<PAGE>

                                                                      Exhibit 10

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                              RESTATED CREDIT AGREEMENT
                                           
                             dated as of August 15, 1997,
                                           
                                           
                                           
                                           
                                        Among
                                           
                                           
                                           
                           FURNISHINGS INTERNATIONAL INC.,
                                           
                      LIFESTYLE FURNISHINGS INTERNATIONAL LTD.,
                                           
                        THE SUBSIDIARY BORROWERS NAMED HEREIN,
                                           
                               THE LENDERS NAMED HEREIN
                                           
                                           
                                         and
                                           
                                           
                              THE CHASE MANHATTAN BANK,
                    as Swingline Lender, Administrative Agent and
                                   Collateral Agent
                                           
                                           
                         THE FIRST NATIONAL BANK OF CHICAGO,
                           as Issuing Bank and as Co-Agent
                                           
                                         and
                                           
                                  CIBC, as Co-Agent
                                                               
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--------------------------------------------------------------------------------


<PAGE>

                                                                               1
 

                                 TABLE OF CONTENTS

       
                                                                            Page
                                     ARTICLE I

                                   Definitions

SECTION 1.01.  Defined Terms...................................................2
SECTION 1.02.  Terms Generally................................................26

                                    ARTICLE II

                                   The Credits

SECTION 2.01.  Commitments....................................................26
SECTION 2.02.  Loans..........................................................26
SECTION 2.03.  Borrowing Procedure............................................28
SECTION 2.04.  Evidence of Debt; Repayment of Loans...........................28
SECTION 2.05.  Fees...........................................................29
SECTION 2.06.  Interest on Loans..............................................30
SECTION 2.07.  Default Interest...............................................30
SECTION 2.08.  Alternate Rate of Interest.....................................30
SECTION 2.09.  Termination and Reduction of Commitments.......................31
SECTION 2.10.  Conversion and Continuation of Borrowings......................31
SECTION 2.11.  [Intentionally Omitted]........................................33
SECTION 2.12.  Optional Prepayment............................................33
SECTION 2.13.  Mandatory Prepayments..........................................33
SECTION 2.14.  Reserve Requirements; Change in Circumstances..................34
SECTION 2.15.  Change in Legality.............................................35
SECTION 2.16.  Indemnity......................................................36
SECTION 2.17.  Pro Rata Treatment.............................................37
SECTION 2.18.  Sharing of Setoffs.............................................37
SECTION 2.19.  Payments.......................................................38
SECTION 2.20.  Taxes..........................................................38
SECTION 2.21.  Assignment of Commitments Under Certain Circumstances; Duty
                 to Mitigate..................................................40
SECTION 2.22.  Swingline Loans................................................42
SECTION 2.23.  Letters of Credit..............................................43

                                      ARTICLE III

                             Representations and Warranties

SECTION 3.01.  Organization; Powers...........................................48
SECTION 3.02.  Authorization..................................................48
SECTION 3.03.  Enforceability.................................................49
SECTION 3.04.  Governmental Approvals.........................................49


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2

SECTION 3.05.  Financial Statements...........................................49
SECTION 3.06.  No Material Adverse Change.....................................49
SECTION 3.07.  Title to Properties; Possession Under Leases...................49
SECTION 3.08.  Subsidiaries...................................................50
SECTION 3.09.  Litigation; Compliance with Laws...............................50
SECTION 3.10.  Agreements.....................................................51
SECTION 3.11.  Federal Reserve Regulations....................................51
SECTION 3.12.  Investment Company Act; Public Utility Holding Company Act.....51
SECTION 3.13.  Use of Proceeds................................................51
SECTION 3.14.  Tax Returns....................................................51
SECTION 3.15.  No Material Misstatements......................................51
SECTION 3.16.  Employee Benefit Plans.........................................52
SECTION 3.17.  Environmental Matters..........................................52
SECTION 3.18.  Insurance......................................................53
SECTION 3.19.  Security Documents.............................................53
SECTION 3.20.  Location of Real Property and Leased Premises..................54
SECTION 3.21.  Labor Matters..................................................54
SECTION 3.22.  Solvency.......................................................54

                                      ARTICLE IV

                                 Conditions of Lending

SECTION 4.01.  All Credit Events..............................................54
SECTION 4.02.  Restatement Credit Event.......................................55

                                       ARTICLE V

                                  Affirmative Covenants

SECTION 5.01.  Existence; Businesses and Properties; Compliance with Laws.....58
SECTION 5.02.  Insurance......................................................58
SECTION 5.03.  Obligations and Taxes..........................................60
SECTION 5.04.  Financial Statements, Reports, etc.............................60
SECTION 5.05.  Litigation and Other Notices...................................61
SECTION 5.06.  Employee Benefits..............................................61
SECTION 5.07.  Maintaining Records; Access to Properties and Inspections......62
SECTION 5.08.  Use of Proceeds................................................62
SECTION 5.09.  Compliance with Environmental Laws.............................62
SECTION 5.10.  Preparation of Environmental Reports...........................62
SECTION 5.11.  Further Assurances.............................................62
SECTION 5.12.  Subsidiaries...................................................63

                                      ARTICLE VI

                                  Negative Covenants

SECTION 6.01.  Indebtedness...................................................63

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                                                                               3

SECTION 6.02.  Liens..........................................................65
SECTION 6.03.  Sale and Lease-Back Transactions...............................67
SECTION 6.04.  Investments, Loans and Advances................................67
SECTION 6.05.  Mergers, Consolidations, Sales of Assets and Acquisitions......69
SECTION 6.06.  Dividends and Distributions; Restrictions on Ability of
                 Subsidiaries to Pay Dividends................................71
SECTION 6.07.  Transactions with Affiliates...................................72
SECTION 6.08.  Other Indebtedness and Agreements..............................72
SECTION 6.09.  Interest Coverage Ratio........................................73
SECTION 6.10.  Total Debt Ratio...............................................74
SECTION 6.11.  Capital Expenditures...........................................74
SECTION 6.12.  Bank Accounts..................................................74
SECTION 6.13.  Business of Holdings, Borrowers and Subsidiaries...............74
SECTION 6.14.  Fiscal Year....................................................75

                                       ARTICLE VII

                                     Events of Default

                                       ARTICLE VIII

                       The Administrative Agent and the Collateral Agent

                                       ARTICLE IX

                                      Miscellaneous

SECTION 9.01.  Notices........................................................80
SECTION 9.02.  Survival of Agreement..........................................80
SECTION 9.03.  Binding Effect.................................................81
SECTION 9.04.  Successors and Assigns.........................................81
SECTION 9.05.  Expenses; Indemnity............................................84
SECTION 9.06.  Right of Setoff................................................85
SECTION 9.07.  Applicable Law.................................................85
SECTION 9.08.  Waivers; Amendment.............................................85
SECTION 9.09.  Interest Rate Limitation.......................................86
SECTION 9.10.  Entire Agreement...............................................87
SECTION 9.11.  WAIVER OF JURY TRIAL...........................................87
SECTION 9.12.  Severability...................................................87
SECTION 9.13.  Counterparts...................................................87
SECTION 9.14.  Headings.......................................................88
SECTION 9.15.  Jurisdiction; Consent to Service of Process....................88
SECTION 9.16.  Confidentiality................................................88
SECTION 9.17.  Obligations Joint and Several..................................89
SECTION 9.18.  Replacement of Existing Credit Agreement.......................80


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4

                                 Exhibits and Schedules

Exhibit A         Form of Administrative Questionnaire
Exhibit B         Form of Assignment and Acceptance
Exhibit C         Form of Borrowing Request
Exhibit D         Form of Indemnity, Subrogation and Contribution Agreement
Exhibit E         Form of Deed of Trust
Exhibit F         Form of Holdings Guarantee Agreement
Exhibit G         Form of Pledge Agreement
Exhibit H         Form of Security Agreement
Exhibit I         Form of Subsidiary Guarantee Agreement
Exhibit J         Form of Opinion of Borrower's Counsel
Exhibit K         Form of Confidentiality Agreement
Exhibit L         Form of Subordination, Nondisturbance and Attornment Agreement
Exhibit M         Form of Note


<PAGE>

                                                                               5

Schedule 1        Subsidiary Borrowers
Schedule 1.01(a)  Existing Account Parties
Schedule 1.01(b)  Existing Letters of Credit
Schedule 1.01(c)  Mortgaged Properties
Schedule 1.01(d)  Specified HFG Assets
Schedule 1.01(e)  Specified HFG Companies
Schedule 2.01     Commitments
Schedule 3.07(b)  Possession under Leases
Schedule 3.07(c)  Condemnation Proceedings
Schedule 3.07(d)  Rights of First Refusal, Options and Other Rights
                  Regarding Interests in Mortgaged Properties
Schedule 3.08     Subsidiaries
Schedule 3.09     Litigation
Schedule 3.17     Environmental Matters
Schedule 3.18     Insurance
Schedule 3.19(d)  Mortgage Filing Offices
Schedule 3.20(a)  Owned Real Property
Schedule 3.20(b)  Leased Real Property
Schedule 3.21     Labor Matters
Schedule 6.01(a)  Indebtedness
Schedule 6.02(a)  Liens
Schedule 6.04(m)  Current Investments, Loans and Advances
Schedule 6.04(n)  Customer Investments, Loans and Advances
Schedule 6.04(o)  Supplier Loans and Advances
Schedule 6.07     Transactions with Affiliates


<PAGE>

                   RESTATED CREDIT AGREEMENT dated as of August 15,
              1997, among LIFESTYLE FURNISHINGS INTERNATIONAL LTD., a
              Delaware corporation (the "Parent Borrower"); each
              subsidiary of the Parent Borrower listed on Schedule 1
              hereto (each, a "Subsidiary Borrower" and collectively,
              the "Subsidiary Borrowers"; the Parent Borrower and the
              Subsidiary Borrowers are collectively referred to
              herein as the "Borrowers"); FURNISHINGS INTERNATIONAL
              INC., a Delaware corporation ("Holdings"); the Lenders
              (as defined in Article I); THE CHASE MANHATTAN BANK, a
              New York banking corporation, as swingline lender (in
              such capacity, the "Swingline Lender"), as
              administrative agent (in such capacity, the
              "Administrative Agent") and as collateral agent (in
              such capacity, the "Collateral Agent") for the Lenders;
              THE FIRST NATIONAL BANK OF CHICAGO, as issuing bank (in
              such capacity, the "Issuing Bank") and as Co-Agent; and
              CIBC, as Co-Agent. 


    Pursuant to the Acquisition Agreement dated as of March 29, 1996, as 
amended (the "Acquisition Agreement"), between Holdings and Masco 
Corporation, a Delaware corporation ("Masco"), effective as of August 5, 1996 
(the "Acquisition Date"), (a) Holdings acquired from Masco all the capital 
stock of each of the Subsidiary Borrowers, (b) Holdings acquired through 
merger the Specified HFG Companies (such term and each other capitalized term 
used but not defined herein having the meaning given it in Article I), with 
Holdings as the surviving corporation, and (c) all outstanding intercompany 
Indebtedness of the Subsidiary Borrowers, the Specified HFG Companies and 
their respective subsidiaries owed to Masco as of the Acquisition Date was 
repaid in full (collectively, the "Acquisition").

    In connection with the Acquisition, (a) 399 Venture Partners Inc., a 
Delaware corporation ("399 Venture Partners"), together with certain 
institutional investors and members of management, made a cash capital 
contribution to Holdings in an aggregate amount of approximately $65,300,000 
(the "Equity Contribution"), (b) Holdings contributed to the Parent Borrower 
(which, in turn, contributed to LHL) all the capital stock of each of the 
Subsidiary Borrowers (other than LHL), all the capital stock of the companies 
referred to in Section 5.12 and the Specified HFG Assets, (c) the Parent 
Borrower issued the Subordinated Notes in a public offering, (d) Holdings, 
the Receivables Subsidiary and certain other Subsidiaries entered into the 
Receivables Financing and (e) the Lenders made certain loans and extensions 
of credit to the Borrowers in the form of (i) Tranche A Term Loans, in an 
aggregate principal amount of $125,000,000, (ii) Tranche B Term Loans, in an 
aggregate principal amount of $175,000,000, and (iii) a revolving credit 
facility, in an aggregate principal amount at any time outstanding not in 
excess of $150,000,000 pursuant to the terms of a Credit Agreement dated as 
of August 5, 1996, among the Borrowers, Holdings, the Lenders, the 
Administrative Agent, the Collateral Agent and Chase Manhattan Bank, as 
issuing bank, as amended by the First Amendment dated as of January 30, 1997 
(as so amended, the "Existing Credit Agreement").  In addition, pursuant to 
the Existing Credit Agreement, the Swingline Lender agreed to extend credit 
in the form of Swingline Loans in an aggregate principal amount at any time 
outstanding not in excess of $25,000,000, and the original issuing bank 
thereunder agreed to issue letters of credit, in an aggregate face amount


<PAGE>

2

at any time outstanding not in excess of $50,000,000, to support payment 
obligations incurred in the ordinary course of business by the Borrowers and 
the Subsidiaries.

    The parties hereto wish to replace the Existing Credit Agreement with 
this Restated Credit Agreement (the "Restated Credit Agreement") (a) to 
replace the existing Tranche A Term Loans and Tranche B Term Loans and 
revolving credit facility with a single revolving credit facility in an 
aggregate principal amount at any time outstanding not in excess of 
$400,000,000, (b) to reduce the applicable interest rates and other charges 
payable under the Existing Credit Agreement, (c) to appoint The First 
National Bank of Chicago as Issuing Bank and permit the issuance of 
electronic and foreign-currency-denominated letters of credit and (d) to 
modify certain covenants and make certain other changes as set forth herein.  
For administrative convenience, and in order to reduce associated expenses, 
the parties hereto have agreed to draft the Restated Credit Agreement as an 
amendment and restatement of the Existing Credit Agreement.  Accordingly, the 
parties hereto agree that the Existing Credit Agreement is hereby amended and 
restated in its entirety as follows:

                                  ARTICLE I

                                 Definitions

    SECTION 1.01.  Defined Terms.  As used in this Restated Credit Agreement, 
the following terms shall have the meanings specified below:

    "ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.

    "ABR Loan" shall mean any Loan bearing interest at a rate determined by 
reference to the Alternate Base Rate in accordance with the provisions of 
Article II.

    "Acquired Entity" shall mean the assets, in the case of an acquisition of 
assets, or the capital stock or other equity interests (or, if the context 
requires, the person that is the issuer of such capital stock or other equity 
interests), in the case of an acquisition of capital stock or other equity 
interests, acquired by any Borrower or any Subsidiary Guarantor pursuant to a 
Permitted Acquisition.

    "Adjusted LIBO Rate" shall mean, with respect to any Eurodollar Borrowing 
for any Interest Period, an interest rate per annum (rounded upwards, if 
necessary, to the next 1/16 of 1%) equal to the product of (a) the LIBO Rate 
in effect for such Interest Period and (b) Statutory Reserves.

    "Administrative Agent Fees" shall have the meaning assigned to such term 
in Section 2.05(b).

    "Administrative Questionnaire" shall mean an Administrative Questionnaire 
in the form of Exhibit A.


<PAGE>

                                                                               3

    "Affiliate" shall mean, when used with respect to a specified person, 
another person that directly, or indirectly through one or more 
intermediaries, Controls or is Controlled by or is under common Control with 
the person specified.

    "Aggregate Credit Exposure" shall mean the aggregate amount of the 
Lenders' Credit Exposures.

    "Alternate Base Rate" shall mean, for any day, a rate per annum (rounded 
upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) 
the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate 
in effect on such day plus 1/2 of 1%.  If for any reason the Administrative 
Agent shall have determined (which determination shall be conclusive absent 
manifest error) that it is unable to ascertain the Federal Funds Effective 
Rate for any reason, including the inability or failure of the Administrative 
Agent to obtain sufficient quotations in accordance with the terms of the 
definition thereof, the Alternate Base Rate shall be determined without 
regard to clause (b) of the immediately preceding sentence, until the 
circumstances giving rise to such inability no longer exist. Any change in 
the Alternate Base Rate due to a change in the Prime Rate or the Federal 
Funds Effective Rate shall be effective on the effective date of such change 
in the Prime Rate or the Federal Funds Effective Rate, respectively.  The 
term "Prime Rate" shall mean the rate of interest per annum publicly 
announced from time to time by the Administrative Agent as its prime rate in 
effect at its principal office in New York City; each change in the Prime 
Rate shall be effective on the date such change is publicly announced as 
being effective.  The term "Federal Funds Effective Rate" shall mean, for any 
day, the weighted average of the rates on overnight Federal funds 
transactions with members of the Federal Reserve System arranged by Federal 
funds brokers, as published on the next succeeding Business Day by the 
Federal Reserve Bank of New York, or, if such rate is not so published for 
any day that is a Business Day, the average of the quotations for the day for 
such transactions received by the Administrative Agent from three Federal 
funds brokers of recognized standing selected by it.  

    "Alternate Currency" shall mean any currency (other than dollars) 
approved by the Issuing Bank as an "Alternate Currency" hereunder.

    "Alternate Currency Letter of Credit" shall mean a Letter of Credit that 
provides for payments of drawings thereunder in an Alternate Currency.

    "Applicable Percentage" shall mean, for any day, with respect to (a) any 
Eurodollar Loan, (b) any ABR Loan or (c) the Commitment Fees, as the case may 
be, the applicable percentage set forth below under the caption (i) 
"Eurodollar Spread", (ii) "ABR Spread" or (iii) "Commitment Fees", 
respectively, based upon the Total Debt Ratio as of the last day of the 
Parent Borrower's most recently ended fiscal quarter:


<PAGE>

4

Total Debt                     Eurodollar            ABR          Commitment
Ratio                            Spread            Spread             Fees    
----------                     ----------          ------         ----------

Category 1
Greater than 4.00 to 1.0         1.125%            0.125%            .25%

Category 2
Less than or equal to 4.00 to 
1.0, but greater than 3.50 to
1.0                               1.00%             0.0%            .25%

Category 3
Less than or equal to 3.50 to 
1.0, but greater than 3.25 to 
1.0                               .875%             0.0%           .225%

Category 4
Less than or equal to 3.25 to
1.0, but greater than 3.00 to 
1.0                               .75%              0.0%           .20%

Category 5
Less than or equal to 3.00 to 
1.0, but greater than 2.50 to 
1.0                              .625%              0.0%          .1875%

Category 6
Less than or equal to 2.50 to
1.0, but greater than 2.25 to 
1.0                              .50%               0.0%            .15%

Category 7
Less than or equal to 2.25 to 
1.0                              .375%              0.0%           .125%


    Each change in the Applicable Percentage resulting from a change in the 
Total Debt Ratio shall be effective with respect to all Loans and all Letters 
of Credit outstanding and Commitment Fees on and after the date of delivery 
to the Administrative Agent of the certificate required by Section 5.04(c) 
(which shall include attached thereto the financial statements and 
certificates required by Section 5.04(a) or (b)) indicating such change until 
the date immediately preceding the next date of delivery of such certificate 
indicating another such change.  Notwithstanding the foregoing, (a) at any 
time prior to December 31, 1997, the Total Debt Ratio shall be deemed to be 
not less than that relating to Category 4 for purposes of determining the 
Applicable Percentage and (b) (i) at any time during which the Parent 
Borrower has failed to deliver such certificate required by Section 5.04(c) 
and the financial statements and certificates required by Section 5.04(a) or 
(b), as applicable, or (ii) at any time after the occurrence and during the 
continuance of an Event of Default, the Total Debt Ratio shall be deemed to 
be in Category 1 for purposes of determining the Applicable Percentage.


<PAGE>

                                                                               5

    "Asset Sale" shall mean the sale, transfer or other disposition (by way 
of merger or otherwise) by any Loan Party or any of the Subsidiaries to any 
person other than any Loan Party or any of the Subsidiaries of (a) any 
Capital Stock of any of the Subsidiaries or (b) any other assets of any Loan 
Party or any of the Subsidiaries, provided that none of (i) any asset sale or 
series of substantially related asset sales described in clause (b) above for 
consideration, at fair market value, of less than $100,000, (ii) any sale of 
accounts receivable (or any related assets) under any Permitted Receivables 
Financing, (iii) any Equity Issuance or (iv) any sale, transfer or other 
disposition of assets pursuant to Section 6.05(a), (b), (c), (d), (e), (g), 
(h), (i) or (j) shall be deemed an "Asset Sale" for purposes of this Restated 
Credit Agreement.

    "Assignment and Acceptance" shall mean an assignment and acceptance 
entered into by a Lender and an assignee, and accepted by the Administrative 
Agent, in the form of Exhibit B or such other form as shall be approved by 
the Administrative Agent.

    "Board" shall mean the Board of Governors of the Federal Reserve System 
of the United States of America.

    "Borrowing" shall mean Loans of a single Type made by the Lenders on a 
single date and as to which a single Interest Period is in effect.

    "Borrowing Request" shall mean a request by the Borrowers in accordance 
with the terms of Section 2.03 and substantially in the form of Exhibit C.

    "Business Day" shall mean any day other than a Saturday, Sunday or day on 
which banks in New York City are authorized or required by law to close; 
provided, however, that when used in connection with a Eurodollar Loan, the 
term "Business Day" shall also exclude any day on which banks are not open 
for dealings in dollar deposits in the London interbank market.

    "Capital Expenditures" shall mean, for any period, without duplication, 
the sum of the aggregate of all expenditures (whether paid in cash or other 
consideration) by Holdings, the Parent Borrower and the Subsidiaries during 
such period that, in accordance with GAAP, are or should be included in 
"additions to property, plant or equipment" or similar items reflected in the 
consolidated statement of cash flows of Holdings, the Parent Borrower and the 
Subsidiaries for such period; provided, however, that Capital Expenditures 
shall not include (i) expenditures relating to the development, purchase or 
acquisition of sample fabric books, (ii) expenditures of proceeds of 
insurance settlements, condemnation awards and other settlements in respect 
of lost, destroyed, damaged or condemned assets, equipment or other property 
to the extent such expenditures are made to replace or repair such lost, 
destroyed, damaged or condemned assets, equipment or other property or 
otherwise to acquire assets or properties useful in the business of the Loan 
Parties and the Subsidiaries within 12 months of receipt of such proceeds, 
(iii) with respect to any person, expenditures that are accounted for as 
capital expenditures of such person and that actually are paid for by a third 
party and for which neither such person nor any subsidiary of such person has 
provided or is required to provide or incur, directly or indirectly, any 
consideration or obligation to such third party or (iv) expenditures 
constituting Permitted Acquisitions.



<PAGE>

6

    "Capital Lease Obligations" of any person shall mean an obligation of 
such person that is required to be classified and accounted for as a capital 
lease for financial reporting purposes in accordance with GAAP, and the 
amount of such obligation shall be the capitalized amount thereof determined 
in accordance with GAAP.

    "Capital Stock" shall mean, with respect to any person, any and all 
shares, interests, rights to purchase, warrants, options, participation or 
other equivalents of or interests in (however designated) equity of such 
person, including any preferred stock, any limited or general partnership 
interest and any limited liability company membership interest, but excluding 
any debt securities convertible into such equity.  For purposes of clauses 
(a)(i) and (a)(ii) of the definition of the term "Change in Control" and the 
definition of the term "Equity Issuance", Capital Stock of Holdings shall be 
deemed to exclude the Class D Common Stock of Holdings.

    "Casualty" shall have the meaning assigned to such term in the Mortgages.

    A "Change in Control" shall be deemed to have occurred if:

         (a) prior to an Initial Public Offering:

              (i)  immediately after giving effect to any transfer by
         any 399 Investor of any shares of Capital Stock or
         Debentures of Holdings or any issuance of additional shares
         of Capital Stock of Holdings, the 399 Investors shall cease
         to own shares of Capital Stock and Debentures of Holdings,
         beneficially and of record, having an aggregate value
         (determined as used herein by reference to (A) in the case
         of common stock and convertible preferred stock, the greater
         of the fair market value thereof and the original purchase
         price thereof (it being understood that the original
         purchase price for all the common stock and convertible
         preferred stock of Holdings as of the Acquisition Date was
         $5,000,000), (B) in the case of any other preferred stock,
         the stated value thereof plus any accrued but unpaid
         dividends thereon, and (C) in the case of Debentures, the
         aggregate principal amount thereof plus any accrued but
         unpaid interest thereon) at least equal to the lesser of
         (x) $35 million and (y) 24% of the aggregate value of all
         outstanding Capital Stock and Debentures of Holdings
         (excluding any such outstanding Capital Stock or Debentures
         then owned by the Management Investors);

              (ii) immediately after giving effect to any transfer by
         any Masco Investor of any shares of Capital Stock or
         Debentures of Holdings or any issuance of additional shares
         of Capital Stock of Holdings, the Masco Investors shall
         cease to own shares of Capital Stock and Debentures of
         Holdings, beneficially and of record, having an aggregate
         value (determined as provided in clause (i) above) at least
         equal to the lesser of (x) $30 million and (y) 21% of the
         aggregate value of all outstanding Capital Stock and
         Debentures of Holdings (excluding any such outstanding
         Capital Stock or Debentures then owned by the Management
         Investors);


<PAGE>

                                                                               7

              (iii) except in the case of any vacancy for 30 days or
         less resulting from the death or resignation of any director
         of Holdings, seats on the Board of Directors of Holdings
         having more than 36% of the total voting power of the Board
         of Directors of Holdings shall at any time be occupied by
         persons who were neither (A) nominated by 399 Venture
         Partners, acting on behalf of the Institutional Investors as
         authorized by the Stockholders' Agreement, or by the
         Nominating Committee of Holdings nor (B) appointed by
         directors so nominated;

              (iv) except in the case of any vacancy for 30 days or
         less resulting from the death or resignation of any director
         of Holdings, seats on the Nominating Committee of Holdings
         having more than one-third of the total voting power of such
         Nominating Committee shall at any time be occupied by
         persons who were neither (A) directors nominated by 399
         Venture Partners, acting on behalf of the Institutional
         Investors as authorize by the Stockholders' Agreement, or by
         such Nominating Committee nor (B) appointed by directors so
         nominated; or

              (v) 399 Venture Partners shall at any time cease to
         have the right, through the ownership of voting securities,
         by contract or otherwise (which may be a contractual right,
         exercisable upon 399 Venture Partners's determination on
         behalf of the Institutional Investors, that the
         Institutional Investors may do so in compliance with
         applicable law or regulation), to elect directors of
         Holdings having a majority of the total voting power of the
         Board of Directors of Holdings;

         (b) following an Initial Public Offering:

              (i) the 399 Investors shall cease to own at any time,
         beneficially and of record, (A) at least 13% of the
         outstanding common stock of Holdings and (B) at least 13% of
         the combined voting power of all classes of Capital Stock of
         Holdings;

              (ii) the Masco Investors shall cease to own at any
         time, beneficially and of record, (A) at least 12% of the
         outstanding common stock of Holdings and (B) at least 12% of
         the combined voting power of all classes of Capital Stock of
         Holdings; 

              (iii) during any period of two consecutive years
         beginning after the Acquisition Date, individuals who at the
         beginning of such period constituted the Board of Directors
         of Holdings (together with any new directors whose election
         was approved by a majority of the directors then in office
         who were either directors at the beginning of such period or
         whose election was previously so approved) cease for any
         reason to have a majority of the total voting power of the
         Board of Directors of Holdings; or

              (iv) any person or group (within the meaning of
         Rule 13d-5 of the Securities Exchange Act of 1934 as in
         effect on the date hereof) (other than the


<PAGE>

8

         399 Investors, the Masco Investors and the Management Investors)
         shall own directly or indirectly, beneficially or of record, at any
         time a percentage of the outstanding shares of common stock of
         Holdings or of the combined voting power of all classes of Capital
         Stock of Holdings, in either case in excess of the percentage then
         owned, beneficially and of record, by the 399 Investors, the Masco
         Investors and the Management Investors collectively; 

         (c) any change in control (or similar event, however
    denominated) with respect to Holdings or the Parent Borrower
    shall occur under and as defined in (i) the Masco Notes, (ii) the
    Subordinated Notes, (iii) the Debentures, (iv) any class of
    preferred stock of Holdings or (v) any other agreement or
    instrument evidencing Indebtedness of Holdings, the Parent
    Borrower or any of the Subsidiaries having, in the case of clause
    (v), an aggregate principal amount in excess of $30,000,000;

         (d) Holdings shall cease to own and control, directly,
    beneficially and of record, 100% of the outstanding Capital Stock
    of the Parent Borrower, free and clear of all Liens (other than
    Liens under the Loan Documents); or

         (e) the Parent Borrower shall cease to own and control,
    directly or indirectly through one or more wholly owned
    Subsidiaries, beneficially and of record, 100% of the outstanding
    Capital Stock of each Subsidiary Borrower, free and clear of all
    Liens (other than Liens under the Loan Documents), other than any
    Subsidiary Borrower all the Capital Stock of which has been sold
    in a transaction permitted by Section 6.05.

    "Citicorp" shall mean Citicorp, a Delaware corporation.

    "Class D Common Stock" shall mean the Class D Common Stock of Holdings 
the dividends, voting and other rights of which are designed to track the 
performance of Simmons.

    "Code" shall mean the Internal Revenue Code of 1986 and the rules and 
regulations promulgated thereunder, as amended from time to time.

    "Collateral" shall mean all the "Collateral" as defined in any Security 
Document and shall also include the Mortgaged Properties.

    "Collateral Release Date" shall mean the first date on which any of the 
following shall occur:

         (a) the Parent Borrower's (i) senior unsecured rating is
    either BBB- or better from S&P or Baa3 or better from Moody's or
    (ii) senior subordinated rating is either BB or better from S&P
    or Ba2 or better from Moody's;

         (b) the Total Debt Ratio is less than or equal to 2.50 to
    1.00 as at the end of each fiscal quarter for four consecutive
    fiscal quarters; or

         (c) the Total Debt Ratio is less than or equal to 2.50 to
    1.00 as of such date and the Parent Borrower (on behalf of the
    Borrowers) has delivered a notice to the


<PAGE>

                                                                               9

    Administrative Agent that it has elected to become subject to the more
    restrictive Total Debt Ratio covenant referred to in Section 6.10(b) for the
    remaining term of this Restated Credit Agreement.

    "Commitment" shall mean, with respect to each Lender, the commitment of 
such Lender to make Loans hereunder and participate in Letters of Credit and 
Swingline Loans in an aggregate amount at any time outstanding not in excess 
of the amount opposite the name of such Lender in Schedule 2.01, or the 
amount in the Assignment and Acceptance pursuant to which such Lender assumed 
its Commitment, as applicable, as such amount may be (a) reduced from time to 
time pursuant to Section 2.09 and (b) reduced or increased from time to time 
pursuant to assignments by or to such Lender pursuant to Section 9.04.

    "Commitment Fee" shall have the meaning assigned to such term in Section 
2.05(a).

    "Commitment Letter" shall mean the Commitment Letter dated July 21, 1997, 
among Holdings, the Borrower, The Chase Manhattan Bank and Chase Securities 
Inc.

    "Condemnation" shall have the meaning assigned to such term in the 
Mortgages.

    "Condemnation Proceeds" shall have the meaning assigned to such term in 
the Mortgages.

    "Confidential Information Memorandum" shall mean the Confidential 
Information Memorandum of the Parent Borrower dated July 1997.

    "Consolidated Current Assets" shall mean, at any date of determination, 
all assets (other than cash and cash-equivalents) that would, in accordance 
with GAAP, be classified on a consolidated balance sheet of Holdings, the 
Parent Borrower and the Subsidiaries as current assets at such date of 
determination.

    "Consolidated Current Liabilities" shall mean, at any date of 
determination, all liabilities (other than the current portion of long-term 
Indebtedness) that would, in accordance with GAAP, be classified on a 
consolidated balance sheet of Holdings, the Parent Borrower and the 
Subsidiaries as current liabilities at such date of determination.

    "Consolidated EBITDA" shall mean, for any period, the Consolidated Net 
Income for such period, plus, without duplication, to the extent deducted in 
computing Consolidated Net Income, the sum of (a) income tax expense, (b) 
interest expense (including interest-equivalent costs associated with any 
Permitted Receivables Financing, whether accounted for as interest expense or 
loss on the sale of receivables), (c) depreciation and amortization expense, 
including amortization of sample fabric books, (d) any extraordinary losses, 
(e) any non-cash charges or non-cash losses and (f) cash restructuring 
charges minus, without duplication, to the extent added in computing such 
Consolidated Net Income, (i) any extraordinary gains and (ii) any non-cash 
income or any non-cash gains, all as determined on a consolidated basis with 
respect to Holdings, the Parent Borrower and the Subsidiaries in accordance 
with GAAP.  Notwithstanding anything herein to the contrary, the aggregate 
amount of cash restructuring charges added back to Consolidated Net Income in 
the determination of Consolidated EBITDA for any period shall not exceed 
$3,500,000.

    "Consolidated Interest Expense" shall mean, for any period, the gross 
interest expense accrued or paid by the Parent Borrower and the Subsidiaries 
during such period, as determined


<PAGE>

10

on a consolidated basis in accordance with GAAP, plus interest-equivalent 
costs associated with any Permitted Receivables Financing, whether accounted 
for as interest expense or loss on the sale of receivables, provided that for 
purposes of this Restated Credit Agreement, "Consolidated Interest Expense" 
shall not include (i) the Fees or expenses, or any amortization or write-offs 
thereof, relating to the Transactions or the prior transactions under the 
Existing Credit Agreement and (ii) penalties and premiums associated with any 
prepayment of Indebtedness.

    "Consolidated Net Income" shall mean, for any period, net income or loss 
of Holdings, the Parent Borrower and the Subsidiaries for such period 
determined on a consolidated basis in accordance with GAAP, provided that 
there shall be excluded (a) the net income (or loss) of any person in which 
any other person (other than Holdings, the Parent Borrower, any wholly owned 
Subsidiary or any director holding qualifying shares or any Nominee 
Shareholder) has an equity interest, except that (i) Holdings's, the Parent 
Borrower's or such Subsidiary's equity in the net income of any such person 
shall be included in determining Consolidated Net Income to the extent of the 
amount of dividends, other distributions or payments in respect of loans 
actually paid to Holdings, the Parent Borrower or any of the Subsidiaries, as 
the case may be, by such person during such period, provided that if the 
ownership of such equity interest by such other person is required by local 
ownership laws in any foreign country, Holdings's, the Parent Borrower's or 
such Subsidiary's equity in the net income of any such person shall be 
included in determining Consolidated Net Income to the extent that cash could 
have been distributed by such person during such period to Holdings, the 
Parent Borrower or such Subsidiary, as the case may be, as a dividend and 
(ii) Holdings's or the Parent Borrower's equity in a net loss of any such 
person for such period shall be included in determining Consolidated Net 
Income, (b) the net income (or loss) of any person for any period prior to 
the date it becomes a Subsidiary or is merged into or consolidated with 
Holdings, the Parent Borrower or any of the Subsidiaries or the date that 
person's assets are acquired by Holdings, the Parent Borrower or any of the 
Subsidiaries, (c) any after tax gains or losses attributable to sales of 
assets out of the ordinary course of business, (d) any interest expense of 
Holdings in respect of the Masco Notes or the Debentures and (e) the Fees or 
expenses, or any amortization or write-offs thereof, relating to the 
Transactions or the prior transactions under the Existing Credit Agreement.

    "Consolidated Working Capital" shall mean, at any date of determination, 
Consolidated Current Assets at such date of determination minus Consolidated 
Current Liabilities at such date of determination.

    "Control" shall mean the possession, directly or indirectly, of the power 
to direct or cause the direction of the management or policies of a person, 
whether through the ownership of voting securities, by contract or otherwise, 
and the terms "Controlling" and "Controlled" shall have meanings correlative 
thereto.

