)  the  Borrowers  shall  apply the Net Cash  Proceeds  thereof
within one  Business  Day of the  receipt  thereof as required  and  provided by
Section 2.5(d), and

             (iv) within ten Business Days prior to each such  Disposition,  the
Agent and the  Lenders  shall have  received a  certificate  in respect  thereto
signed by an Authorized  Signatory of the Parent  identifying the Property to be
sold or otherwise  disposed of and stating (x) that immediately  before or after
giving effect thereto,  no Default or Event of Default shall exist, (y) that the
consideration  received or to be received by the Parent or such  Subsidiary  for
such Property has been  determined by the Managing Person thereof to be not less
than the fair market value of such Property and (z) the total  consideration  to
be paid in respect of such  Disposition,  together with estimates of items to be
deducted therefrom in arriving at the Net Cash Proceeds.

         8.5 Investments, Loans, Etc.

             At any time,  directly or indirectly,  purchase or otherwise  hold,
own,  acquire or invest in the Capital  Stock of,  evidence of  indebtedness  or
other  obligation or security  issued by, any other Person,  or make any loan or
advance to, or enter into any  arrangement for the purpose of providing funds or
credit to, or make any Acquisition, or become a partner or joint venturer in any
partnership  or joint  venture,  or  enter  into any  Interest  Rate  Protection
Arrangement, or make any other investment (whether in cash or other Property) in
any other Person,  or make any commitment or otherwise to agree to do any of the
foregoing (all of which are sometimes referred to herein as  "Investments"),  or
permit any of its Subsidiaries so to do, except:

             (a) Investments in Cash Equivalents;

             (b)  Investments  existing  on the  Effective  Date as set forth on
Schedule 8.5;

             (c) normal business banking accounts and short-term certificates of
deposit and time deposits in, or issued by,  federally  insured  institutions in
amounts not exceeding the limits of such insurance;


<PAGE>

             (d)  Investments in Interest Rate  Protection  Arrangements  (where
used for hedging purposes) covering a notional principal amount not in excess of
the Revolving Loan Commitment Amount;

             (e) loans and  extensions  of credit to  employees  of a Obligor or
Foreign  Subsidiary that are not officers of a Obligor not in excess of $250,000
in the aggregate at any one time outstanding;

             (f)  Investments by any Borrower or any Subsidiary in  Intercompany
Indebtedness permitted under Section 8.1;

             (g) Investments in the form of a subordinated note not in excess of
$5,000,000 payable to Parent in connection with the Disposition of Five Star;

             (h) Investments in Eligible Securities  Collateral by Parent and/or
its Subsidiaries  (and in that regard,  the Parent  represents that Schedule 8.5
contains  a list of all  Eligible  Securities  Collateral  and other  marketable
securities owned by Parent and/or its Subsidiaries as of the Closing Date);

             (i) Investments of the Borrowers described on Schedule 8.1;

             (j) Investments by the Parent in GP (UK); and

             (k) loans to  Persons  solely  for such  Person to  exercise  stock
options he/she has with respect to the Parent's Capital Stock under the Parent's
stock option plan (such loans are referred to herein  individually as an "Option
Loan" and  collectively as the "Option Loans");  provided,  that, no such Option
Loan shall be  permitted  unless (i) there is no  reduction  in the Parent's net
assets as a result of such Option Loan and no Obligor  makes or is  obligated to
make any distribution, advance or payment of cash in connection with such Option
Loan,  (ii) such Option Loan is evidenced  by a promissory  note payable by such
employee to the order of the Parent in the face amount of such Option Loan, such
promissory note is endorsed to the Agent,  the Agent is given  possession of the
original  of such  note and the  Agent is  granted  a first  priority  perfected
security  interest in such note for the  ratable  benefit of the Lenders and the
Issuing Bank, (iii) the making of such Option Loan does not violate any statute,
regulation,  rule or order of any Governmental  Authority and (iv) the amount of
such Option Loan,  when added to the  aggregate  principal  balance of all other
Option Loans then outstanding, does not exceed $7,500,000;

provided, that no Borrower shall be permitted to make any equity Investment in
any other Person.


<PAGE>

8.6      Restricted Payments.

                  Declare or pay any Restricted Payments payable in cash or
otherwise, apply any of its Property thereto or set apart any sum therefor, or
permit any of its Subsidiaries to do so, except:

             (i) any Borrower may declare and pay any dividend payable solely in
shares of its common stock, and

             (ii) any  Subsidiary may declare and pay dividends to its immediate
parent.

         8.7 Capital Expenditures; Leases.

             Make  any,  and will not  permit  any  other  Obligor  to make any,
Capital  Expenditures or incur any obligation to make Capital  Expenditures,  or
lease any assets pursuant to any operating lease or Synthetic Lease,  other than
in connection with Capital  Expenditures,  Synthetic Leases and operating leases
and obligations in connection  therewith in an aggregate  Consolidated amount in
excess  of  $2,500,000  in  any  Fiscal  Year.  Capital  Expenditures  shall  be
calculated  on a  noncumulative  basis so that  amounts not expended in a Fiscal
Year may not be carried over and expended in any subsequent Fiscal Year.

         8.8 Business and Name Changes

             (i)  Materially  change the nature of the business of the Parent or
its  Subsidiaries  as conducted on the  Effective  Date,  or alter or modify its
structure  or  status,  or  change  its  Fiscal  Year from that in effect on the
Effective Date, or permit any of the Obligors or Foreign  Subsidiaries so to do,
or

             (ii) Change the name or chief executive  office of the Parent,  any
other  Obligor or any  Subsidiary  unless the Agent shall have  received  (1) 30
days'  notice  prior to a change in name or chief  executive  office of any such
Person  and (2)  such  documents  as the  Agent  may  request  to  continue  the
perfection of any Liens on the Property of such Borrower, any such other Obligor
or such Subsidiary whose name or chief executive office is to be changed.

         8.9 ERISA

             Cause  any  Pension  Plan  to  have  a  Funded  Current   Liability
Percentage  of less  than  60%,  or  increase  benefits,  or  permit  any of its
Subsidiaries  so to  do,  under  any  Employee  Benefit  Plan  or  establish  or
contribute to any new Employee Benefit Plan.


<PAGE>

         8.10 Prepayments of Indebtedness

                  Prepay or obligate itself to prepay, in whole or in part, any
Indebtedness (other than the Indebtedness under the Loan Documents), or permit
any other Obligor or any Subsidiary so to do other than payments to another
Obligor provided no Default or Event of Default exists before and after giving
effect to any such prepayment.

         8.11 Amendments, Etc. of Certain Agreements

             Enter into or agree to any amendment, modification or waiver of any
term  or  condition  of its  Organizational  Documents  in any way  which  could
reasonably  be  expected  to be adverse to the  interests  of the Lenders or the
Agent, or permit any of its Subsidiaries so to do.

         8.12 Transactions with Affiliates

             Become a party to any transaction  with an Affiliate  (other than a
Obligor or a Foreign  Subsidiary),  or permit any  Obligor or any of the Foreign
Subsidiaries  so to  do,  unless  the  Parent's,  the  applicable  Obligor's  or
applicable Foreign  Subsidiary's  Managing Person shall have determined that the
terms and conditions  relating  thereto are as favorable to such Borrower,  such
Obligor,  or such Foreign  Subsidiary  as those which would be obtainable at the
time  in a  comparable  arms-length  transaction  with a  Person  other  than an
Affiliate.

         8.13 Issuance of Additional Capital Stock

             Issue any additional  Capital  Stock,  or permit any Obligor or any
Foreign  Subsidiary  so to do,  except that each  Borrower may issue  additional
Capital  Stock (i) in  connection  with the payment of any  dividend and (ii) as
long as (x) no Default or Event of Default exists before and after giving effect
to any such issuance of Capital  Stock and (y) the  Borrowers  apply 100% of the
Net Cash  Proceeds  thereof  within one Business  Day of the receipt  thereof in
accordance with the terms of Section 2.5(d) hereof.

         8.14 Limitation on Upstream Dividends by Subsidiaries

             Permit or cause any of its  Subsidiaries to enter into or agree, or
otherwise be or become subject, to any agreement,  contract or other arrangement
(other than this  Agreement)  with any Person pursuant to the terms of which (i)
such  Subsidiary  is or would be  prohibited  from  declaring or paying any cash
dividends on any class of its Capital Stock owned  directly or indirectly by the
Parent or any of the other Subsidiaries or from making any other distribution on
account of any class of any such Capital Stock (herein  referred to as "Upstream
Dividends"),  or (ii) the  declaration  or payment of  Upstream  Dividends  by a
Subsidiary  to the  Parent or  another  Subsidiary,  on an annual or  cumulative
basis, is or would be otherwise limited or restricted.


<PAGE>

         8.15 Limitation on Negative Pledges

             Enter into any  agreement,  other than (i) this  Agreement and (ii)
purchase money mortgages or capital leases permitted by this Agreement (in which
cases, any prohibition or limitation shall only be effective  against the assets
financed  thereby),  or permit any of its Subsidiaries so to do, which prohibits
or limits the ability of the Parent or any Subsidiary to create,  incur,  assume
or suffer to exist any Lien upon any of its  Property or  revenues,  whether now
owned or hereafter acquired.

         8.16 Margin Stock

             Allow any part of the  proceeds any Loan to be utilized (i) for the
purpose of  "purchasing"  or "carrying" any "margin stock" within the respective
meanings  of each  of the  quoted  terms  under  Regulation  U of the  Board  of
Governors of the Federal  Reserve  System as now and from time to time hereafter
in effect or (ii) for any purpose which violates, or which would be inconsistent
with, the provisions of the Regulations of such Board of Governors.

         8.17 Intangible Assets

             Obtain  any  patent,  trademark,   service  mark,  trade  name,  or
copyright,  or rights with respect to the foregoing, or permit any other Obligor
or any of the Foreign Subsidiaries so to do, unless contemporaneously  therewith
the applicable Borrower,  Obligor and/or Foreign Subsidiary, as the case may be,
takes all action and executes  all  documents  reasonably  required to grant the
Agent,  for the ratable  benefit of the Lenders,  a first Lien on the applicable
patent,  trademark,  service  mark,  trade name,  or  copyright,  or rights with
respect to the foregoing.