    "Credit Event" shall have the meaning assigned to such term in Section 
4.01.

    "Credit Exposure" shall mean, with respect to any Lender at any time, the 
aggregate principal amount at such time of all outstanding Loans made by such 
Lender, plus the aggregate amount at such time of such Lender's L/C Exposure, 
plus the aggregate amount at such time of such Lender's Swingline Exposure.

    "Debentures" shall mean any debentures issued by Holdings in exchange for 
shares of Preferred Stock of Holdings.



<PAGE>

                                                                              11

     "Default" shall mean any event or condition that upon notice, lapse of 
time or both would constitute an Event of Default.

    "Disqualified Stock" shall mean, with respect to any person, any Capital 
Stock which by its terms (or by the terms of any security into which it is 
convertible or for which it is exchangeable or exercisable) or upon the 
happening of any event (i) matures or is mandatorily redeemable pursuant to a 
sinking fund obligation or otherwise, (ii) is convertible or exchangeable for 
Indebtedness or Disqualified Stock or (iii) is redeemable at the option of 
the holder thereof, in whole or in part, in each case on or prior to 
ninety-one days after the Maturity Date.  Disqualified Stock shall not 
include (i) Preferred Stock of Holdings or (ii) any Capital Stock that is not 
otherwise Disqualified Stock if by its terms the holders thereof have the 
right to require the issuer to repurchase such stock upon a change of control.

    "dollars" or "$" shall mean lawful money of the United States of America.

    "Dollar Equivalent" shall mean, on or as of any particular date with 
respect to an amount in an Alternate Currency, the amount in dollars, as 
conclusively determined by the Issuing Bank, that is required for the Issuing 
Bank to purchase such Alternate Currency amount as of such date on the basis 
of the spot exchange rate therefor in the interbank currency market where the 
foreign currency and exchange operations of the Issuing Bank are customarily 
conducted with respect to such Alternate Currency.

    "Domestic Subsidiary" shall mean any Subsidiary incorporated or organized 
under the laws of the United States of America, any State thereof or the 
District of Columbia.

    "environment" shall mean ambient air, surface water and groundwater 
(including potable water, navigable water and wetlands), the land surface or 
subsurface strata, the workplace or as otherwise defined in any Environmental 
Law.

    "Environmental Claim" shall mean any written accusation, allegation, 
notice of violation, claim, demand, order, directive, cost recovery action or 
other cause of action by, or on behalf of, any Governmental Authority or any 
judicial or other proceeding by any other person for damages, injunctive or 
equitable relief, personal injury (including sickness, disease or death), 
Remedial Action costs, property damage, natural resource damages, nuisance, 
pollution, any adverse effect on the environment caused by any Hazardous 
Material, or for fines, penalties or restrictions, resulting from or based 
upon (a) the existence, or the continuation of the existence, of a Release 
(including sudden or non-sudden, accidental or non-accidental Releases), (b) 
exposure to any Hazardous Material, (c) the presence, use, handling, 
transportation, storage, treatment or disposal of any Hazardous Material or 
(d) the violation or alleged violation of any Environmental Law or 
Environmental Permit.

    "Environmental Law" shall mean any and all applicable present and future 
treaties, laws, rules, regulations, codes, ordinances, orders, decrees, 
judgments, injunctions or binding agreements issued, promulgated or entered 
into by any Governmental Authority, relating in any way to the environment, 
preservation or reclamation of natural resources, the management, Release or 
threatened Release of any Hazardous Material or to health and safety matters 
relating to Hazardous Materials, including the Comprehensive Environmental 
Response, Compensation and Liability Act of 1980, as amended by the Superfund 
Amendments and Reauthorization Act of 1986, 42 U.S.C. Sections  9601 et seq. 
(collectively "CERCLA"), the Solid Waste Disposal Act, as amended by the 
Resource Conservation and Recovery Act of 1976 and Hazardous and Solid Waste 
Amendments of 1984, 42 U.S.C.


<PAGE>

12


Sections  6901 et seq., the Federal Water Pollution Control Act, as amended 
by the Clean Water Act of 1977, 33 U.S.C. Sections  1251 et seq., the Clean 
Air Act of 1970, as amended 42 U.S.C. Sections  7401 et seq., the Toxic 
Substances Control Act of 1976, 15 U.S.C. Sections  2601 et seq., the 
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. Sections  
651 et seq. (to the extent it regulates occupational exposure to Hazardous 
Material), the Emergency Planning and Community Right-to-Know Act of 1986, 42 
U.S.C. Sections  11001 et seq., the Safe Drinking Water Act of 1974, as 
amended, 42 U.S.C. Sections  300(f) et seq., the Hazardous Materials 
Transportation Act, 49 U.S.C. Sections  5101 et seq., and any similar or 
implementing state or local law, and all amendments or regulations 
promulgated under any of the foregoing.

    "Environmental Permit" shall mean any permit, approval, authorization, 
certificate, license, variance or filing required by or from any Governmental 
Authority pursuant to any Environmental Law.

    "Equity Issuance" shall mean any issuance or sale by Holdings of any 
shares of Capital Stock of Holdings, except for (a) any issuance or sale to 
the Parent Borrower or any Subsidiary, (b) sales or issuances of Capital 
Stock to management or key employees of Holdings, the Parent Borrower or any 
Subsidiary under any employee stock option, stock purchase, stock grant or 
other similar incentive or employee benefit plan in existence from time to 
time or (c) issuances of Capital Stock by Holdings upon the conversion, 
exercise or exchange of any class or series of Holdings' Capital Stock 
pursuant to the terms thereof as set forth in the Certificate of 
Incorporation of Holdings as the same may be in effect at such time.

    "ERISA" shall mean the Employee Retirement Income Security Act of 1974 
and the rules and regulations promulgated thereunder, as the same may be 
amended from time to time.

    "ERISA Affiliate" shall mean any trade or business (whether or not 
incorporated) that, together with any Loan Party, is treated as a single 
employer under Section 414(b) or (c) of the Code, or solely for purposes of 
Section 302 of ERISA and Section 412 of the Code, is treated as a single 
employer under Section 414 of the Code.

    "ERISA Event" shall mean (a) any "reportable event", as defined in 
Section 4043 of ERISA or the regulations issued thereunder, with respect to a 
Plan; (b) the adoption of any amendment to a Plan that would require the 
provision of security pursuant to Section 401(a)(29) of the Code or Section 
307 of ERISA; (c) the existence with respect to any Plan of an "accumulated 
funding deficiency" (as defined in Section 412 of the Code or Section 302 of 
ERISA), whether or not waived; (d) the filing pursuant to Section 412(d) of 
the Code or Section 303(d) of ERISA of an application for a waiver of the 
minimum funding standard with respect to any Plan; (e) the incurrence of any 
liability under Title IV of ERISA with respect to the termination of any Plan 
or the withdrawal or partial withdrawal of any Loan Party or any of its ERISA 
Affiliates from any Plan or Multiemployer Plan; (f) the receipt by any Loan 
Party or any ERISA Affiliate from the PBGC or a plan administrator of any 
notice relating to the intention to terminate any Plan or Plans or to appoint 
a trustee to administer any Plan; (g) the receipt by any Loan Party or any 
ERISA Affiliate of any notice concerning the imposition of Withdrawal 
Liability or a determination that a Multiemployer Plan is, or is expected to 
be, insolvent or in reorganization, within the meaning of Title IV of ERISA; 
(h) the occurrence of a "prohibited transaction" with respect to which any 
Loan Party or any of its Subsidiaries is a "disqualified person" (within the 
meaning of Section 4975 of the Code) or with respect to which any Loan Party 
or any such Subsidiary could otherwise be liable; and (i) any other event or 
condition with respect to a Plan or Multiemployer Plan or any


<PAGE>

                                                                              13

plan subject to Title IV of ERISA maintained, or contributed to, by any ERISA 
Affiliate that could reasonably be expected to result in liability of any 
Loan Party.

    "Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar 
Loans.

    "Eurodollar Loan" shall mean any Loan bearing interest at a rate 
determined by reference to the Adjusted LIBO Rate in accordance with the 
provisions of Article II. 

    "Event of Default" shall have the meaning assigned to such term in 
Article VII.

    "Exchange Rate Protection Agreement" shall mean any currency hedging 
agreement or arrangement designed to protect the Borrowers against 
fluctuations in currency exchange rates and not for speculation.

    "Excluded Taxes" shall have the meaning assigned to such term in Section 
2.20.

    "Existing Account Parties" shall mean the Existing Account Parties, other 
than the Borrowers, set forth on Schedule 1.01(a).

    "Existing Letter of Credit" shall mean each letter of credit that (a) was 
issued under the Existing Credit Agreement for the account of the Borrowers 
or any Existing Account Party, (b) is outstanding on the Restatement 
Effective Date and (c) is listed on Schedule 1.01(b).

    "Fees" shall mean the Commitment Fees, the Administrative Agent Fees, the 
L/C Participation Fees and the Issuing Bank Fees.

    "Financial Officer" of any corporation shall mean the chief financial 
officer, principal accounting officer, treasurer or controller of such 
corporation.

    "Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic 
Subsidiary.

    "GAAP" shall mean generally accepted accounting principles applied on a 
consistent basis.  All accounting terms shall be interpreted and all 
accounting determinations hereunder shall be made in accordance with Section 
1.02.

    "Governmental Authority" shall mean any Federal, state, local or foreign 
court or governmental agency, authority, instrumentality or regulatory body.

    "Guarantee" of or by any person shall mean any obligation, contingent or 
otherwise, of such person guaranteeing or having the economic effect of 
guaranteeing any Indebtedness of any other person (the "primary obligor") in 
any manner, whether directly or indirectly, and including any obligation of 
such person, direct or indirect, (a) to purchase or pay (or advance or supply 
funds for the purchase or payment of) such Indebtedness or to purchase (or to 
advance or supply funds for the purchase of) any security for the payment of 
such Indebtedness, (b) to purchase or lease property, securities or services 
for the purpose of assuring the owner of such Indebtedness of the payment of 
such Indebtedness or (c) to maintain working capital, equity capital or any 
other financial statement condition or liquidity of the primary obligor so as 
to enable the primary obligor to pay such Indebtedness; provided, however, 
that the term "Guarantee" shall not include endorsements for collection or 
deposit in the ordinary course of business.  The amount of any Guarantee of 
any guaranteeing person shall be deemed to be the lower of (a) an amount 
equal to the stated or determinable amount of


<PAGE>

14

the primary obligation in respect of which such Guarantee is made and (b) the 
maximum amount for which such guaranteeing person may be liable pursuant to 
the terms of the instrument embodying such Guarantee, unless such primary 
obligation and the maximum amount for which such guaranteeing person may be 
liable are not stated or determinable, in which case the amount of such 
Guarantee shall be such guaranteeing person's maximum reasonably anticipated 
liability in respect thereof as determined by the Parent Borrower in good 
faith.

    "Guarantee Agreements" shall mean the Holdings Guarantee Agreement and 
the Subsidiary Guarantee Agreement.

    "Guarantors" shall mean Holdings and the Subsidiary Guarantors.

    "Hazardous Materials" shall mean all explosive or radioactive substances 
or wastes, hazardous or toxic substances or wastes, including petroleum or 
petroleum distillates, asbestos or asbestos containing materials, 
polychlorinated biphenyls ("PCBs") or PCB-containing materials or equipment, 
radon gas and all other substances, pollutants, solid, liquid or gaseous 
wastes of any nature regulated pursuant to any Environmental Law.

    "Holdings Guarantee Agreement" shall mean the Amended and Restated 
Holdings Guarantee Agreement, substantially in the form of Exhibit H, made by 
Holdings in favor of the Collateral Agent for the benefit of the Secured 
Parties.

    "Indebtedness" of any person shall mean, without duplication, (a) all 
obligations of such person for borrowed money, (b) all obligations of such 
person evidenced by bonds, debentures, notes or similar instruments, (c) all 
obligations of such person upon which interest charges are customarily paid  
(excluding trade accounts payable and accrued obligations incurred in the 
ordinary course of business), (d) all obligations of such person under 
conditional sale or other title retention agreements relating to property or 
assets purchased by such person, (e) all obligations of such person issued or 
assumed as the deferred purchase price of property or services (excluding 
trade accounts payable and accrued obligations incurred in the ordinary 
course of business), (f) all Indebtedness of others secured by (or for which 
the holder of such Indebtedness has an existing right, contingent or 
otherwise, to be secured by) any Lien on property owned or acquired by such 
person, whether or not the obligations secured thereby have been assumed; 
provided, however, that the amount of Indebtedness of such person shall be 
the lesser of (i) the fair market value of such asset at such date of 
determination and (ii) the amount of such Indebtedness, (g) all Guarantees by 
such person of Indebtedness of others, (h) all Capital Lease Obligations of 
such person, (i) all obligations of such person in respect of interest rate 
protection agreements, foreign currency exchange agreements or other interest 
or exchange rate hedging arrangements and (j) all obligations of such person 
as an account party in respect of letters of credit and bankers' acceptances. 
 The Indebtedness of any person shall include the Indebtedness of any 
partnership in which such person is a general partner, other than to the 
extent that the instrument or agreement evidencing such Indebtedness 
expressly limits the liability of such person in respect thereof.

    "Indemnity, Subrogation and Contribution Agreement" shall mean the 
Indemnity, Subrogation and Contribution Agreement, substantially in the form 
of Exhibit D, among the Borrowers, the Subsidiary Guarantors and the 
Collateral Agent.



<PAGE>

                                                                              15

    "Initial Public Offering" shall mean a fully distributed initial public 
offering of common stock of Holdings pursuant to an effective registration 
statement under the Securities Act of 1933.

    "Institutional Investors" shall mean 399 Venture Partners and certain 
other institutional investors.

    "Insurance Proceeds" shall have the meaning assigned to such term in the 
Mortgages.

    "Intercompany Indebtedness" shall mean any Indebtedness of (a) any Loan 
Party or (b) any of the Subsidiaries, that, in any such case, is owing to any 
Loan Party.

    "Interest Coverage Ratio" shall have the meaning assigned to such term in 
Section 6.09.

    "Interest Payment Date" shall mean, with respect to any Loan, the last 
day of the Interest Period applicable to the Borrowing of which such Loan is 
a part and, in the case of a Eurodollar Borrowing with an Interest Period of 
more than three months' duration, each day that would have been an Interest 
Payment Date had successive Interest Periods of three months' duration been 
applicable to such Borrowing, and, in addition, the date of any prepayment of 
a Eurodollar Borrowing or conversion of such Borrowing to a Borrowing of a 
different Type.

    "Interest Period" shall mean (a) as to any Eurodollar Borrowing, the 
period commencing on the date of such Borrowing and ending on the numerically 
corresponding day (or, if there is no numerically corresponding day, on the 
last day) in the calendar month that is 1, 2, 3 or 6 months thereafter (or 9 
or 12 months if such 9- or 12-month period is consented to by each Lender),  
as the applicable Borrower may elect and (b) as to any ABR Borrowing, the 
period commencing on the date of such Borrowing and ending on the earliest of 
(i) the next succeeding March 31, June 30, September 30 or December 31 and 
(ii) the Maturity Date; provided, however, that if any Interest Period would 
end on a day other than a Business Day, such Interest Period shall be 
extended to the next succeeding Business Day unless, in the case of a 
Eurodollar Borrowing only, such next succeeding Business Day would fall in 
the next calendar month, in which case such Interest Period shall end on the 
next preceding Business Day. Interest shall accrue from and including the 
first day of an Interest Period to but excluding the last day of such 
Interest Period.

    "Interest Rate Protection Agreement" shall mean any interest rate hedging 
agreement or arrangement designed to protect the Borrowers against 
fluctuations in interest rates and not for speculation.

    "Issuing Bank" shall mean, as the context may require, (a)(i) with 
respect to Letters of Credit issued pursuant to this Restated Credit 
Agreement, The First National Bank of Chicago or any successor appointed 
pursuant to Section 2.23(i), and (ii) with respect to each Existing Letter of 
Credit, The Chase Manhattan Bank Delaware or (b) collectively, all the 
foregoing.

    "Issuing Bank Fees" shall have the meaning assigned to such term in 
Section 2.05(c).

    "Joint Venture" shall mean any person of which securities or other 
ownership interests representing at least 20% but no greater than 50% of the 
equity or ordinary voting power are owned, controlled or held by Holdings, 
the Parent Borrower or any Subsidiary, provided that


<PAGE>

16

neither Chang Chun Universal Flooring Co. Ltd. nor Chang Chun Wood Product 
Co. Ltd. shall be deemed a "Joint Venture" for purposes of this Restated 
Credit Agreement.

    "L/C Commitment" shall mean the commitment of the Issuing Bank to issue 
Letters of Credit pursuant to Section 2.23.

    "L/C Commitment Letter" shall mean the letter dated August 8, 1997, 
between the Parent Borrower and The First National Bank of Chicago, as 
Issuing Bank.

    "L/C Disbursement" shall mean a payment or disbursement made by the 
Issuing Bank pursuant to a Letter of Credit.

    "L/C Exposure" shall mean at any time the sum of (a) the aggregate 
undrawn amount of all outstanding Letters of Credit at such time plus (b) the 
aggregate principal amount of all L/C Disbursements that have not yet been 
reimbursed at such time.  The L/C Exposure of any Lender at any time shall 
mean its Pro Rata Percentage of the aggregate L/C Exposure at such time.

    "L/C Participation Fee" shall have the meaning assigned to such term in 
Section 2.05(c).

    "Lenders" shall mean (a) the financial institutions listed on Schedule 
2.01 (other than any such financial institution that has ceased to be a party 
hereto pursuant to an Assignment and Acceptance) and (b) any financial 
institution that has become a party hereto pursuant to an Assignment and 
Acceptance.  Unless the context clearly indicates otherwise, the term 
"Lenders" shall include the Swingline Lender.

    "Letter of Credit" shall mean (a) any letter of credit issued pursuant to 
Section 2.23 and (b) any Existing Letter of Credit.

    "LHL" shall mean LIFESTYLE HOLDINGS LTD., a Delaware corporation and a 
wholly owned subsidiary of the Parent Borrower.

    "LIBO Rate" shall mean, with respect to any Eurodollar Borrowing for any 
Interest Period, the rate appearing on Page 3750 of the Telerate Service (or 
on any successor or substitute page of such service, or any successor to or 
substitute for such service, providing rate quotations comparable to those 
currently provided on such page of the Telerate Service, as determined by the 
Administrative Agent from time to time for purposes of providing quotations 
of interest rates applicable to dollar deposits in the London interbank 
market) at approximately 11:00 a.m., London time, two Business Days prior to 
the commencement of such Interest Period, as the rate for dollar deposits 
with a maturity comparable to such Interest Period.  In the event that such 
rate is not so available at such time for any reason, then the "LIBO Rate" 
with respect to such Eurodollar Borrowing for such Interest Period shall be 
the rate at which dollar deposits approximately equal in principal amount to 
the Administrative Agent's portion of such Eurodollar Borrowing and for a 
maturity comparable to such Interest Period are offered to the principal 
London office of the Administrative Agent in immediately available funds in 
the London interbank market at approximately 11:00 a.m., London time, two 
Business Days prior to the commencement of such Interest Period.

    "Lien" shall mean, with respect to any asset, (a) any mortgage, deed of 
trust, lien, pledge, encumbrance, charge or security interest in or on such 
asset, (b) the interest of a


<PAGE>

                                                                              17

vendor or a lessor under any conditional sale agreement, capital lease or 
title retention agreement (or any financing lease having substantially the 
same economic effect as any of the foregoing) relating to such asset and (c) 
in the case of securities, any purchase option, call or similar right of a 
third party with respect to such securities.

    "Loan Documents" shall mean this Restated Credit Agreement, the Letters 
of Credit, the Guarantee Agreements, the Security Documents and the 
Indemnity, Subrogation and Contribution Agreement.

    "Loan Parties" shall mean the Borrowers and the Guarantors.

    "Loans" shall mean the loans made by the Lenders to the Borrowers 
pursuant to Section 2.01.  Each Loan shall be a Eurodollar Loan or an ABR 
Loan.

    "Management Agreement" shall mean the Management Agreement dated as of 
August 5, 1996, between Holdings and the Parent Borrower, as the same may be 
amended, supplemented or otherwise renewed or replaced from time to time in 
accordance with the terms thereof and hereof.

    "Management Investors" shall mean any officers or employees of Holdings, 
the Parent Borrower or the Subsidiaries who own or acquire Capital Stock of 
Holdings on or after the Acquisition Date and any of their Permitted 
Transferees.

    "Margin Stock" shall have the meaning assigned to such term in Regulation 
U.

    "Masco" shall mean Masco Corporation, a Delaware corporation.

    "Masco Investors" shall mean Masco and its Permitted Transferees.

    "Masco Notes" shall mean the senior pay-in-kind notes of Holdings issued 
to Masco on the Acquisition Date in the original principal amount of 
$285,000,000 as heretofore or hereafter amended, restated, supplemented or 
replaced, and any additional senior pay-in-kind notes or other instruments 
issued pursuant to the terms thereof or in substitution thereof.

    "Master Servicer" shall mean LFI Servicing Corporation or any successor 
thereto or other special purpose wholly owned Subsidiary formed for purposes 
of acting as a master servicer under any Permitted Receivables Financing.

    "Material Adverse Effect" shall mean (a) a materially adverse effect on 
the business, assets, operations, properties or financial condition of 
Holdings, the Parent Borrower and the Subsidiaries, taken as a whole, (b) 
material impairment of the ability of the Loan Parties to perform their 
obligations under the Loan Documents or (c) material impairment of the rights 
of or remedies available to the Lenders under any Loan Document.

    "Maturity Date" shall mean August 15, 2003.

    "Moody's" shall mean Moody's Investors Service, Inc. and its successors.

    "Mortgaged Properties" shall mean the owned real properties of the Loan 
Parties specified on Schedule 1.01(c).



<PAGE>

18

    "Mortgages" shall mean the mortgages, deeds of trust, assignments of 
leases and rents, modifications and other security documents, and amendments 
dated the date hereof and delivered pursuant to clause (i) of Section 
4.02(j), or any such mortgages, deeds of trust, assignments of leases and 
rents, modifications and other security documents delivered pursuant to 
Section 5.11, each (other than the amendments dated the date hereof) 
substantially in the form of Exhibit E.

    "Multiemployer Plan" shall mean a multiemployer plan as defined in 
Section 4001(a)(3) of ERISA to which any Loan Party is obligated to 
contribute.

    "Net Cash Proceeds" shall mean (a) with respect to any Asset Sale, the 
cash proceeds thereof (including cash payments received by way of deferred 
payment of principal pursuant to a note or installment receivable or 
otherwise, but only as and when received, but excluding any other 
consideration received in the form of assumption by the acquiring person of 
Indebtedness or other obligations relating to the properties or assets that 
are subject to the Asset Sale or received in any other non-cash form 
(collectively, "Deferred Cash")) net of (i) costs of sale (including payment 
of legal, title and recording tax expenses, commissions and other fees 
directly incurred in connection therewith and the outstanding principal 
amount of, premium or penalty, if any, interest and other amounts on any 
Indebtedness (other than Loans) required to be repaid under the terms thereof 
or by applicable law as a result of such Asset Sale), (ii) taxes paid or 
payable in the year such Asset Sale occurs or in the following year as a 
result thereof, (iii) amounts (A) provided as a reserve, in accordance with 
GAAP, against any liabilities under any indemnification obligations 
associated with such Asset Sale or (B) held in escrow pursuant to an 
agreement relating to such Asset Sale (provided that, to the extent and at 
the time any such amounts are released from such reserve or escrow, such 
amounts shall constitute Net Cash Proceeds (net of any taxes paid or 
payable)) and (iv) payments to holders of minority interests in the asset 
subject to such Asset Sale or in the entity selling the asset and (b) with 
respect to any Equity Issuance or any issuance or other disposition of 
Indebtedness for borrowed money, the cash proceeds thereof (including 
Deferred Cash) net of underwriting discounts and commissions or placement 
fees, attorneys' fees, accountants' fees, filing and registration fees, 
trustee fees and other fees and expenses directly incurred in connection 
therewith net of any taxes paid or payable as a result thereof.

    "90%-Owned Foreign Subsidiary" shall mean a Foreign Subsidiary of which 
securities or other ownership interests representing at least 90% of the 
equity or at least 90% of the ordinary voting power are, at the time any 
determination is being made, owned, controlled or held by the Parent Borrower 
or any wholly owned Subsidiary or any director holding qualifying shares or 
any Nominee Shareholders.

    "Nominee Shareholder" shall mean any person holding shares of any person 
for the benefit of the Parent Borrower or any wholly owned Subsidiary to the 
extent (a) required by applicable law or (b) in the case of any Foreign 
Subsidiary, advisable for legal, tax, accounting or other similar reasons, 
with the consent of the Administrative Agent.

    "Obligations" shall mean (a) the due and punctual payment of (i) the 
principal of and premium, if any, and interest (including interest accruing 
during the pendency of any bankruptcy, insolvency, receivership or other 
similar proceeding, regardless of whether allowed or allowable in such 
proceeding) on the Loans, when and as due, whether at maturity, by 
acceleration, upon one or more dates set for prepayment or otherwise, (ii) 
each payment required to be made by any Borrower under this Restated Credit 
Agreement in respect of any Letter of Credit, when and as due, including 
payments in respect of reimbursement of


<PAGE>

                                                                              19

disbursements, interest thereon and obligations to provide cash collateral 
and (iii) all other monetary obligations, including fees, costs, expenses and 
indemnities, whether primary, secondary, direct, contingent, fixed or 
otherwise (including monetary obligations incurred during the pendency of any 
bankruptcy, insolvency, receivership or other similar proceeding, regardless 
of whether allowed or allowable in such proceeding), of the Loan Parties to 
the Secured Parties under this Restated Credit Agreement and the other Loan 
Documents, (b) the due and punctual performance of all covenants, agreements, 
obligations and liabilities of the Borrowers under or pursuant to this 
Restated Credit Agreement or the other Loan Documents and (c) all obligations 
of the Borrowers, monetary or otherwise, under each Exchange Rate Protection 
Agreement and each Interest Rate Protection Agreement entered into with a 
counterparty that was a Lender (or any Affiliate of a Lender) at the time 
such Exchange Rate Protection Agreement and such Interest Rate Protection 
Agreement was entered into.

    "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to 
and defined in ERISA.

    "Perfection Certificate" shall mean the Perfection Certificate 
substantially in the form of Annex 2 to the Security Agreement.

    "Permitted Acquisition" shall mean any acquisition of an Acquired Entity 
in which any Borrower or any Subsidiary Guarantor is (a) in the case of an 
asset or stock purchase, the purchaser of assets or stock, or (b) in the case 
of a merger or consolidation, the surviving entity or the owner of all the 
capital stock of the surviving or resulting entity, so long as (a) such 
acquisition was not preceded by an unsolicited tender offer for such Acquired 
Entity by the Borrowers or any Subsidiary, (b) after giving effect to such 
acquisition, (i) the Parent Borrower shall be in compliance, on a pro forma 
basis, with all covenants set forth in this Restated Credit Agreement, 
including the covenants contained in Sections 6.09 and 6.10 (it being 
understood that any such acquisition that occurs prior to September 30, 1997, 
shall be deemed to occur on September 30, 1997, for purposes of testing such 
compliance), which shall be recomputed as at the last day of the most 
recently ended fiscal quarter of the Parent Borrower as if such acquisition 
had occurred on the first day of each relevant period for purposes of testing 
such compliance, and the Parent Borrower shall have delivered to the 
Administrative Agent  an officers' certificate to such effect for any 
acquisition in excess of $10,000,000, and (ii) on the date of such 
acquisition and immediately after giving effect thereto (including the effect 
of any Indebtedness incurred or assumed thereby), no Default or Event of 
Default shall have occurred and be continuing and (c) in the case of an asset 
acquisition, such assets are to be used, and in the case of an acquisition of 
capital stock or other equity interests, the person so acquired is engaged 
in, a similar or a reasonably related line of business or lines of business.

    "Permitted Encumbrances" shall have the meaning assigned to such term in 
the Mortgages.

    "Permitted Foreign Indebtedness" shall mean Indebtedness under each loan 
facility permitting borrowings by or letters of credit issued on behalf of a 
Foreign Subsidiary, which may be supported by an unsecured Guarantee of any 
Loan Party, a letter of credit issued for the account of any Loan Party or a 
pledge of or a security interest in any assets of such Foreign Subsidiary.

    "Permitted Foreign Investments" shall mean (a) any investments in, or 
loans or advances to, any Foreign Subsidiary by the Parent Borrower or any 
Domestic Subsidiary or


<PAGE>

20

(b) any letters of credit or Guarantees to support Permitted Foreign 
Indebtedness issued by or for the account of the Parent Borrower or any 
Domestic Subsidiary.  For purposes of determining the amount of any Permitted 
Foreign Investment outstanding at any time, (i) the amount of any investment, 
loan or advance made pursuant to clause (a) above shall equal the aggregate 
amount of the consideration (whether in cash or property, valued at the time 
each such investment, loan or advance is made) paid for such investment, loan 
or advance (net of any return of capital or principal of (but not dividends 
or interest on) such investment, loan or advance) and (ii) the amount of any 
Permitted Foreign Investment pursuant to clause (b) above shall be the face 
amount of any such letter of credit or Guarantee.

    "Permitted Investments" shall mean:

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

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

         (c) investments in (i) certificates of deposit, banker's
    acceptances and time deposits maturing within one year from the
    date of acquisition thereof issued or guaranteed by or placed
    with, and money market deposit accounts issued or offered by, any
    domestic office of any commercial bank organized under the laws
    of the United States of America or any State thereof that has a
    combined capital and surplus profits of not less than
    $250,000,000 or (ii) Eurocurrency time deposits maturing within
    360 days from the date of acquisition thereof with any branch or
    office of (A) any commercial bank organized under the laws of a
    country that is a member of the Organization for Economic
    Cooperation and Development, and comparable in credit quality to
    the investments permitted under the preceding clause (i), or (B)
    any Lender;

         (d) repurchase obligations with a term of not more than 30
    days for, and secured by, underlying securities of the types
    described in clause (a) above entered into with a bank meeting
    the qualifications described in clause (c) above;

         (e) investments in securities with maturities of six months
    or less from the date of acquisition issued or fully guaranteed
    by any state, commonwealth or territory of the United States of
    America, or by any political subdivision or taxing authority
    thereof, and rated at least "A" by S&P or "A-1" by Moody's; 

         (f) investments in money market funds complying with the
    risk limiting conditions of Rule 2a-7 (or any successor rule) of
    the Securities and Exchange Commission under the Investment
    Company Act of 1940, as amended;

         (g) in the case of any Foreign Subsidiary, investments
    comparable in credit quality and tenor to those referred to above
    and customarily used by corporations for cash management purposes
    in any jurisdiction outside the United States of America; and


<PAGE>

                                                                              21

         (h) other investment instruments approved in writing by the
    Required Lenders.

    "Permitted Receivables Financing" shall mean (a) the Receivables 
Financing, (b) any factoring or similar arrangement entered into by Holdings 
or any Borrower from time to time and (c) any subsequent financing secured 
substantially by receivables (and related assets) originated by Holdings 
and/or any Borrower in any amount, provided that such financing is 
non-recourse to the Parent Borrower and its Subsidiaries (other than any 
Receivables Subsidiary or any Acquired Entity) except to a limited extent 
customary for such financings.

    "Permitted Transferee" shall mean (a) with respect to 399 Venture 
Partners, (i) Citicorp or any direct or indirect wholly owned subsidiary of 
Citicorp, and (ii) any officer, director or employee of 399 Venture Partners, 
Citicorp or any wholly owned subsidiary of Citicorp; (b) with respect to 
Masco, any direct or indirect majority owned subsidiary of Masco (provided 
Masco Controls such subsidiary); and (c) with respect to any officer, 
director or employee of Holdings, the Parent Borrower, any of the 
Subsidiaries, 399 Venture Partners or Citicorp or any wholly owned subsidiary 
of Citicorp, (i) any spouse, parent or lineal descendant (including by 
adoption and stepchildren) of such officer, director or employee and (ii) any 
trust, corporation or partnership a majority in interest of the 
beneficiaries, stockholders or partners of which consists of such employees, 
officers or directors or one or more of the persons described in clause 
(c)(i).

    "person" shall mean any natural person, corporation, business trust, 
joint venture, association, company, partnership or government, or any agency 
or political subdivision thereof.

    "Plan" shall mean any employee pension benefit plan (other than a 
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 
412 of the Code or Section 307 of ERISA, and in respect of which any Loan 
Party is (or, if such plan were terminated, would under Section 4069 of ERISA 
be deemed to be) an "employer" as defined in Section 3(5) of ERISA.

    "Pledge Agreement" shall mean the Amended and Restated Pledge Agreement, 
substantially in the form of Exhibit G, among Holdings, the Borrowers, the 
Subsidiaries party thereto and the Collateral Agent for the benefit of the 
Secured Parties.

    "Preferred Stock" shall mean the preferred stock of Holdings.

    "Pro Rata Percentage" of any Lender at any time shall mean the percentage 
of the Total Commitment represented by such Lender's Commitment.

    "Properties" shall have the meaning given such term in Section 3.17.

    "Receivables Financing" shall mean (a) the sale by Holdings and certain 
of the Subsidiaries of accounts receivable to the Receivables Subsidiary 
pursuant to the Receivables Sale Agreement, (b) the sale of such accounts 
receivable (or participation interests therein) by the Receivables Subsidiary 
pursuant to the Receivables Pooling Agreement and (c) the servicing of such 
accounts receivable pursuant to the Receivables Servicing Agreement.

    "Receivables Pooling Agreement" shall mean the Pooling Agreement relating 
to the Receivables Financing, among the Receivables Subsidiary, the Master 
Servicer and the Receivables Trustee, as amended, restated, supplemented or 
replaced from time to time.




<PAGE>

22

    "Receivables Sale Agreement" shall mean the Receivables Sale Agreement 
relating to the Receivables Financing, among the Receivables Subsidiary, 
Holdings and the Subsidiaries party thereto, as amended, restated, 
supplemented or replaced from time to time.

    "Receivables Servicing Agreement" shall mean the Master Servicing 
Agreement relating to the Receivables Financing, among the Receivables 
Subsidiary, the Master Servicer, Holdings, the Subsidiaries party thereto and 
the Receivables Trustee, as amended, restated, supplemented or replaced from 
time to time.

    "Receivables Subsidiary" shall mean LFI Receivables Corporation or any 
successor thereto or other bankruptcy-remote, special-purpose wholly owned 
Subsidiary formed for purposes of a Permitted Receivables Financing.

    "Receivables Trustee" shall mean the trustee on behalf of the holders of 
participation interests in the receivables sold pursuant to the Permitted 
Receivables Financing.

    "Refinancing Indebtedness" shall have the meaning given such term is 
Section 6.01(r).

    "Register" shall have the meaning given such term in Section 9.04(d).

    "Regulation G" shall mean Regulation G of the Board as from time to time 
in effect and all official rulings and interpretations thereunder or thereof.

    "Regulation U" shall mean Regulation U of the Board as from time to time 
in effect and all official rulings and interpretations thereunder or thereof.

    "Regulation X" shall mean Regulation X of the Board as from time to time 
in effect and all official rulings and interpretations thereunder or thereof.

    "Release" shall mean any spilling, leaking, pumping, pouring, emitting, 
emptying, discharging, injecting, escaping, leaching, dumping, disposing, 
depositing, dispersing, emanating or migrating of any Hazardous Material in, 
into, onto or through the environment.

    "Remedial Action" shall mean (a) "remedial action" as such term is 
defined in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions 
required by any Governmental Authority or voluntarily undertaken to: (i) 
cleanup, remove, treat, abate or in any other way address any Hazardous 
Material in the environment; (ii) prevent the Release or threat of Release, 
or minimize the further Release of any Hazardous Material so it does not 
migrate or endanger or threaten to endanger public health, welfare or the 
environment; or (iii) perform studies and investigations in connection with, 
or as a precondition to, (i) or (ii) above.

    "Required Lenders" shall mean, at any time, Lenders having Loans 
(excluding Swingline Loans), L/C Exposures, Swingline Exposures and unused 
Commitments representing more than 50% of the sum of all Loans outstanding 
(excluding Swingline Loans), the L/C Exposure, the Swingline Exposure and 
unused Total Commitments at such time.

    "Responsible Officer" of any corporation shall mean any executive officer 
or Financial Officer of such corporation and any other officer or similar 
official thereof responsible for the administration of the obligations of 
such corporation in respect of this Restated Credit Agreement.




<PAGE>

                                                                              23

     "Restatement Effective Date" shall have the meaning assigned to such 
term in Section 4.02.

    "Restricted Payment" shall mean, without duplication, (a) all 
investments, loans or advances made by the Parent Borrower or any Subsidiary 
in or to Holdings, other than those specifically permitted by Section 
6.04(b)(i), (ii), (iii) and (iv); (b) all dividends, distributions and 
repurchases of stock by the Parent Borrower or any Subsidiary, other than 
those specifically permitted by Section 6.06(a)(i) through 6.06(a)(iii) 
(other than any such payment or distribution that is made under Section 
6.06(a)(ii) in reliance on Section 6.04(b)(v)); and (c) all payments by the 
Parent Borrower or any Subsidiary that would be prohibited by Section 6.08 
but for the exception in Section 6.08(b)(ii).

    "Restricted Payments Basket" shall mean a cumulative amount equal to (a) 
the sum of:

         (i) 50% of the Consolidated Net Income accrued during the
    period (treated as one accounting period) from the Acquisition
    Date to the end of the most recent fiscal quarter for which
    financial statements have been delivered pursuant to and in
    accordance with Section 5.04 (or, in the event that such
    Consolidated Net Income shall be a deficit, minus 100% of such
    deficit); plus

         (ii) the aggregate Net Cash Proceeds received by the Parent
    Borrower or any Subsidiary as capital contributions or from the
    issuance or sale of its Capital Stock (other than Disqualified
    Stock) subsequent to the Acquisition Date (other than an issuance
    or sale to a Subsidiary or an employee stock ownership plan or
    other trust established by the Parent Borrower or any Subsidiary
    to the extent the purchase by such plan or trust is financed by
    Indebtedness of such plan or trust and for which the Parent
    Borrower or Subsidiary is liable, directly or indirectly, as a
    guarantor or otherwise (including by the making of cash
    contributions to such plan or trust which are used to pay
    interest or principal on such Indebtedness)); plus

         (iii) upon any Restricted Payment Election under
    Section 6.05(f), up to 50% of the Net Cash Proceeds received by
    the Parent Borrower or any Subsidiary from Asset Sales not
    prohibited by this Restated Credit Agreement, subject to the
    requirements of Section 6.05(f), 

minus (b) the cumulative amount, without duplication, of all Restricted 
Payments made by the Borrowers during the period (treated as one accounting 
period) subsequent to the Acquisition Date.

    "S&P" shall mean Standard and Poor's Ratings Group, a division of 
McGraw-Hill, Inc., and its successors.

    "Secured Parties" shall have the meaning assigned to such term in the 
Security Agreement.

    "Security Agreement" shall mean the Amended and Restated Security 
Agreement, substantially in the form of Exhibit H, among Holdings, the 
Borrowers, the Subsidiaries party thereto and the Collateral Agent for the 
benefit of the Secured Parties.

    "Security Documents" shall mean the Mortgages, the Security Agreement, 
the Pledge Agreement and each of the security agreements, mortgages and other 
instruments and


<PAGE>

24

documents executed and delivered pursuant to any of the foregoing or 
pursuant to Section 5.11.

    "Significant Foreign Subsidiary" shall mean, at any date of 
determination, a Foreign Subsidiary with respect to which the sum of (a) such 
Foreign Subsidiary's net worth, as determined in accordance with GAAP plus 
(b) the aggregate amount of outstanding advances to such Foreign Subsidiary 
from Holdings, the Parent Borrower or any Subsidiary as of the last day of 
the most recent fiscal period for which financial statements have been 
delivered pursuant to Section 5.04(a) or (b) is equal to or greater than 
$4,000,000.

    "Simmons" shall mean Simmons Upholstered Furniture Corporation, a 
Delaware corporation and a wholly owned subsidiary of Holdings.

    "Specified HFG Assets" shall mean the assets of the Specified HFG 
Companies set forth on Schedule 1.01(d).

    "Specified HFG Companies" shall mean the corporations set forth on 
Schedule 1.01(e).

    "Statutory Reserves" shall mean a fraction (expressed as a decimal), the 
numerator of which is the number one and the denominator of which is the 
number one minus the aggregate of the maximum reserve percentages (including 
any marginal, special, emergency or supplemental reserves) expressed as a 
decimal established by the Board or successor banking authority to which the 
Administrative Agent is subject with respect to the Adjusted LIBO Rate for 
Eurocurrency Liabilities (as defined in Regulation D of the Board).  Such 
reserve percentages shall include those imposed pursuant to such Regulation 
D. Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities 
and to be subject to such reserve requirements without benefit of or credit 
for proration, exemptions or offsets that may be available from time to time 
to any Lender under such Regulation D. Statutory Reserves shall be adjusted 
automatically on and as of the effective date of any change in any reserve 
percentage.

    "Stockholders' Agreement" shall mean the Stockholders' Agreement dated as 
of the Acquisition Date hereof, among Holdings, Masco, the Institutional 
Investors and the Management Investors, as the same may be amended, restated, 
supplemented or otherwise renewed or replaced from time to time in accordance 
with the terms thereof and hereof.

    "Subordinated Notes" shall mean the 10-7/8% Senior Subordinated Notes due 
2006 issued on the Acquisition Date in the aggregate principal amount of 
$200,000,000 and shall include any substantially identical notes issued in 
exchange therefor after the Acquisition Date, pursuant to the indenture 
governing such notes.

    "subsidiary" shall mean, with respect to any person (herein referred to 
as the "parent"), any corporation, partnership, association or other business 
entity (a) of which securities or other ownership interests representing more 
than 50% of the equity or more than 50% of the ordinary voting power or more 
than 50% of the general partnership interests are, at the time any 
determination is being made, owned, controlled or held, or (b) that is, at 
the time any determination is made, otherwise Controlled, by the parent or 
one or more subsidiaries of the parent or by the parent and one or more 
subsidiaries of the parent, provided that the term "subsidiary", when used in 
respect of Holdings, the Parent Borrower or any of its subsidiaries,


<PAGE>

                                                                              25

shall not include any foreign joint venture in which Holdings, the Parent 
Borrower or any such subsidiary owns less than or equal to 50% of the equity 
interest in such joint venture.

    "Subsidiary" shall mean any subsidiary of the Parent Borrower.

    "Subsidiary Guarantee Agreement" shall mean the Amended and Restated 
Subsidiary Guarantee Agreement, substantially in the form of Exhibit I, made 
by the Subsidiary Guarantors in favor of the Collateral Agent for the benefit 
of the Secured Parties.

    "Subsidiary Guarantor" shall mean each Subsidiary that is or becomes a 
party to a Subsidiary Guarantee Agreement.

    "Swingline Commitment" shall mean the commitment of the Swingline Lender 
to make loans pursuant to Section 2.22, as the same may be reduced from time 
to time pursuant to Section 2.09 .

    "Swingline Exposure" shall mean at any time the aggregate principal 
amount at such time of all outstanding Swingline Loans.  The Swingline 
Exposure of any Lender at any time shall equal its Pro Rata Percentage of the 
aggregate Swingline Exposure at such time.

    "Swingline Loan" shall mean any loan made by the Swingline Lender 
pursuant to Section 2.22(a).

    "Tax Sharing Agreement" shall mean the Tax Sharing Agreement dated as of 
the Acquisition Date, among Holdings, the Parent Borrower, the Receivables 
Subsidiary and Simmons, as the same may be amended, restated, supplemented or 
otherwise renewed or replaced from time to time in accordance with the terms 
thereof and hereof.

    "399 Investors" shall mean 399 Venture Partners and its Permitted 
Transferees.

    "Total Commitment" shall mean, at any time, the aggregate amount of the 
Lenders' Commitments, as in effect at such time.

    "Total Debt" shall mean, at any time, all Indebtedness of the Parent 
Borrower and its Subsidiaries of the type referred to in clauses (a), (b), 
(c), (e), (h) and (j) (provided that obligations in respect of letters of 
credit shall not be included in Total Debt except to the extent of any 
unreimbursed drawings thereunder) of the definition of the term 
"Indebtedness".

    "Total Debt Ratio" shall mean, as of any date, the ratio of (a) Total 
Debt as of the last day of the fiscal quarter most recently ended as of such 
date to (b) Consolidated EBITDA for the period of four fiscal quarters most 
recently ended as of such date.

    "Tranche A Term Loans" shall have the meaning assigned to such term in 
the preamble to this Restated Credit Agreement.

    "Tranche B Term Loans" shall have the meaning assigned to such term in 
the preamble to this Restated Credit Agreement.

    "Transactions" shall have the meaning assigned to such term in Section 
3.02.




<PAGE>

26

    "Transition Services Agreement" shall mean the Transition Services 
Agreement dated as of the Acquisition Date, between Holdings and Masco, as 
amended, supplemented or otherwise renewed or replaced from time to time in 
accordance with the terms thereof and hereof.

    "Type", when used in respect of any Loan or Borrowing, shall refer to the 
Rate by reference to which interest on such Loan or on the Loans comprising 
such Borrowing is determined.  For purposes hereof, the term "Rate" shall 
include the Adjusted LIBO Rate and the Alternate Base Rate.

    "wholly owned subsidiary" of any person shall mean a subsidiary of such 
person of which securities or other ownership interests representing 100% of 
the equity or 100% of the ordinary voting power or 100% of the general 
partnership interests are, at the time any determination is being made, 
owned, controlled or held by such person or one or more wholly owned 
subsidiaries of such person or by any director holding qualifying shares or 
any Nominee Shareholder.  The term "wholly owned", when used to modify the 
term "Subsidiary" or "Domestic Subsidiary", shall have a correlative meaning.

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

    SECTION 1.02.  Terms Generally.  The definitions in Section 1.01 shall 
apply equally to both the singular and plural forms of the terms defined.  
Whenever the context may require, any pronoun shall include the corresponding 
masculine, feminine and neuter forms.  The words "include", "includes" and 
"including" shall be deemed to be followed by the phrase "without 
limitation".  All references herein to Articles, Sections, Exhibits and 
Schedules shall be deemed references to Articles and Sections of, and 
Exhibits and Schedules to, this Restated Credit Agreement unless the context 
shall otherwise require. Except as otherwise expressly provided herein, (a) 
any reference in this Restated Credit Agreement to any Loan Document shall 
mean such document as amended, restated, supplemented or otherwise modified 
from time to time, (b) all terms of an accounting or financial nature shall 
be construed in accordance with GAAP, as in effect from time to time; 
provided, however, that for purposes of determining compliance with the 
covenants contained in Article VI, all accounting terms herein shall be 
interpreted and all accounting determinations hereunder shall be made in 
accordance with GAAP as in effect on the date of this Restated Credit 
Agreement and applied on a basis consistent with the application used in the 
financial statements referred to in Section 3.05(a) and (c) (i) all 
references herein to Holdings on an unconsolidated basis shall be deemed to 
exclude any investment by Holdings in any of its subsidiaries and (ii) all 
financial terms and all financial statements with respect to Holdings, the 
Parent Borrower and the Subsidiaries on a consolidated basis shall exclude 
Simmons.

                                 ARTICLE II

                                 The Credits

    SECTION 2.01.  Commitments.  Subject to the terms and conditions and 
relying upon the representations and warranties herein set forth, each Lender 
agrees, severally and not jointly, to make Loans to the Borrowers, at any 
time and from time to time on or after the date hereof, and until the earlier 
of the Maturity Date and the termination of the Commitment of


<PAGE>

                                                                              27


such Lender in accordance with the terms hereof, in an aggregate principal 
amount at any time outstanding that will not result in (i) such Lender's 
Credit Exposure exceeding (ii) such Lender's Commitment.  Within the limits 
set forth in the immediately preceding sentence and subject to the terms, 
conditions and limitations set forth herein, the Borrowers may borrow, pay or 
prepay and reborrow Loans.

    SECTION 2.02.  Loans.  (a)  Each Loan (other than Swingline Loans) shall 
be made as part of a Borrowing consisting of Loans made by the Lenders 
ratably in accordance with their respective Commitments; provided, however, 
that the failure of any Lender to make any Loan shall not in itself relieve 
any other Lender of its obligation to lend hereunder (it being understood, 
however, that no Lender shall be responsible for the failure of any other 
Lender to make any Loan required to be made by such other Lender).  Except 
for Loans deemed made pursuant to Section 2.02(f) and Swingline Loans, the 
Loans comprising any Borrowing shall be in an aggregate principal amount that 
is (i) not less than $5,000,000 (in the case of Eurodollar Borrowings) and 
$1,000,000 (in the case of ABR Borrowings) and, in each case, in an integral 
multiple of $1,000,000 or (ii) equal to the remaining available balance of 
the applicable Commitment.  

    (b)  Subject to Sections 2.08 and 2.15, each Borrowing shall be comprised 
entirely of ABR Loans or Eurodollar Loans as the applicable Borrower may 
request pursuant to Section 2.03.  Each Lender may at its option make any 
Eurodollar Loan by causing any domestic or foreign branch or Affiliate of 
such Lender to make such Loan, provided that any exercise of such option 
shall not affect the obligation of the Borrowers to repay such Loan in 
accordance with the terms of this Restated Credit Agreement.  Borrowings of 
more than one Type may be outstanding at the same time; provided, however, 
that the Borrowers shall not be entitled to request any Borrowing that, if 
made, would result in more than twelve Eurodollar Borrowings outstanding 
hereunder at any time.  For purposes of the foregoing, Borrowings having 
different Interest Periods, regardless of whether they commence on the same 
date, shall be considered separate Borrowings.

    (c)  Except with respect to Loans made pursuant to Section 2.02(f), each 
Lender shall make each Loan to be made by it hereunder on the proposed date 
thereof by wire transfer of immediately available funds to such account in 
New York City as the Administrative Agent may designate not later than 12:00 
(noon), New York City time, and the Administrative Agent shall by 1:00 p.m., 
New York City time, credit the amounts so received to an account in the name 
of the Parent Borrower (acting as agent for and on behalf of itself and the 
Subsidiary Borrowers), maintained with the Administrative Agent and 
designated in the applicable Borrowing Request or, if a Borrowing shall not 
occur on such date because any condition precedent herein specified shall not 
have been met, return the amounts so received to the respective Lenders.

    (d)  Unless the Administrative Agent shall have received notice from a 
Lender prior to the date of any Borrowing that such Lender will not make 
available to the Administrative Agent such Lender's portion of such 
Borrowing, the Administrative Agent may assume that such Lender has made such 
portion available to the Administrative Agent on the date of such Borrowing 
in accordance with paragraph (c) above and the Administrative Agent may, in 
reliance upon such assumption, make available to the applicable Borrower on 
such date a corresponding amount.  If the Administrative Agent shall have so 
made funds available then, to the extent that such Lender shall not have made 
such portion available to the Administrative Agent, such Lender and the 
Borrowers severally agree to repay to the Administrative Agent forthwith on 
demand such corresponding amount together with interest thereon, for each day 


<PAGE>

28

from the date such amount is made available to the Borrowers until the date 
such amount is repaid to the Administrative Agent at (i) in the case of the 
Borrowers, the interest rate applicable at the time to the Loans comprising 
such Borrowing and (ii) in the case of such Lender, a rate determined by the 
Administrative Agent to represent its cost of overnight or short-term funds 
(which determination shall be conclusive absent manifest error). If such 
Lender shall repay to the Administrative Agent such corresponding amount, 
such amount shall constitute such Lender's Loan as part of such Borrowing for 
purposes of this Restated Credit Agreement.   

    (e)  Notwithstanding any other provision of this Restated Credit 
Agreement, the Borrowers shall not be entitled to request any Borrowing if 
the Interest Period requested with respect thereto would end after the 
Maturity Date.

    (f)  If the Issuing Bank shall not have received from the Borrowers the 
payment required to be made by Section 2.23(e) within the time specified in 
such Section, the Issuing Bank will promptly notify the Administrative Agent 
of the L/C Disbursement and the Administrative Agent will promptly notify 
each Lender of such L/C Disbursement and its Pro Rata Percentage thereof.  
Each Lender shall pay by wire transfer of immediately available funds to the 
Administrative Agent not later than 2:00 p.m., New York City time, on such 
date (or, if such Lender shall have received such notice later than 12:00 
(noon), New York City time, on any day, not later than 10:00 a.m., New York 
City time, on the immediately following Business Day), an amount equal to 
such Lender's Pro Rata Percentage of such L/C Disbursement (it being 
understood that such amount shall be deemed to constitute an ABR Loan of such 
Lender and such payment shall be deemed to have reduced the L/C Exposure), 
and the Administrative Agent will promptly pay to the Issuing Bank amounts so 
received by it from the Lenders.  The Administrative Agent will promptly pay 
to the Issuing Bank any amounts received by it from the Borrowers pursuant to 
Section 2.23(e) prior to the time that any Lender makes any payment pursuant 
to this paragraph (f); any such amounts received by the Administrative Agent 
thereafter will be promptly remitted by the Administrative Agent to the 
Lenders that shall have made such payments and to the Issuing Bank, as their 
interests may appear.  If any Lender shall not have made its Pro Rata 
Percentage of such L/C Disbursement available to the Administrative Agent as 
provided above, such Lender and the Borrowers severally agree to pay interest 
on such amount, for each day from and including the date such amount is 
required to be paid in accordance with this paragraph to but excluding the 
date such amount is paid, to the Administrative Agent for the account of the  
Issuing Bank at (i) in the case of the Borrowers, a rate per annum equal to 
the interest rate applicable to Loans pursuant to Section 2.06(a), and (ii) 
in the case of such Lender, for the first such day, the Federal Funds 
Effective Rate, and for each day thereafter, the Alternate Base Rate.

    SECTION 2.03.  Borrowing Procedure.  In order to request a Borrowing 
(other than a Swingline Loan or a deemed Borrowing pursuant to Section 
2.02(f), as to which this Section 2.03 shall not apply), the applicable 
Borrower shall notify the Administrative Agent by telephone of its intent to 
request a Borrowing and shall hand deliver or telecopy to the Administrative 
Agent a duly completed Borrowing Request (a) in the case of a Eurodollar 
Borrowing, not later than 11:00 a.m., New York City time, three Business Days 
before a proposed Borrowing, and (b) in the case of an ABR Borrowing, not 
later than 12:00 noon, New York City time, one Business Day before a proposed 
Borrowing.  Each Borrowing Request shall be irrevocable, shall be signed by 
or on behalf of the applicable Borrower and shall specify the following 
information:  (i) whether the Borrowing then being requested is to be a 
Eurodollar Borrowing or an ABR Borrowing; (ii) the date of such Borrowing 
(which shall be a Business Day), (iii) the number and location of the account 
to which funds are to be


<PAGE>

                                                                              29


disbursed (which shall be an account that complies with the requirements of 
Section 2.02(c)); (iv) the amount of such Borrowing; and (v) if such 
Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect 
thereto; provided, however, that, notwithstanding any contrary specification 
in any Borrowing Request, each requested Borrowing shall comply with the 
requirements set forth in Section 2.02.  If no election as to the Type of 
Borrowing is specified in any such notice, then the requested Borrowing shall 
be an ABR Borrowing.  If no Interest Period with respect to any Eurodollar 
Borrowing is specified in any such notice, then the applicable Borrower shall 
be deemed to have selected an Interest Period of one month's duration.  The 
Administrative Agent shall promptly advise the applicable Lenders of any 
notice given pursuant to this Section 2.03 (and the contents thereof), and of 
each Lender's portion of the requested Borrowing.  

    SECTION 2.04.  Evidence of Debt; Repayment of Loans.  (a) The Borrowers, 
jointly and severally, unconditionally promise to pay to the Administrative 
Agent for the account of each Lender (i) the then unpaid principal amount of 
each Swingline Loan, on the last day of the Interest Period applicable to 
such Loan or, if earlier, on the Maturity Date, and (iii) the then unpaid 
principal amount of each Loan on the Maturity Date.  

    (b)  Each Lender shall maintain in accordance with its usual practice an 
account or accounts evidencing the Indebtedness of the Borrowers to such 
Lender resulting from each Loan made by such Lender from time to time, 
including the amounts of principal and interest payable and paid such Lender 
from time to time under this Restated Credit Agreement.

    (c)  The Administrative Agent shall maintain accounts in which it will 
record (i) the amount of each Loan made hereunder, the Type thereof and the 
Interest Period applicable thereto, (ii) the amount of any principal or 
interest due and payable or to become due and payable from the Borrowers to 
each Lender hereunder and (iii) the amount of any sum received by the 
Administrative Agent hereunder from the Borrowers or any Guarantor and each 
Lender's share thereof. Notwithstanding any other provision of this Restated 
Credit Agreement, it is understood and agreed that each Loan made hereunder 
shall be deemed made for the account of all the Borrowers, jointly and 
severally, and the Administrative Agent and the Lenders shall not have any 
obligation to maintain any accounts with respect to any Borrowing (or any 
portion thereof) made by any individual Borrower.

    (d)  The entries made in the accounts maintained pursuant to paragraphs 
(b) and (c) above shall be prima facie evidence of the existence and amounts 
of the obligations therein recorded; provided, however, that the failure of 
any Lender or the Administrative Agent to maintain such accounts or any error 
therein shall not in any manner affect the obligations of the Borrowers to 
repay the Loans in accordance with their terms.

    (e)  Notwithstanding any other provision of this Restated Credit 
Agreement, in the event any Lender shall request and receive a promissory 
note payable to such Lender and its registered assigns, the interests 
represented by such note shall at all times (including after any assignment 
of all or part of such interests pursuant to Section 9.04) be represented by 
one or more promissory notes payable to the payee named therein or its 
registered assigns.

    SECTION 2.05.  Fees.  (a)  The Borrowers agree to pay to the 
Administrative Agent (for the benefit of each Lender), on the last day of 
March, June, September and December in each year, on each date on which the 
Commitment of such Lender shall expire or be terminated or reduced as 
provided herein and on the Maturity Date, a commitment fee (a "Commitment 
Fee") on the average daily unused amount of the Commitment of such Lender 


<PAGE>

30

(other than the Swingline Commitment) during the preceding quarter (or 
applicable shorter period) at a rate per annum equal to the Applicable 
Percentage.  All Commitment Fees shall be computed on the basis of the actual 
number of days elapsed in a year of 360 days.  The Commitment Fee due to each 
Lender shall commence to accrue on the Restatement Effective Date and shall 
cease to accrue on the date on which the Commitment of such Lender shall 
expire or be terminated as provided herein or on the Maturity Date. For 
purposes of calculating Commitment Fees only, no portion of the Commitments 
shall be deemed utilized under Section 2.17 as a result of outstanding 
Swingline Loans.

    (b)  The Borrowers agree to pay to the Administrative Agent, for its own 
account, the administration fee set forth in the Commitment Letter at the 
times and in the amounts specified therein (the "Administrative Agent Fees").

    (c)  The Borrowers agree to pay (i) to the Administrative Agent (for the 
benefit of each Lender), on the last day of March, June, September and 
December of each year, on the date on which the Commitment of such Lender 
shall be terminated as provided herein and on the Maturity Date, a fee (an 
"L/C Participation Fee") calculated on such Lender's Pro Rata Percentage of 
the average daily aggregate L/C Exposure (excluding the portion thereof 
attributable to unreimbursed L/C Disbursements) during the preceding quarter 
(or applicable shorter period) at a rate equal to the Applicable Percentage 
from time to time used to determine the interest rate on Revolving Credit 
Borrowings comprised of Eurodollar Loans pursuant to Section 2.06, and (ii) 
to the Issuing Bank with respect to each Letter of Credit the fronting fees, 
payable on the last day of March, June, September and December of each year, 
the date on which the Commitment shall be terminated as provided herein and 
on the Maturity Date, set forth in the L/C Commitment Letter plus, in 
connection with the issuance, amendment or transfer of any Letter of Credit 
or any L/C Disbursement, the agreed-upon documentary and processing charges 
as set forth in the L/C Commitment Letter (collectively, the "Issuing Bank 
Fees").  All L/C Participation Fees and Issuing Bank Fees shall be computed 
on the basis of the actual number of days elapsed in a year of 360 days.

      (d)  All Fees shall be paid on the dates due, in immediately available 
funds, to the Administrative Agent for distribution, if and as appropriate, 
among the Lenders, except that the Issuing Bank Fees shall be paid directly 
to the Issuing Bank, and except as set forth in the Commitment Letter.

    SECTION 2.06.  Interest on Loans.  (a)  Subject to the provisions of 
Section 2.07, the Loans comprising each ABR Borrowing, including each 
Swingline Loan, shall bear interest (computed on the basis of the actual 
number of days elapsed over a year of 365 or 366 days, as the case may be, 
when the Alternate Base Rate is determined by reference to the Prime Rate and 
over a year of 360 days at all other times) at a rate per annum equal to the 
Alternate Base Rate plus the Applicable Percentage with respect to ABR Loans 
in effect from time to time.

    (b)  Subject to the provisions of Section 2.07, the Loans comprising each 
Eurodollar Borrowing shall bear interest (computed on the basis of the actual 
number of days elapsed over a year of 360 days) at a rate per annum equal to 
the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing 
plus the Applicable Percentage with respect to Eurodollar Loans in effect 
from time to time.

      (c)  Interest on each Loan shall be payable on the Interest Payment 
Dates applicable to such Loan except as otherwise provided in this Restated 
Credit Agreement.  The applicable Alternate Base Rate or Adjusted LIBO Rate 
for each Interest Period or day within an Interest


<PAGE>

                                                                              31



Period, as the case may be, shall be determined by the Administrative Agent, 
and such determination shall be conclusive absent manifest error.

    SECTION 2.07.  Default Interest.  If the Borrowers shall default in the 
payment of the principal of, or interest on, any Loan or any other amount 
becoming due hereunder, by acceleration or otherwise, or under any other Loan 
Document, the Borrowers agree to pay on demand from time to time interest, to 
the extent permitted by law, on such defaulted amount to but excluding the 
date of actual payment (after as well as before judgment) (a) in the case of 
overdue principal, at the rate otherwise applicable to such Loan pursuant to 
Section 2.06 plus 2.00% per annum and (b) in all other cases, at a rate per 
annum (computed on the basis of the actual number of days elapsed over a year 
of 365 or 366 days, as the case may be, when the Alternate Base Rate 
determined by reference to the Prime Rate and over a year of 360 days at all 
other times) equal to the sum of the Alternate Base Rate plus 2.00%.

    SECTION 2.08.  Alternate Rate of Interest.  In the event, and on each 
occasion, that on or before the day two Business Days prior to the 
commencement of any Interest Period for a Eurodollar Borrowing the 
Administrative Agent shall have determined, or shall have been advised by the 
Required Lenders or the applicable Lender required to make a Eurodollar Loan, 
that dollar deposits in the principal amounts of the Loans comprising such 
Borrowing are not generally available in the London interbank market, or that 
the rates at which such dollar deposits are being offered will not adequately 
and fairly reflect the cost to any Lender of making or maintaining its 
Eurodollar Loan during such Interest Period, or that reasonable means do not 
exist for ascertaining the Adjusted LIBO Rate, the Administrative Agent 
shall, as soon as practicable thereafter, give written or telecopy notice of 
such determination to the Borrowers and the Lenders.  In the event of any 
such determination, until the Administrative Agent shall have advised the 
Borrowers and the Lenders that the circumstances giving rise to such notice 
no longer exist, any request by the Borrowers for a Eurodollar Borrowing 
pursuant to Section 2.03 or 2.10 shall be deemed to be a request for an ABR 
Borrowing, provided that if the circumstances giving rise to such 
determination do not affect all the Lenders, then requests by the Borrowers 
for Eurodollar Borrowings may be made to Lenders that are not affected 
thereby and such unaffected Lender shall remain obligated to make the 
Eurodollar Loan contained in such request on the terms and subject to the 
conditions set forth in this Restated Credit Agreement.  Each determination 
by the Administrative Agent hereunder shall be conclusive absent manifest 
error.

    SECTION 2.09.  Termination and Reduction of Commitments. (a)  The 
Commitments, the Swingline Commitment and the L/C Commitment shall 
automatically terminate on the Maturity Date.  Notwithstanding the foregoing, 
all the Commitments shall automatically terminate at 5:00 p.m., New York City 
time, on September 30, 1997, if the Restatement Effective Date shall not have 
occurred by such time.  

    (b)  Upon at least three Business Days' prior irrevocable notice to the 
Administrative Agent given by telephone (promptly confirmed by written or 
telecopy notice), the Borrowers may at any time in whole permanently 
terminate, or from time to time in part permanently reduce the Commitments; 
provided, however, that (i) each partial reduction of the Commitments shall 
be in an integral multiple of $1,000,000 and in a minimum amount of 
$5,000,000 and (ii) the Total Commitment shall not be reduced to an amount 
that is less than the Aggregate Credit Exposure at the time.

    (c)  On or prior to August 15, 2002, the Borrowers shall permanently 
reduce the Total Commitments to an aggregate amount not greater than 
$325,000,000.



<PAGE>

32

    (d)  Not less than one year following receipt by the Parent Borrower or 
any Subsidiary of any Net Cash Proceeds from any Asset Sale, the Borrowers 
shall permanently reduce the Commitments by an amount equal to 50% of such 
Net Cash Proceeds, but only as and to the extent provided in Section 6.05(f).

    (e)  Each reduction in the Total Commitment hereunder shall be made 
ratably among the Lenders in accordance with their respective Commitments.  
The Borrowers shall pay to the Administrative Agent for the account of the 
applicable Lenders, on the date of each termination or reduction, the 
Commitment Fees on the amount of the Commitments so terminated or reduced 
accrued to but excluding the date of such termination or reduction.

    SECTION 2.10.  Conversion and Continuation of Borrowings.  The applicable 
Borrower shall have the right at any time upon prior irrevocable notice to 
the Administrative Agent given by telephone (promptly confirmed by written or 
telecopy notice) (a) not later than 12:00 (noon), New York City time, one 
Business Day prior to conversion, to convert any Eurodollar Borrowing into an 
ABR Borrowing, (b) not later than 11:00 a.m., New York City time, three 
Business Days prior to conversion or continuation, to convert any ABR 
Borrowing into a Eurodollar Borrowing or to continue any Eurodollar Borrowing 
as a Eurodollar Borrowing for an additional Interest Period, and (c) not 
later than 11:00 a.m., New York City time, three Business Days prior to 
conversion, to convert the Interest Period with respect to any Eurodollar 
Borrowing to another permissible Interest Period, subject in each case to the 
following:

         (i)  each conversion or continuation shall be made pro rata
    among the Lenders in accordance with the respective principal
    amounts of the Loans comprising the converted or continued
    Borrowing;

         (ii)  if less than all the outstanding principal amount of
    any Borrowing shall be converted or continued, then each
    resulting Borrowing shall satisfy the limitations specified in
    Sections 2.02(a) and 2.02(b) regarding the principal amount and
    maximum number of Borrowings of the relevant Type;

         (iii)  each conversion shall be effected by each Lender and
    the Administrative Agent by recording for the account of such
    Lender the new Loan of such Lender resulting from such conversion
    and reducing the Loan (or portion thereof) of such Lender being
    converted by an equivalent principal amount; accrued interest on
    any Eurodollar Loan (or portion thereof) being converted shall be
    paid by the Borrowers at the time of conversion; 

         (iv)  if any Eurodollar Borrowing is converted at a time
    other than the end of the Interest Period applicable thereto, the
    Borrowers shall pay, upon demand, any amounts due to the Lenders
    pursuant to Section 2.16;

         (v)  any portion of a Borrowing maturing or required to be
    repaid in less than one month may not be converted into or
    continued as a Eurodollar Borrowing; 

         (vi)  any portion of a Eurodollar Borrowing that cannot be
    converted into or continued as a Eurodollar Borrowing by reason
    of the immediately preceding clause shall be automatically
    converted at the end of the Interest Period in effect for such
    Borrowing into an ABR Borrowing; and


<PAGE>

                                                                              33

         (vii) upon notice to the Borrowers from the Administrative
    Agent given at the request of the Required Lenders, after the
    occurrence and during the continuance of a Default or Event of
    Default, no outstanding Loan may be converted into, or continued
    as, a Eurodollar Loan.

    Each notice pursuant to this Section 2.10 shall be irrevocable and shall 
refer to this Restated Credit Agreement and specify (i) the identity and 
amount of the Borrowing that the applicable Borrower requests be converted or 
continued, (ii) whether such Borrowing is to be converted to or continued as 
a Eurodollar Borrowing or an ABR Borrowing, (iii) if such notice requests a 
conversion, the date of such conversion (which shall be a Business Day) and 
(iv) if such Borrowing is to be converted to or continued as a Eurodollar 
Borrowing, the Interest Period with respect thereto.  If no Interest Period 
is specified in any such notice with respect to any conversion to or 
continuation as a Eurodollar Borrowing, the applicable Borrower shall be 
deemed to have selected an Interest Period of one month's duration.  The 
Administrative Agent shall advise the Lenders of any notice given pursuant to 
this Section 2.10 and of each Lender's portion of any converted or continued 
Borrowing.  If the applicable Borrower shall not have given notice in 
accordance with this Section 2.10 to continue any Eurodollar Borrowing into a 
subsequent Interest Period (and shall not otherwise have given notice in 
accordance with this Section 2.10 to convert such Borrowing), such Borrowing 
shall, at the end of the Interest Period applicable thereto (unless repaid 
pursuant to the terms hereof), automatically be converted into an ABR 
Borrowing.

    SECTION 2.11.  [Intentionally Omitted].

    SECTION 2.12.  Optional Prepayment.  (a)  The Borrowers shall have the 
right at any time and from time to time to prepay any Borrowing, in whole or 
in part, upon at least one Business Day's prior notice (in the case of an ABR 
Borrowing) and three Business Days' prior notice (in the case of a Eurodollar 
Borrowing) to the Administrative Agent given by telephone (promptly confirmed 
by written or telecopy notice) before 11:00 a.m., New York City time; 
provided, however, that each partial prepayment shall be in an amount that is 
an integral multiple of $1,000,000 and not less than $5,000,000 (in the case 
of repayments of Eurodollar Borrowings) and $1,000,000 (in the case of 
repayments of ABR Borrowings).

    (b)  Each notice of prepayment shall specify the prepayment date and the 
principal amount of each Borrowing (or portion thereof) to be prepaid, shall 
be irrevocable and shall commit the Borrowers to prepay such Borrowing by the 
amount stated therein on the date stated therein.  All prepayments under this 
Section 2.12 shall be subject to Section 2.16 but otherwise without premium 
or penalty.  All prepayments of Eurodollar Borrowings under this Section 2.12 
shall be accompanied by accrued interest on the principal amount being 
prepaid to the date of payment.