         8.18 Hydro Med Subordinated Debt Documents.

             Enter  into any  amendment,  modification  or  waiver of any of the
documents,  instruments or agreements executed pursuant to or in connection with
the Hydro Med Subordinated  Debt to the extent any such amendment,  modification
or waiver is or could be viewed as adverse to the  interests  of the Agent,  the
Issuing Bank or any Lender.

         8.19 No Prepayment of Subordinated  Debt. The Parent will not, and will
not permit any of its Subsidiaries, to:

             (i) make any payment or  prepayment  of principal of, or premium or
interest on, any  Subordinated  Debt,  (x) other than, so long as no Default has
occurred  and is  continuing,  on the  stated,  scheduled  date for  payment  of
interest  or other  mandatory  payments  expressly  set forth in the  applicable
documents evidencing the Subordinated Debt, or (y) which would violate the terms
of this Agreement and the applicable documents evidencing the Subordinated Debt,


<PAGE>

             (ii) redeem,  retire,  purchase,  defease or otherwise  acquire any
Subordinated  Debt,  unless  expressly  required  to  redeem  or  purchase  such
Indebtedness under the documents evidencing the Subordinated Debt.

         8.20 No Investments, etc. in Certain Subsidiaries.

             Notwithstanding  anything to the contrary in this Agreement,  in no
event shall the  aggregate  amount of  Investments  by the  Borrowers  and their
Material  Subsidiaries  in, or transfers of cash or property by the Borrowers or
their Material Subsidiaries to any non-Material Subsidiaries or Subsidiaries not
a party to the  Subsidiary  Guaranty and Security  Agreement,  in the  aggregate
amount exceed $1,000,000 in any Fiscal Year.  Notwithstanding the foregoing, the
Parent may expend up to  $750,000 in the  aggregate  in the event of a wind-down
and dissolution of Hydro Med Sciences, Inc.

9. DEFAULT

         9.1 Events of Default

             The  following   shall  each   constitute  an  "Event  of  Default"
hereunder:

             (a)  The  (i)  failure  of any  Borrower  to make  any  payment  of
principal  hereunder,  any  payments  under  a  Reimbursement  Agreement  or any
payments in respect of any Reimbursement  Obligation,  in each case when due and
payable,  or (ii)  failure of any  Borrower  to make any  deposit  into the Cash
Collateral Accounts when required hereby; or

             (b) The failure of any  Borrower  to make any payment of  interest,
Fees, expenses or other amounts payable under any Loan Document (or otherwise to
the Agent with respect to the loan facilities established hereunder) within five
Business Days of the date when due and payable; or

             (c) The failure of any  Borrower to observe or perform any covenant
or agreement  contained in Sections 2.5, 2.6, 7.1, 7.2(a),  (d), (e), 7.3, 7.11,
7.12, 7.13 or Section 8; or

             (d) The  failure of any  Obligor  to  observe or perform  any other
term,  covenant,  or agreement  contained in any Loan  Document and such failure
shall have continued unremedied for a period of 30 days after such Obligor shall
have obtained knowledge thereof; or

             (e) Any  representation  or warranty  made by any Obligor (or by an
officer  thereof on its  behalf)  in any Loan  Document  or in any  certificate,
report,  opinion (other than an opinion of counsel) or other document  delivered
or to be  delivered  pursuant  thereto,  shall prove to have been  incorrect  or
misleading (whether because of misstatement or omission) in any material respect
when made; or


<PAGE>

             (f)  Liabilities  and/or other  obligations of any Borrower  (other
than its obligations hereunder), any of their Subsidiaries or any other Obligor,
whether as principal, guarantor, surety or other obligor, for the payment of any
Indebtedness  or operating  leases in an aggregate  amount in excess of $500,000
(or the foreign currency equivalent) (i) shall become or shall be declared to be
due and payable prior to the expressed  maturity  thereof,  or (ii) shall not be
paid when due or within any grace  period  for the  payment  thereof,  (iii) any
holder of any such  obligation  shall have the right to declare such  obligation
due and payable prior to the expressed maturity thereof or (iv) as a consequence
of the occurrence or continuation of any event or condition,  any Borrower,  any
of their Subsidiaries or any other Obligor,  has become obligated to purchase or
repay any Indebtedness before its regularly scheduled maturity date; or

             (g) Any license, franchise, permit, right, approval or agreement of
any Borrower, any of their Subsidiaries or any other Obligor, is not renewed, or
is suspended, revoked or terminated and the non-renewal,  suspension, revocation
or termination thereof could have a Material Adverse Effect; or

             (h) Any Borrower,  any of their Foreign  Subsidiaries  or any other
Obligor, shall (i) suspend or discontinue its business,  (ii) make an assignment
for the benefit of  creditors,  (iii)  generally not be paying its debts as such
debts become due,  (iv) admit in writing its  inability to pay its debts as they
become due, (v) file a voluntary  petition in bankruptcy,  (vi) become insolvent
(however such insolvency shall be evidenced),  (vii) file any petition or answer
or institute any proceeding seeking for itself any reorganization,  arrangement,
composition, readjustment of debt, liquidation or dissolution or similar relief,
including any plan of compromise or  arrangement or other  corporate  proceeding
involving or affecting its creditors,  under any present or future statute,  law
or regulation of any jurisdiction,  (viii) petition or apply to any tribunal for
any receiver,  custodian or any trustee or other similar  official for it or any
substantial  part of its  Property,  (ix) be the subject of any such  proceeding
filed against it which remains undismissed for a period of 60 days, (x) file any
answer admitting or not contesting the material allegations of any such petition
filed against it or any order, judgment or decree approving such petition in any
such  proceeding,  (xi) seek,  approve,  consent  to, or  acquiesce  in any such
proceeding,  or in the  appointment  of  any  trustee,  receiver,  sequestrator,
custodian,  liquidator,  or fiscal agent for it, or any substantial  part of its
Property,  or an  order  is  entered  appointing  any  such  trustee,  receiver,
custodian,  liquidator  or fiscal agent and such order  remains in effect for 60
days,  or (xii) take any formal  action for the purpose of effecting  any of the
foregoing or looking to the  liquidation or  dissolution of such Borrower,  such
Foreign Subsidiary or such other Obligor; or

             (i) An  order  for  relief  is  entered  under  the  bankruptcy  or
insolvency laws of any jurisdiction or any other decree or order is entered by a
court having  jurisdiction (i)  adjudicating any Borrower,  any of their Foreign
Subsidiaries  or any other  Obligor,  bankrupt or insolvent,  (ii)  approving as
properly  filed a petition  seeking  reorganization,  liquidation,  arrangement,

<PAGE>

adjustment or composition of or in respect of any Borrower, any of their Foreign
Subsidiaries  or any other Obligor,  under the bankruptcy or insolvency  laws of
any jurisdiction,  (iii) appointing a receiver,  liquidator,  assignee, trustee,
custodian,  sequestrator  (or other similar  official) of any  Borrower,  any of
their Foreign  Subsidiaries or any other Obligor,  or of any substantial part of
the Property of any thereof,  or (iv) ordering the winding up or  liquidation of
the affairs of any  Borrower,  any of their  Foreign  Subsidiaries  or any other
Obligor,  and any such decree or order  continues  unstayed  and in effect for a
period of 60 days; or

             (j) Judgments or decrees against any Borrower, any of their Foreign
Subsidiaries  or any other  Obligor,  aggregating  in excess of $500,000 (or the
foreign  currency   equivalent)   shall  remain  unpaid,   unstayed  on  appeal,
undischarged, unbonded or undismissed for a period of 60 days; or

             (k) Any Loan Document  shall cease,  for any reason,  to be in full
force and effect, or any Obligor shall so assert in writing or shall disavow any
of its obligations under any Loan Document, or any "Event of Default" shall have
occurred under, and as such term is defined in, any Loan Document; or

             (l) The occurrence of a Change in Control; or

             (m) (i) Any  Termination  Event shall occur;  (ii) any  Accumulated
Funding  Deficiency,  regardless of whether waived,  shall exist with respect to
any Pension Plan;  (iii) any Person shall engage in any  Prohibited  Transaction
involving any Employee Benefit Plan; (iv) the Parent, any of its Subsidiaries or
any ERISA  Affiliate shall fail to pay when due an amount which is payable by it
to the PBGC or to a Pension Plan under Title IV of ERISA;  (v) the imposition of
any tax under  Section  4980B(a)  of the Code;  (vi) the  assessment  of a civil
penalty with respect to any Employee Benefit Plan under Section 502(c) of ERISA;
or (vii) any other event or  condition  shall occur or exist with  respect to an
Employee  Benefit  Plan which in the case of clauses  (i) through  (vii)  would,
individually or in the aggregate, have a Material Adverse Effect.

             (n) Unless  otherwise  waived or  consented  to by the  Agent,  the
Lenders and the Issuing Bank in writing,  the subordination  provisions relating
to any  Subordinated  Debt (the  "Subordination  Provisions")  shall  fail to be
enforceable  by the Agent,  the Lenders and the Issuing Bank in accordance  with
the terms thereof, or the monetary  Obligations shall fail to constitute "senior
debt" (or similar term) referring to such Obligations; or any Borrower or any of
its Subsidiaries shall, directly or indirectly, disavow or contest in any manner
(a) the  effectiveness,  validity or  enforceability of any of the Subordination
Provisions,  (b) that the Subordination  Provisions exist for the benefit of the
Agent, the Lenders and the Issuing Bank or (c) that all payments of principal of
or  premium  and  interest  on the  Subordinated  Debt,  or  realized  from  the
liquidation  of any  property  of any  Obligor,  shall be subject to any of such
Subordination Provisions.


<PAGE>

             (o) Any Loan Document or any Lien granted  thereunder shall (except
in  accordance  with its  terms),  in whole or in part,  terminate,  cease to be
effective or cease to be the legally valid,  binding and enforceable  obligation
of any Obligor party thereto; any Obligor or any other party shall,  directly or
indirectly,  contest in any manner such effectiveness,  validity, binding nature
or  enforceability;  or, except as permitted  under any Loan Document,  any Lien
securing the  Obligations  shall,  in whole or in part,  cease to be a perfected
first registered priority Lien, subject to Permitted Liens.