    SECTION 2.13.  Mandatory Prepayments.  (a)  In the event of any 
termination of all the Commitments, the Borrowers shall repay or prepay all 
outstanding Borrowings and all outstanding Swingline Loans on the date of 
such termination.  In the event of any partial reduction of the Commitments, 
then (i) at or prior to the effective date of such reduction, the 
Administrative Agent shall notify the Borrowers and the Lenders of the 
Aggregate Credit Exposure after giving effect thereto and (ii) if the 
Aggregate Credit Exposure would exceed the Total Commitment after giving 
effect to such reduction or termination, then the Borrowers shall, on the 
date of such reduction or termination, repay or prepay Borrowings or 
Swingline Loans (or a combination thereof) in an amount sufficient to 
eliminate such excess. If following any reduction of the Total Commitment and 
any payments required pursuant to this


<PAGE>

34

Section 2.13(a), the Total Commitment is less than the aggregate L/C 
Exposure, the Borrowers shall, on the date of such reduction, provide cash 
collateral, in accordance with Section 2.23(j), in an amount equal to the 
amount by which the aggregate L/C Exposure exceeds the Total Commitment upon 
such date of reduction.

    (b)  The Borrowers shall deliver to the Administrative Agent, at the time 
of each prepayment required under this Section 2.13, (i) a certificate signed 
by a Financial Officer of the Parent Borrower setting forth in reasonable 
detail the calculation of the amount of such prepayment and (ii) to the 
extent reasonably practicable, at least three days prior written notice of 
such prepayment.  Each notice of prepayment shall specify the prepayment 
date, the Type of each Loan being prepaid, the principal amount of each Loan 
(or portion thereof) to be prepaid and the amount, if any, to be deposited in 
the Prepayment Account.  All prepayments of Borrowings under this Section 
2.13 shall be subject to Section 2.13(c) and Section 2.16, but shall 
otherwise be without premium or penalty.  All prepayments of Eurodollar 
Borrowings under this Section 2.13 shall be accompanied by accrued interest 
on the principal amount being prepaid to the date of payment.

    (c) Amounts to be applied pursuant to this Section 2.13 to the prepayment 
of Loans shall be applied, as applicable, first to reduce outstanding ABR 
Loans.  Any amounts remaining after each such application shall, at the 
option of the Parent Borrower, be applied to prepay Eurodollar Loans, 
immediately and/or shall be deposited in the Prepayment Account (as defined 
below).  The Administrative Agent shall apply any cash deposited in the 
Prepayment Account to prepay Eurodollar Loans, in each case on the last day 
of their respective Interest Periods (or, at the direction of the Parent 
Borrower, on any earlier date) until all outstanding Loans have been prepaid 
or until all the allocable cash on deposit with respect to such Loans has 
been exhausted.  For purposes of this Restated Credit Agreement, the term 
"Prepayment Account" shall mean an account established by the Parent Borrower 
with the Administrative Agent and over which the Administrative Agent shall 
have exclusive dominion and control, including the exclusive right of 
withdrawal for application in accordance with this paragraph (c).  The 
Administrative Agent will, at the request of the Parent Borrower, invest 
amounts on deposit in the Prepayment Account in Permitted Investments that 
mature prior to the last day of the applicable Interest Periods of the 
Eurodollar Borrowings to be prepaid; provided, however, that (i) the 
Administrative Agent shall not be required to make any investment that, in 
its sole judgment, would require or cause the Administrative Agent to be in, 
or would result in any, violation of any law, statute, rule or regulation and 
(ii) the Administrative Agent shall have no obligation to invest amounts on 
deposit in the Prepayment Account if a Default or Event of Default shall have 
occurred and be continuing. The Administrative Agent shall provide to the 
Parent Borrower statements with regard to the Prepayment Account in 
accordance with the Administrative Agent's customary practice.  The Borrowers 
shall indemnify the Administrative Agent for any losses relating to the 
investments so that the amount available to prepay Eurodollar Borrowings on 
the last day of the applicable Interest Period is not less than the amount 
that would have been available had no investments been made pursuant hereto.  
Other than any interest earned on such investments, the Prepayment Account 
shall not bear interest.  Interest or profits, if any, on such investments 
shall be deposited in the Prepayment Account and reinvested and disbursed as 
specified above. If the maturity of the Loans has been accelerated pursuant 
to Article VII, the Administrative Agent may, in its sole discretion, apply 
all amounts on deposit in the Prepayment Account to satisfy any of the 
Obligations.  The Borrowers hereby grant to the Administrative Agent, for its 
benefit and the benefit of the Issuing Bank, the Swingline Lender and the 
Lenders, a security interest in the Prepayment Account to secure the 
Obligations.



<PAGE>

                                                                              35


    SECTION 2.14.  Reserve Requirements; Change in Circumstances. (a)  
Notwithstanding any other provision of this Restated Credit Agreement, if 
after the date of this Restated Credit Agreement any change in applicable law 
or regulation or in the interpretation or administration thereof by any 
Governmental Authority charged with the interpretation or administration 
thereof (whether or not having the force of law) shall change the basis of 
taxation of payments to any Lender or the Issuing Bank of the principal of or 
interest on any Eurodollar Loan made by such Lender or any Fees or other 
amounts payable hereunder (other than changes in respect of Excluded Taxes 
and taxes described in Section 2.20), or shall impose, modify or deem 
applicable any reserve, special deposit or similar requirement against assets 
of, deposits with or for the account of or credit extended by any Lender or 
the issuance of Letters of Credit by the Issuing Bank (except any such 
reserve requirement which is reflected in the Adjusted LIBO Rate) or shall 
impose on such Lender or the Issuing Bank or the London interbank market any 
other condition affecting this Restated Credit Agreement or Eurodollar Loans 
made by such Lender or any Letter of Credit or participation therein, and the 
result of any of the foregoing shall be to increase the cost to such Lender 
of making or maintaining any Eurodollar Loan or increase the cost to any 
Lender or the Issuing Bank of issuing or maintaining any Letter of Credit or 
purchasing or maintaining a participation therein or to reduce the amount of 
any sum received or receivable by such Lender or the Issuing Bank hereunder 
(whether of principal, interest or otherwise), in each case by an amount 
deemed by such Lender or the Issuing Bank, as the case may be, to be 
material, then the Borrowers agree to pay to such Lender or the Issuing Bank, 
as the case may be, upon demand such additional amount or amounts as will 
compensate such Lender or the Issuing Bank, as the case may be, for such 
additional costs incurred or reduction suffered.

    (b)  If any Lender or the Issuing Bank shall have determined that the 
adoption after the date hereof of any law, rule, regulation or guideline 
regarding capital adequacy, or any change after the date hereof in any such 
law, rule, regulation or guideline (whether such law, rule, regulation or 
guideline has been adopted) or in the interpretation or administration 
thereof by any Governmental Authority charged with the interpretation or 
administration thereof, or compliance by any Lender (or any lending office of 
such Lender) or the Issuing Bank or any Lender's or the Issuing Bank's 
holding company with any request or directive regarding capital adequacy 
issued or adopted after the date hereof (whether or not having the force of 
law) of any Governmental Authority has or would have the effect of reducing 
the rate of return on such Lender's or the Issuing Bank's capital or on the 
capital of such Lender's or the Issuing Bank's holding company, if any, as a 
consequence of this Restated Credit Agreement or the Loans made or 
participations in Letters of Credit purchased by such Lender pursuant hereto 
or the Letters of Credit issued by the Issuing Bank pursuant hereto to a 
level below that which such Lender or the Issuing Bank or such Lender's or 
the Issuing Bank's holding company could have achieved but for such 
applicability, adoption, change or compliance (taking into consideration such 
Lender's or the Issuing Bank's policies and the policies of such Lender's or 
the Issuing Bank's holding company with respect to capital adequacy) by an 
amount deemed by such Lender or the Issuing Bank to be material, then from 
time to time the Borrowers agree to pay to such Lender or the Issuing Bank, 
as the case may be, such additional amount or amounts as will compensate such 
Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding 
company for any such reduction suffered.

    (c)  A certificate of a Lender or the Issuing Bank setting forth (i) the 
amount or amounts necessary to compensate such Lender or the Issuing Bank or 
its holding company, as applicable, as specified in paragraph (a) or (b) 
above and (ii) a reasonably detailed explanation of the calculation of such 
amount or amounts shall be delivered to the Borrowers and shall be conclusive 
absent manifest error.  The Borrowers shall pay such Lender or the Issuing 
Bank


<PAGE>

36

the amount shown as due on any such certificate delivered by it within 10 
days after its receipt of the same.  

    (d)  Failure or delay on the part of any Lender or the Issuing Bank to 
demand compensation for any increased costs or reduction in amounts received 
or receivable or reduction in return on capital shall not constitute a waiver 
of such Lender's or the Issuing Bank's right to demand such compensation, 
provided that the Borrowers shall not be required to compensate a Lender or 
the Issuing Bank pursuant to this Section for any increased costs or 
reductions incurred more than 270 days prior to the date that such Lender or 
the Issuing Bank, as the case may be, notifies the Parent Borrower of the 
event giving rise to such increased costs or reductions and of such Lender's 
or the Issuing Bank's intention to claim compensation therefor.  The 
protection of this Section shall be available to each Lender and the Issuing 
Bank regardless of any possible contention of the invalidity or 
inapplicability of the law, rule, regulation,  guideline or other change or 
condition that shall have occurred or been imposed; provided, however, that 
the Borrowers shall be entitled to reimbursement of any compensation paid to 
any Lender or the Issuing Bank under this Section for costs that are 
ultimately reimbursed or credited to such Lender or the Issuing Bank.  

    SECTION 2.15.  Change in Legality.  (a)  Notwithstanding any other 
provision of this Restated Credit Agreement, if, after the date hereof, any 
change in any law or regulation or in the interpretation thereof by any 
Governmental Authority charged with the administration or interpretation 
thereof shall make it unlawful for any Lender to make or maintain any 
Eurodollar Loan or to give effect to its obligations as contemplated hereby 
with respect to any Eurodollar Loan, then, by written notice to the Borrowers 
and to the Administrative Agent:

         (i) such Lender may declare that Eurodollar Loans will not
    thereafter (for the duration of such unlawfulness) be made by
    such Lender hereunder (or be continued for additional Interest
    Periods and ABR Loans will not thereafter (for such duration) be
    converted into Eurodollar Loans), whereupon any request for a
    Eurodollar Borrowing (or to convert an ABR Borrowing to a
    Eurodollar Borrowing or to continue a Eurodollar Borrowing for an
    additional Interest Period) shall, as to such Lender only, be
    deemed a request for an ABR Loan (or to convert a Eurodollar Loan
    into an ABR Loan, as the case may be), unless such declaration
    shall be subsequently withdrawn; and

         (ii) such Lender may require that all outstanding Eurodollar
    Loans made by it be converted to ABR Loans, in which event all
    such Eurodollar Loans shall be automatically converted to ABR
    Loans as of the effective date of such notice as provided in
    paragraph (b) below.

In the event any Lender shall exercise its rights under (i) or (ii) above, 
all payments and prepayments of principal that would otherwise have been 
applied to repay the Eurodollar Loans that would have been made by such 
Lender or the converted Eurodollar Loans of such Lender shall instead be 
applied to repay the ABR Loans made by such Lender in lieu of, or resulting 
from the conversion of, such Eurodollar Loans.

    (b)  For purposes of this Section 2.15, a notice to the Borrowers by any 
Lender shall be effective as to each Eurodollar Loan made by such Lender, if 
lawful, on the last day of the Interest Period currently applicable to such 
Eurodollar Loan; in all other cases such notice shall be effective on the 
date of receipt by the Borrowers.




<PAGE>

                                                                              37


    SECTION 2.16.  Indemnity.  The Borrowers jointly and severally shall 
indemnify each Lender against any loss or expense that such Lender may 
reasonably sustain or incur as a consequence of (a) any event, other than a 
default by such Lender in the performance of its obligations hereunder or a 
suspension or limitation under Section 2.08 of the right to select a 
Eurodollar Loan, which results in (i) such Lender receiving or being deemed 
to receive any amount on account of the principal of any Eurodollar Loan 
prior to the end of the Interest Period in effect therefor (it being 
understood that amounts held in the Prepayments Account shall not be deemed 
received by any Lender for purposes of this Section), (ii) the conversion of 
any Eurodollar Loan to an ABR Loan, or the conversion of the Interest Period 
with respect to any Eurodollar Loan, in each case other than on the last day 
of the Interest Period in effect therefor, or (iii) any Eurodollar Loan to be 
made by such Lender (including any Eurodollar Loan to be made pursuant to a 
conversion or continuation under Section 2.10) not being made after notice of 
such Loan shall have been given by the applicable Borrower hereunder (any of 
the events referred to in this clause (a) being called a "Breakage Event") or 
(b) any default in the making of any payment or prepayment of Eurodollar 
Loans required to be made hereunder.  In the case of any Breakage Event, such 
loss shall be an amount equal to the excess, as reasonably determined by such 
Lender, of (i) its cost of obtaining funds for the Eurodollar Loan that is 
the subject of such Breakage Event for the period from the date of such 
Breakage Event to the last day of the Interest Period in effect (or that 
would have been in effect) for such Loan over (ii) the amount of interest 
that would be realized by such Lender in redeploying the funds released or 
not utilized by reason of such Breakage Event for such period.  A certificate 
of any Lender (i) setting forth any amount or amounts which such Lender is 
entitled to receive pursuant to this Section 2.16 and (ii) a reasonably 
detailed explanation of the calculation of such amount or amounts shall be 
delivered to the Borrowers and shall be conclusive absent manifest error.

    SECTION 2.17.  Pro Rata Treatment.  Except as provided below in this 
Section 2.17 with respect to Swingline Loans and as required under Section 
2.15, each Borrowing, each payment or prepayment of principal of any 
Borrowing, each payment of interest on the Loans, each payment of the 
Commitment Fees, each reduction of the Commitments and each conversion of any 
Borrowing to or continuation of any Borrowing as a Borrowing of any Type 
shall be allocated pro rata among the Lenders, in the case of principal and 
interest payments, in accordance with their respective applicable outstanding 
Loans and, in the case of all other payments, the Commitments (or, if such 
Commitments shall have expired or been terminated, in accordance with the 
respective principal amounts of their outstanding Loans).  For purposes of 
determining the available Commitments of the Lenders at any time, each 
outstanding Swingline Loan shall be deemed to have utilized the Commitments 
of the Lenders (including those Lenders which shall not have made Swingline 
Loans) pro rata in accordance with such Lender's respective Commitment.  Each 
Lender agrees that in computing such Lender's portion of any Borrowing to be 
made hereunder, the Administrative Agent may, in its discretion, round each 
Lender's percentage of such Borrowing to the next higher or lower whole 
dollar amount.

    SECTION 2.18.  Sharing of Setoffs.  Each Lender agrees that if it shall, 
through the exercise of a right of banker's lien, setoff or counterclaim 
against the Borrowers or any other Loan Party, or pursuant to a secured claim 
under Section 506 of Title 11 of the United States Code or other security or 
interest arising from, or in lieu of, such secured claim, received by such 
Lender under any applicable bankruptcy, insolvency or other similar law or 
otherwise, or by any other means, obtain payment (voluntary or involuntary) 
in respect of any Loan or Loans or L/C Disbursement as a result of which the 
unpaid principal portion of its Loans and participations or other interests 
of a type permitted to be held by such Lender in L/C


<PAGE>

38

Disbursements shall be proportionately less than the unpaid principal portion 
of the Loans and participations or interests in L/C Disbursements of any 
other Lender, it shall be deemed simultaneously to have purchased from such 
other Lender at face value, and shall promptly pay to such other Lender the 
purchase price for, a participation or interest in the Loans and 
participations or interests in L/C Disbursements, as the case may be, of such 
other Lender, so that the aggregate unpaid principal amount of the Loans and 
participations or interests in L/C Disbursements and participations or 
interests in Loans and participations or interests in L/C Disbursements held 
by each Lender shall be in the same proportion to the aggregate unpaid 
principal amount of all Loans and participations or interests in L/C 
Disbursements then outstanding as the principal amount of its Loans and 
participations or interests in L/C Disbursements prior to such exercise of 
banker's lien, setoff or counterclaim or other event was to the principal 
amount of all Loans and participations or interests in L/C Disbursements 
outstanding prior to such exercise of banker's lien, setoff or counterclaim 
or other event; provided, however, that if any such purchase or purchases or 
adjustments shall be made pursuant to this Section 2.18 and the payment 
giving rise thereto shall thereafter be recovered, such purchase or purchases 
or adjustments shall be rescinded to the extent of such recovery and the 
purchase price or prices or adjustment restored without interest.  The 
Borrowers and Holdings expressly consent to the foregoing arrangements and 
agree that any Lender holding a participation or interest in a Loan or L/C 
Disbursement deemed to have been so purchased may exercise any and all rights 
of banker's lien, setoff or counterclaim with respect to any and all moneys 
owing by the Borrowers and Holdings to such Lender by reason thereof as fully 
as if such Lender had made a Loan directly to the Borrowers in the amount of 
such participation.

    SECTION 2.19.  Payments.  (a)  The Borrowers shall make each payment 
(including principal of or interest on any Borrowing or any L/C Disbursement 
or any Fees or other amounts) hereunder and under any other Loan Document not 
later than 12:00 (noon), New York City time, on the date when due in 
immediately available dollars, without setoff or counterclaim.  Each such 
payment (other than (i) Issuing Bank Fees, which shall be paid directly to 
the Issuing Bank, (ii) principal of and interest on Swingline Loans, which 
shall be paid directly to the Swingline Lender except as otherwise provided 
in Section 2.22(e) and (iii) other payments that are specifically required to 
be paid directly to a Lender) shall be made to the Administrative Agent at 
its offices at 270 Park Avenue, New York, New York.

    (b)  Whenever any payment (including principal of or interest on any 
Borrowing or any Fees or other amounts) hereunder or under any other Loan 
Document shall become due, or otherwise would occur, on a day that is not a 
Business Day, such payment may be made on the next succeeding Business Day, 
and such extension of time shall in such case be included in the computation 
of interest or Fees, if applicable.

    SECTION 2.20.  Taxes.  (a)  Any and all payments by or on behalf of the 
Borrowers or any Loan Party hereunder and under any other Loan Document shall 
be made, in accordance with Section 2.19, free and clear of and without 
deduction for any and all current or future taxes, levies, imposts, 
deductions, charges or withholdings, and all interests, penalties or similar 
liabilities with respect thereto, excluding  (i) taxes, levies, imposts, 
deductions, charges and withholdings imposed on the net income or net profits 
of the Administrative Agent, any Lender or the Issuing Bank (or any 
transferee or assignee thereof, including a participation holder (any such 
entity a "Transferee")), however denominated, and all interest, penalties or 
similar liabilities with respect thereto, and (ii) franchise taxes, levies, 
imposts, deductions, charges and withholdings based or imposed on the net 
income or net profits or in lieu of net income or net profits of the 
Administrative Agent, any Lender or the Issuing Bank (or Transferee) and all 
interest, penalties or similar liabilities with respect thereto, (the taxes, 


<PAGE>

                                                                              39


levies, imposts, deductions, charges and withholdings and other liabilities 
referred to in the foregoing clauses (i) and (ii) individually or 
collectively being called "Excluded Taxes"), in each case imposed (a) by the 
U.S. or any political subdivision or taxing authority thereof or therein; (b) 
by any jurisdiction under the laws of which the Administrative Agent, such 
Lender or the Issuing Bank (or Transferee) or its lending office or office 
through which it is issuing any Letter of Credit is organized or in which its 
lending office or office through which it is issuing any Letter of Credit is 
located, managed or controlled or in which its principal office is located or 
any political subdivision or taxing authority thereof or therein; or (c) by 
reason of any connection between the jurisdiction imposing such tax and the 
Administrative Agent, such Lender, the Issuing Bank, such Transferee, such 
lending office or office through which it is issuing any Letter of Credit, 
other than a connection arising solely from this Restated Credit Agreement or 
any transaction hereunder (all such nonexcluded taxes, levies, imposts, 
deductions, charges, withholdings and liabilities, collectively or 
individually, being called "Taxes").  If the Borrowers or any Loan Party 
shall be required to deduct any Taxes from or in respect of any sum payable 
hereunder or under any other Loan Document to the Administrative Agent, any 
Lender or the Issuing Bank (or any Transferee), (i) the sum payable shall be 
increased by the amount (an "additional amount") necessary so that after 
making all required deductions (including deductions applicable to additional 
sums payable under this Section 2.20) the Administrative Agent, such Lender 
or the Issuing Bank (or Transferee), as the case may be, shall receive an 
amount equal to the sum it would have received had no such deductions been 
made, (ii) the Borrowers or such Loan Party shall make such deductions and 
(iii) the Borrowers or such Loan Party shall pay the full amount deducted to 
the relevant Governmental Authority in accordance with applicable law.  

    (b)  In addition, the Borrowers agree to pay to the relevant Governmental 
Authority in accordance with applicable law any current or future stamp or 
documentary taxes or any other excise or property taxes, charges or similar 
levies (including mortgage recording taxes and similar fees) that arise from 
any payment made hereunder or under any other Loan Document or from the 
execution, delivery or registration of, or otherwise solely with respect to, 
this Restated Credit Agreement or any other Loan Document ("Other Taxes").

    (c)  The Borrowers shall indemnify the Administrative Agent, each Lender 
and the Issuing Bank (or Transferee) for the full amount of Taxes and Other 
Taxes paid by the Administrative Agent, such Lender or the Issuing Bank (or 
Transferee), as the case may be, and any liability (including penalties, 
interest and expenses (including reasonable attorney's fees and expenses) 
other than those resulting solely from a failure by the Administrative Agent, 
such Lender or the Issuing Bank (or Transferee), as the case may be, to pay 
any Taxes or Other Taxes which it is required to pay and for which it 
received an indemnity payment) arising therefrom or with respect thereto, 
whether or not such Taxes or Other Taxes were correctly or legally asserted 
by the relevant Governmental Authority.  A certificate as to the amount of 
such payment or liability prepared by the Administrative Agent, a Lender or 
the Issuing Bank (or Transferee), or the Administrative Agent on its behalf, 
absent manifest error, shall be final, conclusive and binding for all 
purposes.  Such indemnification shall be made within 30 days after the date 
the Administrative Agent, any Lender or the Issuing Bank (or Transferee), as 
the case may be, makes written demand therefor.  If the Administrative Agent, 
any Lender or the Issuing Bank (or


<PAGE>

40

any Transferee) shall become aware that it is entitled to receive a refund or 
other tax credit or benefit in respect of any Taxes or Other Taxes (including 
any Taxes or Other Taxes that were not correctly or legally asserted by the 
relevant Government Authority), it shall promptly notify the Borrowers 
thereof and, in the case of a refund, shall within 30 days after receipt of a 
request by the Borrowers, apply for such refund at the Borrowers' expense.  
If the Administrative Agent, any Lender or the Issuing Bank (or any 
Transferee) receives a refund or other tax credit or benefit in respect of 
any Taxes or Other Taxes (including any Taxes or Other Taxes that were not 
correctly or legally asserted by the relevant Government Authority) for which 
the Administrative Agent, such Lender or the Issuing Bank (or such 
Transferee) has received payment from the Borrowers hereunder, it shall 
promptly notify the Borrowers thereof and shall promptly repay such refund 
or, in the case of a tax credit or other benefit shall repay the amount of 
the tax credit or benefit received promptly following the date on which such 
tax credit or other benefit is offset against such party's tax liability, in 
each case to the Borrowers without interest and net of any expenses incurred, 
except to the extent interest shall have explicitly accompanied such refund 
or other tax credit or benefit, provided that the Borrowers, upon the request 
of such Lender, the Issuing Bank or the Administrative Agent, agree to return 
the amount of such refund or other tax benefit or credit (plus any penalties, 
interest or other charges required to be paid) to such Lender, the Issuing 
Bank or the Administrative Agent in the event such Lender, the Issuing Bank 
or the Administrative Agent is required to repay such amount to the relevant 
taxing authority.

    (d)  As soon as practicable after the date of any payment of Taxes or 
Other Taxes by the Borrowers or any other Loan Party to the relevant 
Governmental Authority, the Borrowers or such other Loan Party will deliver 
to the Administrative Agent, at its address referred to in Section 9.01, the 
original or a certified copy of any receipt issued by such Governmental 
Authority or other proof reasonably acceptable to the indemnified party 
evidencing payment thereof.

    (e)  Each Lender (or Transferee) or successor Issuing Bank that is 
organized under the laws of a jurisdiction other than the United States, any 
State thereof or the District of Columbia (a "Non-U.S. Lender") shall deliver 
to the Borrowers and the Administrative Agent two copies of either United 
States Internal Revenue Service Form 1001 or Form 4224, or, in the case of a 
Non-U.S. Lender claiming exemption from U.S. Federal withholding tax under 
Section 871(h) or 881(c) of the Code with respect to payments of "portfolio 
interest", a Form W-8, or any subsequent versions thereof or successors 
thereto (and, if such Non-U.S. Lender delivers a Form W-8, a certificate 
representing that such Non-U.S. Lender is not a bank for purposes of Section 
881(c) of the Code), is not a 10-percent shareholder (within the meaning of 
Section 871(h)(3)(B) of the Code) of the Borrowers and is not a controlled 
foreign corporation related to the Borrowers (within the meaning of Section 
864(d)(4) of the Code)), properly completed and duly executed by such 
Non-U.S. Lender claiming complete exemption from, or reduced rate of, U.S. 
Federal withholding tax on payments of interest by the Borrowers under this 
Restated Credit Agreement and the other Loan Documents, provided, that if 
such Non-U.S. Lender is a bank for purposes of Section 881(c) of the Code, 
such Non-U.S. Lender shall make whole the Borrowers for reliance on such 
certificate.  Such forms shall be delivered by each Non-U.S. Lender on or 
before the date it becomes a party to this Restated Credit Agreement (or, in 
the case of a Transferee that is a participation holder, on or before the 
date such participation holder becomes a Transferee hereunder) and on or 
before the date, if any, such Non-U.S. Lender changes its applicable lending 
office by designating a different lending office (a "New Lending Office").  
In addition, each Non-U.S. Lender shall deliver such forms promptly upon the 
obsolescence or invalidity of any form previously delivered by such Non-U.S. 
Lender.  Notwithstanding any other provision of this Section 2.20(e), a 
Non-U.S. Lender shall not be required to deliver any form pursuant to this 
Section 2.20(e) that such Non-U.S. Lender  is not legally able to deliver.

    (f)  The Borrowers shall not be required to indemnify any Non-U.S. Lender 
or to pay any additional amounts to any Non-U.S. Lender, in respect of United 
States Federal


<PAGE>

                                                                              41


withholding tax pursuant to paragraph (a) or (c) above to the extent that (i) 
the obligation to withhold amounts with respect to United States Federal 
withholding tax existed on the date such Non-U.S. Lender became a party to 
this Restated Credit Agreement (or, in the case of a Transferee that is a 
participation holder, on the date such participation holder became a 
Transferee hereunder) or, with respect to payments to a New Lending Office, 
the date such Non-U.S. Lender designated such New Lending Office with respect 
to a Loan; provided, however, that this paragraph (f) shall not apply (x) to 
any Transferee or New Lending Office that becomes a Transferee or New Lending 
Office as a result of an assignment, participation, transfer or designation 
made at the request of the Borrowers and (y) to the extent the indemnity 
payment or additional amounts any Transferee, or any Lender (or Transferee), 
acting through a New Lending Office, would be entitled to receive (without 
regard to this paragraph (f)) do not exceed the indemnity payment or 
additional amounts that the person making the assignment, participation or 
transfer to such Transferee, or Lender (or Transferee) making the designation 
of such New Lending Office, would have been entitled to receive in the 
absence of such assignment, participation, transfer or designation or (ii) 
the obligation to pay such additional amounts would not have arisen but for a 
failure by such Non-U.S. Lender to comply with the provisions of paragraph 
(e) above.

    (g)  Nothing contained in this Section 2.20 shall require any Lender or 
the Issuing Bank (or any Transferee) or the Administrative Agent to make 
available any of its tax returns (or any other information that it deems to 
be confidential or proprietary).

    SECTION 2.21.  Assignment of Commitments Under Certain Circumstances; 
Duty to Mitigate.  (a)  In the event (i) any Lender or the Issuing Bank 
delivers a certificate requesting compensation pursuant to Section 2.14, (ii) 
any Lender or the Issuing Bank delivers a notice described in Section 2.15 or 
the Administrative Agent delivers a notice described in Section 2.08,  (iii) 
the Borrowers are required to pay any additional amount or indemnification 
payment to any Lender or the Issuing Bank or any Governmental Authority on 
account of any Lender or the Issuing Bank pursuant to Section 2.20 or (iv) 
any Lender or the Issuing Bank shall refuse to consent to a proposed change, 
waiver, discharge, termination or assignment that requires such Lender's or 
the Issuing Bank's consent and that has been approved by the Required Lenders 
as provided in Section 9.08(c), the Borrowers may, at their sole expense and 
effort (including with respect to the processing and recordation fee referred 
to in Section 9.04(b)), upon notice to such Lender or the Issuing Bank and 
the Administrative Agent, require such Lender or the Issuing Bank to transfer 
and assign, without recourse (in accordance with and subject to the 
restrictions contained in Section 9.04), all of its interests, rights and 
obligations under this Restated Credit Agreement to one or more assignees 
that shall assume such assigned obligations (any of which assignees may be 
another Lender, if one or more Lenders accept such assignment), provided that 
(A) such assignment shall not conflict with any law, rule, regulation or 
order of any court or other Governmental Authority having jurisdiction, (B) 
the Borrowers shall have received the prior written consent of the 
Administrative Agent (and, if a Commitment is being assigned, of the Issuing 
Bank and the Swingline Lender), which consents shall not unreasonably be 
withheld, (C) the Borrowers or such assignee or assignees shall have paid to 
the affected Lender or the Issuing Bank in immediately available funds an 
amount equal to the sum of the principal of, and interest accrued to the date 
of such payment on, the outstanding Loans or L/C Disbursements of such Lender 
or the Issuing Bank, respectively, plus all Fees and other amounts accrued 
for the account of such Lender or the Issuing Bank hereunder (including any 
amounts then due pursuant to requests or notices previously provided under 
Section 2.14 and Section 2.16), and (D) in the case of any refusal to consent 
contemplated by clause (iv) above, such assignment is also made in accordance 
with Section 9.08(c) and provided further that, if prior to any such


<PAGE>

42

transfer and assignment the circumstances or event that resulted in such 
Lender's or the Issuing Bank's claim for compensation under Section 2.14 or 
notice under Section 2.08 or 2.15 or the amounts paid pursuant to Section 
2.20, as the case may be, cease to cause such Lender or the Issuing Bank to 
suffer increased costs or reductions in amounts received or receivable or 
reduction in return on capital, or cease to have the consequences specified 
in Section 2.08 or 2.15, or cease to result in amounts being payable under 
Section 2.20, as the case may be (including as a result of any action taken 
by such Lender or the Issuing Bank pursuant to paragraph (b) below), or if 
such Lender or the Issuing Bank shall waive its right to claim further 
compensation under Section 2.14 in respect of such circumstances or event or 
shall withdraw its notice under Section 2.08 or  2.15 or shall waive its 
right to further payments under Section 2.20 in respect of such circumstances 
or event, or shall grant the consent or waiver requested pursuant to Section 
9.04(i) or 9.08(b) as the case may be, then such Lender or the Issuing Bank 
shall not thereafter be required to make any such transfer and assignment 
hereunder. 

    (b)  If (i) any Lender or the Issuing Bank shall request compensation 
under Section 2.14, (ii) any Lender or the Issuing Bank delivers a notice 
described in Section 2.15 or the Administrative Agent delivers a notice 
described in Section 2.08 or (iii) the Borrowers are required to pay any 
additional amount or an indemnification payment to any Lender or the Issuing 
Bank or any Governmental Authority on account of any Lender or the Issuing 
Bank, pursuant to Section 2.20, then such Lender or the Issuing Bank upon the 
request of the Borrowers shall use reasonable efforts (which shall not 
require such Lender or the Issuing Bank to incur an unreimbursed loss or 
unreimbursed cost or expense or otherwise take any action inconsistent with 
its internal policies or legal or regulatory restrictions or suffer any 
disadvantage or burden deemed by it to be significant) (A) to file any 
certificate or document reasonably requested in writing by the Borrowers or 
(B) to assign its rights and delegate and transfer its obligations hereunder 
to another of its offices, branches or affiliates, if such filing or 
assignment would reduce its claims for compensation under Section 2.14 or 
enable it to withdraw its notice pursuant to Section 2.15 or Section 2.08 or 
would reduce amounts payable pursuant to Section 2.20, as the case may be, in 
the future.  The Borrowers hereby agree to pay all reasonable costs and 
expenses incurred by any Lender or the Issuing Bank in connection with any 
such filing or assignment, delegation and transfer.

    SECTION 2.22.  Swingline Loans.  (a)  Swingline Commitment. Subject to 
the terms and conditions and relying upon the representations and warranties 
herein set forth, the Swingline Lender agrees to make loans to any Borrower 
at any time and from time to time on and after the Restatement Effective Date 
and until the earlier of the Maturity Date and the termination of the 
Commitments in accordance with the terms hereof, in an aggregate principal 
amount at any time outstanding that will not result in (i) the aggregate 
principal amount of all Swingline Loans exceeding $25,000,000 in the 
aggregate or (ii) the Aggregate Credit Exposure, after giving effect to any 
Swingline Loan, exceeding the Total Commitment.  Each Swingline Loan shall be 
in a principal amount that is an integral multiple of $500,000 or such lesser 
amount necessary to reimburse a Letter of Credit pursuant to Section 2.23(e). 
 The Swingline Commitment may be terminated or reduced from time to time as 
provided herein.  Within the foregoing limits, the Borrowers may borrow, pay 
or prepay and reborrow Swingline Loans hereunder, subject to the terms, 
conditions and limitations set forth herein.

    (b)  Swingline Loans.  The applicable Borrower shall notify the 
Administrative Agent by telecopy, or by telephone (confirmed by telecopy), 
not later than 2:00 p.m., New York City time, on the day of a proposed 
Swingline Loan.  Such notice shall be delivered on a Business Day, shall be 
irrevocable and shall refer to this Restated Credit Agreement and shall 
specify


<PAGE>

                                                                              43


the requested date (which shall be a Business Day) and amount of such 
Swingline Loan.  The Administrative Agent will promptly advise the Swingline 
Lender of any notice received from any Borrower pursuant to this paragraph 
(b).  The Swingline Lender shall make each Swingline Loan available to the 
applicable Borrower by means of a credit to the general deposit account of 
the Parent Borrower (acting as agent for and on behalf of itself and the 
Subsidiary Borrowers) with the Swingline Lender by 3:00 p.m. on the date such 
Swingline Loan is so requested. 

    (c)  Prepayment.  The Borrowers shall have the right at any time and from 
time to time to prepay any Swingline Loan, in whole or in part, upon giving 
notice to the Swingline Lender and the Administrative Agent by telephone 
(promptly confirmed by written or telecopy notice) before 12:00 (noon), New 
York City time on the date of prepayment.

    (d)  Interest.  Each Swingline Loan shall be an ABR Loan and, subject to 
the provisions of Section 2.07, shall bear interest as provided in Section 
2.06(a) and (c).