         9.2 Contract Remedies

             (a) Upon the  occurrence  of an  Event  of  Default  or at any time
thereafter  during  the  continuance  thereof,  (i) if such event is an Event of
Default  specified  in clause (h) or (i) above,  the  Commitments  of all of the
Lenders shall immediately and automatically terminate and the Loans, all accrued
and unpaid interest thereon and all other amounts owing under the Loan Documents
shall  immediately  become due and  payable,  and the Agent may,  and,  upon the
direction of the Required Lenders shall, exercise any and all remedies and other
rights provided in the Loan Documents, and (ii) if such event is any other Event
of  Default,  any or all of the  following  actions  may be taken:  (A) with the
consent of the Required  Lenders,  the Agent may, and upon the  direction of the
Required  Lenders shall,  by notice to any Borrower,  declare the Commitments of
all of the  Lenders  terminated  forthwith,  whereupon  such  Commitments  shall
immediately  terminate,  and (B) with the consent of the Required  Lenders,  the
Agent may, and upon the direction of the Required  Lenders  shall,  by notice of
default to any  Borrower,  declare the Loans,  all  accrued and unpaid  interest
thereon  and all other  amounts  owing  under the Loan  Documents  to be due and
payable forthwith,  whereupon the same shall immediately become due and payable,
and the  Agent  may,  and upon the  direction  of the  Required  Lenders  shall,
exercise any and all remedies and other rights  provided in the Loan  Documents.
Except as otherwise provided in this Section,  presentment,  demand, protest and
all other notices of any kind are hereby expressly waived.  Each Borrower hereby
further   expressly  waives  and  covenants  not  to  assert  any  appraisement,
valuation,  stay,  extension,  redemption  or similar  laws,  now or at any time
hereafter  in  force  which  might  delay,   prevent  or  otherwise  impede  the
performance or enforcement of any Loan Document.

             (b) In the event that the Commitments of all the Lenders shall have
been terminated or the Loans,  all accrued and unpaid  interest  thereon and all
other  amounts owing under the Loan  Documents  shall have been declared due and
payable  pursuant to the  provisions of this Section,  any funds received by the
Agent and the Lenders from or on behalf of the Borrowers shall be applied by the
Agent and the Lenders in liquidation of the Loans of the Borrowers and the other
obligations of the Borrowers  under the Loan  Documents in the following  manner
and order:  (i) first,  to the  payment of interest  on, and then the  principal
portion of, any Loans which the Agent may have  advanced on behalf of any Lender
for  which  the  Agent  has not  then  been  reimbursed  by such  Lender  or the

<PAGE>

Borrowers;  (ii)  second,  to the payment of any fees or expenses  due the Agent
from the Borrowers,  (iii) third, to reimburse the Agent and the Lenders for any
expenses  (to the extent not paid  pursuant  to clause  (ii) above) due from the
Borrowers  pursuant to the  provisions  of Section  11.5;  (iv)  fourth,  to the
payment of accrued  Fees and all other fees,  expenses and amounts due under the
Loan  Documents  (to the extent not paid  pursuant to clause (ii) above)  (other
than principal and interest on the Loans and amounts  payable in connection with
Interest Rate Protection Arrangements with a Rate Protection Lender), (v) fifth,
to the  payment,  in the case of  interest  received  from or on  behalf  of the
Borrowers,  pro rata  according to the Revolving Loan  Commitment  Percentage of
each Lender,  of interest due on the Revolving Credit Loans,  (vi) sixth, to the
payment  pro rata in the case of  principal  received  from or on  behalf of the
Borrowers  and/or in the case of amounts  received on account of  Interest  Rate
Protection Arrangements with a Rate Protection Lender, pro rata according to the
principal on the then  outstanding  Loans and the amount then owed in connection
with such Interest Rate  Protection  Arrangement(s);  and, if more than one such
Interest  Rate  Protection  Arrangement  then  exists,  pro rata  among all such
Interest  Rate  Protection  Arrangements,  of principal on the Loans;  and (vii)
seventh,  to the payment of any other  amounts  owing to the Agent,  the Issuing
Bank and the Lenders under any Loan Document.

10. THE AGENT

         10.1 Appointment

             Each  of the  Issuing  Bank  and  each  Lender  hereby  irrevocably
designates  and appoints  Fleet as the Agent of the Issuing Bank and such Lender
under the Loan  Documents  and each of the Issuing  Bank and each Lender  hereby
irrevocably  authorizes  the Agent to take such  action on its behalf  under the
provisions  of the Loan  Documents  and to exercise such powers and perform such
duties  as are  expressly  delegated  to the  Agent  by the  terms  of the  Loan
Documents, together with such other powers as are reasonably incidental thereto.
The duties of the Agent shall be mechanical and  administrative in nature,  and,
notwithstanding  any provision to the contrary  elsewhere in any Loan  Document,
the  Agent  shall not have any  duties  or  responsibilities  other  than  those
expressly set forth therein,  or any fiduciary  relationship  with, or fiduciary
duty to, the Issuing Bank or any Lender,  and no implied  covenants,  functions,
responsibilities, duties, obligations or liabilities shall be read into the Loan
Documents or otherwise exist against the Agent.

         10.2 Delegation of Duties

             The Agent may execute any of its duties under the Loan Documents by
or through agents or  attorneys-in-fact  and shall be entitled to rely upon, and
shall be fully  protected in, and shall not be under any liability for,  relying
upon, the advice of counsel concerning all matters pertaining to such duties.


<PAGE>

         10.3 Exculpatory Provisions

             Neither the Agent nor any of its  officers,  directors,  employees,
agents,  attorneys-in-fact  or  affiliates  shall be (i)  liable  for any action
lawfully  taken  or  omitted  to be  taken  by it or  such  Person  under  or in
connection  with the Loan  Documents  (except for its or such Person's own gross
negligence  or willful  misconduct),  or (ii)  responsible  in any manner to the
Issuing Bank or any of the Lenders for any recitals, statements, representations
or warranties  made by any Borrower or any other Obligor or any officer  thereof
contained in the Loan  Documents  or in any  certificate,  report,  statement or
other document referred to or provided for in, or received by the Agent under or
in  connection   with,   the  Loan   Documents  or  for  the  value,   validity,
effectiveness,  genuineness, perfection, enforceability or sufficiency of any of
the Loan  Documents or for any failure of any  Borrower or any other  Obligor or
any other Person to perform its obligations  thereunder.  The Agent shall not be
under any  obligation  to the  Issuing  Bank or any  Lender to  ascertain  or to
inquire as to the observance or  performance of any of the agreements  contained
in, or conditions of, the Loan Documents,  or to inspect the Property,  books or
records of any Borrower or any other  Obligor.  The Issuing Bank and the Lenders
acknowledge that the Agent shall not be under any duty to take any discretionary
action  permitted under the Loan Documents  unless the Agent shall be instructed
in  writing  to do so  by  the  Issuing  Bank  and  Required  Lenders  and  such
instructions  shall be  binding  on the  Issuing  Bank and all  Lenders  and all
holders of the Notes; provided, however, that the Agent shall not be required to
take any action which exposes the Agent to personal  liability or is contrary to
law or any  provision  of the Loan  Documents.  The Agent shall not be under any
liability or responsibility  whatsoever, as Agent, to any Borrower, or any other
Obligor  or any  other  Person  as a  consequence  of any  failure  or  delay in
performance,  or any  breach,  by the  Issuing  Bank or any Lender of any of its
obligations under any of the Loan Documents.

         10.4 Reliance by Agent

             The Agent shall be entitled to rely,  and shall be fully  protected
in  relying,  upon  any  writing,  resolution,   notice,  consent,  certificate,
affidavit,  opinion, letter,  cablegram,  telegram,  telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed,  sent or made by a proper Person or
Persons and upon advice and  statements of legal counsel  (including  counsel to
the Borrowers or any other Obligor),  independent  accountants and other experts
selected by the Agent.  The Agent may treat the Issuing Bank or each Lender,  as
the case may be, or the Person designated in the last notice filed with it under
this Section,  as the holder of all of the interests of the Issuing Bank or such
Lender,  as the case may be, in its Loans,  in its Notes,  the Letters of Credit
and the  Reimbursement  Obligations,  as  applicable,  until  written  notice of
transfer, signed by the Issuing Bank or such Lender (or the Person designated in
the last  notice  filed with the Agent)  and by the  Person  designated  in such
written  notice of transfer,  in form and substance  satisfactory  to the Agent,
shall have been filed with the Agent.  The Agent  shall not be under any duty to

<PAGE>

examine or pass upon the validity, effectiveness,  enforceability or genuineness
of the Loan Documents or any  instrument,  document or  communication  furnished
pursuant thereto or in connection therewith,  and the Agent shall be entitled to
assume that the same are valid,  effective and genuine, have been signed or sent
by the proper  parties and are what they purport to be. The Agent shall be fully
justified  in failing or  refusing to take any action  under the Loan  Documents
unless it shall first receive such advice or concurrence of the Required Lenders
as it deems  appropriate.  The Agent  shall in all cases be fully  protected  in
acting,  or in refraining  from acting,  under the Loan  Documents in accordance
with a request  or  direction  of the  Required  Lenders,  and such  request  or
direction  and any  action  taken or failure to act  pursuant  thereto  shall be
binding  upon the Issuing  Bank,  all the Lenders and all future  holders of the
Notes and the Reimbursement Obligations.

         10.5 Notice of Default

             The Agent  shall not be deemed to have  knowledge  or notice of the
occurrence  of any  Default  or Event of Default  unless the Agent has  received
written notice  thereof from the Issuing Bank, a Lender or any Borrower.  In the
event that the Agent  receives  such a notice,  the Agent  shall  promptly  give
notice  thereof to the Issuing  Bank,  the Lenders and any  Borrower.  The Agent
shall take such action with respect to such Default or Event of Default as shall
be directed by the Required Lenders,  provided,  however,  that unless and until
the Agent shall have received such  directions,  the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem to be in the best interests
of the Lenders.

         10.6 Non-Reliance on Agent and Other Lenders

             Each of the  Issuing  Bank and each Lender  expressly  acknowledges
that neither the Agent nor any of its respective officers, directors, employees,
agents,   attorneys-in-fact  or  affiliates  has  made  any  representations  or
warranties to it and that no act by the Agent hereinafter,  including any review
of the  affairs  of any  Borrower  or any  other  Obligor,  shall be  deemed  to
constitute any  representation  or warranty by the Agent to any Lender.  Each of
the  Issuing  Bank  and  each  Lender  represents  to the  Agent  that  it  has,
independently  and without  reliance  upon the Agent,  the  Issuing  Bank or any
Lender, and based on such documents and information as it has deemed appropriate
made its own  evaluation of and  investigation  into the  business,  operations,
Property,  financial and other condition and  creditworthiness  of each Borrower
and each other Obligor and the value and Lien status of any collateral  security
and made its own decision to enter into this Agreement. Each of the Issuing Bank
and each Lender also represents that it will, independently and without reliance
upon the Agent, the Issuing Bank or any Lender,  and based on such documents and
information as it shall deem  appropriate at the time,  continue to make its own
credit analysis,  evaluations and decisions in taking or not taking action under
any Loan  Document,  and to make such  investigation  as it deems  necessary  to
inform  itself as to the  business,  operations,  Property,  financial and other

<PAGE>

condition and  creditworthiness  of each Borrower and each other Obligor and the
value and Lien status of any collateral  security.  Except for notices,  reports
and other  documents  expressly  required to be  furnished  to the Issuing  Bank
and/or the Lenders by the Agent hereunder,  the Agent shall not have any duty or
responsibility  to provide  the  Issuing  Bank or any Lender  with any credit or
other information concerning the business,  operations,  Property, financial and
other condition or  creditworthiness of any Borrower and any other Obligor which
at any time may come into the  possession  of the Agent or any of its  officers,
directors, employees, agents, attorneys-in-fact or affiliates.

         10.7 Indemnification

             Each Lender  agrees to indemnify and hold harmless the Agent in its
capacity as such (to the extent not promptly  reimbursed  by the  Borrowers  and
without limiting the obligation of the Borrowers to do so), ratably according to
its Revolving  Loan  Commitment  Percentage  or, in the event any Loans shall be
outstanding,  from and against  any and all  liabilities,  obligations,  losses,
damages, penalties,  actions, judgments, suits, costs, expenses or disbursements
of any kind  whatsoever  including any amounts paid to the Lenders  (through the
Agent) by the Borrowers or any other  Obligor  pursuant to the terms of the Loan
Documents,  that are  subsequently  rescinded or avoided,  or must  otherwise be
restored or returned, which may at any time (including at any time following the
payment of the Revolving  Credit Loans and the Notes) be imposed on, incurred by
or asserted  against the Agent in any way relating to or arising out of the Loan
Documents or any other  documents  contemplated by or referred to therein or the
transactions  contemplated thereby or any action taken or omitted to be taken by
the Agent under or in connection with any of the foregoing;  provided,  however,
that  no  Lender  shall  be  liable  for  the  payment  of any  portion  of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  expenses  or  disbursements  to the extent  resulting  from the  finally
adjudicated  gross  negligence  or  willful  misconduct  of the  Agent.  Without
limitation of the foregoing,  each Lender agrees to reimburse the Agent promptly
upon demand for its pro rata share of any unpaid costs and  expenses  (including
reasonable fees and expenses of counsel)  payable by the Borrowers under Section
11.5 to the  extent  that the  Agent has not been paid such fees or has not been
reimbursed  for such costs and expenses,  by the  Borrowers.  The failure of any
Lender to reimburse the Agent promptly upon demand for its pro rata share of any
amount  required  to be paid by the  Lenders  to the Agent as  provided  in this
Section  shall not  relieve  any other  Lender of its  obligation  hereunder  to
reimburse  the Agent for its pro rata share of such amount,  but no Lender shall
be  responsible  for the failure of any other Lender to reimburse  the Agent for
such  other  Lender's  pro rata share of such  amount.  The  agreements  in this
Section shall survive the  termination of the  Commitments of all of the Lenders
and the payment of all amounts payable under the Loan Documents.


<PAGE>

         10.8 Agent in Its Individual Capacity

             Fleet and its  affiliates  may make secured or unsecured  loans to,
accept deposits from, issue letters of credit for the account of, act as trustee
under  indentures  of, and generally  engage in any kind of business  with,  any
Borrower or any other Obligor as though Fleet were not Agent hereunder and Fleet
did not arrange the transactions  contemplated hereby;  provided,  however, that
any new loans made by the Agent to any Borrower must be disclosed to the Lenders
within 30 days of the making of any new loan(s). With respect to the Commitments
made or  renewed  by  Fleet  and the  Notes  issued  to,  and the  Reimbursement
Obligations  owing to, Fleet,  Fleet shall have the same rights and powers under
the Loan Documents as any Lender and may exercise the same as though it were not
the Agent,  and the terms  "Lender"  and  "Lenders"  shall in each case  include
Fleet.

         10.9 Successor Agent

             If  at  any  time  the  Agent  deems  it  advisable,  in  its  sole
discretion,  it may submit to the  Issuing  Bank,  each of the  Lenders  and any
Borrower a written notice of its  resignation as Agent under the Loan Documents,
such resignation to be effective upon the earlier of (i) the written  acceptance
of the duties of the Agent under the Loan  Documents  by a  successor  Agent and
(ii) on the 30th day after the date of such notice.  Upon any such  resignation,
the  Required  Lenders  shall have the right to appoint  from among the  Lenders
which is a commercial  bank a successor  Agent. If no successor Agent shall have
been so appointed  by the Required  Lenders and  accepted  such  appointment  in
writing  within  30  days  after  the  retiring  Agent's  giving  of  notice  of
resignation,  then the retiring Agent may, on behalf of the Issuing Bank and the
Lenders,  appoint a successor Agent, which successor Agent shall be a commercial
bank  organized  under the laws of the United  States or any State  thereof  and
having  a  combined  capital,   surplus,  and  undivided  profits  of  at  least
$250,000,000  and which shall be reasonably  acceptable to the Parent.  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 retiring Agent,  and the retiring
Agent's rights, powers,  privileges and duties as Agent under the Loan Documents
shall be terminated. The Borrowers, the other Obligors, the Issuing Bank and the
Lenders  shall  execute  such  documents  as shall be  necessary  to effect such
appointment.  After any retiring Agent's resignation as Agent, the provisions of
the Loan Documents shall inure to its benefit as to any actions taken or omitted
to be taken by it, and any  amounts  owing to it,  while it was Agent  under the
Loan  Documents.  If at any time there shall not be a duly  appointed and acting
Agent,  each Borrower  agrees,  jointly and severally,  to make each payment due
under the Loan Documents  directly to the Issuing Bank and the Lenders  entitled
thereto during such time.


<PAGE>

11. OTHER PROVISIONS

         11.1 Amendments and Waivers

             Notwithstanding  anything  to the  contrary  contained  in any Loan
Document,  with the written consent of the Required  Lenders,  the Agent and the
appropriate  parties to the Loan Documents  (other than the Issuing Bank and the
Lenders) may, from time to time, enter into written  amendments,  supplements or
modifications  thereof and, with the consent of the Required Lenders,  the Agent
on behalf of the Issuing  Bank and the  Lenders,  may execute and deliver to any
such parties a written  instrument  waiving or consenting to the departure from,
on such terms and conditions as the Agent may specify in such instrument, any of
the  requirements  of the Loan  Documents or any Default or Event of Default and
its  consequences;  provided,  however,  that  no  such  amendment,  supplement,
modification, waiver or consent shall:

             (a) without the  consent of all of the  Lenders  (i)  increase  the
Revolving Loan Commitment  Amount of any Lender,  (ii) extend the Revolving Loan
Commitment  Period,  (iii)  reduce  the rate or  amount,  or extend  the time of
payment,  of  the  Revolving  Loan  Commitment  Fee  or  the  Letter  of  Credit
Commissions,  (iv)  reduce  the rate or amount of, or extend the time of payment
of, interest on any Loan or any Note or Reimbursement Obligation, (v) reduce the
amount,  or extend the time of payment of any  installment  or other  payment of
principal on any Loan or any Note or Reimbursement Obligation,  (vi) decrease or
forgive  the  principal  amount  of  any  Loan  or  any  Note  or  Reimbursement
Obligation,  (vii) consent to any  Acquisitions by any of the Obligors or (viii)
consent to any  assignment  or delegation by any Borrower of any of their rights
or obligations under any Loan Document;

             (b)  without  the  consent  of  all  the  Lenders  (i)  change  the
provisions of Section 3.5, 3.6, 3.7,  3.9,  3.10,  9.1(a),  this Section 11.1 or
Section  11.7(a),  (ii) change the  definition  of  "Required  Lenders",  or any
provision  of this  Agreement  requiring  the consent or approval of all Lenders
(iii)  change the several  nature of the Lenders'  obligations,  (iv) change any
provision  governing the sharing of payments and liabilities  among the Lenders,
(v) release all or substantially all of the obligations of any Obligor under any
Loan Document,  (other than in connection with (A) a Disposition permitted under
Section  8.4, or (B) any release  specifically  provided  for in the  Collateral
Documents),  or (vi) release any  substantial  portion of the  Collateral or any
security  interest  therein  (other than in  connection  with (A) a  Disposition
permitted under Section 8.4, (B) a dissolution  permitted by Section 7.3, or (C)
any release specifically provided for in the Collateral Documents);

             (c)  without  the  written  consent of the Swing Line Loan  Lender,
amend,  modify or waive any  provision  of Sections  2.2 and 2.3(b) or otherwise
change any of the rights or  obligations of the Swing Line Loan Lender under any
Loan Document;


<PAGE>

             (d) without the written consent of the Issuing Bank, amend,  modify
or waive any  provision of Sections  2.7,  2.8, 2.9 or  3.2(b)(ii)  or otherwise
change  any of the  rights or  obligations  of the  Issuing  Bank under any Loan
Document; and

             (e)  without  the written  consent of the Agent,  amend,  modify or
waive any  provision  of  Section  10 or  otherwise  change any of the rights or
obligations of the Agent under any Loan Document.

             Any such  amendment,  supplement,  modification,  waiver or consent
shall apply equally to the Agent,  the Issuing Bank,  the Swing Line Loan Lender
and each of the Lenders and shall be binding upon the parties to the  applicable
Loan Document,  the Lenders,  the Issuing Bank, the Swing Line Loan Lenders, the
Agent and all future holders of the Notes and the Reimbursement Obligations.  In
the case of any waiver, the parties to the applicable Loan Document, the Issuing
Bank,  the Lenders and the Agent shall be restored to their former  position and
rights hereunder and under the outstanding Notes and other Loan Documents to the
extent  provided for in such waiver,  and any Default or Event of Default waived
shall not extend to any  subsequent  or other  Default or Event of  Default,  or
impair any right consequent  thereon.  Notwithstanding  anything to the contrary
contained in any Loan Document, the Agent may, at any time and from time to time
without the consent of any one or more of the Lenders, release any Collateral or
any security  interest  therein in connection  with (A) any  disposition of such
Collateral  permitted by Section 8.4, (B) any  dissolution  permitted by Section
7.3, or (C) any release specifically provided for in the Collateral Documents.