    (e)  Participations.  The Swingline Lender may by written notice given to 
the Administrative Agent not later than 10:00 a.m., New York City time, on 
any Business Day require the Lenders to acquire participations on such 
Business Day in all or a portion of the Swingline Loans outstanding.  Such 
notice shall specify the aggregate amount of Swingline Loans in which Lenders 
will participate.  The Administrative Agent will, promptly upon receipt of 
such notice, give notice to each Lender, specifying in such notice such 
Lender's Pro Rata Percentage of such Swingline Loan or Loans.  In furtherance 
of the foregoing, each Lender hereby absolutely and unconditionally agrees, 
upon receipt of notice as provided above, to pay to the Administrative Agent, 
for the account of the Swingline Lender, such Lender's Pro Rata Percentage of 
such Swingline Loan or Loans.  Each Lender acknowledges and agrees that its 
obligation to acquire participations in Swingline Loans pursuant to this 
paragraph is absolute and unconditional and shall not be affected by any 
circumstance whatsoever, including the occurrence and continuance of a 
Default or an Event of Default, and that each such payment shall be made 
without any offset, abatement, withholding or reduction whatsoever.  Each 
Lender shall comply with its obligation under this paragraph by wire transfer 
of immediately available funds, in the same manner as provided in Section 
2.02(c) with respect to Loans made by such Lender (and Section 2.02(c) shall 
apply, mutatis mutandis, to the payment obligations of the Lenders) and the 
Administrative Agent shall promptly pay to the Swingline Lender the amounts 
so received by it from the Lenders.  The Administrative Agent shall notify 
the Parent Borrower of any participations in any Swingline Loan acquired 
pursuant to this paragraph and thereafter payments in respect of such 
Swingline Loan shall be made to the Administrative Agent and not to the 
Swingline Lender.  Any amounts received by the Swingline Lender from any 
Borrower (or other party on behalf of any Borrower) in respect of a Swingline 
Loan after receipt by the Swingline Lender of the proceeds of a sale of 
participations therein shall be promptly remitted to the Administrative 
Agent; any such amounts received by the Administrative Agent shall be 
promptly remitted by the Administrative Agent to the Lenders that shall have 
made their payments pursuant to this paragraph and to the Swingline Lender, 
as their interests may appear.  The purchase of participations in a Swingline 
Loan pursuant to this paragraph shall not relieve the Borrowers (or other 
party liable for obligations of the Borrowers) of any default in the payment 
thereof.

    SECTION 2.23.  Letters of Credit.  (a) General.  Subject to the terms and 
conditions set forth herein, (i) each of the Existing Letters of Credit 
shall, upon the initial funding of Loans on the Restatement Effective Date 
and without any further action on the part of the Issuing Bank or any other 
person, be deemed for all purposes (other than with respect to


<PAGE>

44

issuance fees to the extent previously paid in connection with the original 
issuance of such Existing Letter of Credit) to be a Letter of Credit 
hereunder and (ii) any Borrower may request the issuance of a Letter of 
Credit for its own account or the account of any Subsidiary (provided that a 
Borrower shall be a co-applicant and co-obligor with respect to each Letter 
of Credit issued for the account of or in favor of any such Subsidiary), in a 
form reasonably acceptable to the Administrative Agent and the Issuing Bank 
(which may include electronic transmission, pursuant to negotiated 
arrangements between the Borrowers and the Issuing Bank), at any time and 
from time to time while the Commitments remain in effect.  This Section shall 
not be construed to impose an obligation upon the Issuing Bank to issue any 
Letter of Credit that is inconsistent with the terms and conditions of this 
Restated Credit Agreement.

    (b)  Notice of Issuance, Amendment, Renewal, Extension; Certain 
Conditions.  In order to request the issuance of a Letter of Credit (or to 
amend, renew or extend an existing Letter of Credit), a Borrower shall hand 
deliver or telecopy (or transmit by electronic transmission, pursuant to 
negotiated arrangements between the Borrowers and the Issuing Bank) to the 
Issuing Bank and the Administrative Agent (at least one Business Day in 
advance of the requested date of issuance, amendment, renewal or extension) a 
notice requesting the issuance of a Letter of Credit, or identifying the 
Letter of Credit to be amended, renewed or extended, the date of issuance, 
amendment, renewal or extension, the date on which such Letter of Credit is 
to expire (which shall comply with paragraph (c) below), the amount of such 
Letter of Credit, the name and address of the beneficiary thereof and such 
other information as shall be necessary to prepare such Letter of Credit, and 
all such information shall be included on the Issuing Bank's standard form of 
application and reimbursement agreement, provided, however, that to the 
extent of any inconsistency between the provisions of such standard forms and 
the provisions of this Restated Credit Agreement, the latter shall govern in 
all respects.  The Issuing Bank shall provide to the Administrative Agent on 
a weekly basis and on the last day of each March, June, September and 
December, a report describing any issuances, disbursements or other activity 
with respect to all outstanding Letters of Credit for the period through, but 
not including, the last day of such March, June, September or December, as 
the case may be.  A Letter of Credit shall be issued, amended, renewed or 
extended only if, and upon issuance, amendment, renewal or extension of each 
Letter of Credit the Borrowers shall be deemed to represent and warrant that, 
after giving effect to such issuance, amendment, renewal or extension (i) the 
L/C Exposure shall not exceed $50,000,000 and (ii) the Aggregate Credit 
Exposure shall not exceed the Total Commitment.  If the Administrative Agent 
determines that, after giving effect to the issuance, amendment, renewal or 
extension of any Letter of Credit, that the Aggregate Credit Exposure shall 
exceed the Total Commitment, it shall promptly provide the Issuing Bank 
written notice to such effect.     Each Letter of Credit shall provide for 
payments of drawings in dollars or an Alternate Currency.

    (c)  Expiration Date.  Each Letter of Credit shall expire at the close of 
business on the earlier of the date one year after the date of the issuance 
of such Letter of Credit and the date that is five Business Days prior to the 
Maturity Date, unless such Letter of Credit expires by its terms on an 
earlier date.  Each Letter of Credit may, upon the request of the applicable 
Borrower, include a provision whereby such Letter of Credit shall be renewed 
automatically for additional consecutive periods of 12 months or less (but 
not beyond the date that is five Business Days prior to the Maturity Date) 
unless the Issuing Bank notifies the beneficiary thereof at least 30 days 
prior to the then-applicable expiration date that such Letter of Credit will 
not be renewed.



<PAGE>

                                                                              45


    (d)  Participations.  By the issuance of a Letter of Credit and without 
any further action on the part of the Issuing Bank or the Lenders, the 
Issuing Bank hereby grants to each Lender, and each such Lender hereby 
acquires from the Issuing Bank, a participation in such Letter of Credit 
equal to such Lender's Pro Rata Percentage of the aggregate amount available 
to be drawn under such Letter of Credit, effective upon the issuance of such 
Letter of Credit.  In addition, the Issuing Bank hereby grants to each 
Lender, and each Lender hereby acquires from the Issuing Bank, a 
participation in each Existing Letter of Credit equal to such Lender's Pro 
Rata Percentage of the face amount of such Existing Letter of Credit, 
effective on the Restatement Effective Date.  In consideration and in 
furtherance of the foregoing, each Lender hereby absolutely and 
unconditionally agrees to pay to the Administrative Agent, for the account of 
the Issuing Bank, such Lender's Pro Rata Percentage of each L/C Disbursement 
made by the Issuing Bank and not reimbursed by the Borrowers (or, if 
applicable, another party pursuant to its obligations under any other Loan 
Document) forthwith on the date due as provided in Section 2.02(f).  Each 
Lender acknowledges and agrees that its obligation to acquire participations 
pursuant to this paragraph in respect of Letters of Credit is absolute and 
unconditional and shall not be affected by any circumstance whatsoever, 
including the occurrence and continuance of a Default or an Event of Default, 
and that each such payment shall be made without any offset, abatement, 
withholding or reduction whatsoever.

    (e)  Reimbursement.  If the Issuing Bank shall make any L/C Disbursement 
in respect of a Letter of Credit, the Borrowers shall pay to the 
Administrative Agent an amount equal to such L/C Disbursement not later than 
3:00 p.m. on the day that the Borrowers shall have received notice from the 
Issuing Bank that payment of such draft will be made (it being understood 
that such L/C Disbursement will be made prior to or promptly after the 
delivery of such notice), or, if the Borrowers shall have received such 
notice later than 3:00 p.m., New York City time, on any Business Day, not 
later than 1:00 p.m., New York City time, on the immediately following 
Business Day.

    (f)  Obligations Absolute.  The Borrowers' obligations to reimburse L/C 
Disbursements as provided in paragraph (e) above shall be absolute, 
unconditional and irrevocable, and shall be performed strictly in accordance 
with the terms of this Restated Credit Agreement, under any and all 
circumstances whatsoever, and irrespective of:

         (i) any lack of validity or enforceability of any Letter of
    Credit or any Loan Document, or any term or provision therein; 

         (ii) any amendment or waiver of or any consent to departure
    from all or any of the provisions of any Letter of Credit or any
    Loan Document;

         (iii) the existence of any claim, setoff, defense or other
    right that the Borrowers, any other party guaranteeing, or
    otherwise obligated with, the Borrowers, any Subsidiary or other
    Affiliate thereof or any other person may at any time have
    against the beneficiary under any Letter of Credit, the Issuing
    Bank, the Administrative Agent or any Lender or any other person,
    whether in connection with this Restated Credit Agreement, any
    other Loan Document or any other related or unrelated agreement
    or transaction;

         (iv) any draft or other document presented under a Letter of
    Credit proving to be forged, fraudulent, invalid or insufficient
    in any respect or any statement therein being untrue or
    inaccurate in any respect;



<PAGE>

46

         (v) payment by the Issuing Bank under a Letter of Credit
    against presentation of a draft or other document that does not
    comply with the terms of such Letter of Credit; and

         (vi) any other act or omission to act or delay of any kind
    of the Issuing Bank, the Lenders, the Administrative Agent or any
    other person or any other event or circumstance whatsoever,
    whether or not similar to any of the foregoing, that might, but
    for the provisions of this Section, constitute a legal or
    equitable discharge of the Borrowers' obligations hereunder.

    Without limiting the generality of the foregoing, it is expressly 
understood and agreed that the absolute and unconditional obligation of the 
Borrowers hereunder to reimburse L/C Disbursements will not be excused by the 
gross negligence or wilful misconduct of the Issuing Bank.  However, the 
foregoing shall not be construed to excuse or release any claims of Borrowers 
against the Issuing Bank, the Lenders, the Administrative Agent or any other 
person for any gross negligence or wilful misconduct or to excuse or release 
the Issuing Bank from liability to the Borrowers to the extent of any direct 
damages (as opposed to consequential damages, claims in respect of which are 
hereby waived by the Borrowers to the extent permitted by applicable law) 
suffered by the Borrowers that are caused by the Issuing Bank's gross 
negligence or wilful misconduct in determining whether drafts and other 
documents presented under a Letter of Credit comply with the terms thereof.  
It is understood that the Issuing Bank may accept documents that appear on 
their face to be in order, without responsibility for further investigation, 
regardless of any notice or information to the contrary and, in making any 
payment under any Letter of Credit (i) the Issuing Bank's exclusive reliance 
on the documents presented to it under such Letter of Credit as to any and 
all matters set forth therein, including reliance on the amount of any draft 
presented under such Letter of Credit, whether or not the amount due to the 
beneficiary thereunder equals the amount of such draft and whether or not any 
document presented pursuant to such Letter of Credit proves to be 
insufficient in any respect, if such document on its face appears to be in 
order, and whether or not any other statement or any other document presented 
pursuant to such Letter of Credit proves to be forged or invalid or any 
statement therein proves to be inaccurate or untrue in any respect whatsoever 
and (ii) any noncompliance in any immaterial respect of the documents 
presented under such Letter of Credit with the terms thereof shall, in each 
case, be deemed not to constitute wilful misconduct or gross negligence of 
the Issuing Bank.

    (g)  Disbursement Procedures.  The Issuing Bank shall, promptly following 
its receipt thereof, examine all documents purporting to represent a demand 
for payment under a Letter of Credit.  The Issuing Bank shall as promptly as 
possible give telephonic notification, confirmed by telecopy, to the 
Administrative Agent and the Borrowers of such demand for payment and whether 
and when the Issuing Bank has made or will make an L/C Disbursement 
thereunder, provided that any failure to give or delay in giving such notice 
shall not relieve the Borrowers of their obligation to reimburse the Issuing 
Bank and the Lenders with respect to any such L/C Disbursement.  The 
Administrative Agent shall promptly give each Lender notice thereof.

    (h)  Interim Interest.  If the Issuing Bank shall make any L/C 
Disbursement in respect of a Letter of Credit, then, unless the Borrowers 
shall reimburse such L/C Disbursement in full on such date, the unpaid amount 
thereof shall bear interest for the account of the Issuing Bank, for each day 
from and including the date of such L/C Disbursement, to but excluding the 
earlier of the date of payment by the Borrowers or the date on which interest 
shall commence


<PAGE>

                                                                              47


to accrue thereon as provided in Section 2.02(f), at the rate per annum that 
would apply to such amount if such amount were an ABR Loan.

    (i)  Resignation or Removal of the Issuing Bank.  The Issuing Bank may 
resign at any time by giving 60 days' prior written notice to the 
Administrative Agent, the Lenders and the Borrowers, and may be removed at 
any time by the Parent Borrower by notice to the Issuing Bank, the 
Administrative Agent and the Lenders.  Subject to the last sentence of this 
clause (i), upon the acceptance of any appointment as the Issuing Bank 
hereunder by a Lender that shall agree to serve as successor Issuing Bank, 
such successor shall succeed to and become vested with all the interests, 
rights and obligations of the retiring Issuing Bank and the retiring Issuing 
Bank shall be discharged from its obligations to issue additional Letters of 
Credit hereunder.  At the time such removal or resignation shall become 
effective, the Borrowers shall pay all accrued and unpaid fees pursuant to 
Section 2.05(c)(ii).  The acceptance of any appointment as the Issuing Bank 
hereunder by a successor Lender shall be evidenced by an agreement entered 
into by such successor, in a form satisfactory to the Borrowers and the 
Administrative Agent, and, from and after the effective date of such 
agreement, (i) such successor Lender shall have all the rights and 
obligations of the previous Issuing Bank under this Restated Credit Agreement 
and the other Loan Documents and (ii) references herein and in the other Loan 
Documents to the term "Issuing Bank" shall be deemed to refer to such 
successor or to any previous Issuing Bank, or to such successor and all 
previous Issuing Banks, as the context shall require.  After the resignation 
or removal of the Issuing Bank hereunder, the retiring Issuing Bank shall 
remain a party hereto and shall continue to have all the rights and 
obligations of an Issuing Bank under this Restated Credit Agreement and the 
other Loan Documents with respect to Letters of Credit issued by it prior to 
such resignation or removal, but shall not be required to issue additional 
Letters of Credit.

    (j)  Cash Collateralization.  If any Event of Default shall occur and be 
continuing, the Borrowers shall, on the Business Day they receive notice from 
the Administrative Agent or the Required Lenders (or, if the maturity of the 
Loans has been accelerated, Lenders holding participations in outstanding 
Letters of Credit representing greater than 50% of the aggregate undrawn 
amount of all outstanding Letters of Credit) thereof and of the amount of the 
L/C Exposure at such time, deposit in an account with the Collateral Agent, 
for the benefit of the Lenders, an amount in cash equal to the L/C Exposure 
as of such date.  Such deposit shall be held by the Collateral Agent as 
collateral for the payment and performance of the Obligations.  The 
Collateral Agent shall have exclusive dominion and control, including the 
exclusive right of withdrawal, over such account.  Other than any interest 
earned on the investment of such deposits in Permitted Investments, which 
investments shall be made at the option and sole discretion of the Collateral 
Agent, such deposits shall not bear interest.  Interest or profits, if any, 
on such investments shall accumulate in such account.  Moneys in such account 
shall (i) be applied by the Administrative Agent to reimburse the Issuing 
Bank for L/C Disbursements for which it has not been reimbursed, (ii) be held 
for the satisfaction of the reimbursement obligations of the Borrowers for 
the L/C Exposure at such time and (iii) if the maturity of the Loans has been 
accelerated (but subject to the consent of Lenders holding participations in 
outstanding Letters of Credit representing greater than 50% of the aggregate 
undrawn amount of all outstanding Letters of Credit), be applied to satisfy 
the Obligations.  If the Borrowers are required to provide an amount of cash 
collateral hereunder as a result of the occurrence of an Event of Default, 
such amount (to the extent not applied as aforesaid) shall be returned to the 
Borrowers within three Business Days after all Events of Default have been 
cured or waived.  If the Borrowers are required to provide an amount of cash 
collateral hereunder pursuant to Section 2.13(a), such amount shall be 
returned to the Borrowers from time to time to the extent that the amount of 
such cash collateral held by the Collateral Agent


<PAGE>

48

exceeds the excess, if any, of the aggregate L/C Exposure over the Total 
Commitment, provided that such return shall not be required at any time that 
an Event of Default has occurred and is continuing.

    (k)  Alternate Currency Letter of Credit.  In the event that an Alternate 
Currency Letter of Credit is issued, the following provisions shall apply:

         (i) such Alternate Currency Letter of Credit shall
    constitute a Letter of Credit for all purposes of this Restated
    Credit Agreement and the other Loan Documents;

         (ii) for purposes of determining the L/C Exposure for any
    purpose other than expressly provided below, the amount of such
    Letter of Credit and of any unreimbursed L/C Disbursements in
    respect thereof shall be, as of any date of determination, the
    Dollar Equivalent of the Alternate Currency amount determined at
    least every 30 days or more frequently at the Administrative
    Agent's request;

         (iii) for purposes of calculating Commitment Fees, L/C
    Participation Fees and fronting fees payable to the Issuing Bank,
    the amount of such Letter of Credit and of any unreimbursed L/C
    Disbursements in respect thereof shall be the Dollar Equivalent
    of the Alternate Currency amount thereof as of the last Business
    Day of each December, March, June and September (or the date on
    which such Letter of Credit was issued or such L/C Disbursement
    was made, if such date is more recent than such last Business
    Day) during the period for which such fees are being calculated;

         (iv) the obligation of the Borrowers to reimburse L/C
    Disbursements under such Alternate Currency Letter of Credit, and
    to pay fees in respect thereof and interest or other amounts
    thereon, shall be payable only in dollars and shall not be
    discharged by paying an amount in an Alternate Currency.  The
    obligation of the Borrowers to reimburse any such L/C
    Disbursement shall be in an amount of dollars equal to the Dollar
    Equivalent of the Alternate Currency amount thereof determined as
    of the date on which such L/C Disbursement is made, and any
    interest on the unreimbursed amount thereof shall accrue on the
    unreimbursed portion of such Dollar Equivalent amount;

         (v) the obligation of each Lender with a Commitment to pay
    its Pro Rata Percentage of any unreimbursed L/C Disbursement
    under such Alternate Currency Letter of Credit shall be payable
    only in dollars and shall be in an amount equal to such Pro Rata
    Percentage of the Dollar Equivalent amount of such unreimbursed
    Letter of Credit Disbursement determined as provided in
    clause (iv) above.  Under no circumstances shall the provisions
    hereof permitting the issuance of Alternate Currency Letters of
    Credit be construed, by implication or otherwise, as imposing any
    obligation upon any Lender to make any Loan or other payment
    under any Loan Document, or to accept any payment from the
    Borrowers in respect of any Obligations, in any currency other
    than dollars, it being understood that the parties intend all
    Obligations to be denominated and payable only in dollars;

         (vi) as of the date of issuance of any Alternate Currency
    Letter of Credit, the Dollar Equivalent of the L/C Exposure in
    respect of all Alternate Currency Letters of Credit shall not
    exceed $40,000,000 after giving effect to such issuance.



<PAGE>

                                                                              49

                                   ARTICLE III
   
                          Representations and Warranties

    Each of Holdings and the Borrowers represents and warrants to the 
Administrative Agent, the Collateral Agent, the Issuing Bank and each of the 
Lenders that:

    SECTION 3.01.  Organization; Powers.  Each of Holdings, the Borrowers and 
the Subsidiaries (a) is a corporation duly organized, validly existing and in 
good standing under the laws of the jurisdiction of its organization, (b) has 
all requisite power and authority to own its property and assets and to carry 
on its business as now conducted and as proposed to be conducted, (c) is 
qualified to do business in, and is in good standing in, every jurisdiction 
where the nature of its business so requires and (d) has the corporate power 
and authority to execute, deliver and perform its obligations under each of 
the Loan Documents and each other agreement or instrument contemplated hereby 
to which it is or will be a party and, in the case of the Borrowers, to 
borrow hereunder, except in each case where the failure to satisfy any of the 
above could not reasonably be expected to result in a Material Adverse Effect.

    SECTION 3.02.  Authorization.  The execution, delivery and performance by 
each Loan Party of each of the Loan Documents to which such Loan Party is a 
party, and in the case of Borrowers, the borrowings hereunder (collectively, 
the "Transactions") (a) have been duly authorized by all requisite corporate 
action on the part of such Loan Party and (b) will not (i) violate (A) any 
provision of law, statute, rule or regulation, or of the certificate or 
articles of incorporation or other constitutive documents or by-laws of 
Holdings, any Borrower or any Subsidiary, (B) any order of any Governmental 
Authority or (C) any provision of any indenture, agreement or other 
instrument to which Holdings, any Borrower or any Subsidiary is a party or by 
which any of them or any of their property is or may be bound, (ii) be in 
conflict with, result in a breach of or constitute (alone or with notice or 
lapse of time or both) a default under, or give rise to any right to 
accelerate or to require the prepayment, repurchase or redemption of any 
obligation under any such indenture, agreement or other instrument, except 
where any such conflict, violation, breach, default or right referred to in 
clause (i) or (ii), individually or in the aggregate, could not  reasonably 
be expected to have a Material Adverse Effect, or (iii) result in the 
creation or imposition of any Lien upon or with respect to any property or 
assets now owned or hereafter acquired by Holdings, any Borrower or any 
Subsidiary (other than any Lien created hereunder or under the Security 
Documents).

    SECTION 3.03.  Enforceability.  This Restated Credit Agreement has been 
duly executed and delivered by Holdings and each Borrower and constitutes, 
and each other Loan Document when executed and delivered by each Loan Party 
thereto will constitute, a legal, valid and binding obligation of such Loan 
Party enforceable against such Loan Party in accordance with its respective 
terms, subject (a) as to enforcement of remedies, to applicable bankruptcy, 
insolvency, reorganization, moratorium and other similar laws affecting the 
enforcement of creditors' rights generally, from time to time in effect and 
(b) to general principles of equity (whether enforcement is sought by a 
proceeding in equity or at law) .

    SECTION 3.04.  Governmental Approvals.  No action, consent or approval 
of, registration or filing with or any other action by any Governmental 
Authority is or will be required in connection with the Transactions or the 
other transactions contemplated hereby, except for (a) the filing of 
appropriate Uniform Commercial Code financing statements, (b) recordation of 
the Mortgages and related Uniform Commercial Code financing statements, (c) 
such as have been made or obtained and are in full force and effect, (d) 
filings required


<PAGE>

50

pursuant to the Securities Act of 1933, the Securities Act of 1934 or any 
state "blue sky" laws in connection with the registration of any securities 
to be exchanged for the Masco Notes, (e) filings by Holdings pursuant to the 
Small Business Investment Act of 1958,  as amended, and (f) such actions, 
consents, approvals and filings the failure of which to obtain or make  could 
not reasonably be expected to result in a Material Adverse Effect.

    SECTION 3.05.  Financial Statements.  The Parent Borrower has heretofore 
furnished to the Lenders the consolidated balance sheets and statements of 
income, stockholders' equity and cash flows of the Parent Borrower and its 
subsidiaries on a consolidated basis (i) as of and for the fiscal year ended 
December 31, 1996, audited by and accompanied by the opinion of Coopers & 
Lybrand LLP, independent public accountants, and (ii) as of and for the two 
fiscal quarter period ended June 30, 1997, certified by its chief financial 
officer. Such financial statements present fairly the financial condition and 
results of operations and cash flows of the Parent Borrower and its 
consolidated Subsidiaries as of such dates and for such periods.  Such 
financial statements were prepared in accordance with GAAP (except for the 
absence of footnote disclosure and subject to year-end audit adjustments in 
the case of the financial statements referred to in clause (ii)).

    SECTION 3.06.  No Material Adverse Change.  There has been no material 
adverse change in the business, assets, operations, properties, financial 
condition, contingent liabilities or material agreements of Holdings, the 
Parent Borrower and the Subsidiaries, taken as a whole, since December 31, 
1996.

    SECTION 3.07.  Title to Properties; Possession Under Leases.  (a) Each of 
Holdings, the Borrowers and the Subsidiaries has good title to (and with 
respect to owned real property good and marketable title to), or valid 
leasehold interests in, all its material properties and assets (including all 
Mortgaged Properties and all properties listed on Schedules 3.20(a) and 
3.20(b)), except where lack of such title or valid leasehold interest does 
not materially interfere with its ability to conduct its business as 
currently conducted.  All interests of such persons in such material 
properties and assets are free and clear of Liens, other than Liens expressly 
permitted by Section 6.02 and, in addition, with respect to the Mortgaged 
Properties, Permitted Encumbrances.

    (b)  Except as set forth on Schedule 3.07(b), each of Holdings, the 
Borrowers and the Subsidiaries has complied with all material obligations 
under all material leases to which it is a party and all such leases are in 
full force and effect.  Each of Holdings, the Borrowers and the Subsidiaries 
enjoys peaceful and undisturbed possession under all such material leases, 
except where failure to enjoy such possession does not materially interfere 
with its ability to conduct its business as currently conducted.

    (c)  Except as set forth on Schedule 3.07(c), neither Holdings nor any 
Borrower has received any notice of, nor has any knowledge of, any pending or 
contemplated condemnation proceeding affecting the Mortgaged Properties or 
any sale or disposition thereof in lieu of condemnation.

    (d)  Except as set forth on Schedule 3.07(d), none of Holdings, the 
Borrowers or any of the Subsidiaries is obligated under any right of first 
refusal, option or other contractual right to sell, assign or otherwise 
dispose of any Mortgaged Property or any interest therein.

    SECTION 3.08.  Subsidiaries.  (a)  Schedule 3.08 sets forth as of the 
Restatement Effective Date a list of all Subsidiaries of the Parent Borrower 
and the percentage ownership


<PAGE>

                                                                              51


interest of Holdings, the Parent Borrower and any other person therein.  The 
shares of Capital Stock or other ownership interests so indicated on Schedule 
3.08 are fully paid and non-assessable and are owned, as of the Restatement 
Effective Date, by Holdings, the Parent Borrower or a subsidiary of Holdings 
or the Parent Borrower, as applicable, directly or indirectly, free and clear 
of all Liens (other than Liens permitted under the Loan Documents).  Holdings 
owns 100% of the issued and outstanding shares of Capital Stock of the Parent 
Borrower and the Parent Borrower owns directly or indirectly 100% of the 
issued and outstanding shares of Capital Stock of each Subsidiary Borrower.  
As of the Restatement Effective Date, the only direct or indirect subsidiary 
of Holdings other than the Parent Borrower and the Subsidiaries is Simmons.

    (b)  As of the Restatement Effective Date, none of the Subsidiaries is 
subject to a consensual encumbrance or restriction that limits such 
Subsidiary's ability to make an Upstream Payment.

    (c)  Each of Dixie Furniture Company, Incorporated, Henry Link 
Corporation, Link-Taylor Corporation and Young-Hinkle Corporation does not 
have assets (other than the rights associated with each such company's name) 
in excess of $5,000, does not have any employees and does not conduct any 
business.

    SECTION 3.09.  Litigation; Compliance with Laws.  (a)  Except as set 
forth on Schedule 3.09, there are no actions, suits or proceedings at law or 
in equity or by or before any Governmental Authority now pending or, to the 
knowledge of Holdings or any Borrower, threatened against or affecting 
Holdings or any Borrower or any Subsidiary or any business, property or 
rights of any such person (i) that involve any Loan Document or the 
Transactions or (ii) as to which there is a reasonable likelihood of an 
adverse determination and that, if adversely determined, could reasonably be 
expected, individually or in the aggregate, to result in a Material Adverse 
Effect.

    (b)  None of Holdings, the Borrowers or any of the Subsidiaries or any of 
their respective material properties or assets is in violation of, nor will 
the continued operation of their material properties and assets as currently 
conducted violate, any law, rule or regulation (including any zoning, 
building, Environmental Law, ordinance, code or approval or any building 
permits) or any restrictions of record or agreements affecting the Mortgaged 
Property, or is in default with respect to any judgment, writ, injunction, 
decree or order of any Governmental Authority, where such violation or 
default could reasonably be expected to result in a Material Adverse Effect.

    (c)  None of Holdings, the Borrowers or any of the Subsidiaries is in 
violation of any zoning or building law, ordinance, rule, regulation or 
restriction affecting a Mortgaged Property or any building permit, including 
certificates of occupancy, where such violation could reasonably be expected 
to result in a Material Adverse Effect.

    SECTION 3.10.  Agreements.  (a)  None of Holdings, the Borrowers or any 
of the Subsidiaries is a party to any agreement or instrument or subject to 
any corporate restriction that has resulted or could reasonably be expected 
to result in a Material Adverse Effect.

    (b)  None of Holdings, the Borrowers or any of the Subsidiaries is in 
default in any manner under any provision of any indenture or other agreement 
or instrument evidencing Indebtedness, or any other material agreement or 
instrument to which it is a party or by which


<PAGE>

52

it or any of its properties or assets are bound, where such default could 
reasonably be expected to result in a Material Adverse Effect.

    SECTION 3.11.  Federal Reserve Regulations.   (a)  None of Holdings, the 
Borrowers or any of the Subsidiaries is engaged principally, or as one of its 
important activities, in the business of extending credit for the purpose of 
buying or carrying Margin Stock.

    (b)  No part of the proceeds of any Loan or any Letter of Credit will be 
used for the purpose of buying or carrying Margin Stock. 

    SECTION 3.12.  Investment Company Act; Public Utility Holding Company 
Act.  None of Holdings, the Borrowers or any Subsidiary is (a) an "investment 
company" as defined in, or subject to regulation under, the Investment 
Company Act of 1940 or (b) a "holding company" as defined in, or subject to 
regulation under, the Public Utility Holding Company Act of 1935.

    SECTION 3.13.  Use of Proceeds.  The Borrowers will use the proceeds of 
the Loans and will request the issuance of Letters of Credit (a) to refinance 
the loans outstanding under the Existing Credit Agreement, (b) to pay certain 
costs, fees and charges in connection with the Transactions and (c) for 
ongoing general corporate purposes, including the financing of Permitted 
Acquisitions.

    SECTION 3.14.  Tax Returns.  Each of Holdings, the Borrowers and the 
Subsidiaries has filed or caused to be filed all Federal, state or other 
material tax returns required to have been filed by it and has paid or caused 
to be paid all taxes due and payable by it and all assessments received by it 
to the extent that such failure to file or nonpayment could reasonably be 
expected to result in a Material Adverse Effect.

    SECTION 3.15.  No Material Misstatements.  None of (a) the Confidential 
Information Memorandum as of the date thereof and the Restatement Effective 
Date or (b) any other information, reports, financial statements, exhibits or 
schedules, taken as a whole, furnished by or on behalf of Holdings or any 
Borrower to the Administrative Agent or any Lender in connection with the 
negotiation of any Loan Document or included therein or delivered pursuant 
thereto contained, contains or will contain any material misstatement of fact 
or omitted, omits or will omit to state any material fact necessary to make 
the statements therein, in the light of the circumstances under which they 
were, are or will be made, not materially misleading, provided that to the 
extent any such information, report, financial statement, exhibit or schedule 
was based upon or constitutes a forecast or projection, each of Holdings and 
the Borrowers represents only that it acted in good faith and utilized 
reasonable assumptions and due care in the preparation of such information, 
report, financial statement, exhibit or schedule.

    SECTION 3.16.  Employee Benefit Plans.  Except to the extent failure to 
comply could not reasonably be expected to result in a Material Adverse 
Effect, each of Holdings and the Borrowers is in compliance with the 
applicable provisions of ERISA and the Code and the regulations and published 
interpretations thereunder.  Neither Holdings nor any Borrower is aware of 
any circumstances or event with respect to any employee benefit plan 
maintained or contributed to by an ERISA Affiliate that could result in a 
liability that could reasonably be expected to have a Material Adverse 
Effect.  No ERISA Event has occurred or is reasonably expected to occur that, 
when taken together with all other such ERISA Events, could reasonably be 
expected to result in a Material Adverse Effect.



<PAGE>

                                                                              53

    SECTION 3.17.  Environmental Matters.  Except as set forth on Schedule 
3.17:

         (a) The properties owned or operated by Holdings, the
    Borrowers and the Subsidiaries (the "Properties") do not contain
    any Hazardous Materials in amounts or concentrations that
    (i) constitute or constituted a violation of, (ii) require
    Remedial Action under, or (iii) could reasonably be expected to
    give rise to liability under, Environmental Laws, which
    violations, Remedial Actions and liabilities, in the aggregate,
    could reasonably be expected to result in a Material Adverse
    Effect;

         (b) The Properties and all operations of the Borrowers and
    the Subsidiaries are in compliance, and in the last three years
    have been in compliance, with all Environmental Laws and all
    necessary Environmental Permits have been obtained and are in
    effect, except to the extent that such non-compliance or failure
    to obtain any necessary permits, in the aggregate, could not be
    reasonably expected to result in a Material Adverse Effect;

         (c) There have been no Releases or threatened Releases at,
    from, under or proximate to the Properties or otherwise in
    connection with the operations of the Borrowers or the
    Subsidiaries, which Releases or threatened Releases, in the
    aggregate, could reasonably be expected to result in a Material
    Adverse Effect;

         (d) None of Holdings, the Borrowers or any of the
    Subsidiaries has received any notice of an Environmental Claim in
    connection with the Properties or the operations of the Borrowers
    or the Subsidiaries or with regard to any person whose
    liabilities for environmental matters Holdings, the Borrowers or
    the Subsidiaries has retained or assumed, in whole or in part,
    contractually, by operation of law or otherwise, which, in the
    aggregate, could reasonably be expected to result in a Material
    Adverse Effect, nor do Holdings, the Borrowers or the
    Subsidiaries have reason to believe that any such notice will be
    received or is being threatened; and

         (e) Hazardous Materials have not been transported from the
    Properties, nor have Hazardous Materials been generated, treated,
    stored or disposed of at, on or under any of the Properties, in a
    manner that could reasonably be expected to give rise to
    liability under any Environmental Law, nor have the Borrowers or
    the Subsidiaries retained or assumed any liability,
    contractually, by operation of law or otherwise, with respect to
    the generation, treatment, storage or disposal of Hazardous
    Materials, in each case, which transportation, generation,
    treatment, storage or disposal, or retention or assumption of
    liabilities, in the aggregate, could reasonably be expected to
    result in a Material Adverse Effect.

    SECTION 3.18.  Insurance.  Schedule 3.18 sets forth a true, complete and 
correct description of all insurance maintained by or for Holdings, any 
Borrower or any Domestic Subsidiary as of the Restatement Effective Date.  As 
of such date, such insurance is in full force and effect and all premiums 
that have become due and payable have been duly paid.  Holdings, the 
Borrowers and the Subsidiaries have insurance in such amounts and covering 
such risks and liabilities as are in accordance with normal industry practice.

    SECTION 3.19.  Security Documents.  (a)  The Pledge Agreement is 
effective to create in favor of the Collateral Agent, for the ratable benefit 
of the Secured Parties, a legal, valid and enforceable security interest in 
the Collateral (as defined in the Pledge Agreement) and, when such Collateral 
is delivered to the Collateral Agent, the Pledge Agreement shall


<PAGE>

54

constitute a fully perfected first priority Lien on, and security interest 
in, all right, title and interest of the pledgors thereunder in such 
Collateral, in each case prior and superior in right to any other person.
 