         11.2 Notices

             All notices, requests and demands to or upon the respective parties
to the Loan Documents to be effective shall be in writing and, unless  otherwise
expressly provided therein, shall be deemed to have been duly given or made when
delivered by hand, one Business Day after having been sent by overnight  courier
service, or when deposited in the mail,  first-class postage prepaid, or, in the
case of notice by telecopy,  when sent,  addressed as follows in the case of the
Borrowers,  the Agent or the Issuing Bank,  and as set forth in Schedule 11.2 in
the case of each Lender,  or  addressed to such other  addresses as to which the
Agent may be hereafter  notified by the respective parties thereto or any future
holders of the Notes:

                  Borrowers:

                  c/o GP Strategies Corporation
                  9 West 57th Street
                  Suite 4170
                  New York, New York 10019
                  Attention:  Scott Greenberg, CFO
                  Telephone: (212) 230-9529
                  Telecopy:  (212) 230-9500


<PAGE>

                  with a copy to:

                  Patricia F. Brennan, Esq.
                  Morgan, Lewis & Bockius, LLP
                  101 Park Avenue
                  New York, New York
                  Telephone: (212) 309-6814
                  Telecopy:  (212) 309-6273

                  The Agent or the Issuing Bank:

                  Fleet National Bank
                  1185 Avenue of the Americas
                  New York, NY 10036
                  Attention: James V. Maiorino
                  Telephone: (212) 819-5727
                  Telecopy:  (212) 819-4120

                  with a copy to:

                  Scott M. Zemser, Esq.
                  Bingham Dana LLP
                  399 Park Avenue
                  New York, New York 10022
                  Telephone: (212) 318-7700
                  Telecopy:  (212) 752-5378

except that any notice, request or demand by the Borrowers to or upon the Agent,
the Issuing Bank or the Lenders pursuant to Sections 2.3, 2.7 or 3.3 shall not
be effective until received. Any party to a Loan Document may rely on signatures
of the parties thereto which are transmitted by telecopy or other electronic
means as fully as if originally signed.

         11.3 No Waiver; Cumulative Remedies

             No failure to exercise and no delay in  exercising,  on the part of
the Agent, the Issuing Bank or any Lender, any right, remedy, power or privilege
under any Loan Document shall operate as a waiver thereof;  nor shall any single
or partial  exercise of any right,  remedy,  power or  privilege  under any Loan
Document  preclude any other or further  exercise thereof or the exercise of any
other  right,  remedy,  power or  privilege.  The rights,  remedies,  powers and
privileges  under the Loan  Documents  are  cumulative  and not exclusive of any
rights, remedies, powers and privileges provided by law.


<PAGE>

         11.4 Survival of Representations and Warranties and Certain Obligations

             (a)  All   representations  and  warranties  made  under  the  Loan
Documents  and in any  document,  certificate  or statement  delivered  pursuant
thereto or in connection  therewith  shall survive the execution and delivery of
the Loan Documents.

             (b) The  obligations of the Borrowers under Sections 3.5, 3.6, 3.7,
3.8, 3.9, 3.10,  11.5 and 11.8 shall survive the  termination of the Commitments
of all of the Lenders,  the Letter of Credit Commitment,  and the payment of the
Loans, the  Reimbursement  Obligations,  and all other amounts payable under the
Loan Documents.

         11.5 Expenses

             Each  Borrower  agrees,   jointly  and  severally,   promptly  upon
presentation of a statement or invoice therefor, and whether any Loan is made or
any Letter of Credit is issued (i) to pay or reimburse Fleet (in its capacity as
Agent and  arranger)  for all its  respective  out-of-pocket  costs and expenses
reasonably incurred in connection with the development,  preparation,  execution
and  syndication  of,  the  Loan  Documents  and any  amendment,  supplement  or
modification  thereto  (whether or not  executed or  effective),  any  documents
prepared  in  connection  therewith  and the  consummation  of the  transactions
contemplated thereby, including the reasonable fees and disbursements of Special
Counsel,  (ii) to pay or reimburse each of the Issuing Bank, the Swing Line Loan
Lender, the Agent and the Lenders for all of its reasonable  out-of-pocket costs
and expenses,  including reasonable fees and disbursements of counsel,  incurred
in connection  with (A) any Default or Event of Default and any  enforcement  or
collection   proceedings  resulting  therefrom,   (B)  in  connection  with  the
negotiation of any restructuring or "work-out"  (whether  consummated or not) of
the  obligations  of any Obligor  under any of the Loan  Documents,  and (C) the
enforcement  of this Section and (iii) to pay,  indemnify,  and hold each of the
Issuing Bank,  the Swing Line Loan Lender,  the Lenders,  and the Agent harmless
from  and  against,  any and  all  recording  and  filing  fees  and any and all
liabilities  with  respect  to, or  resulting  from any delay in paying,  stamp,
excise and other similar taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or consummation of any
of  the  transactions   contemplated   by,  or  any  amendment,   supplement  or
modification  of, or any  waiver or  consent  under or in  respect  of, the Loan
Documents and any such other documents, and (iv) to pay, indemnify and hold each
of the Issuing Bank,  the Swing Line Loan Lender,  the Lenders and the Agent and
each of its officers,  directors and employees harmless from and against any and
all other liabilities, obligations, claims, losses, damages, penalties, actions,
judgments,  suits,  costs,  expenses  or  disbursements  of any  kind or  nature
whatsoever (including reasonable counsel fees and disbursements) with respect to
the enforcement  and performance of the Loan Documents,  the use of the proceeds
of the Loans and the Letters of Credit and the  enforcement  and  performance of
the  provisions  of any  subordination  agreement  involving  the  Agent and the
Lenders (all the foregoing, collectively, the "Indemnified Liabilities") and, if

<PAGE>

and to the extent that the  foregoing  indemnity  may be  unenforceable  for any
reason,  the Borrowers  agree to make the maximum  payment not prohibited  under
applicable law; provided,  however,  that the Borrowers shall have no obligation
to pay  Indemnified  Liabilities to the Agent,  the Issuing Bank, the Swing Line
Loan Lender, or any Lender arising from the finally adjudicated gross negligence
or  willful  misconduct  of the Agent,  the  Issuing  Bank,  the Swing Line Loan
Lender,  or such  Lender or claims  between  one  indemnified  party and another
indemnified  party. The agreements in this Section shall survive the termination
of the  Commitments of all of the Lenders,  the Letter of Credit  Commitment and
the payment of all amounts  payable under the Loan Documents.  In addition,  the
Borrowers jointly and severally also agree to reimburse the Administrative Agent
on demand for all reasonable  third party  administration,  audit and monitoring
expenses  incurred in connection with the Borrowing Base and  determinations  in
respect thereof.

         11.6 Lending Offices

             (a) Each  Lender  shall have the right at any time and from time to
time to transfer its Loans and Reimbursement  Obligations to a different office,
provided that such Lender shall  promptly  notify the Agent and the Borrowers of
any such change of office.  Such office  shall  thereupon  become such  Lender's
lending office,  provided,  however, that no Lender shall be entitled to receive
any greater  amount under  Sections 3.5, 3.7 and 3.10, as a result of a transfer
of any such Loans and  Reimbursement  Obligations to a different  office of such
Lender than it would be entitled to immediately  prior thereto unless such claim
would have arisen even if such transfer had not occurred.

             (b) Each  Lender  agrees  that,  upon the  occurrence  of any event
giving rise to any increased cost or indemnity  under Sections 3.5, 3.7 and 3.10
with  respect to such  Lender,  it will,  if  requested  by the  Borrowers,  use
reasonable  efforts  to  designate  another  lending  office  for any  Loans and
Reimbursement Obligations affected by such event, provided that such designation
is made on such  terms  that  such  Lender  and its  lending  office  suffer  no
economic,  legal or  regulatory  disadvantage,  with the object of avoiding  the
consequence  of the event  giving  rise to the  operation  of any such  Section.
Nothing in this Section shall affect or postpone any of the  obligations  of the
Borrowers  or the right of any Lender  provided in Sections  3.5,  3.6,  3.7 and
3.10.

         11.7 Successors and Assigns

             (a) This Agreement, the Notes and the other Loan Documents to which
the  Borrowers are a party shall be binding upon and inure to the benefit of the
Borrowers,  the Lenders, the Agent, the Swing Line Loan Lender, the Issuing Bank
all  future  holders  of the  Notes  and  Reimbursement  Obligations  and  their
respective  successors  and  assigns.  The  Borrowers  shall  not  delegate  any
obligation or duty under any Loan Document  without the prior written consent of
the Agent, the Issuing Bank, the Swing Line Loan Lender and each Lender.


<PAGE>

             (b) Subject to Section  11.7(e),  any Lender may at any time assign
all or any portion of its rights under any Loan Document to any Federal  Reserve
Bank.