    (b)  The Security Agreement is effective to create in favor of the 
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, 
valid and enforceable security interest in the Collateral (as defined in the 
Security Agreement) owned by the Grantors on the Restatement Effective Date 
and, when financing statements in appropriate form are filed in the offices 
specified on Schedule 6 to the Perfection Certificate, the Security Agreement 
shall constitute a fully perfected Lien on, and security interest in, all 
right, title and interest of the grantors thereunder in such Collateral 
(other than the Intellectual Property, as defined in the Security Agreement) 
that may be perfected by filing, recording or registering a financing 
statement under the Uniform Commercial Code as in effect in the United States 
(or any political subdivision thereof) and its territories and possessions, 
in each case prior and superior in right to any other Lien on any Collateral 
other than Liens expressly permitted by Section 6.02.

    (c)  The security agreement executed pursuant to the Existing Credit 
Agreement and filed in the United States Patent and Trademark Office and the 
United States Copyright Office on August 26, 1996, constitutes a fully 
perfected Lien on, and security interest in, all right, title and interest of 
the grantors thereunder in the Patents, Trademarks (other than "intent to 
use" Trademark applications) and Copyrights (each, as defined in the Security 
Agreement) material to the Borrowers' or Guarantors' business on the 
Acquisition Date and in which a security interest may be perfected by filing, 
recording or registration of the Security Agreement in the United States 
Patent and Trademark Office and the United States Copyright Office, in each 
case prior and superior in right to any other person other than Liens 
permitted by Section 6.02 (it being understood and agreed that subsequent 
recordings in the United States Patent and Trademark Office and the United 
States Copyright Office will not be required to perfect a lien on registered 
trademarks, trademark applications and copyrights acquired or developed by 
the grantors after the Acquisition Date).

    (d)  The Mortgages, as amended by the amendments thereto on the date 
hereof  (the "Mortgage Amendments"), are effective to create in favor of the 
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, 
valid and enforceable Lien on all of the Loan Parties' right, title and 
interest in and to the Mortgaged Properties thereunder and the proceeds 
thereof, and when the Mortgage Amendments are filed in the offices specified 
on Schedule 3.19(d) and the proper amount of mortgage recording or similar 
taxes (if any) are paid and when the financing statements are duly filed in 
the appropriate public records, the Mortgages shall constitute a fully 
perfected Lien on, and security interest in, all right, title and interest of 
the Loan Parties in such Mortgaged Property and the proceeds thereof, in each 
case prior and superior in right to any other person other than Permitted 
Encumbrances.

    SECTION 3.20.  Location of Real Property and Leased Premises. (a)  
Schedule 3.20(a) lists completely and correctly in all material respects as 
of the Restatement Effective Date the address of all real property owned by 
Holdings, the Borrowers and the Subsidiaries.

    (b)  Schedule 3.20(b) lists completely and correctly in all material 
respects as of the Restatement Effective Date the address of all real 
property leased by Holdings, the Borrowers and the Subsidiaries.



<PAGE>

                                                                              55


    SECTION 3.21.  Labor Matters.  As of the date hereof and the Restatement 
Effective Date, there are no strikes or lockouts against Holdings, any 
Borrower or any Subsidiary pending or, to the knowledge of Holdings or any 
Borrower, threatened.  The hours worked by and payments made to employees of 
Holdings, the Borrowers and the Subsidiaries have not been in violation of 
the Fair Labor Standards Act or any other applicable Federal, state, local or 
foreign law dealing with such matters in any case where a Material Adverse 
Effect could reasonably be expected to occur as a result of such violation. 
Except as set forth on Schedule 3.21, all payments due from Holdings, any 
Borrower or any Subsidiary, or for which any claim may be made against 
Holdings, any Borrower or any Subsidiary, on account of wages and employee 
health and welfare insurance and other benefits, have been paid or accrued as 
a liability on the books of Holdings, such Borrower or such Subsidiary.

    SECTION 3.22.  Solvency.  (a)  Immediately following the making of each 
Loan made on the Restatement Effective Date and after giving effect to the 
application of the proceeds of such Loans, (i) the fair value of the assets 
of each Loan Party will exceed its debts and liabilities, subordinated, 
contingent or otherwise; (ii) the present fair saleable value of the property 
of each Loan Party will be greater than the amount that will be required to 
pay the probable liability of its debts and other liabilities, subordinated, 
contingent or otherwise, as such debts and other liabilities become absolute 
and matured; (iii) each Loan Party will be able to pay its debts and 
liabilities, subordinated, contingent or otherwise, as such debts and 
liabilities become absolute and matured; and (iv) each Loan Party will not 
have unreasonably small capital with which to conduct the business in which 
it is engaged as such business is now conducted and is proposed to be 
conducted following the Closing Date.

                                 ARTICLE IV

                            Conditions of Lending

    The obligations of the Lenders to make Loans and of the Issuing Bank to 
issue Letters of Credit hereunder are subject to the satisfaction of the 
following conditions:

    SECTION 4.01.  All Credit Events.  On the date of each Borrowing (other 
than (i) any Borrowing made pursuant to Section 2.02(f) or (ii) any 
continuation or conversion of a Borrowing pursuant to Section 2.10 into a 
Borrowing that does not increase the aggregate principal amount of Loans 
outstanding), including each Borrowing of a Swingline Loan and on the date of 
each issuance of a Letter of Credit (each such event being called a "Credit 
Event"):

         (a)  The Administrative Agent shall have received a notice
    of such Borrowing as required by Section 2.03 (or such notice
    shall have been deemed given in accordance with Section 2.03) or,
    in the case of the issuance of a Letter of Credit, the Issuing
    Bank and the Administrative Agent shall have received a notice
    requesting the issuance of such Letter of Credit as required by
    Section 2.23(b) or, in the case of the Borrowing of a Swingline
    Loan, the Swingline Lender and the Administrative Agent shall
    have received a notice requesting such Swingline Loan as required
    by Section 2.22(b).

         (b)  The representations and warranties set forth in
    Article III hereof shall be true and correct in all material
    respects on and as of the date of such Credit Event with the same
    effect as though made on and as of such date, except to the
    extent such


<PAGE>

56

    representations and warranties expressly relate to an earlier date (in
    which case such representations and warranties shall have been true and
    correct in all material respects on such earlier date).

         (c)  Each Borrower and each other Loan Party shall be in
    compliance with all the terms and provisions set forth herein and
    in each other Loan Document on its part to be observed or
    performed, and at the time of and immediately after such Credit
    Event, no Event of Default or Default shall have occurred and be
    continuing.

Each Credit Event shall be deemed to constitute a representation and warranty 
by each Borrower and Holdings on the date of such Credit Event as to the 
matters specified in paragraphs (b) (except as aforesaid) and (c) of this 
Section 4.01.

    SECTION 4.02. Restatement Credit Event.  On the date this Restated Credit 
Agreement becomes effective (the "Restatement Effective Date"):

         (a)  The Administrative Agent shall have received, on behalf
    of itself, the Lenders and the Issuing Bank, a favorable written
    opinion of Davis, Polk & Wardwell, counsel for Holdings and the
    Borrowers, substantially to the effect set forth in Exhibit J,
    dated the Restatement Effective Date, addressed to the Issuing
    Bank, the Administrative Agent and the Lenders, and covering such
    other matters relating to the Loan Documents and the Transactions
    as the Administrative Agent shall reasonably request, and
    Holdings and the Borrowers hereby request such counsel to deliver
    such opinion.

         (b)  All legal matters incident to this Restated Credit
    Agreement, the Borrowings and extensions of credit hereunder and
    the other Loan Documents shall be satisfactory to the Lenders, to
    the Issuing Bank and to Cravath, Swaine & Moore, counsel for the
    Administrative Agent.

         (c)  The Administrative Agent shall have received (i) a
    certificate as to the good standing of each Loan Party as of a
    recent date, from the Secretary of State of the state of its
    organization; (ii) a certificate of the Secretary or Assistant
    Secretary of each Loan Party dated the Restatement Effective Date
    and certifying (A) that attached thereto is a true and complete
    copy of resolutions duly adopted by the Board of Directors of
    such Loan Party authorizing the execution, delivery and
    performance of the Loan Documents to which such Loan Party is a
    party and, in the case of the Borrowers, the borrowings
    hereunder, and that such resolutions have not been modified,
    rescinded or amended and are in full force and effect, (B) that
    the certificate or articles of incorporation of such Loan Party
    have not been amended since the Acquisition Date, (C) that the
    by-laws of such Loan Party have not been amended since the
    Acquisition Date and (D) as to the incumbency and specimen
    signature of each officer executing any Loan Document or any
    other document delivered in connection therewith on behalf of
    such Loan Party; (iii) a certificate of another officer as to the
    incumbency and specimen signature of the Secretary or Assistant
    Secretary executing the certificate pursuant to (ii) above; and
    (iv) such other documents as the Lenders, the Issuing Bank or
    Cravath, Swaine & Moore, counsel for the Administrative Agent,
    may reasonably request. 

         (d)  The Administrative Agent shall have received a
    certificate, dated the Restatement Effective Date and signed by a
    Financial Officer of Holdings and the


<PAGE>

                                                                              57


    Parent Borrower, confirming compliance with the conditions precedent
    set forth in paragraphs (b) and (c) of Section 4.01.

         (e)  The Administrative Agent shall have received all Fees
    and other amounts due and payable on or prior to the Restatement
    Effective Date, including, to the extent invoiced, reimbursement
    or payment of all out-of-pocket expenses required to be
    reimbursed or paid by the Borrowers hereunder or under any other
    Loan Document.

         (f)  The Pledge Agreement shall have been duly executed by
    the Loan Parties party thereto and delivered to the Collateral
    Agent, and all the outstanding Capital Stock of the Borrowers and
    the Subsidiaries shall have been duly and validly pledged
    thereunder to the Collateral Agent for the ratable benefit of the
    Secured Parties and certificates representing such shares,
    accompanied by instruments of transfer or stock powers endorsed
    in blank, shall be in the actual possession of the Collateral
    Agent, provided that (i) neither the Parent Borrower nor any
    Domestic Subsidiary shall be required to pledge more than 65% of
    the Capital Stock of any Foreign Subsidiary, (ii) no Foreign
    Subsidiary shall be required to pledge the Capital Stock of any
    of its Foreign Subsidiaries, and (iii) the Capital Stock of the
    Receivables Subsidiary and Master Servicer shall not be required
    to be pledged.

         (g)  The Security Agreement shall have been duly executed by
    the Loan Parties party thereto and shall have been delivered to
    the Collateral Agent and each document (including each Uniform
    Commercial Code financing statement) required by law or
    reasonably requested by the Administrative Agent to be filed,
    registered or recorded in order to create in favor of the
    Collateral Agent for the benefit of the Secured Parties a valid,
    legal and perfected first priority security interest in and lien
    on the Collateral described in such agreement, subject to Liens
    permitted by Section 6.02, shall have been delivered to the
    Collateral Agent.

         (h)  The Collateral Agent shall have received with respect
    to the Existing Credit Agreement the results of a search of the
    Uniform Commercial Code (or equivalent filings) filings made with
    respect to the Loan Parties in the states (or other
    jurisdictions) in which the chief executive office of each such
    person is located, any offices of such persons in which records
    have been kept relating to Accounts (as defined in the Security
    Agreement) and the other jurisdictions in which Uniform
    Commercial Code filings (or equivalent filings) are to be made
    pursuant to the preceding paragraph, together with copies of the
    financing statements (or similar documents) disclosed by such
    search, and accompanied by evidence satisfactory to the
    Collateral Agent that the Liens indicated in any such financing
    statement (or similar document) would be permitted under
    Section 6.02 or have been released.

         (i)  The Collateral Agent shall have received a Perfection
    Certificate with respect to the Loan Parties dated the
    Restatement Effective Date and duly executed by a Responsible
    Officer of Holdings or the Parent Borrower.

         (j)  (i) Each of the Security Documents, as amended,
    relating to each of the Mortgaged Properties shall remain in full
    force and effect, (ii) each of such Mortgaged Properties shall
    not be subject to any Lien other than those permitted under
    Section 6.02 and other than Permitted Encumbrances, and
    (iii) each of the amendments to such Security Documents shall
    have been filed and recorded in the recording office


<PAGE>

58

    as specified on Schedule 3.19(d) and, in connection therewith, the
    Collateral Agent shall have received evidence satisfactory to it of each
    such filing and recordation.  

         (k)  Each of the Holdings Guarantee Agreement and the
    Subsidiary Guarantee Agreement shall have been duly executed by
    the Loan Parties party thereto and shall have been delivered to
    the Collateral Agent.

         (l)  The Indemnity, Subrogation and Contribution Agreement
    shall have been duly executed by the Loan Parties party thereto
    and shall have been delivered to the Collateral Agent.

         (m)  The Administrative Agent shall have received a
    certificate as to coverage under the insurance policies required
    by Section 5.02 and the applicable provisions of the Security
    Documents, each of which shall be endorsed or otherwise amended
    to include a "standard" or "New York" lender's loss payable
    endorsement (in the case of each property or boiler policy) and
    to name the Collateral Agent as additional insured, in form and
    substance reasonably satisfactory to the Administrative Agent.

         (n)  There shall have been no material adverse change in the
    business, assets, operations, properties, financial condition,
    contingent liabilities, prospects or material agreements of
    Holdings, the Parent Borrower and the Subsidiaries, taken as a
    whole, since December 31, 1996.

         (o)  Substantially contemporaneously with the Restatement
    Effective Date, the Borrowers shall have repaid in full the
    principal of all loans outstanding, interest thereon and other
    amounts due and payable under the Existing Credit Agreement and
    under each other agreement related thereto, and the
    Administrative Agent shall have received duly executed
    documentation either evidencing or necessary for the cancelation
    of all commitments under the Existing Credit Agreement.


                                  ARTICLE V

                            Affirmative Covenants

    Each of Holdings and the Borrowers covenants and agrees with each Lender 
that so long as this Restated Credit Agreement shall remain in effect and 
until the Commitments have been terminated and the principal of and interest 
on each Loan, all Fees and all other expenses or amounts payable under any 
Loan Document have been paid in full and all Letters of Credit have been 
canceled or have expired and all amounts drawn thereunder have been 
reimbursed in full, unless the Required Lenders shall otherwise consent in 
writing, each of Holdings and the Borrowers will, and will cause each of the 
Subsidiaries (other than the Receivables Subsidiary and the Master Servicer) 
to:

    SECTION 5.01.  Existence; Businesses and Properties; Compliance with 
Laws.  (a)  Do or cause to be done all things necessary to preserve, renew 
and keep in full force and effect its legal existence, except as otherwise 
expressly permitted under Section 6.05.

    (b)  Do or cause to be done all things necessary to obtain, preserve, 
renew, extend and keep in full force and effect the rights, licenses, 
permits, franchises, authorizations, patents, copyrights, trademarks and 
trade names material to the conduct of its business; comply in all


<PAGE>

                                                                              59

material respects with all applicable laws, rules, regulations (including any 
zoning, building, environmental and safety law, ordinance, code or approval 
or any building permits or any restrictions of record or agreements affecting 
the Mortgaged Properties) and decrees and orders of any Governmental 
Authority, whether now in effect or hereafter enacted except where 
noncompliance could not reasonably be expected to result in a Material 
Adverse Effect or, in the case of the Mortgaged Properties, where 
noncompliance with zoning and building laws, rules and regulations, building 
permits and certificates of occupancy could not reasonably be expected to 
result in a material adverse effect on the business, assets, operations or 
financial condition of the person that has title to the Mortgaged Property; 
and at all times maintain and preserve all property material to the conduct 
of such business and keep such property in good repair, working order and 
condition (reasonable wear and tear excepted) and from time to time make, or 
cause to be made, all needful and proper repairs, renewals, additions, 
improvements and replacements thereto necessary in order that the business 
carried on in connection therewith may be properly conducted in all material 
respects at all times.

    SECTION 5.02.  Insurance. (a)  Keep its insurable properties adequately 
insured at all times by financially sound and reputable insurers; maintain 
such other insurance, to such extent and against such risks, including fire 
and other risks insured against by extended coverage, as is customary with 
companies in the same or similar businesses operating in the same or similar 
locations, including commercial general liability insurance against claims 
for bodily injury or death or property damage occurring upon, in, about or in 
connection with the use of any properties owned, occupied or controlled by 
it; and maintain such other insurance as may be required by law.

    (b)  Prior to the Collateral Release Date, cause all property and boiler 
policies to be endorsed or otherwise amended to include a "standard" or "New 
York" lender's loss payable endorsement, in form and substance reasonably 
satisfactory to the Administrative Agent and the Collateral Agent, which 
endorsement shall provide that, from and after the Restatement Effective 
Date, if the insurance carrier shall have received written notice from the 
Administrative Agent or the Collateral Agent of the occurrence of an Event of 
Default, the insurance carrier shall pay all proceeds otherwise payable to 
the Loan Parties under such policies directly to the Collateral Agent; cause 
all such policies to provide that none of Holdings, the Borrowers, the 
Administrative Agent, the Collateral Agent or any other party shall be a 
coinsurer thereunder and to contain a "Replacement Cost Endorsement", without 
any deduction for depreciation, and such other provisions as the 
Administrative Agent or the Collateral Agent may reasonably require from time 
to time to protect their interests; deliver, promptly as available but in no 
event later than 120 days after the Restatement Effective Date, original or 
certified copies of all such policies to the Collateral Agent; cause each 
such policy to provide that it shall not be canceled or not renewed (i) by 
reason of nonpayment of premium upon not less than 10 days' prior written 
notice thereof by the insurer to the Administrative Agent and the Collateral 
Agent (giving the Administrative Agent and the Collateral Agent the right to 
cure defaults in the payment of premiums) or (ii) for any other reason upon 
not less than 30 days' prior written notice thereof by the insurer to the 
Administrative Agent and the Collateral Agent; deliver to the Administrative 
Agent and the Collateral Agent, (A) prior to the cancelation, or nonrenewal 
of any such policy of insurance, a copy of a renewal or replacement policy 
(or other evidence of renewal of a policy previously delivered to the 
Administrative Agent and the Collateral Agent) together with evidence 
satisfactory to the Administrative Agent and the Collateral Agent of payment 
of the premium therefor to the extent due and payable and (B) promptly upon 
any modification of any such policy, a copy of such modified policy.



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60

    (c)  Prior to the Collateral Release Date, if at any time the area in 
which the Premises (as defined in the Mortgages) are located is designated a 
"flood hazard area" in any Flood Insurance Rate Map published by the Federal 
Emergency Management Agency (or any successor agency), obtain flood insurance 
in such total amount as the Administrative Agent or the Collateral Agent may 
from time to time reasonably require, and otherwise comply with the National 
Flood Insurance Program as set forth in the Flood Disaster Protection Act of 
1973, as it may be amended from time to time.

    (d)  Prior to the Collateral Release Date, with respect to any Mortgaged 
Property, carry and maintain commercial general liability insurance including 
the "broad form CGL endorsement" and coverage on an occurrence basis against 
claims made for bodily injury, death and property damage and umbrella 
liability insurance against such claims, in no event for a combined single 
limit of less than $25,000,000, naming the Collateral Agent as an additional 
insured, on forms reasonably satisfactory to the Collateral Agent.

    (e)  Notify the Administrative Agent and, prior to the Collateral Release 
Date, the Collateral Agent immediately whenever any separate insurance 
concurrent in form or contributing in the event of loss with that required to 
be maintained under this Section 5.02 is taken out by Holdings or the 
Borrowers; and promptly deliver to the Administrative Agent and, prior to the 
Collateral Release Date, the Collateral Agent a duplicate original or 
certified copy of such policy or policies.

    (f)  In connection with the covenants set forth in this Section 5.02, it 
is understood and agreed that:

         (i) none of the Administrative Agent, the Lenders, the
    Issuing Bank, or their respective agents or employees shall be
    liable for any loss or damage insured by the insurance policies
    required to be maintained under this Section 5.02, it being
    understood that (a) the Borrowers and the other Loan Parties
    shall look solely to their insurance companies or any other
    parties other than the aforesaid parties for the recovery of such
    loss or damage and (b) Holdings and the Borrowers shall use
    reasonable efforts to cause such insurance policies to waive the
    insurer's rights of subrogation against the Administrative Agent,
    the Collateral Agent, the Lenders, the Issuing Bank or their
    agents or employees.  If, however, any such insurance policy does
    not provide waiver of subrogation rights against such parties, as
    required above, then Holdings and each Borrower hereby agrees, to
    the extent permitted by law, to waive its right of recovery, if
    any, against the Administrative Agent, the Collateral Agent, the
    Lenders, the Issuing Bank and their agents and employees in
    respect of any such loss or damage; and

         (ii) the designation of any form, type or amount of
    insurance coverage by the Administrative Agent or the Collateral
    Agent under this Section 5.02 shall in no event be deemed a
    representation, warranty or advice by the Administrative Agent or
    the Collateral Agent that such insurance is adequate for the
    purposes of the business of Holdings, the Borrowers and the
    Subsidiaries or the protection of their properties.

    SECTION 5.03.  Obligations and Taxes.  Pay its Indebtedness and other 
monetary obligations promptly and in accordance with their terms and pay and 
discharge promptly when due all taxes, assessments and governmental charges 
or levies imposed upon it or upon its income or profits or in respect of its 
property, before such taxes, assessments and governmental charges shall 
become delinquent or in default, as well as all lawful claims for


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                                                                              61

labor, materials and supplies or otherwise that, if unpaid, might give rise 
to a Lien upon such properties or any part thereof; provided, however, that 
such payment and discharge shall not be required with respect to (i) any such 
tax, assessment, charge, levy or claim so long as the validity or amount 
thereof shall be contested in good faith by appropriate proceedings and 
Holdings or such Borrower, as applicable, shall have set aside on its books 
adequate reserves with respect thereto in accordance with GAAP and such 
contest operates to suspend collection of the contested obligation, tax, 
assessment or charge and enforcement of a Lien and, in the case of a 
Mortgaged Property, there is no risk of forfeiture of such property and (ii) 
any Indebtedness or other obligation or any tax, assessment, charge, levy or 
claims, the failure to pay and discharge when due which, individually or in 
the aggregate, could not reasonably be expected to have a Material Adverse 
Effect.

    SECTION 5.04.  Financial Statements, Reports, etc. In the case of 
Holdings and the Parent Borrower, furnish to the Administrative Agent and 
each Lender:

         (a) within 90 days after the end of each fiscal year, its
    consolidated balance sheet and related statements of income,
    stockholders' equity and cash flows showing the consolidated
    financial condition of such Person and its consolidated
    subsidiaries as of the close of such fiscal year and the
    consolidated results of its operations and the operations of such
    subsidiaries during such year (and showing, on a comparative
    basis, the figures for the previous year), all audited by Coopers
    and Lybrand LLP or other independent public accountants of
    recognized national standing acceptable to the Required Lenders
    and accompanied by an opinion of such accountants (which shall
    not be qualified in any material respect) to the effect that such
    consolidated financial statements fairly present in all material
    respects the financial condition and results of operations of
    such Person and its consolidated subsidiaries on a consolidated
    basis in accordance with GAAP consistently applied;

         (b) within 45 days after the end of each of the first three
    fiscal quarters of each fiscal year, its unaudited consolidated
    balance sheet and related statements of income, stockholders'
    equity and cash flows showing the consolidated financial
    condition of such Person and its consolidated subsidiaries as of
    the close of such fiscal quarter and the consolidated results of
    its operations and the operations of such subsidiaries during
    such fiscal quarter and the then elapsed portion of the fiscal
    year (and showing, on a comparative basis, such information as of
    and for the corresponding dates and periods of the preceding
    fiscal year), all certified by a Financial Officer of such Person
    as fairly presenting in all material respects the consolidated
    financial condition and results of operations of such Person and
    its consolidated subsidiaries on a consolidated basis in
    accordance with GAAP (except for the absence of footnote
    disclosure) consistently applied, subject to year-end audit
    adjustments;

         (c) concurrently with any delivery of financial statements
    under subparagraph (a) or (b) above, a certificate of the
    Financial Officer certifying such statements and (i) certifying
    that no Event of Default or Default has occurred or, if an Event
    of Default or Default has occurred, specifying the nature and
    extent thereof and any corrective action taken or proposed to be
    taken with respect thereto, (ii) setting forth computations in
    reasonable detail satisfactory to the Administrative Agent
    demonstrating compliance with the covenants contained in
    Sections 6.09, 6.10 and 6.11 and (iii) setting forth any change
    in the Applicable Percentage;



<PAGE>

62

         (d) concurrently with the delivery of financial statements
    under subparagraph (a) above, a certificate of the accounting
    firm opining on such statements (which certificate may be limited
    to accounting matters and disclaim responsibility for legal
    interpretations) (i) certifying whether such accounting firm has
    become aware of the occurrence of any Event of Default or Default
    and (ii) confirming the accuracy of the computations referred to
    in clauses (ii) and (iii) of sub-paragraph (c) above;

         (e) promptly after the same become publicly available,
    copies of all periodic and other reports, proxy statements and
    other materials filed by Holdings, any Borrower or any Subsidiary
    with the Securities and Exchange Commission, or any Governmental
    Authority succeeding to any or all of the functions of said
    Commission, or with any national securities exchange, or
    distributed to its shareholders generally, as the case may be; 

         (f) promptly, from time to time, such other information
    regarding the operations, business affairs and financial
    condition of Holdings, any Borrower or any Subsidiary, or
    compliance with the terms of any Loan Document, or, if available,
    such financial statements showing the results of operations of
    Simmons, in each case as the Administrative Agent or any Lender
    may reasonably request; and

         (g) prior to the beginning of each fiscal year, a copy of
    the budget for its consolidated balance sheet and related
    statements of income and cash flows for each quarter of such
    fiscal year.

    SECTION 5.05.  Litigation and Other Notices.  Furnish to the 
Administrative Agent, the Issuing Bank and each Lender written notice of the 
following promptly after (and, in any event, no later than five days after) 
any Responsible Officers of Holdings or the Parent Borrower obtains knowledge 
thereof:

         (a) any Event of Default or Default, specifying the nature
    and extent thereof and the corrective action (if any) taken or
    proposed to be taken with respect thereto;

         (b) the filing or commencement of, or any written threat or
    notice of intention of any person to file or commence, any
    action, suit or proceeding, whether at law or in equity or by or
    before any Governmental Authority, against Holdings, any Borrower
    or any Subsidiary that could reasonably be expected to result in
    a Material Adverse Effect; and

         (c) any development that has resulted in, or could
    reasonably be expected to result in, a Material Adverse Effect.

    SECTION 5.06.  Employee Benefits.  (a) Comply in all material respects 
with the applicable provisions of ERISA and the Code to the extent failure to 
comply could reasonably be expected to result in a Material Adverse Effect 
and (b) furnish to the Administrative Agent promptly, and in any event within 
10 days, after any Responsible Officer of Holdings or any Borrower knows or 
has reason to know that, any ERISA Event has occurred that, alone or together 
with any other ERISA Event, could reasonably be expected to result in 
liability of Holdings or the Borrowers in an aggregate amount exceeding 
$5,000,000, a statement of a Financial Officer of Holdings or the Parent 
Borrower, as applicable, setting forth details as to such ERISA Event and the 
action, if any, that Holdings or the Parent Borrower, as applicable, has 
taken or proposes to take with respect thereto.



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    SECTION 5.07.  Maintaining Records; Access to Properties and Inspections. 
 Keep proper books of record and account in which full, true and correct 
entries in conformity with GAAP and all requirements of law are made in 
relation to its business and activities.  Each Loan Party and each Subsidiary 
(a) will permit any representatives designated by the Administrative Agent or 
any Lender to visit and inspect the financial records and the properties of 
Holdings, any Borrower or any Subsidiary at reasonable times and as often as 
reasonably requested and to make extracts from and copies of such financial 
records, and (b) will permit any representatives designated by the 
Administrative Agent or any Lender to discuss the affairs, finances and 
condition of Holdings, any Borrower or any Subsidiary with the officers 
thereof and independent accountants therefor; provided, however, that the 
number of visits pursuant to clause (a) above in any year shall not exceed 
two, unless (i) a Default or Event of Default shall have occurred and be 
continuing or (ii) the Collateral Agent, or the Required Lenders through the 
Administrative Agent, determines in good faith that any material event or 
material change has occurred with respect to Holdings, the Borrowers and the 
Subsidiaries and that as a result of such event or change more frequent 
visits are necessary or prudent.

    SECTION 5.08.  Use of Proceeds.  Use the proceeds of the Loans and 
request the issuance of Letters of Credit only for the purposes set forth in 
Section 3.13.

    SECTION 5.09.  Compliance with Environmental Laws.  Comply, and cause all 
lessees and other persons occupying its Properties to comply, in all material 
respects with all Environmental Laws and Environmental Permits applicable to 
its operations and Properties and the operations conducted thereon; obtain 
and renew all material Environmental Permits necessary for its Properties; 
and conduct any Remedial Action in accordance with Environmental Laws, except 
where noncompliance with Environmental Laws and Environmental Permits or the 
failure to obtain or renew such Environmental Permits or conduct such 
Remedial Action, in the aggregate, could not be reasonably expected to result 
in a Material Adverse Effect.

    SECTION 5.10.  Preparation of Environmental Reports.  If a Default caused 
by reason of a breach of Section 3.17 or 5.09 relating to the presence of 
Hazardous Materials at any Properties shall have occurred and be continuing, 
at the request of the Required Lenders through the Administrative Agent, 
provide to the Lenders within 90 days after such request, at the expense of 
the Borrowers, an environmental site assessment report for the Properties 
which are the subject of such Default prepared by an environmental consulting 
firm reasonably acceptable to the Administrative Agent and indicating the 
presence or absence of Hazardous Materials and the estimated cost of any 
compliance or Remedial Action in connection with such Properties.

    SECTION 5.11.  Further Assurances.  Execute any and all further 
documents, financing statements, agreements and instruments, and take all 
further action (including, prior to the Collateral Release Date, filing 
Uniform Commercial Code and other financing statements, mortgages and deeds 
of trust) that may be required under applicable law, or that the Required 
Lenders, the Administrative Agent or the Collateral Agent may reasonably 
request, in order to effectuate the transactions contemplated by the Loan 
Documents and, prior to the Collateral Release Date, in order to grant, 
preserve, protect and perfect the validity and first priority of the security 
interests created or intended to be created by the Security Documents 
(subject to Liens permitted by Section 6.02).  Holdings and the Borrowers 
will cause any subsequently acquired or organized Domestic Subsidiary to 
execute a Subsidiary Guarantee Agreement, Indemnity Subrogation and 
Contribution Agreement and any


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64

applicable Security Document in favor of the Collateral Agent.  In addition, 
prior to the Collateral Release Date, upon consummation of any acquisition of 
any new business unit, except where financing for such acquisition is 
obtained through secured financing permitted by Section 6.01, Holdings and 
each Borrower will, at its cost and expense, promptly secure the Obligations 
by pledging or creating, or causing to be pledged or created, perfected 
security interests with respect to all equipment, inventory and other 
tangible personal property (other than receivables) so acquired.  Such 
security interests and Liens will be created under the Security Documents and 
other security agreements and other instruments and documents in form and 
substance reasonably satisfactory to the Collateral Agent, and Holdings and 
each Borrower shall deliver or cause to be delivered to the Lenders all such 
instruments and documents (including legal opinions and lien searches) as the 
Collateral Agent shall reasonably request to evidence compliance with this 
Section.  Holdings and each Borrower agree to provide such evidence as the 
Collateral Agent shall reasonably request as to the perfection and priority 
status of each such security interest and Lien. Prior to the Collateral 
Release Date, each Loan Party agrees promptly to notify the Collateral Agent 
if any material portion of the Collateral owned or held by such Loan Party is 
damaged or destroyed.

    SECTION 5.12.  Subsidiaries.  In the event that any of Dixie Furniture 
Company, Incorporated, Henry Link Corporation, Link-Taylor Corporation or 
Young-Hinkle Corporation (a) acquires or otherwise obtains any assets (other 
than rights associated with each such company's name) in excess of $5,000, 
(b) hires or otherwise retains any employees or (c) conducts any business, 
cause such company to become a Subsidiary Guarantor in accordance with 
Section 5.11 as if such company were a subsequently acquired or organized 
Domestic Subsidiary.

                                 ARTICLE VI

                             Negative Covenants

    Each of Holdings and the Borrowers covenants and agrees with each Lender 
that, so long as this Restated Credit Agreement shall remain in effect and 
until the Commitments have been terminated and the principal of and interest 
on each Loan, all Fees and all other expenses or amounts payable under any 
Loan Document have been paid in full and all Letters of Credit have been 
canceled or have expired and all amounts drawn thereunder have been 
reimbursed in full, unless the Required Lenders shall otherwise consent in 
writing, neither Holdings nor the Borrowers will, nor will they cause or 
permit any of the Subsidiaries (other than the Receivables Subsidiary and the 
Master Servicer, except in the case of Section 6.13) to:

    SECTION 6.01.  Indebtedness.  Incur, create, assume or permit to exist 
any Indebtedness, except:

         (a) Indebtedness existing on the date hereof and set forth
    on Schedule 6.01(a);

         (b) Indebtedness created hereunder and under the other Loan
    Documents; 

         (c) in the case of Holdings, the Masco Notes and the
    Debentures;

         (d) (i) in the case of the Parent Borrower, the Subordinated
    Notes and (ii) in the case of the Subsidiary Guarantors, the
    Guarantees guaranteeing the Subordinated Notes;


<PAGE>

                                                                              65

         (e) Permitted Foreign Indebtedness in an aggregate principal
    amount at any time outstanding not to exceed $75,000,000 (less,
    without duplication, the aggregate amount of Indebtedness of
    Foreign Subsidiaries pursuant to Section 6.01(o) outstanding at
    such time and the aggregate outstanding amount of Permitted
    Foreign Investments made pursuant to Section 6.04(k));

         (f) other unsecured or subordinated Indebtedness of any
    type, provided that there may not be outstanding at any time more
    than $100,000,000 in aggregate principal amount of such
    Indebtedness that, by its terms, matures prior to the Maturity
    Date;

         (g) intercompany loans and advances, letters of credit and
    guarantees in support of Indebtedness permitted by Section
    6.04(b), (c), (j), (k), (m) and (p);

         (h) Indebtedness consisting of purchase money Indebtedness
    (including Indebtedness that is in existence with respect to any
    asset or other property at the time such asset or other property
    is acquired), industrial revenue bonds or Capital Lease
    Obligations incurred after the Restatement Effective Date to
    finance capital expenditures, provided that the Indebtedness
    incurred shall not exceed the purchase price of the assets
    financed thereby;

         (i) Indebtedness pursuant to Exchange Rate Protection
    Agreements and Interest Rate Protection Agreements;

         (j) Indebtedness of Holdings, the Parent Borrower and the
    Subsidiaries owed to (including obligations in respect of letters
    of credit for the benefit of) any person providing worker's
    compensation, health, disability or other employee benefits or
    property, casualty or liability insurance to Holdings, the Parent
    Borrower or any Subsidiary, pursuant to reimbursement or
    indemnification obligations to such person, in each case incurred
    in the ordinary course of business;

         (k) Indebtedness of Holdings, the Parent Borrower or any
    Subsidiary in respect of performance bonds, bid bonds, appeal
    bonds, surety bonds and similar obligations and trade related
    letters of credit, in each case provided in the ordinary course
    of business, including those incurred to secure health, safety
    and environmental obligations in the ordinary course of business;

         (l) Indebtedness that is secured solely by newly acquired
    real property or by real property of any Acquired Entity and
    which is nonrecourse to the Borrowers and the Guarantors (other
    than such Acquired Entity); 

         (m) Indebtedness issued by Holdings or the Parent Borrower,
    in lieu of the payment of cash, in connection with the purchase
    or redemption of Capital Stock held by directors, officers,
    employees or consultants of Holdings, the Parent Borrower or any
    Subsidiary or their Permitted Transferees;

         (n) Indebtedness incurred pursuant to any Permitted
    Receivables Financing from time to time;

         (o) Indebtedness not in excess of $15,000,000, which
    Indebtedness is guaranteed by Masco, or with respect to which
    Masco has provided credit support, in


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66

    either case pursuant to the terms of the Acquisition Agreement (the
    "Masco Guarantees");

         (p)  Indebtedness incurred pursuant to any sale and
    lease-back transaction permitted by Section 6.03;

         (q) secured Indebtedness in addition to that permitted by
    clauses (a) through (p) above in an aggregate principal amount
    not to exceed $25,000,000 at any time outstanding; and

         (r) extensions, renewals or refinancings of Indebtedness
    under the above paragraphs so long as, in the case of paragraphs
    (c) and (d) above, (A) such Indebtedness ("Refinancing
    Indebtedness") is in an aggregate principal amount not greater
    than the aggregate principal amount of the Indebtedness being
    extended, renewed or refinanced plus the amount of any premiums
    required to be paid thereon and fees and expenses associated
    therewith, (B) such Refinancing Indebtedness has a final maturity
    that is not less than six months after the Maturity Date, (C) the
    interest rate applicable to such Refinancing Indebtedness is a
    market interest rate (as determined in good faith by the Board of
    Directors of the Parent Borrower) as of the time of such
    extension, renewal or refinancing, (D) if the Indebtedness being
    extended, renewed or refinanced is subordinated to the
    Obligations, such Refinancing Indebtedness is subordinated to the
    Obligations to the same extent as the Indebtedness being
    extended, renewed or refinanced and (E) at the time and after
    giving effect to such extension, renewal or refinancing, no
    Default or Event of Default shall have occurred and be
    continuing.

    SECTION 6.02.  Liens.  Create, incur, assume or permit to exist any Lien 
on any property or assets (including stock or other securities of any person, 
including any Subsidiary) now owned or hereafter acquired by it or on any 
income or revenues or rights in respect of any thereof, except:

         (a) Liens on property or assets of Holdings, the Parent
    Borrower and the Subsidiaries existing on the date hereof and set
    forth on Schedule 6.02(a), provided that such Liens shall secure
    only those obligations which they secure on the date hereof (and
    extensions, renewals and refinancings of such obligations
    permitted by Section 6.01);

         (b) any Lien created under the Loan Documents;

         (c) any Lien existing on any property or asset prior to the
    acquisition thereof by Holdings, the Parent Borrower or any
    Subsidiary, provided that (i) such Lien is not created in
    contemplation of or in connection with such acquisition and
    (ii) such Lien does not apply to any other property or assets of
    Holdings, any Borrower or any Subsidiary;

         (d) Liens for taxes, assessments, governmental charges and
    levies not yet due or which are being contested or are unpaid in
    compliance with Section 5.03;

         (e) carriers', warehousemen's, mechanics', materialmen's,
    repairmen's and other like Liens arising in the ordinary course
    of business and securing obligations that are not due and payable
    or which are being contested in compliance with Section 5.03;


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                                                                              67

         (f) Liens of landlords or of mortgagees of landlords arising
    by operation of law, provided that the (A) rental payments
    secured thereby are not yet due and payable and (B) the Borrowers
    use reasonable efforts to obtain a consent from such landlord, in
    which such landlord or mortgagee acknowledges the Collateral
    Agent's first priority security interest in the Inventory (as
    defined in the Security Documents) pledged by each Loan Party to
    the Collateral Agent and agrees to provide the Collateral Agent
    with access to the premises covered by such lease in order to
    enforce such security interest;

         (g) pledges and deposits made in the ordinary course of
    business in compliance with workmen's compensation, unemployment
    insurance and other social security or similar laws or
    regulations;

         (h) pledges and deposits to secure the performance of bids,
    trade contracts (other than for Indebtedness), leases (other than
    Capital Lease Obligations), statutory obligations, surety and
    appeal bonds, performance bonds and other obligations of a like
    nature incurred in the ordinary course of business;

         (i) zoning restrictions, easements, rights-of-way, minor
    defects or irregularities in title, restrictions on use of real
    property and other similar encumbrances which, in the aggregate,
    do not materially detract from the value of the property subject
    thereto or materially interfere with the ordinary conduct of the
    business of Holdings, the Parent Borrower or the Subsidiaries;

         (j) purchase money security interests in real property,
    improvements thereto or equipment hereafter acquired (or, in the
    case of improvements, constructed) by Holdings, any Borrower or
    any Subsidiary, provided that (i) such security interests secure
    Indebtedness permitted by Section 6.01(h), (ii) such security
    interests are incurred, and the Indebtedness secured thereby is
    created, not later than 120 days after such acquisition (or
    construction) or are incurred to extend, renew or refinance such
    security interests and Indebtedness incurred within such period,
    (iii) the Indebtedness secured thereby does not exceed the lesser
    of the cost or the fair market value of such real property,
    improvements or equipment at the time of such acquisition (or
    construction) and (iv) such security interests do not apply to
    any other property or assets of Holdings, any Borrower or any
    Subsidiary; 

         (k) attachment or judgment Liens securing judgments, unless
    the aggregate amount of such judgments shall (A) exceed
    $10,000,000 (except to the extent the Administrative Agent shall
    have received satisfactory evidence that such judgments are
    covered by insurance) and (B) remain undischarged for a period of
    more than 60 consecutive days during which execution shall not be
    effectively stayed;

         (l) Liens to secure Capital Lease Obligations, industrial
    revenue bonds or Indebtedness permitted by Sections 6.01(h) or
    (l), provided that such Liens do not extend to any property or
    assets of Holdings, the Parent Borrower or any Subsidiary other
    than the property or assets financed thereby;

         (m) rights of first offer or refusal relating to interests
    in joint ventures;

         (n) UCC filings that relate to the preservation of claims in
    respect of interests in property subject to operating leases (it
    being agreed that the permissiveness of such


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68

    filing hereunder shall not be considered a waiver of any claim that
    the Lenders or the Collateral Agent may have on the property to which
    such interest relates);

         (o) Liens securing any Indebtedness permitted by
    Sections 6.01(l), (p) and (q);

         (p) in the case of any Foreign Subsidiary, Liens securing
    any Permitted Foreign Indebtedness permitted by Section 6.01(e);

         (q) Liens in favor of customs and revenue authorities
    arising as a matter of law to secure payment of custom duties in
    connection with the importation of goods in the ordinary course
    of business;

         (r) Liens arising out of conditional sale, title retention,
    consignment or similar arrangements for the sale of goods entered
    into by Holdings, the Parent Borrower or any of the Subsidiaries
    in the ordinary course of business;

         (s) Liens on accounts receivables financed in connection
    with any Permitted Receivables Financing permitted by Section
    6.05; and

         (t) pledges of any Capital Stock of Simmons.

    SECTION 6.03.  Sale and Lease-Back Transactions.  Enter into any 
arrangement, directly or indirectly, with any person whereby it shall sell or 
transfer any property, real or personal, used or useful in its business, 
whether now owned or hereafter acquired, and thereafter rent or lease such 
property or other property which it intends to use for substantially the same 
purpose or purposes as the property being sold or transferred, provided that 
the Parent Borrower and the Subsidiaries may enter into any such transaction 
to the extent that the Capital Lease Obligation and Liens associated 
therewith would be permitted by Sections 6.01(h), 6.01(l) or 6.02(o).

    SECTION 6.04.  Investments, Loans and Advances.  Purchase, hold or 
acquire any Capital Stock, evidences of Indebtedness or other securities of, 
make or permit to exist any loans or advances to, or make or permit to exist 
any investment or any other interest in, any other person, except:

         (a) investments by Holdings existing on the Closing Date in
    the Capital Stock of the Parent Borrower and Simmons;

         (b) investments, loans or advances made by any Borrower in
    or to Holdings, (i) to the extent necessary to enable Holdings to
    pay fees and expenses payable under the Transition Services
    Agreement (and also to the extent that payment by the Parent
    Borrower of the fees and expenses payable pursuant to the
    Management Agreement may constitute such investments, loans or
    advances), (ii) to the extent necessary to enable Holdings to
    make payments consisting of indemnification obligations,
    guarantee fees and reimbursement of amounts expended by Masco for
    the benefit of the Parent Borrower and the Subsidiaries required
    to be made pursuant to the Acquisition Agreement, (iii) to fund
    any repurchase, redemption or other payment pursuant to
    Section 6.06(a)(iii), (iv) to the extent necessary to cover any
    operating expenses of Holdings or (v) for any purpose, with
    amounts available under the Restricted Payments Basket, provided
    that after giving effect to any investment, loan


<PAGE>

                                                                              69

    or advance made pursuant to this paragraph (b), the Parent Borrower
    shall be in compliance on a pro forma basis with Sections 6.09 and 6.10.

         (c) investments, loans or advances made by Holdings, any
    Borrower or any Subsidiary in or to any Borrower or any
    Subsidiary Guarantor;

         (d) Permitted Investments;

         (e) investments by Holdings, any Borrower or any Subsidiary
    in (i) the Capital Stock of the Receivables Subsidiary or Master
    Servicer and (ii) other interests in the Receivables Subsidiary,
    in each case to the extent necessary in connection with or
    required by the terms of the Permitted Receivables Financing;

         (f) investments consisting of noncash consideration received
    in connection with a sale of assets permitted by Section 6.05;

         (g) investments arising from transactions by any Loan Party
    or any of the Subsidiaries with customers or suppliers (including
    Affiliates to the extent permitted by Section 6.07) in the
    ordinary course of business, including endorsements of negotiable
    instruments and debt obligations and other investments received
    in connection with the bankruptcy or reorganization of customers
    and suppliers and in settlement of delinquent obligations of, and
    other disputes with, customers or suppliers, arising in the
    ordinary course of business, and in the exercise of the
    reasonable business judgment of such Borrower or such Subsidiary;

         (h) advances to employees made to cover payroll, travel and
    similar expenses that are expected at the time of such advances
    ultimately to be treated as expenses in accordance with GAAP and
    that are made in the ordinary course of business, provided that
    in the event it is determined that any item with respect to which
    any such advance is made will not be treated as such an expense,
    this clause (h) shall be inapplicable with respect to such
    advances;

         (i) loans or advances to employees made in the ordinary
    course of business not exceeding $5,000,000 in the aggregate
    outstanding at any time;

         (j) investments, loans or advances made by any Foreign
    Subsidiary in or to any other Foreign Subsidiary;

         (k) Permitted Foreign Investments not to exceed $75,000,000
    at any time outstanding (less, without duplication, the aggregate
    outstanding principal amount of Permitted Foreign Indebtedness
    and the aggregate amount of Indebtedness of Foreign Subsidiaries
    pursuant to Section 6.01(o) outstanding at such time);

         (l) Capital Expenditures and other purchases permitted
    hereunder;

         (m) investments, loans and advances existing on the date
    hereof and as set forth on Schedule 6.04(m) and renewals,
    replacements and extensions thereof, provided that the amount of
    any such renewed, replaced or extended investment, loan or
    advance shall be for an amount no greater than the amount of the
    investment, loan or advance being renewed or extended;


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70

         (n) investments, loans and advances in or to customers and
    dealers in the ordinary course of business (including
    investments, loans and advances existing on the date hereof and
    set forth on Schedule 6.04(n)) not exceeding in the aggregate
    $75,000,000 at any time outstanding; 

         (o) investments, loans and advances in or to suppliers in
    the ordinary course of business and investments, loans and
    advances in or to Joint Ventures engaged in any related business
    (including investments, loans and advances existing on the date
    hereof and set forth on Schedule 6.04(o)),not exceeding in the
    aggregate $80,000,000 at any time outstanding;

         (p) investments, loans and advances in or to a Foreign
    Subsidiary originally arising from dividend receivables owed by
    such Foreign Subsidiary or any other Foreign Subsidiary (whether
    or not thereafter reclassified from a loan or an advance to an
    investment or vice versa), provided that there shall be no net
    increase in the aggregate amount of cash investments, cash loans
    and cash advances to Foreign Subsidiaries as a result of any
    investments, loans and advances permitted pursuant to this
    Section 6.04(p);

         (q) Permitted Acquisitions; and

         (r) investments, loans or advances in addition to those
    permitted by clauses (a) through (q) above not exceeding in the
    aggregate $25,000,000 at any time outstanding.

    SECTION 6.05.  Mergers, Consolidations, Sales of Assets and Acquisitions. 
 Merge into or consolidate with any other person, or permit any other person 
to merge into or consolidate with it, or sell, transfer, lease or otherwise 
dispose of (in one transaction or in a series of transactions) all or any  of 
its assets (whether now owned or hereafter acquired) or any Capital Stock of 
the Parent Borrower or any Subsidiary, or purchase, lease or otherwise 
acquire (in one transaction or a series of transactions) all or any of the 
assets of any other person, except that:

         (a) any Loan Party and any Subsidiary may purchase and sell
    inventory and Permitted Investments and purchase and sell
    obsolete, worn out and unused assets and scrap in the ordinary
    course of business;

         (b) if at the time thereof and immediately after giving
    effect thereto no Event of Default or Default shall have occurred
    and be continuing, (i) any wholly owned Subsidiary may merge into
    the Parent Borrower in a transaction in which the Parent Borrower
    is the surviving corporation, (ii) any wholly owned Subsidiary
    may merge into or consolidate with any other wholly owned
    Domestic Subsidiary in a transaction in which the surviving
    entity is a wholly owned Domestic Subsidiary; (iii) any 90%-Owned
    Foreign Subsidiary may merge into any other 90%-Owned Foreign
    Subsidiary in a transaction in which the surviving entity is a
    90%-Owned Foreign Subsidiary and no person other than the Parent
    Borrower, a wholly owned Domestic Subsidiary or a 90%-Owned
    Foreign Subsidiary receives any consideration (other than
    interests in the surviving entity to any applicable minority
    interest holder not exceeding the proportionate interests of such
    minority interest holder in the applicable Subsidiary) and
    (iv) any direct wholly owned subsidiary of any Foreign Subsidiary
    may merge into such Foreign Subsidiary or into another direct
    wholly owned subsidiary of such


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                                                                              71

    Foreign Subsidiary so long as no person other than such Foreign
    Subsidiary receives any consideration;

         (c) (i) any Loan Party or any Subsidiary may sell, transfer,
    lease or otherwise dispose of any of its assets to any Borrower
    or any Subsidiary Guarantor, (ii) any 90%-Owned Foreign
    Subsidiary may sell, transfer, lease or otherwise dispose of any
    of its assets to any 90%-Owned Foreign Subsidiary and (iii) any
    direct wholly owned subsidiary of any Foreign Subsidiary may
    sell, transfer, lease or otherwise dispose of any of its assets
    to such Foreign Subsidiary or another wholly owned subsidiary of
    such Foreign Subsidiary;

         (d) any Loan Party and any Subsidiary may sell accounts
    receivable and related assets pursuant to any Permitted
    Receivables Financing in effect from time to time;

         (e) any sale and lease-back transaction permitted by Section
    6.03 may be effected;

         (f) any Loan Party and any Subsidiary may sell other assets
    or Capital Stock of any Subsidiary without limitation, so long as
    the Net Cash Proceeds received by the Parent Borrower or any
    Subsidiary of any such Asset Sale are applied as follows:

              (i) at the election of the Parent Borrower (a
         "Restricted Payment Election"), up to 50% of such Net Cash
         Proceeds may be added to the Restricted Payments Basket, and
         used to make Restricted Payments, so long as (A) the
         Commitments are permanently reduced, simultaneously with
         such election, by an amount equal to an equivalent
         percentage of such Net Cash Proceeds pursuant to
         Section 2.09(d) and (B) the Total Debt Ratio, on a pro forma
         basis after giving effect to such transactions, is less than
         or equal to 2.50 to 1.00; or

              (ii) to the extent any portion of such Net Cash
         Proceeds is not (A) added to the Restricted Payments Basket
         and applied to permanently reduce the Commitments pursuant
         to paragraph (i) above within one year following the receipt
         or (B) used by such Loan Party or Subsidiary within one year
         following receipt to purchase (or enter into binding
         commitments to purchase) assets used in the business of such
         Loan Party or Subsidiary or to make an investment, loan or
         advance in or to another Loan Party that within such
         one-year period uses the proceeds of such investment to
         purchase (or enters into binding commitments to  purchase)
         assets used in the business of such other Loan Party, an
         amount equal to 50% of such unused portion shall be applied
         to permanently reduce the Commitments pursuant to
         Section 2.09;

         (g) any investments, loans or advances permitted by
    Section 6.04 may be effected; 

         (h) any Loan Party or any Subsidiary may lease or sublease
    properties in which it has interests or lease or sublease any
    other property in the ordinary course of business;

         (i) a Foreign Subsidiary may issue its Capital Stock (i) to
    the extent it is required to do so pursuant to director
    qualification and to local ownership laws in the


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72

    applicable foreign country and (ii) to the management of such Foreign
    Subsidiary under any employee stock option, stock purchase, stock
    grant or other similar incentive or employee benefit plan in
    existence from time to time; and

         (j) Holdings may sell, transfer or otherwise dispose of
    (including by means of a dividend) the Capital Stock or assets of
    Simmons;

provided, however, that prior to the Collateral Release Date any sale, 
transfer or other disposition of assets or stock otherwise permitted by 
Section 6.05 (f) above shall not be permitted unless (A) such sale, transfer 
or other disposition is for consideration at least 75% of which is cash and 
(B) such consideration is at least equal to the fair market value of the 
assets sold, transferred or disposed of (as determined in good faith by the 
board of directors of the Parent Borrower).

    SECTION 6.06.  Dividends and Distributions; Restrictions on Ability of 
Subsidiaries to Pay Dividends.  (a)  In the case of the Parent Borrower or 
any Subsidiary, declare or pay, directly or indirectly, any dividend or make 
any other distribution (by reduction of capital or otherwise), whether in 
cash, property, securities or a combination thereof, with respect to any 
shares of its Capital Stock or directly or indirectly redeem, purchase, 
retire or otherwise acquire for value (or permit any Subsidiary to purchase 
or acquire for value) any shares of any class of its Capital Stock or set 
aside any amount for any such purpose; provided, however, that:

         (i) any Subsidiary may declare and pay dividends to,
    repurchase its Capital Stock from, or make other distributions
    to, the Parent Borrower or any wholly owned Subsidiary (or, in
    the case of non-wholly owned Subsidiaries, to or from the Parent
    Borrower or any Subsidiary and each other owner of Capital Stock
    of such Subsidiary on a pro rata basis (or more favorable basis
    from the perspective of the Parent Borrower or such Subsidiary)
    based on their relative ownership interests);

         (ii) the Parent Borrower may declare and pay dividends or
    make other distributions to Holdings to the same extent that the
    Parent Borrower may loan or advance funds to Holdings pursuant to
    Section 6.04(b);

         (iii) the Parent Borrower or a Foreign Subsidiary may
    purchase or redeem, and the Parent Borrower may make payments of
    principal and interest on Indebtedness issued pursuant to
    Section 6.01(m) to purchase or redeem, shares of Capital Stock
    (or options or warrants in respect of such shares) of Holdings,
    the Parent Borrower, or any Subsidiary  (including related stock
    appreciation rights or similar securities) held by any current or
    former director, officer,  employee or consultant of the Parent
    Borrower or any Subsidiary (or held by their Permitted
    Transferees) upon such person's death, disability, retirement or
    termination of employment or consulting services or under the
    terms of any agreement under which such shares of stock or
    related rights or similar securities were issued; and

         (iv) the Parent Borrower or any Subsidiary may declare or
    pay, directly or indirectly, any other dividend or make any other
    distribution not specifically authorized pursuant to the above
    paragraphs (i) through (iii) with amounts then available under
    the Restricted Payments Basket, provided that after giving effect
    to any dividend or distribution made pursuant to this
    clause (iv), the Parent Borrower shall be in compliance on a pro
    forma basis with Sections 6.09 and 6.10.



<PAGE>

                                                                              73

    (b)  Permit its subsidiaries (other than the Receivables Subsidiary, the 
Master Servicer and Simmons) to, directly or indirectly, create or otherwise 
cause or suffer to exist or become effective any encumbrance or restriction 
on the ability of any such subsidiary to (i) pay any dividends or make any 
other distributions on its Capital Stock or any other equity interest or (ii) 
make or repay any loans or advances to the Parent Borrower or the parent of 
such subsidiary (subclauses (i) and (ii) are collectively referred to as an 
"Upstream Payment") other than encumbrances and restrictions:

         (A)  pursuant to the Loan Documents;

         (B)  existing under, or by reason of, applicable law;

         (C)  contained in any debt instrument relating to (i) a
              person acquired after the date hereof, provided that
              (x) such instrument was in existence at the time of
              such acquisition and was not created in contemplation
              of or in connection with such acquisition, (y) the
              officers of the Parent Borrower reasonably believe at
              the time of such acquisition that the terms of such
              instrument will not encumber or restrict the ability of
              such acquired person to make an Upstream Payment and
              (z) such instrument contains no express encumbrances or
              restrictions on the ability of such acquired person to
              make an Upstream Payment and (ii) industrial revenue
              bonds permitted under Section 6.01(h) or Indebtedness
              permitted under Section 6.01(l), provided that such
              instrument contains no express encumbrances or
              restrictions on the ability of the applicable obligor
              thereon to make an Upstream Payment;

         (D)  contained in or required by Permitted Foreign
              Indebtedness; and

         (E)  contained in agreements for Asset Sales permitted under
              Section 6.05.

    SECTION 6.07.  Transactions with Affiliates.  Sell or transfer any 
property or assets to, or purchase or acquire any property or assets from, or 
otherwise engage in any other transactions with, any of its Affiliates, 
except that Holdings, any Borrower or any Subsidiary may engage in any of the 
foregoing transactions in the ordinary course of business at prices and on 
terms and conditions not less favorable to Holdings, such Borrower or such 
Subsidiary than could be obtained on an arm's-length basis from unrelated 
third parties; provided, however, that the foregoing restriction shall not 
apply to (a) any transactions expressly permitted by this Restated Credit 
Agreement, including those permitted by Section 6.06 and any Permitted 
Receivables Financing, (b) transactions among Foreign Subsidiaries, (c) 
transactions pursuant to agreements entered into or in effect on the 
Restatement Effective Date and set forth on Schedule 6.07, including 
amendments thereto entered into after the Restatement Effective Date, 
provided that the terms of any such amendment are not, in the aggregate, less 
favorable to the Lenders than the terms of such agreement prior to such 
amendment, (d) any transactions among the Loan Parties and (e) transactions 
with Affiliates of Citicorp conducted in the normal course of such 
Affiliates' banking business.

    SECTION 6.08.  Other Indebtedness and Agreements.  (a) In the case of the 
Parent Borrower or any Subsidiary, make any payment or distribution, whether 
in cash, property, securities or a combination thereof, other than scheduled 
payments of principal and interest as and when due (to the extent not 
prohibited by applicable subordination provisions), in respect of, or pay, or 
offer or commit to pay, or directly or indirectly redeem, repurchase, retire 
or


<PAGE>

74

otherwise acquire for consideration (or set apart any sum for the aforesaid 
purposes), the Subordinated Notes or any other Indebtedness for borrowed 
money (other than Intercompany Indebtedness, Indebtedness under Sections 
6.01(a), (b), (e), (f), (g), (h), (i), (j), (k), (l), (m), (n), (o), (p) or 
(q) or any Refinancing Indebtedness in respect thereof) of any Loan Party or 
any Subsidiary.

    (b)  Notwithstanding anything contained in this Section 6.08 to the 
contrary,  any payment or distribution that would otherwise be prohibited by 
this Section 6.08 may be effected, in whole or in part, with (i) the Net Cash 
Proceeds of any public offering of Capital Stock (other than Disqualified 
Stock) or (ii) amounts then available under the Restricted Payments Basket, 
provided that (A) no Default or Event of Default shall have occurred and be 
continuing at the time of any such payment pursuant to this paragraph (b) and 
(B) after giving effect to any such payment pursuant to this paragraph (b), 
the Parent Borrower shall be in compliance on a pro forma basis with Sections 
6.09 and 6.10.

    (c)  Permit any waiver, supplement, modification, amendment, termination 
or release of any indenture, instrument or agreement governing the 
Debentures, the Masco Notes or the Subordinated Notes (or any Indebtedness 
issued to refinance such Indebtedness in accordance with this Restated Credit 
Agreement), to the extent that any such waiver, supplement, modification, 
amendment, termination or release would be adverse to the Lenders in any 
material respect.

    (d)  Permit any waiver, supplement, modification, amendment, termination 
or release of (i) the certificate of incorporation or by-laws of Holdings, 
any Borrower or any Subsidiary, (ii) the Acquisition Agreement, (iii) the 
Stockholders' Agreement, (iv) the Management Agreement, (v) the Transition 
Services Agreement or (vi) the Tax Sharing Agreement, in each case to the 
extent that any such waiver, supplement, modification, amendment, termination 
or release would be adverse to the Lenders in any material respect.

    SECTION 6.09.  Interest Coverage Ratio.  Permit the ratio (the "Interest 
Coverage Ratio") of (a) Consolidated EBITDA to (b) Consolidated Interest 
Expenses for any period of four consecutive fiscal quarters ending on the 
last day of any fiscal quarter included in any period set forth below to be 
less than the ratio set forth below for such period:

From and Including:          To and Including:           Interest Coverage Ratio
------------------           ----------------            -----------------------
June 30, 1997                December 30, 1998               2.00 to 1.00
December 31, 1998            December 30, 1999               2.25 to 1.00
December 31, 1999            December 30, 2000               2.50 to 1.00
December 31, 2000            December 30, 2001               2.75 to 1.00
December 31, 2001                                            3.00 to 1.00
and thereafter


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                                                                              75


SECTION 6.10.  Total Debt Ratio.  Permit the Total Debt Ratio (a) as of the 
last day of any fiscal quarter included in any period set forth below to be 
in excess of the ratio set forth below for such period:

From and Including:            To and Including:               Total Debt Ratio
------------------             ----------------                -----------------
June 30, 1997                  December 30, 1998                  5.00 to 1.00
December 31, 1998              December 30, 1999                  4.50 to 1.00
December 31, 1999                                                 4.00 to 1.00
and thereafter

or (b) if the Parent Borrower has made the election referred to in the 
definition of the term "Collateral Release Date", as of the last day of any 
fiscal quarter ending after the date of such election to be in excess of 3.00 
to 1.00.

    SECTION 6.11.  Capital Expenditures.  Incur Capital Expenditures in 
excess of $90,000,000 in any fiscal year commencing with the fiscal year 
ending December 31, 1997; provided, however, that (a) the amount of permitted 
Capital Expenditures in any fiscal year shall be increased by the total 
amount of unused permitted Capital Expenditures for the immediately preceding 
year (other than amounts referred to in clause (b) of this proviso and less 
an amount equal to any unused permitted Capital Expenditures carried forward 
to such preceding year pursuant to this proviso) and (b) Holdings, the Parent 
Borrower and the Subsidiaries may incur, in the aggregate, an additional 
$10,000,000 in each fiscal year of Capital Expenditures in connection with 
matters relating to compliance with any Environmental Law or cleanup of any 
Hazardous Materials that is not in the ordinary course of business.

    SECTION 6.12.  Bank Accounts.  Establish or maintain any bank account or 
similar account with any financial institution that is not a Lender, other 
than (a) the accounts specified in Section 2A of the Perfection Certificate, 
(b) any deposit account used exclusively for the payment of payroll of any 
Loan Party or any Subsidiary, (c) foreign accounts of any Foreign Subsidiary 
and (d) other accounts with an aggregate balance of less than $3,000,000.

    SECTION 6.13.  Business of Holdings, Borrowers and Subsidiaries. Engage 
at any time in any business or business activity other than (a) in the case 
of the Parent Borrower and the Subsidiaries (other than the Receivables 
Subsidiary and the Master Servicer), the business currently conducted by it 
and business activities reasonably incidental thereto or related to or 
derived from any such business or activities; (b) in the case of Holdings, 
(i) the ownership of all the outstanding Capital Stock of the Parent Borrower 
and Simmons, together with activities directly related thereto, (ii) the 
business currently conducted by the Specified HFG Companies and business 
activities reasonably incidental thereto or business activities related 
thereto or derived therefrom, (iii) performance of its obligations under the 
Loan Documents, under intercompany Indebtedness and under all agreements, 
Capital Stock and Indebtedness contemplated by the Acquisition Agreement, 
(iv) actions required by law to maintain its status as a corporation, (v) 
actions incidental to the consummation of the Transactions and (vi) sale and 
servicing obligations under any Permitted Receivables Financing; (c) in the 
case of the Receivables Subsidiary, the purchase and sale of receivables (or 
participation interests therein) in connection with any Permitted Receivables 
Financing, together with activities related thereto; and (d) in the case of 
the Master Servicer, the servicing obligations under any Permitted 
Receivables Financing, together with activities related thereto.


<PAGE>

76

    SECTION 6.14.  Fiscal Year.  Change the end of its fiscal year from 
December 31 to any other date.

                                 ARTICLE VII

                              Events of Default

    In case of the happening of any of the following events ("Events
of Default"):

         (a) any representation or warranty made or deemed made by a
    Loan Party in or in connection with any Loan Document or the
    borrowings or issuances of Letters of Credit hereunder, or any
    representation, warranty, statement or information contained in
    any report, certificate, financial statement or other instrument
    furnished in connection with or pursuant to any Loan Document,
    shall prove to have been false or misleading in any material
    respect when so made, deemed made or furnished;

         (b) default shall be made in the payment of any principal of
    any Loan or the reimbursement with respect to any L/C
    Disbursement when and as the same shall become due and payable,
    whether at the due date thereof or at a date fixed for prepayment
    thereof or by acceleration thereof or otherwise; 

         (c) default shall be made in the payment of any interest on
    any Loan or any Fee or L/C Disbursement or any other amount
    (other than an amount referred to in (b) above) due under any
    Loan Document, when and as the same shall become due and payable,
    and such default shall continue unremedied for a period of five
    Business Days;

         (d) default shall be made in the due observance or
    performance by Holdings, any Borrower or any Subsidiary of any
    covenant, condition or agreement contained in Section 5.01(a),
    5.05 or 5.08 or in Article VI;

         (e) default shall be made in the due observance or
    performance by Holdings, any Borrower or any Subsidiary of any
    covenant, condition or agreement contained in any Loan Document
    (other than those specified in (b), (c) or (d) above) and such
    default shall continue unremedied for a period of 30 days after
    notice thereof from the Administrative Agent or any Lender to the
    Borrowers;

         (f) (i) Holdings, any Borrower or any Subsidiary shall (A)
    fail to pay any principal or interest, regardless of amount, due
    in respect of any Indebtedness in a principal amount in excess of
    $10,000,000, when and as the same shall become due and payable,
    or (B) fail to observe or perform any other term, covenant,
    condition or agreement contained in any agreement or instrument
    evidencing or governing any such Indebtedness if the effect of
    any failure referred to in this clause (B) is to cause, or to
    permit the holder or holders of such Indebtedness or a trustee on
    its or their behalf to cause, such Indebtedness to become due
    prior to its stated maturity, or (ii) any default or other event
    shall have occurred under the Receivables Sale Agreement, the
    Receivables Pooling Agreement or any other document governing any
    Permitted Receivables Financing if the effect of such default or
    other event is to cause, or to permit the holder or holders of
    interests in the receivables purchased thereunder or a


<PAGE>

                                                                              77

    trustee on its or their behalf to cause, the termination of any
    Permitted Receivables Financing;

         (g) an involuntary proceeding shall be commenced or an
    involuntary petition shall be filed in a court of competent
    jurisdiction seeking (i) relief in respect of Holdings, any
    Borrower, any Domestic Subsidiary or any Significant Foreign
    Subsidiary, or of a substantial part of the property or assets of
    Holdings, any Borrower, any Domestic Subsidiary or any
    Significant Foreign Subsidiary, under Title 11 of the United
    States Code, as now constituted or hereafter amended, or any
    other Federal, state or foreign bankruptcy, insolvency,
    receivership or similar law, (ii) the appointment of a receiver,
    trustee, custodian, sequestrator, conservator or similar official
    for Holdings, any Borrower, any Domestic Subsidiary or any
    Significant Foreign Subsidiary or for a substantial part of the
    property or assets of Holdings, any Borrower, any Domestic
    Subsidiary or any Significant Foreign Subsidiary or (iii) the
    winding-up or liquidation of Holdings, any Borrower, any Domestic
    Subsidiary or any Significant Foreign Subsidiary; and such
    proceeding or petition shall continue undismissed for 60 days or
    an order or decree approving or ordering any of the foregoing
    shall be entered;

         (h) Holdings, any Borrower, any Domestic Subsidiary or any
    Significant Foreign Subsidiary shall (i) voluntarily commence any
    proceeding or file any petition seeking relief under Title 11 of
    the United States Code, as now constituted or hereafter amended,
    or any other Federal, state or foreign bankruptcy, insolvency,
    receivership or similar law, (ii) consent to the institution of,
    or fail to contest in a timely and appropriate manner, any
    proceeding or the filing of any petition described in (g) above,
    (iii) apply for or consent to the appointment of a receiver,
    trustee, custodian, sequestrator, conservator or similar official
    for Holdings, any Borrower, any Domestic Subsidiary or any
    Significant Foreign Subsidiary or for a substantial part of the
    property or assets of Holdings, any Borrower, any Domestic
    Subsidiary or any Significant Foreign Subsidiary, (iv) file an
    answer admitting the material allegations of a petition filed
    against it in any such proceeding, (v) make a general assignment
    for the benefit of creditors, (vi) become unable, admit in
    writing its inability or fail generally to pay its debts as they
    become due or (vii) take any action for the purpose of effecting
    any of the foregoing;

         (i) one or more judgments for the payment of money in an
    aggregate amount in excess of $10,000,000, which amount is not
    covered by insurance (provided that in the event such a judgment
    is covered by insurance, the Administrative Agent is provided
    with satisfactory evidence that the insurance provider will
    provide the coverage relating thereto) shall be rendered against
    Holdings, any Borrower, any Subsidiary or any combination thereof
    and the same shall remain undischarged for a period of
    60 consecutive days during which execution shall not be
    effectively stayed, or any action shall be legally taken by a
    judgment creditor to levy upon assets or properties of Holdings,
    any Borrower or any Subsidiary to enforce any such judgment;

         (j) an ERISA Event shall have occurred that, in the
    reasonable opinion of the Required Lenders, when taken together
    with all other such ERISA Events, could reasonably be expected to
    result in liability of Holdings or the Borrowers in an aggregate
    amount exceeding $10,000,000;


<PAGE>

78

         (k) prior to the Collateral Release Date, any security
    interest purported to be created by any Security Document in any
    Collateral having a value, in the aggregate, of more than
    $10,000,000 shall cease to be, or shall be asserted by any
    Borrower or any other Loan Party not to be, a valid, perfected,
    first priority (except as otherwise expressly provided in this
    Restated Credit Agreement or such Security Document) security
    interest in the securities, assets or properties covered thereby,
    except to the extent that any such loss of perfection or priority
    results from the failure of the Collateral Agent to maintain
    possession of certificates representing securities pledged under
    the Pledge Agreement and except to the extent that such loss is
    covered by a lender's title insurance policy and the
    Administrative Agent is provided with satisfactory evidence that
    related insurance provider will provide the coverage relating
    thereto;

         (l) any Loan Document shall not be for any reason, or shall
    be asserted by any Loan Party not to be, in full force and effect
    and enforceable in accordance with its terms; or

         (m) there shall have occurred a Change in Control;

then, and in every such event (other than an event with respect to Holdings 
or any Borrower described in paragraph (g) or (h) above), and at any time 
thereafter during the continuance of such event, the Administrative Agent may 
and, at the request of the Required Lenders shall, by written notice to the 
Borrowers, take either or both of the following actions, at the same or 
different times:  (i) terminate forthwith the Commitments and (ii) declare 
the Loans then outstanding to be forthwith due and payable in whole or in 
part, whereupon the principal of the Loans so declared to be due and payable, 
together with accrued interest thereon and any unpaid accrued Fees and all 
other liabilities of Holdings and the Borrowers accrued hereunder and under 
any other Loan Document, shall become forthwith due and payable, without 
presentment, demand, protest or any other notice of any kind, all of which 
are hereby expressly waived by Holdings and the Borrowers, anything contained 
herein or in any other Loan Document to the contrary notwithstanding; and in 
any event with respect to Holdings or any of the Borrowers described in 
paragraph (g) or (h) above, the Commitments shall automatically terminate and 
the principal of the Loans then outstanding, together with accrued interest 
thereon and any unpaid accrued Fees and all other liabilities of Holdings and 
the Borrowers accrued hereunder and under any other Loan Document, shall 
automatically become due and payable, without presentment, demand, protest or 
any other notice of any kind, all of which are hereby expressly waived by 
Holdings and the Borrowers, anything contained herein or in any other Loan 
Document to the contrary notwithstanding.