             (c) In addition to its rights under  Section  11.7(b),  each Lender
shall  have  the  right  to  sell,  assign,   transfer  or  negotiate  (each  an
"Assignment")  all or a portion of its Loans,  its Commitment and its Notes,  to
any subsidiary or Affiliate of such Lender, to any other Lender, or to any other
bank,  insurance company,  financial  institution,  pension fund, mutual fund or
other  similar  fund,  provided  that (i)  each  such  Assignment  shall be of a
constant,  and not a varying,  percentage of all of the assignor Lender's rights
and  obligations  under the Loan  Documents,  (ii) the Commitment  Amount of the
Commitment  assigned  shall be not less than  $5,000,000 or the full  Commitment
Amount of such  assignor  Lender's  Commitment,  (iii)  unless the  assignee  is
another Lender or a subsidiary or Affiliate of any Lender, or unless at the time
of such Assignment an Event of Default shall exist,  Parent shall have consented
thereto in writing (which consent shall not be unreasonably withheld),  and (iv)
the assignor Lender and such assignee shall deliver to the Agent three copies of
an Assignment and Acceptance  Agreement  executed by each of them, along with an
assignment  fee in the sum of $3,500 for the account of the Agent.  Upon receipt
of such  number  of  executed  copies  of each such  Assignment  and  Acceptance
Agreement  together with the assignment fee therefor and the Parent's consent to
such  Assignment,  if required,  the Agent shall record the same and execute not
less  than  two  copies  of such  Assignment  and  Acceptance  Agreement  in the
appropriate  place,  deliver one such copy to the  assignor and one such copy to
the assignee,  and deliver one photocopy thereof, as executed, to the Borrowers.
From and after the  Assignment  Effective  Date specified in, and as defined in,
such Assignment and Acceptance  Agreement,  the assignee  thereunder  shall be a
party  hereto and shall for all  purposes of this  Agreement  and the other Loan
Documents be deemed a "Lender"  and, to the extent  provided in such  Assignment
and Acceptance Agreement,  the assignor Lender thereunder shall be released from
its obligations under this Agreement and the other Loan Documents. Each Borrower
agrees, jointly and severally,  that, if requested, in connection with each such
Assignment,  it shall at its own cost and expense execute and deliver (1) to the
Agent  or such  assignee  a Note in a  maximum  principal  amount  equal  to the
Commitment  Amount of the Commitment  assumed by such  assignee,  and (2) to the
Agent or such assignor Lender,  in the event that such assignor Lender shall not
have assigned all of its Commitment,  a Note in a maximum principal amount equal
to the Commitment  Amount of the Commitment  retained by such assignor,  in each
case  either in escrow  pending  the  delivery  of, or against  receipt of, such
assignor  Lender's  existing  Note. The Agent shall be entitled to rely upon the
representations  and warranties  made by the assignee under each  Assignment and
Acceptance  Agreement.  Notwithstanding  any  other  term of this  Section,  the
agreement of Fleet to provide the Swing Line Loan Commitment shall not impair or
otherwise  restrict in any manner the ability of Fleet to make any assignment of
its Loans or Commitment, it being understood and agreed that Fleet may terminate
its Swing Line Loan  Commitment  either in whole or in part, in connection  with
the making of any assignment.


<PAGE>

             (d) In  addition  to the  participations  provided  for in  Section
11.11, each Lender may grant participations in all or any part of its Loans, its
Notes and its  Commitments to one or more banks,  insurance  companies,  pension
funds,  mutual funds or other  financial  institutions,  provided  that (i) such
Lender's  obligations  under this Agreement and the other Loan  Documents  shall
remain unchanged,  (ii) such Lender shall remain solely responsible to the other
parties to this  Agreement and the other Loan  Documents for the  performance of
such  obligations,  (iii) the Parent,  the Agent, the Issuing Bank 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,  (iv) the  granting  of such  participation  does not
require that any additional  loss,  cost or expense be borne by the Borrowers at
any time, and (v) the voting rights of any holder of any participation  shall be
limited to decisions that in accordance with Section 11.1 require the consent of
all of the Lenders.

             (e) No Lender shall, as between and among the Borrower,  the Agent,
the Issuing Bank and such Lender,  be relieved of any of its  obligations  under
the  Loan   Documents  as  a  result  of  any   assignment  of  or  granting  of
participations  in, all or any part of its Loans,  its  Commitment and its Note,
except that a Lender shall be relieved of its  obligations  to the extent of any
such  Assignment of all or any part of its Loans,  its  Commitments or its Notes
pursuant to Section 11.7(c).

         11.8 Indemnity

             Each Borrower,  jointly and severally,  agrees, to defend, protect,
indemnify, and hold harmless the Agent, the Issuing Bank and each and all of the
Lenders,  each  of  their  respective  Affiliates  and  each  of the  respective
officers,  directors,  employees  and agents of each of the  foregoing  (each an
"Indemnified  Person" and,  collectively,  the  "Indemnified  Persons") from and
against  any and  all  liabilities,  obligations,  losses,  damages,  penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature  whatsoever  (including the fees and  disbursements of counsel to such
Indemnified  Persons) in connection with any  investigative,  administrative  or
judicial proceeding, whether direct, indirect or consequential and whether based
on any  federal,  state  or  provincial  laws or  other  statutory  regulations,
including securities and commercial laws and regulations, under common law or at
equitable  cause,  or on contract or otherwise,  including any  liabilities  and
costs under environmental laws,  Federal,  state,  provincial or local health or
safety  laws,  regulations,  or  common  law  principles,  arising  from  or  in
connection  with the past,  present or future  operations of any  Borrower,  any
other  Obligor,  or their  respective  predecessors  in  interest,  or the past,
present or future  environmental  condition of the Property of the Parent or any
of its Subsidiaries,  the presence of asbestos-containing  materials at any such
Property,  or the release or threatened  release of any Hazardous  Substance (as
defined under applicable  environmental  law) into the environment from any such
Property) in any manner  relating to or arising out of the Loan  Documents,  any
commitment   letter  executed  and  delivered  by  the  Parent  or  any  of  its

<PAGE>

Subsidiaries,  the Issuing  Bank  and/or the Agent,  the  capitalization  of the
Parent  or any of its  Subsidiaries,  the  Commitments,  the  Letter  of  Credit
Commitment,  the making of, issuance of,  management of and participation in the
Loans or the  Letters of Credit,  or the use or  intended  use of the Letters of
Credit and the  proceeds of the Loans  hereunder,  provided  that the  Borrowers
shall not have any obligation  under this Section to an Indemnified  Person with
respect to any of the  foregoing  to the extent  found in a final  judgment of a
court having jurisdiction to have resulted primarily out of the gross negligence
or willful  misconduct of such Indemnified  Person or arising solely from claims
between one such  Indemnified  Person and another such Indemnified  Person.  The
indemnity  set forth  herein  shall be in addition to any other  obligations  or
liabilities of the Parent to each Indemnified Person under the Loan Documents or
at common  law or  otherwise,  and shall  survive  any  termination  of the Loan
Documents,  the expiration of the Commitments of all of the Lenders,  the Letter
of Credit  Commitment and the payment of all  Indebtedness of the Obligors under
the Loan Documents.

         11.9 Limitation of Liability

             No claim may be made by the Parent,  any other Obligor,  any of its
Subsidiaries,  any Lender or other Person against the Agent, any Lender,  or any
directors,  officers,  employees,  or  agents  of any of them  for any  special,
indirect,  consequential  or punitive damages in respect of any claim for breach
of contract or any other  theory of  liability  arising out of or related to the
transactions  contemplated by any Loan Document,  or any act,  omission or event
occurring in connection therewith, and the Parent, its Subsidiaries,  such other
Obligor, any such Lender or other Person hereby waives,  releases and agrees not
to sue upon any claim for any such  damages,  whether or not accrued and whether
or not known or suspected to exist in its favor.

         11.10 Counterparts

             Each Loan Document (other than the Notes) may be executed by one or
more of the parties  thereto on any number of separate  counterparts  and all of
said counterparts  taken together shall be deemed to constitute one and the same
document.  It shall not be  necessary  in making  proof of any Loan  Document to
produce  or  account  for more  than one  counterpart  signed by the party to be
charged. A counterpart of any Loan Document or to any document  evidencing,  and
of any an amendment,  modification, consent or waiver to or of any Loan Document
transmitted  by  telecopy   shall  be  deemed  to  be  an  originally   executed
counterpart. A set of the copies of the Loan Documents signed by all the parties
thereto shall be deposited  with each of the  Borrowers,  the Issuing Bank,  the
Agent and the Lenders. Any party to a Loan Document may rely upon the signatures
of any other party thereto which are transmitted by telecopy or other electronic
means to the same extent as if originally signed.


<PAGE>

         11.11 Adjustments; Set-off

             (a) If any Lender (a "Benefited Lender"),  shall obtain any payment
(whether voluntary,  involuntary,  through the exercise of any right of set-off,
or otherwise) on account of its Loans, Notes or the Reimbursement Obligations in
excess of its  Revolving  Loan  Commitment  Percentage  of payments then due and
payable on account of the Loans,  the Notes, and the  Reimbursement  Obligations
received  by all  the  Lenders,  then  such  Benefited  Lender  shall  forthwith
purchase, without recourse, for cash, from the other Lenders such participations
in their Loans and Notes,  as shall be necessary to cause such Benefited  Lender
to share such excess payment with each of them according to their Revolving Loan
Commitment  Percentages,  provided,  however, that if all or any portion of such
excess payment is thereafter recovered from such Benefited Lender, such purchase
from such other  Lenders  shall be  rescinded,  and each such other Lender shall
repay  to such  Benefited  Lender  the  purchase  price  to the  extent  of such
recovery,  together  with an amount equal to such other  Lender's pro rata share
(according to the proportion of (i) the amount of such other  Lender's  required
repayment to (ii) the total amount so recovered from such  Benefited  Lender) of
any interest or other amount paid or payable by such Benefited Lender in respect
of the total amount so recovered.  The Parent agrees that such Benefited  Lender
so  purchasing  a  participation  from  such  other  Lenders  pursuant  to  this
subsection  (a) may  exercise  such  rights to payment  (including  the right of
set-off) with respect to such  participation  as fully as such Benefited  Lender
were the direct creditor of such Parent in the amount of such participation.

             (b) In addition to any rights and  remedies of the Issuing Bank and
the Lenders  provided by law, upon the occurrence of an Event of Default and the
acceleration of the obligations owing in connection with the Loan Documents,  or
at any time  upon the  occurrence  and  during  the  continuance  of an Event of
Default,  under Sections 9.1(a) or (b), each of the Issuing Bank, the Swing Line
Loan Lender and the Lenders  shall have the right,  without  prior notice to the
Parent or any other  Obligor,  any such notice  being  expressly  waived by each
Borrower and each other Obligor to the extent not prohibited by applicable  law,
to set-off and apply against any indebtedness,  whether matured or unmatured, of
the Borrowers or such other Obligor,  as the case may be, to the Issuing Bank or
such  Lender,  as the case may be, any amount owing from the Issuing  Bank,  the
Swing Line Loan Lender or such Lender,  as the case may be, to such  Borrower or
such other Obligor,  as the case may be, at, or at any time after, the happening
of any of the above-mentioned events. To the extent not prohibited by applicable
law, the aforesaid  right of set-off may be exercised by the Issuing  Bank,  the
Swing Line Loan Lender or such Lender, as the case may be, against the Borrowers
or such other Obligor, as the case may be, or against any trustee in bankruptcy,
custodian,  debtor  in  possession,  assignee  for  the  benefit  of  creditors,
receiver, or execution, judgment or attachment creditor of the Borrowers or such
other Obligor,  as the case may be, or against  anyone else claiming  through or
against the Borrowers or such other Obligor, as the case may be, or such trustee
in  bankruptcy,  custodian,  debtor in  possession,  assignee for the benefit of

<PAGE>

creditors,   receiver,   or   execution,   judgment  or   attachment   creditor,
notwithstanding  the  fact  that  such  right of  set-off  shall  not have  been
exercised by the Issuing Bank, the Swing Line Loan Lender or such Lender, as the
case may be,  prior to the  making,  filing or  issuance,  or  service  upon the
Issuing Bank or such  Lender,  as the case may be, of, or of notice of, any such
petition,  assignment  for the benefit of creditors,  appointment or application
for the appointment of a receiver, or issuance of execution,  subpoena, order or
warrant.  Each of the Issuing  Bank,  the Swing Line Loan Lender and the Lenders
agrees promptly to notify the Borrowers and the Agent after any such set-off and
application made by the Issuing Bank, the Swing Line Loan Lender or such Lender,
as the case may be,  provided  that the  failure to give such  notice  shall not
affect the validity of such set-off and application.

         11.12 Construction

             Each  party  to  a  Loan  Document  represents  that  it  has  been
represented   by  counsel  in  connection   with  the  Loan  Documents  and  the
transactions  contemplated thereby and that the principle that agreements are to
be construed against the party drafting the same shall be inapplicable.

         11.13 Governing Law

             THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO
BE A CONTRACT  MADE UNDER AND GOVERNED BY THE INTERNAL  LAWS OF THE STATE OF NEW
YORK  (INCLUDING  FOR SUCH  PURPOSES  SECTIONS  5-1401 AND 5-1402 OF THE GENERAL
OBLIGATIONS  LAW OF THE STATE OF NEW YORK),  EXCLUDING  THE LAW OF CONFLICTS BUT
GIVING EFFECT TO FEDERAL LAWS  APPLICABLE TO NATIONAL BANKS EXCEPT TO THE EXTENT
THE VALIDITY OR  PERFECTION OF A SECURITY  INTEREST  UNDER A LOAN  DOCUMENT,  OR
REMEDIES UNDER A LOAN DOCUMENT, IN RESPECT OF ANY COLLATERAL ARE GOVEREND BY THE
LAWS OF THE JURISDICTION OTHER THAN THE STATE OF NEW YORK. EACH LETTER OF CREDIT
SHALL BE  GOVERNED  BY, AND  CONSTRUED  IN  ACCORDANCE  WITH,  THE LAWS OR RULES
DESIGNATED IN SUCH LETTER OF CREDIT,  OR IF NO LAWS OR RULES ARE DESIGNATED,  IN
THE CASE OF STANDBY  LETTERS  OF CREDIT,  THE  INTERNATIONAL  STANDBY  PRACTICES
(ISP98--INTERNATIONAL  CHAMBER OF  COMMERCE  PUBLICATION  NUMBER 590 (THE "ISP98
RULES"))  AND, IN THE CASE OF TRADE LETTERS OF CREDIT,  THE UNIFORM  CUSTOMS AND
PRACTICE  FOR  DOCUMENTARY  CREDITS,  1993  REVISION  (INTERNATIONAL  CHAMBER OF
COMMERCE  PUBLICATION  NO. 500 (THE "UCP 500  RULES")),  AND,  AS TO MATTERS NOT
GOVERNED BY THE ISP98 RULES OR THE UCP 500 RULES,  AS  APPLICABLE,  THE INTERNAL
LAWS OF THE STATE OF NEW YORK.  This  Agreement  and the  other  Loan  Documents
constitute the entire understanding among the parties hereto with respect to the
subject matter hereof and thereof and supersede any prior agreements, written or
oral, with respect thereto.


<PAGE>

         11.14 Headings Descriptive

             Section  headings  have been  inserted  in the Loan  Documents  for
convenience only and shall not be construed to be a part thereof.

         11.15 Severability

             Every  provision of the Loan Documents is intended to be severable,
and if any term or provision thereof shall be invalid,  illegal or unenforceable
for any reason,  the  validity,  legality and  enforceability  of the  remaining
provisions  thereof  shall  not  be  affected  or  impaired  thereby,   and  any
invalidity,  illegality or unenforceability in any jurisdiction shall not affect
the validity,  legality or  enforceability  of any such term or provision in any
other jurisdiction.

         11.16 Integration

             All  exhibits  to a Loan  Document  shall  be  deemed  to be a part
thereof.  Except for agreements between the Agent and the Borrowers with respect
to  certain  fees,   the  Loan  Documents   embody  the  entire   agreement  and
understanding  among the Borrowers,  the Agent, the Issuing Bank and the Lenders
with respect to the subject  matter  thereof and supersede all prior  agreements
and  understandings  among the  Borrowers,  the Agent,  the Issuing Bank and the
Lenders with respect to the subject matter thereof.

         11.17 Consent to Jurisdiction

             Each party to a Loan  Document  hereby  irrevocably  submits to the
jurisdiction  of any New York State or Federal  court sitting in the City of New
York over any suit, action or proceeding  arising out of or relating to the Loan
Documents.  Each party to a Loan  Document  hereby  irrevocably  waives,  to the
fullest extent  permitted or not  prohibited by law, any objection  which it may
now or  hereafter  have to the laying of the venue of any such  suit,  action or
proceeding  brought in such a court and any claim that any such suit,  action or
proceeding  brought in such a court has been brought in an  inconvenient  forum.
Each Obligor  hereby  agrees that a final  judgment in any such suit,  action or
proceeding  brought in such a court,  after all  appropriate  appeals,  shall be
conclusive and binding upon it.

         11.18 Service of Process

             Each party to a Loan Document  hereby  irrevocably  consents to the
service of  process in any suit,  action or  proceeding  by sending  the same by
first class mail, return receipt  requested or by overnight courier service,  to
the  address  of such  party set forth in Section  11.2 of the  applicable  Loan

<PAGE>

Document  executed by such party.  Each party to a Loan  Document  hereby agrees
that any such service (i) shall be deemed in every respect  effective service of
process upon it in any such suit,  action, or proceeding,  and (ii) shall to the
fullest  extent  enforceable  by law,  be taken  and  held to be valid  personal
service upon and personal delivery to it.

         11.19 No Limitation on Service or Suit

             Nothing in the Loan Documents or any modification,  waiver, consent
or amendment  thereto  shall affect the right of the Agent,  the Issuing Bank or
any Lender to serve process in any manner permitted by law or limit the right of
the Agent,  the  Issuing  Bank or any Lender to bring  proceedings  against  any
Obligor in the courts of any jurisdiction or jurisdictions in which such Obligor
may be served.

         11.20 WAIVER OF TRIAL BY JURY

             EACH OF THE AGENT,  THE ISSUING  BANK,  THE SWING LINE LOAN LENDER,
THE LENDERS AND THE BORROWERS HEREBY  KNOWINGLY,  VOLUNTARILY AND  INTENTIONALLY
WAIVES  ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN  RESPECT  OF ANY  LITIGATION
ARISING  OUT  OF,  UNDER  OR IN  CONNECTION  WITH  THE  LOAN  DOCUMENTS  OR  THE
TRANSACTIONS CONTEMPLATED THEREIN. FURTHER, THE BORROWERS HEREBY CERTIFY THAT NO
REPRESENTATIVE  OR AGENT OF THE ISSUING  BANK,  THE SWING LINE LOAN LENDER,  THE
AGENT, OR THE LENDERS, OR COUNSEL TO THE ISSUING BANK, THE AGENT OR THE LENDERS,
HAS REPRESENTED,  EXPRESSLY OR OTHERWISE,  THAT THE ISSUING BANK, THE AGENT, THE
SWING  LINE  LOAN  LENDER  OR THE  LENDERS  WOULD  NOT,  IN THE  EVENT  OF  SUCH
LITIGATION,  SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.  EACH
BORROWER ACKNOWLEDGES THAT THE ISSUING BANK, THE AGENT AND THE LENDERS HAVE BEEN
INDUCED TO ENTER INTO THIS  AGREEMENT  BY, INTER ALIA,  THE  PROVISIONS  OF THIS
SECTION.

         11.21 Treatment of Certain Information

             Each of the Issuing Bank and Lenders  understands  that some of the
information  furnished to it pursuant to this Loan  Agreement may be received by
it prior to the time that such information shall have been made public, and each
of the Issuing Bank and Lenders  hereby agree that it will keep, and will direct
its officers and employees to keep, all the information  provided to it pursuant
to this  Loan  Agreement  confidential  prior to its  becoming  public  (through
publication  other  than as a result of action  by  Issuing  Bank and one of the
Lenders in violation of this Section 11.21) subject,  however, to (i) disclosure
to  officers,   directors,   employees,   representatives,   agents,   auditors,
consultants,  advisors,  lawyers  and  affiliates  of the  Issuing  Bank or such

<PAGE>

Lender,  in the ordinary  course of business,  (ii) disclosure to such officers,
directors,  employees,  agents and representatives of a prospective  assignee or
participant as need to know such  information in connection  with the evaluation
of a possible  participation in the Commitments  hereunder (who will be informed
of the  confidential  nature  of the  material);  (iii) the  obligations  of the
Issuing Bank and Lenders or a participant  under  applicable law, or pursuant to
subpoenas or other legal process, to make information  available to governmental
agencies  and  examiners  or to  others  and the right of the  Issuing  Bank and
Lenders to use such  information  in  proceedings  to enforce  their  rights and
remedies hereunder or under any other Loan Document or in any proceeding against
the Issuing Bank and lenders in connection with this Loan Agreement or under any
other Loan Document or the transactions  contemplated hereunder; (iv) disclosure
to the extent such  information (A) becomes  publicly  available other than as a
result  of a breach of this  Loan  Agreement  or (B)  becomes  available  to the
Issuing Bank or Lender or a  participant  on a  non-confidential  basis,  not in
breach of any agreement or other obligation to the Borrowers from a source other
than the  Borrowers;  (v)  disclosure  to the  extent the  Borrowers  shall have
consented to such disclosure in writing; or (vi) the Issuing Bank or each Lender
or  participant's  right to make  information  available (A) to any  corporation
controlled by the Issuing Bank or Lender or  participant or under common control
with the Issuing Bank or Lender or participant in connection  with the sale of a
participation by such Lender or participant to such other  corporation  provided
such transferee agrees to be bound by  confidentiality or (B) in accordance with
Section 11.21.

         11.22 Judgment Currency

             (a) If, for the purposes of obtaining  judgment in any court, it is
necessary  to  convert  a sum due to a Lender  in any  currency  (the  "Original
Currency") into another currency (the "Other  Currency"),  the parties agree, to
the fullest  extent that they may  effectively  do so, that the rate of exchange
used shall be that at which, in accordance with normal banking procedures,  such
Lender  could  purchase  the Original  Currency  with the Other  Currency on the
Business Day preceding the day on which final judgment is given or, if permitted
by applicable law, on the day on which the judgment is paid or satisfied.

             (b) The  obligations  of the Borrowers in respect of any sum due in
the Original Currency from it to a Lender under any of the Loan Documents shall,
notwithstanding  any judgment in any Other  Currency,  be discharged only to the
extent  that on the  Business  Day  following  receipt  by the Lender of any sum
adjudged to be so due in the Other Currency,  the Lender may, in accordance with
normal  banking  procedures,  purchase  the  Original  Currency  with such Other
Currency.  If the amount of the Original  Currency so purchased is less than the
sum originally due to the Lender in the Original Currency, each Borrower agrees,
as a separate  obligation  and  notwithstanding  the judgment,  to indemnify the
Lender,  against  any loss,  and,  if the  amount of the  Original  Currency  so
purchased exceeds the sum originally due to the Lender in the Original Currency,
the Lender shall remit such excess to such Borrower.


<PAGE>

         11.23 Pledge to Federal Reserve

             Any Lender may at any time  pledge all or any portion of its rights
under the Loan Documents  including any portion of any Note payable to it to any
of the twelve  (12)  Federal  Reserve  Banks  organized  under  Section 4 of the
Federal  Reserve  Act, 12 U.S.C.  Section  341.  No such  pledge or  enforcement
thereof shall release any such Lender from its obligations under any of the Loan
Documents.

         11.24 Lost Notes

             Upon  receipt of an affidavit of an officer of any Lender as to the
loss,  theft,  destruction  or  mutilation  of any  Note or any  other  security
document  which is not of  public  record,  and,  in the case of any such  loss,
theft,  destruction or mutilation,  upon surrender and cancellation of such Note
or other  Collateral  Document,  the Borrowers  will issue,  in lieu thereof,  a
replacement  Note or other  Collateral  Document  in the same  principal  amount
thereof and otherwise of like tenor.

         11.25 Interest Adjustment

             All  agreements  between the Obligors and the Agent and the Lenders
are hereby  expressly  limited so that in no  contingency  or event  whatsoever,
whether by reason of  acceleration  of  maturity of the  indebtedness  evidenced
hereby or  otherwise,  shall the amount paid or agreed to be paid to the Lenders
for the use or the forbearance of the indebtedness evidenced by the Notes exceed
the  maximum  permissible  under  applicable  law.  As  used  herein,  the  term
"applicable  law" shall mean the law in effect as of the date  hereof  provided,
however,  that in the  event  there is a change in the law  which  results  in a
higher  permissible rate of interest,  then the Loan Documents shall be governed
by such new law as of its effective date. In this regard, it is expressly agreed
that  it is the  intent  of the  Obligors,  the  Agent  and the  Lenders  in the
execution,  delivery  and  acceptance  of this  Agreement  to contract in strict
compliance  with the laws of the State of New York from time to time in  effect.
If, under or from any  circumstances  whatsoever,  fulfillment  of any provision
hereof  or of any of the  Loan  Documents  at the  time of  performance  of such
provision  shall be due, shall involve  transcending  the limit of such validity
prescribed  by  applicable  law,  then  the  obligation  to be  fulfilled  shall
automatically  be reduced to the limits of such  validity,  and if under or from
any  circumstances  whatsoever  the Lenders  should ever  receive as interest an
amount  which would exceed the highest  lawful rate,  such amount which would be
excessive  interest  shall be applied to the reduction of the principal  balance
evidenced  by a Note (in such manner as the Lenders may  determine in their sole
discretion)  and not to the payment of interest.  This  provision  shall control
every other  provision of all agreements  between the Obligors and the Agent and
the Lenders.

         11.26 No Set-off or Counterclaim; Loan Documents in Full Effect

             The Borrowers hereby acknowledge,  confirm and declare that (i) all
sums owing to the Agent and/or the Lenders in connection with the Loan Documents
are owed  without  offset,  deduction,  counterclaim  or  defense of any kind or

<PAGE>

nature to the  payment  thereof  and (ii) the Loan  Documents  and the Liens and
security interests created thereby are valid,  subsisting and, to the Borrowers'
knowledge, perfected liens and security interests.

         11.27 Amendment and Restatement

             This Agreement  amends and restates the Existing  Credit  Agreement
and all indebtedness,  liabilities,  Obligations,  Liens and security  interests
arising or created  under the Loan  Documents  continue in full force and effect
(except as expressly  heretofore  modified  and/or  modified  and/or amended and
restated in connection with the  transactions  contemplated by this  Agreement),
unimpaired and  undischarged.  This  Agreement is a replacement,  consolidation,
amendment and  restatement of the Existing  Credit  Agreement (and the Revolving
Credit  Notes  are  issued  in  substitution   and  exchange  for,  and  not  in
satisfaction  of, certain  Indebtedness  outstanding  under the Existing  Credit
Agreement) and IS NOT A NOVATION.

         11.28  Re-Allocation  of  Loans,  Letters  of Credit  Outstandings  and
Commitments.

             All Loans,  Letters of Credit  Outstanding  and Commitments of each
Lender under the Existing Credit Agreement  shall,  from and after the Effective
Date,  be  assigned  and  re-allocated  among the  Loans,  Letters of Credit and
Commitments  provided for  hereunder,  so that after giving effect  hereto,  the
Revolving Loan Commitment  Percentages of all Lenders are set forth on Exhibit A
hereto.

         11.29 Certain Collateral Matters.

             (a) The Agent is authorized  on behalf of the Lenders,  without the
necessity of any notice to or further  consent  from the  Lenders,  from time to
time to take any action with  respect to any  Collateral  or the Loan  Documents
which may be necessary to perfect and maintain  perfected the security  interest
in and Liens upon the Collateral granted pursuant to the Loan Documents.

             (b) The Lenders irrevocably  authorize the Agent, at its option and
in its discretion,  to release any security  interest or Lien granted to or held
by the Agent upon any Collateral (i) upon  termination  of the  Commitments  and
Letter of Credit  Commitments  and payment in full in cash of all  principal and
interest  on  the  Loans,  all  fees  payable  pursuant  to  Section  2.10,  all
Reimbursement  Obligations,  and all other Obligations  payable under the Credit
Agreement and under any Loan Document;  (ii) constituting property sold or to be
sold or disposed of as part of or in connection with any  disposition  permitted
hereunder;  (iii)  constituting  property  in which the  Borrowers  or any other
obligor of the  Borrowers  owned no interest at the time the  security  interest
and/or Lien was granted or at any time thereafter;  (iv)  constituting  property
leased to the  Borrowers  or any other  obligor of the  Borrowers  under a lease
which has expired or been terminated in a transaction permitted under the Credit
Agreement  or is about to expire and which has not been,  and is not intended by

<PAGE>

the  Borrowers  or any of the  Subsidiaries  of the  Borrowers  to be renewed or
extended; (v) consisting of an instrument evidencing  Indebtedness or other debt
instrument, if the Indebtedness evidenced thereby has been paid in full; or (vi)
if  approved,  authorized  or ratified by the  Required  Lenders or as otherwise
required by Section  11.1,  each Lender.  Upon request by the Agent at any time,
the Lenders will confirm in writing the Agent's authority to release  particular
Collateral pursuant to this Section 11.29.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]



<PAGE>


         IN  WITNESS  WHEREOF,  the  parties  hereto  have  caused  this  Credit
Agreement to be duly executed and delivered by their proper and duly  authorized
officers as of the day and year first above written.

                                GP STRATEGIES CORPORATION



                                By:
                                    Name:  Scott N. Greenberg
                                    Title: President and Chief Financial Officer




                                GENERAL PHYSICS CORPORATION



                                By:
                                    Name:
                                    Title:



<PAGE>




                                FLEET NATIONAL BANK,

                                Individually, as Issuing Bank and as Agent



                                By:
                                     Name:
                                     Title:



                               DIME SAVINGS BANK OF NEW YORK, FSB

                               By:
                               Name:
                               Title:



<PAGE>


                               LASALLE BUSINESS CREDIT INC.


                               By:
                               Name:
                               Title:



<PAGE>






                                                                  EXHIBIT A





                                    LENDERS;
                     REVOLVING LOAN COMMITMENT PERCENTAGES;
                                    ADDRESSES


--------------------------------------------------------------------------------
                                                                 Revolving Loan
                                                                   Commitment
          LENDER                                Commitment         Percentage
-------------------------------------------------------------------------------
                                                $20,000,000            50%
  FLEET NATIONAL BANK
    1185 Avenue of the Americas
    New York, NY  10036

    Attention:    James V. Maiorino
    Tel:  (212) 819-5727
    Fax: (212) 819-4120

-------------------------------------------------------------------------------
                                                $10,000,000            25%
  LASALLE BUSINESS CREDIT INC.
    135 S. LaSalle Street
    Suite 145
    Chicago, IL 60603

    Attention: Tom Brennan
    Tel:  (312) 904-6169
    Fax: (312) 904-6450

------------------------------------------------------------------------------
  DIME SAVINGS BANK                             $10,000,000            25%
  OF NEW YORK, FSB
    1180 Avenue of the Americas
    New York, NY 10036

    Attention: Patrick Grady
    Tel:  (212) 382-8352
    Fax: (212) 382-8349

------------------------------------------------------------------------------
                        TOTAL COMMITMENT        $40,000,000            100%
------------------------------------------------------------------------------











</TEXT>
</DOCUMENT>