                                ARTICLE VIII

              The Administrative Agent and the Collateral Agent

    In order to expedite the transactions contemplated by this Restated 
Credit Agreement, The Chase Manhattan Bank is hereby appointed to act as 
Administrative Agent and Collateral Agent on behalf of the Lenders (for 
purposes of this Article VIII, the Administrative Agent and the Collateral 
Agent are referred to collectively as the "Agents") and The First National 
Bank of Chicago is hereby appointed as the Issuing Bank.  The Issuing Bank, 
each of the Lenders and each assignee of any such Lender hereby irrevocably 
authorize the Agents to take such actions on behalf of such Lender or 
assignee or the Issuing Bank and to exercise such


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                                                                              79

powers as are specifically delegated to the Agents by the terms and 
provisions hereof and of the other Loan Documents, together with such actions 
and powers as are reasonably incidental thereto.  The Administrative Agent is 
hereby expressly authorized by the Lenders and the Issuing Bank, without 
hereby limiting any implied authority, (a) to receive on behalf of the 
Lenders and the Issuing Bank all payments of principal of and interest on the 
Loans, all payments in respect of L/C Disbursements and all other amounts due 
to the Lenders hereunder (other than payments that are specifically required 
to be paid directly to a Lender), and promptly to distribute to each Lender 
or the Issuing Bank its proper share of each payment so received; (b) to give 
notice on behalf of each of the Lenders to Holdings and the Borrowers of any 
Event of Default specified in this Restated Credit Agreement of which the 
Administrative Agent has actual knowledge acquired in connection with its 
agency hereunder; and (c) to receive and distribute to each Lender copies of 
all notices, financial statements and other materials delivered by Holdings, 
any Borrower or any other Loan Party pursuant to this Restated Credit 
Agreement or the other Loan Documents as received by the Administrative 
Agent.  Without limiting the generality of the foregoing, the Agents are 
hereby expressly authorized to execute any and all documents (including 
releases) with respect to the Collateral and the rights of the Secured 
Parties with respect thereto, as contemplated by and in accordance with the 
provisions of this Restated Credit Agreement and the Security Documents.

    Neither the Agents nor any of their respective directors, officers, 
employees or agents shall be liable as such for any action taken or omitted 
by any of them except for its or his own gross negligence or wilful 
misconduct, or be responsible for any statement, warranty or representation 
herein or the contents of any document delivered in connection herewith, or 
be required to ascertain or to make any inquiry concerning the performance or 
observance by the Borrowers or any other Loan Party of any of the terms, 
conditions, covenants or agreements contained in any Loan Document.  The 
Agents shall not be responsible to the Lenders for the due execution, 
genuineness, validity, enforceability or effectiveness of this Restated 
Credit Agreement or any other Loan Documents, instruments or agreements.  The 
Agents shall in all cases be fully protected in acting, or refraining from 
acting, in accordance with written instructions signed by the Required 
Lenders and, except as otherwise specifically provided herein, such 
instructions and any action or inaction pursuant thereto shall be binding on 
all the Lenders.  Each Agent shall, in the absence of knowledge to the 
contrary, be entitled to rely on any instrument or document believed by it in 
good faith to be genuine and correct and to have been signed or sent by the 
proper person or persons.  Neither the Agents nor any of their respective 
directors, officers, employees or agents shall have any responsibility to the 
Borrowers or any other Loan Party on account of the failure of or delay in 
performance or breach by any Lender or the Issuing Bank of any of its 
obligations hereunder or to any Lender or the Issuing Bank on account of the 
failure of or delay in performance or breach by any other Lender or the 
Issuing Bank or the Borrowers or any other Loan Party of any of their 
respective obligations hereunder or under any other Loan Document or in 
connection herewith or therewith.  Each of the Agents may execute any and all 
duties hereunder by or through agents or employees and shall be entitled to 
rely upon the advice of legal counsel selected by it with respect to all 
matters arising hereunder and shall not be liable for any action taken or 
suffered in good faith by it in accordance with the advice of such counsel.

    The Lenders hereby acknowledge that neither Agent shall be under any duty 
to take any discretionary action permitted to be taken by it pursuant to the 
provisions of this Restated Credit Agreement unless it shall be requested in 
writing to do so by the Required Lenders.



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80

    Subject to the appointment and acceptance of a successor Agent as 
provided below, either Agent may resign at any time by notifying the Lenders 
and the Borrowers.  Upon any such resignation, the Required Lenders shall 
have the right to appoint a successor, provided that such appointment shall 
require the consent of the Borrowers (which consent shall not be unreasonably 
withheld), so long as no Default or Event of Default shall have occurred and 
be continuing.  If no successor shall have been so appointed by the Required 
Lenders and shall have accepted such appointment within 30 days after the 
retiring Agent gives notice of its resignation, then the retiring Agent may, 
on behalf of the Lenders, appoint a successor Agent which shall be a bank 
with an office in New York, New York, having a combined capital and surplus 
of at least $500,000,000 or an Affiliate of any such bank. Upon the 
acceptance of any appointment as Agent hereunder by a successor bank, such 
successor shall succeed to and become vested with all the rights, powers, 
privileges and duties of the retiring Agent and the retiring Agent shall be 
discharged from its duties and obligations hereunder.  After the Agent's 
resignation hereunder, the provisions of this Article and Section 9.05 shall 
continue in effect for its benefit in respect of any actions taken or omitted 
to be taken by it while it was acting as Agent.

    With respect to the Loans made by it hereunder, each Agent in its 
individual capacity and not as Agent shall have the same rights and powers as 
any other Lender and may exercise the same as though it were not an Agent, 
and the Agents and their Affiliates may accept deposits from, lend money to 
and generally engage in any kind of business with Holdings, any Borrower or 
any Subsidiary or other Affiliate thereof as if it were not an Agent.

    Each Lender agrees (a) to reimburse the Agents, on demand, in the amount 
of its pro rata share (based on its Commitments hereunder, or if such 
Commitments have expired or been terminated, based on its outstanding Loans) 
of any expenses incurred for the benefit of the Lenders by the Agents, 
including counsel fees and compensation of agents and employees paid for 
services rendered on behalf of the Lenders, that are required to be but shall 
not have been reimbursed by the Borrowers and (b) to indemnify and hold 
harmless each Agent and any of its directors, officers, employees or agents, 
on demand, in the amount of such pro rata share, from and against any and all 
liabilities, taxes, obligations, losses, damages, penalties, actions, 
judgments, suits, costs, expenses or disbursements of any kind or nature 
whatsoever that may be imposed on, incurred by or asserted against it in its 
capacity as Agent or any of them in any way relating to or arising out of 
this Restated Credit Agreement or any other Loan Document or any action taken 
or omitted by it or any of them under this Restated Credit Agreement or any 
other Loan Document, to the extent the same are required to be but shall not 
have been reimbursed by the Borrowers or any other Loan Party, provided that 
no Lender shall be liable to an Agent or any such other indemnified person 
for any portion of such liabilities, obligations, losses, damages, penalties, 
actions, judgments, suits, costs, expenses or disbursements that is 
determined by a court of competent jurisdiction by final and nonappealable 
judgment to have resulted from the gross negligence or wilful misconduct of 
such Agent or any of its directors, officers, employees or agents.

    Each Lender acknowledges that it has, independently and without reliance 
upon the Agents or any other Lender and based on such documents and 
information as it has deemed appropriate, made its own credit analysis and 
decision to enter into this Restated Credit Agreement.  Each Lender also 
acknowledges that it will, independently and without reliance upon the Agents 
or any other Lender and based on such documents and information as it shall 
from time to time deem appropriate, continue to make its own decisions in 
taking or not taking action under or based upon this Restated Credit 
Agreement or any other Loan Document, any related agreement or any document 
furnished hereunder or thereunder.




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                                                                              81

                                 ARTICLE IX

                                Miscellaneous

    SECTION 9.01.  Notices.  Notices and other communications provided for 
herein shall be in writing and shall be delivered by hand or overnight 
courier service, mailed by certified or registered mail or sent by telecopy, 
as follows:

         (a) if to the Borrowers or Holdings, to LifeStyle
    Furnishings International Ltd. at 1300 National Highway,
    Thomasville, North Carolina 27360, Attention of President
    (Telecopy No.(910) 476-2656) with a copy to the Attention of
    General Counsel (Telecopy No. (910) 476-4551); 

         (b) if to the Administrative Agent or the Swingline Lender,
    to Chase Manhattan Agency Services, One Chase Manhattan Plaza,
    8th Floor, New York, New York 10005, Attention of Sandra Miklave
    (Telecopy No. (212) 552-5658), with a copy to The Chase Manhattan
    Bank, 270 Park Avenue, New York 10017, Attention of William
    Caggiano (Telecopy No. (212) 972-0009);

         (c) if to the Issuing Bank, to The First National Bank of
    Chicago, 153 West 51st Street, New York, NY 10019, Attention of
    Nelson Martinez (Telecopy No. (212) 373-1367); and 

         (d) if to a Lender, to it at its address (or telecopy
    number) set forth on Schedule 2.01 or in the Assignment and
    Acceptance pursuant to which such Lender shall have become a
    party hereto.

All notices and other communications given to any party hereto in accordance 
with the provisions of this Restated Credit Agreement shall be deemed to have 
been given on the date of receipt if delivered by hand or overnight courier 
service or when receipt is acknowledged if sent by telecopy or on the date 
five Business Days after dispatch by certified or registered mail if mailed, 
in each case delivered, sent or mailed (properly addressed) to such party as 
provided in this Section 9.01 or in accordance with the latest unrevoked 
direction from such party given in accordance with this Section 9.01.  All 
notices, reports, filings or other communications required to be given to the 
Lenders as a group shall be deemed to have been given on the date of receipt 
by the Administrative Agent.

    SECTION 9.02.  Survival of Agreement.  All covenants, agreements, 
representations and warranties made by the Borrowers or Holdings herein and 
in the certificates or other instruments prepared or delivered in connection 
with or pursuant to this Restated Credit Agreement or any other Loan Document 
shall be considered to have been relied upon by the Lenders and the Issuing 
Bank and shall survive the making by the Lenders of the Loans and the 
issuance of Letters of Credit by the Issuing Bank, regardless of any 
investigation made by the Lenders or the Issuing Bank or on their behalf, and 
shall continue in full force and effect as long as the principal of or any 
accrued interest on any Loan or any Fee or any other amount payable under 
this Restated Credit Agreement or any other Loan Document is outstanding and 
unpaid or any Letter of Credit is outstanding and so long as the Commitments 
have not been terminated.  The provisions of Sections 2.14, 2.16, 2.20, 9.05 
and 9.16 shall remain operative and in full force and effect regardless of 
the expiration of the term of this Restated Credit Agreement, the 
consummation of the transactions contemplated hereby, the repayment of any


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82

of the Loans, the expiration of the Commitments,  the expiration of any 
Letter of Credit, the invalidity or unenforceability of any term or provision 
of this Restated Credit Agreement or any other Loan Document, or any 
investigation made by or on behalf of the Administrative Agent, the 
Collateral Agent, any Lender or the Issuing Bank.  

    SECTION 9.03.  Binding Effect.  This Restated Credit Agreement shall 
become effective when it shall have been executed by each of the Borrowers, 
Holdings and the Administrative Agent and when the Administrative Agent shall 
have received counterparts hereof which, when taken together, bear the 
signatures of each of the other parties hereto, and thereafter shall be 
binding upon and inure to the benefit of the parties hereto and their 
respective permitted successors and assigns.

    SECTION 9.04.  Successors and Assigns.  (a)  Whenever in this Restated 
Credit Agreement any of the parties hereto is referred to, such reference 
shall be deemed to include the permitted successors and assigns of such 
party; and all covenants, promises and agreements by or on behalf of the 
Borrowers, Holdings, the Administrative Agent, the Issuing Bank or the 
Lenders that are contained in this Restated Credit Agreement shall bind and 
inure to the benefit of their respective successors and assigns.

    (b)  Each Lender may assign to one or more assignees all or a portion of 
its interests, rights and obligations under this Restated Credit Agreement 
(including all or a portion of its Commitment, the Loans at the time owing to 
it and participations in Letters of Credit held by it (it being understood 
that Commitments, Loans, L/C Disbursements and participations in Letters of 
Credit may only be assigned in pro rata amounts)); provided, however, that 
(i) except in the case of an assignment to a Lender or an Affiliate of such 
Lender, (A) the Parent Borrower (only so long as an Event of Default pursuant 
to clause (b), (c), (g) or (h) of Article VII shall not have occurred and be 
continuing) and the Administrative Agent (and, in the case of any assignment 
of a Commitment, the Issuing Bank and the Swingline Lender) must give their 
prior written consent to such assignment (which consent shall not be 
unreasonably withheld) and (B) the amount of the Commitment of the assigning 
Lender subject to each such assignment (determined as of the date the 
Assignment and Acceptance with respect to such assignment is delivered to the 
Administrative Agent) shall not be less than $5,000,000 (or, if less, the 
entire remaining amount of such Lender's Commitment), (ii) the parties to 
each such assignment shall execute and deliver to the Administrative Agent an 
Assignment and Acceptance, together with a processing and recordation fee of 
$3,500 and (iii) the assignee, if it shall not be a Lender, shall deliver to 
the Administrative Agent an Administrative Questionnaire.  Upon acceptance 
and recording pursuant to paragraph (e) of this Section 9.04, from and after 
the effective date specified in each Assignment and Acceptance, which 
effective date shall be at least five Business Days after the execution 
thereof, (A) the assignee thereunder shall be a party hereto and, to the 
extent of the interest assigned by such Assignment and Acceptance, have the 
rights and obligations of a Lender under this Restated Credit Agreement and 
(B) the assigning Lender thereunder shall, to the extent of the interest 
assigned by such Assignment and Acceptance, be released from its obligations 
under this Restated Credit Agreement (and, in the case of an Assignment and 
Acceptance covering all or the remaining portion of an assigning Lender's 
rights and obligations under this Restated Credit Agreement, such Lender 
shall cease to be a party hereto but shall continue to be entitled to the 
benefits of Sections 2.14, 2.16, 2.20 and 9.05, as well as to any Fees 
accrued for its account and not yet paid).  

    (c)  By executing and delivering an Assignment and Acceptance, the 
assigning Lender thereunder and the assignee thereunder shall be deemed to 
confirm to and agree with each


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                                                                              83

other and the other parties hereto as follows:  (i) such assigning Lender 
warrants that it is the legal and beneficial owner of the interest being 
assigned thereby free and clear of any adverse claim and that its Commitment, 
and the outstanding balance of its Loans, in each case without giving effect 
to assignments thereof which have not become effective, are as set forth in 
such Assignment and Acceptance, (ii) except as set forth in (i) above, such 
assigning Lender makes no representation or warranty and assumes no 
responsibility with respect to any statements, warranties or representations 
made in or in connection with this Restated Credit Agreement, or the 
execution, legality, validity, enforceability, genuineness, sufficiency or 
value of this Restated Credit Agreement, any other Loan Document or any other 
instrument or document furnished pursuant hereto, or the financial condition 
of Holdings, any Borrower or any Subsidiary or the performance or observance 
by Holdings, any Borrower or any Subsidiary of any of its obligations under 
this Restated Credit Agreement, any other Loan Document or any other 
instrument or document furnished pursuant hereto; (iii) such assignee 
represents and warrants that it is legally authorized to enter into such 
Assignment and Acceptance; (iv) such assignee confirms that it has received a 
copy of this Restated Credit Agreement, together with copies of the most 
recent financial statements referred to in Section 3.05(a) or delivered 
pursuant to Section 5.04 and such other documents and information as it has 
deemed appropriate to make its own credit analysis and decision to enter into 
such Assignment and Acceptance; (v) such assignee will independently and 
without reliance upon the Administrative Agent, the Collateral Agent, such 
assigning Lender or any other Lender and based on such documents and 
information as it shall deem appropriate at the time, continue to make its 
own credit decisions in taking or not taking action under this Restated 
Credit Agreement; (vi) such assignee appoints and authorizes the 
Administrative Agent, the Issuing Bank and the Collateral Agent to take such 
action as agent on its behalf and to exercise such powers under this Restated 
Credit Agreement as are delegated to the Administrative Agent,  Issuing Bank 
and the Collateral Agent, respectively, by the terms hereof, together with 
such powers as are reasonably incidental thereto; and (vii) such assignee 
agrees that it will perform in accordance with their terms all the 
obligations which by the terms of this Restated Credit Agreement are required 
to be performed by it as a Lender.

    (d)  The Administrative Agent shall maintain at one of its offices in The 
City of New York a copy of each Assignment and Acceptance delivered to it and 
a register for the recordation of the names and addresses of the Lenders, and 
the Commitments of, and principal amount of the Loans owing to, each Lender 
pursuant to the terms hereof from time to time (the "Register").  The entries 
in the Register shall be conclusive and Holdings, the Borrowers, the other 
Loan Parties, the Administrative Agent, the Issuing Bank, the Collateral 
Agent and the Lenders shall treat each person whose name is recorded in the 
Register pursuant to the terms hereof as a Lender hereunder for all purposes 
of this Restated Credit Agreement, notwithstanding notice to the contrary.  
The Register shall be available for inspection by Holdings, the Borrowers, 
the other Loan Parties, the Issuing Bank, the Collateral Agent and any 
Lender, at any reasonable time and from time to time upon reasonable prior 
notice.

    (e)  Upon its receipt of a duly completed Assignment and Acceptance 
executed by an assigning Lender and an assignee, an Administrative 
Questionnaire completed in respect of the assignee (unless the assignee shall 
already be a Lender hereunder), the processing and recordation fee referred 
to in paragraph (b) above and, if required, the written consent of the Parent 
Borrower, the Swingline Lender, the Issuing Bank and the Administrative Agent 
to such assignment, the Administrative Agent shall (i) accept such Assignment 
and Acceptance, (ii) record the information contained therein in the Register 
and (iii) give prompt notice thereof to the Lenders, the Issuing Bank and the 
Swingline Lender.  No assignment shall be effective unless and until it has 
been recorded in the Register as provided in this paragraph (e).



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84

    (f)  Each Lender may without the consent of the Parent Borrower, the 
Swingline Lender, the Issuing Bank or the Administrative Agent sell 
participations to one or more banks or other entities in all or a portion of 
its rights and obligations under this Restated Credit Agreement (including 
all or a portion of its Commitment and the Loans owing to it); provided, 
however, that (i) such Lender's obligations under this Restated Credit 
Agreement shall remain unchanged, (ii) such Lender shall remain solely 
responsible to the other parties hereto for the performance of such 
obligations, (iii) the participating banks or other entities shall be 
entitled to the benefit of the cost protection provisions contained in 
Sections 2.14, 2.16 and 2.20 to the same extent as if they were Lenders, 
provided that no such participating bank or entity shall be entitled to 
receive any greater amount pursuant to such Sections than a Lender would have 
been entitled to receive in respect of the amount of participation sold by 
such Lender to such participating bank or entity had no sale occurred, and 
(iv) Holdings, the Borrowers, the other Loan Parties, the Administrative 
Agent, the Issuing Bank and the Lenders shall continue to deal solely and 
directly with such Lender in connection with such Lender's rights and 
obligations under this Restated Credit Agreement, and such Lender shall 
retain the sole right to enforce the obligations of Holdings and the 
Borrowers relating to the Loans or L/C Disbursements and to approve any 
amendment, modification or waiver of any provision of this Restated Credit 
Agreement (other than amendments, modifications or waivers decreasing any 
fees payable hereunder or the amount of principal of or the rate at which 
interest is payable on the Loans, extending any scheduled principal payment 
date or date fixed for the payment of interest on the Loans, increasing or 
extending the Commitments or releasing all or any substantial part of the 
Collateral (except as expressly permitted by the Loan Documents)).

    (g)  Any Lender or participant may, in connection with any assignment or 
participation or proposed assignment or participation pursuant to this 
Section 9.04, disclose to the assignee or participant or proposed assignee or 
participant any information relating to Holdings or the Borrowers furnished 
to such Lender by or on behalf of Holdings or the Borrowers, provided that, 
prior to any such disclosure of information, each such assignee or 
participant or proposed assignee or participant shall execute an agreement in 
the form of Exhibit K.

    (h)  Any Lender may at any time assign all or any portion of its rights 
under this Restated Credit Agreement to a Federal Reserve Bank to secure 
extensions of credit by such Federal Reserve Bank to such Lender, provided 
that no such assignment shall release a Lender from any of its obligations 
hereunder or substitute any such Bank for such Lender as a party hereto.  In 
order to facilitate such an assignment to a Federal Reserve Bank, the 
Borrowers shall, at the request of the assigning Lender, duly execute and 
deliver to the assigning Lender a promissory note or notes, in form and 
substance reasonably satisfactory to the Borrowers, evidencing the Loans made 
to the Borrowers by the assigning Lender hereunder.

    (i)  Neither Holdings nor any Borrower shall assign or delegate any of 
its rights or duties hereunder without the prior written consent of the 
Administrative Agent, the Issuing Bank and each Lender, and any attempted 
assignment without such consent shall be null and void.

    (j)  In the event that S&P, Moody's and Thompson's BankWatch (or 
InsuranceWatch Ratings Service, in the case of Lenders that are insurance 
companies (or Best's Insurance Reports, if such insurance company is not 
rated by Insurance Watch Ratings Service)) shall, after the date that any 
Lender becomes a Lender, downgrade the long-term certificate deposit ratings 
of such Lender, and the resulting ratings shall be below BBB-, Baa3 and C (or 
BB, in the case of a Lender that is an insurance company (or B, in the case 
of an insurance company not rated by InsuranceWatch Ratings Service)), then 
the Issuing Bank shall have the right, but


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                                                                              85

not the obligation, at its own expense, upon notice to such Lender and the 
Administrative Agent, to replace (or to request the Borrowers to use their 
reasonable efforts to replace) such Lender with an assignee (in accordance 
with and subject to the restrictions contained in paragraph (b) above), and 
such Lender hereby agrees to transfer and assign without recourse (in 
accordance with and subject to the restrictions contained in paragraph (b) 
above) all its interests, rights and obligations in respect of its Commitment 
to such assignee; provided, however, that (i) no such assignment shall 
conflict with any law, rule and regulation or order of any Governmental 
Authority and (ii) the Issuing Bank or such assignee, as the case may be, 
shall pay to such Lender in immediately available funds on the date of such 
assignment the principal of and interest accrued to the date of payment on 
the Loans made by such Lender hereunder and all other amounts accrued for 
such Lender's account or owed to it hereunder.

    SECTION 9.05.  Expenses; Indemnity.  (a)  The Borrowers agree to pay all 
reasonable out-of-pocket expenses incurred by the Administrative Agent, the 
Collateral Agent, the Issuing Bank and the Swingline Lender in connection 
with the syndication of the credit facilities provided for herein and the 
preparation and administration of this Restated Credit Agreement and the 
other Loan Documents or in connection with any amendments, modifications or 
waivers of the provisions hereof or thereof or incurred by the Administrative 
Agent, the Collateral Agent or any Lender in connection with the enforcement 
or protection of its rights in connection with this Restated Credit Agreement 
and the other Loan Documents or in connection with the Loans made or Letters 
of Credit issued hereunder, including the reasonable fees, charges and 
disbursements of Cravath, Swaine & Moore, counsel for the Administrative 
Agent and the Collateral Agent, and, in connection with any such enforcement 
or protection, the reasonable fees, charges and disbursements of any other 
counsel for the Administrative Agent, the Collateral Agent or any Lender, it 
being understood that, except in the case of enforcement costs upon default 
by the Borrowers hereunder, such parties and their counsel will, if then 
requested by the Borrowers, provide good faith estimates of such expenses to 
the Parent Borrower upon request prior to any such undertaking.

    (b)  The Borrowers agree, jointly and severally, to indemnify the 
Administrative Agent, the Collateral Agent, each Lender and the Issuing Bank, 
each Affiliate of any of the foregoing persons and each of their respective 
directors, trustees, officers, employees and agents (each such person being 
called an "Indemnitee") against, and to hold each Indemnitee harmless from, 
any and all losses, claims, damages, liabilities and related expenses, 
including reasonable counsel fees, charges and disbursements, incurred by or 
asserted against any Indemnitee arising out of or as a result of (i) any 
claim, litigation, investigation or proceeding, whether or not any Indemnitee 
is a party thereto, relating to the execution or delivery of this Restated 
Credit Agreement or any other Loan Document or any agreement or instrument 
contemplated thereby, the performance by the parties thereto of their 
respective obligations thereunder, the consummation of the Transactions and 
the other transactions contemplated thereby or the use of the proceeds of the 
Loans or issuance of Letters of Credit or (ii) any actual or alleged presence 
or Release of Hazardous Materials on any property owned or operated by 
Holdings, the Borrowers or any of the Subsidiaries, or any Environmental 
Claim related in any way to Holdings, the Borrowers or the Subsidiaries, 
provided that such indemnity shall not, as to any Indemnitee, be available to 
the extent that such losses, claims, damages, liabilities or related expenses 
are determined by a court of competent jurisdiction by final and 
nonappealable judgment to have resulted from the gross negligence or wilful 
misconduct of such Indemnitee.  Notwithstanding any of the foregoing, nothing 
within this Section 9.05(b) shall constitute a release by the Parent Borrower 
of any claims arising against any Lender, the Issuing Bank or the 
Administrative Agent under this Restated Credit Agreement.



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86

    (c)  The provisions of this Section 9.05 shall remain operative and in 
full force and effect regardless of the expiration of the term of this 
Restated Credit Agreement, the consummation of the transactions contemplated 
hereby, the repayment of any of the Loans, the expiration of the Commitments, 
the expiration of any Letter of Credit, the invalidity or unenforceability of 
any term or provision of this Restated Credit Agreement or any other Loan 
Document, or any investigation made by or on behalf of the Administrative 
Agent, the Collateral Agent, any Lender or the Issuing Bank.  All amounts due 
under this Section 9.05 shall be payable on written demand therefor.

    SECTION 9.06.  Right of Setoff.  If an Event of Default shall have 
occurred and be continuing, each Lender is hereby authorized at any time and 
from time to time, to the fullest extent permitted by law, to set off and 
apply any and all deposits (general or special, time or demand, provisional 
or final) at any time held and other indebtedness at any time owing by such 
Lender to or for the credit or the account of Holdings or any Borrower 
against any of and all the obligations of Holdings or any Borrower now or 
hereafter existing under this Restated Credit Agreement and other Loan 
Documents held by such Lender, irrespective of whether or not such Lender 
shall have made any demand under this Restated Credit Agreement or such other 
Loan Document and although such obligations may be unmatured.  The rights of 
each Lender under this Section 9.06 are in addition to other rights and 
remedies (including other rights of setoff) which such Lender may have.

    SECTION 9.07.  Applicable Law.  THIS RESTATED CREDIT AGREEMENT AND THE 
OTHER LOAN DOCUMENTS (OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH 
IN OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED 
BY THE LAWS OF THE STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED 
BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED 
IN SUCH LETTER OF CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE 
UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), 
INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM 
CUSTOMS") AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF 
THE STATE OF NEW YORK.

    SECTION 9.08.  Waivers; Amendment.  (a)  No failure or delay of the 
Administrative Agent, the Collateral Agent, any Lender or the Issuing Bank in 
exercising any power or right hereunder or under any other Loan Document 
shall operate as a waiver thereof, nor shall any single or partial exercise 
of any such right or power, or any abandonment or discontinuance of steps to 
enforce such a right or power, preclude any other or further exercise thereof 
or the exercise of any other right or power.  The rights and remedies of the 
Administrative Agent, the Collateral Agent, the Issuing Bank and the Lenders 
hereunder and under the other Loan Documents are cumulative and are not 
exclusive of any rights or remedies that they would otherwise have.  No 
waiver of any provision of this Restated Credit Agreement or any other Loan 
Document or consent to any departure by any Borrower or any other Loan Party 
therefrom shall in any event be effective unless the same shall be permitted 
by paragraph (b) below, and then such waiver or consent shall be effective 
only in the specific instance and for the purpose for which given.  No notice 
or demand on the Borrowers or Holdings in any case shall entitle the 
Borrowers or Holdings to any other or further notice or demand in similar or 
other circumstances.

    (b)  Neither this Restated Credit Agreement nor any provision hereof may 
be waived, amended or modified except pursuant to an agreement or agreements 
in writing entered into


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                                                                              87

by the Borrowers, Holdings and the Required Lenders; provided, however, that 
no such agreement (i) shall (A) decrease the principal amount of, or extend 
the maturity of or any date for the payment of any interest on, any Loan or 
any date for reimbursement of an L/C Disbursement, or waive or excuse any 
such payment or any part thereof, or decrease the rate of interest on any 
Loan or L/C Disbursement, without the prior written consent of each Lender 
affected thereby, (B) increase or extend the Commitment of any Lender or 
decrease or extend the date for payment of the Commitment Fees of such Lender 
without the prior written consent of such Lender or (C) amend or modify the 
provisions of Section 2.17 or 9.04(i), the provisions of this Section, the 
definition of the term "Required Lenders" or release any Guarantor or, prior 
to the Collateral Release Date, all or any substantial part of the Collateral 
(except, in each case, as expressly permitted by the Loan Documents), without 
the prior written consent of each Lender or (ii) shall amend, modify or 
otherwise affect the rights or duties of the Administrative Agent, the 
Collateral Agent, the Issuing Bank or the Swingline Lender hereunder or under 
any other Loan Document without the prior written consent of the 
Administrative Agent, the Collateral Agent, the Issuing Bank or the Swingline 
Lender, as the case may be.

    (c)  If, in connection with any proposed change, waiver, discharge or 
termination of any of the provisions of this Restated Credit Agreement as 
contemplated by this Section 9.08, or any proposed assignment by Holdings or 
any Borrower as contemplated by Section 9.04(i), the consent of the Required 
Lenders is obtained but the consent of one or more other Lenders or of the 
Issuing Bank whose consent is required is not obtained, then the Borrowers 
shall have the right, so long as all nonconsenting Lenders whose individual 
consent is required or the Issuing Bank, as applicable, are treated as 
described below, to require each such nonconsenting Lender or Issuing Bank to 
transfer and assign all its interest, rights and obligations under this 
Restated Credit Agreement to one or more assignees pursuant to and in 
accordance with Section 2.21, so long as at the time of such transfer and 
assignment each such assignee consents to the proposed change, waiver, 
discharge or termination and the assignment.

    (d)  Notwithstanding anything to the contrary in Section 9.08(b), upon 
the delivery of notice by the Parent Borrower to the Administrative Agent 
that one of the events that triggers a Collateral Release Date has occurred, 
which such notice shall describe such event in reasonable detail, (i) the 
Collateral Agent shall (A) release all Liens and security interests in 
respect of the Collateral held by it on behalf of the Secured Parties and (B) 
execute all documents reasonably required by the Parent Borrower in order to 
effectuate such release, (ii) all references to "Collateral" herein shall 
have no further effect and all covenants and provisions relating to the 
Collateral shall cease to apply and (iii) the Security Documents shall (A) 
terminate automatically in accordance with the terms thereof and (B) cease to 
be Loan Documents hereunder, and each Lender hereby authorizes the 
Administrative Agent to enter into on its behalf an amendment to this 
Restated Credit Agreement to effect the foregoing.

    SECTION 9.09.  Interest Rate Limitation.  Notwithstanding anything herein 
to the contrary, if at any time the interest rate applicable to any Loan or 
participation in any L/C Disbursement, together with all fees, charges and 
other amounts which are treated as interest or loan charges on such Loan or 
participation in such L/C Disbursement under applicable law (collectively, 
the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") 
which may be contracted for, charged, taken, received or reserved by the 
Lender holding such Loan or participation in accordance with applicable law, 
the rate of interest payable in respect of such Loan or participation 
hereunder, together with all Charges payable in respect thereof, shall be 
limited to the Maximum Rate and, to the extent lawful, the interest and 
Charges that


<PAGE>

88

would have been payable in respect of such Loan or participation but were not 
payable as a result of the operation of this Section 9.09 shall be cumulated 
and the interest and Charges payable to such Lender in respect of other Loans 
or participations or periods shall be increased (but not above the Maximum 
Rate therefor) until such cumulated amount, together with interest thereon at 
the Federal Funds Effective Rate to the date of repayment, shall have been 
received by such Lender.

    SECTION 9.10.  Entire Agreement.  This Restated Credit Agreement, the 
Commitment Letter (to the extent it sets forth the fees payable to certain 
parties hereunder), [the L/C Commitment Letter,] the other Loan Documents and 
the confidentiality agreements previously signed by the Lenders constitute 
the entire contract between the parties relative to the subject matter 
hereof.  Any other previous agreement among the parties with respect to the 
subject matter hereof is superseded by this Restated Credit Agreement and the 
other Loan Documents.  Nothing in this Restated Credit Agreement or in the 
other Loan Documents, expressed or implied, is intended to confer upon any 
party other than the parties hereto and thereto any rights, remedies, 
obligations or liabilities under or by reason of this Restated Credit 
Agreement or the other Loan Documents.

    SECTION 9.11.  WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO 
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO a 
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT 
OF, UNDER OR IN CONNECTION WITH THIS RESTATED CREDIT AGREEMENT OR ANY OF THE 
OTHER LOAN DOCUMENTS.  EACH PARTY HERETO (A) CERTIFIES THAT NO 
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, 
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF 
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT 
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS RESTATED 
CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER 
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.

    SECTION 9.12.  Severability.  In the event any one or more of the 
provisions contained in this Restated Credit Agreement or in any other Loan 
Document should be held invalid, illegal or unenforceable in any respect, the 
validity, legality and enforceability of the remaining provisions contained 
herein and therein shall not in any way be affected or impaired thereby (it 
being understood that the invalidity of a particular provision in a 
particular jurisdiction shall not in and of itself affect the validity of 
such provision in any other jurisdiction).  The parties shall endeavor in 
good-faith negotiations to replace the invalid, illegal or unenforceable 
provisions with valid provisions the economic effect of which comes as close 
as possible to that of the invalid, illegal or unenforceable provisions.

    SECTION 9.13.  Counterparts.  This Restated Credit Agreement may be 
executed in counterparts (and by different parties hereto on different 
counterparts), each of which shall constitute an original but all of which 
when taken together shall constitute a single contract, and shall become 
effective as provided in Section 9.03. Delivery of an executed signature page 
to this Restated Credit Agreement by facsimile transmission shall be as 
effective as delivery of a manually signed counterpart of this Restated 
Credit Agreement.



<PAGE>

                                                                              89

    SECTION 9.14.  Headings.  Article and Section headings and the Table of 
Contents used herein are for convenience of reference only, are not part of 
this Restated Credit Agreement and are not to affect the construction of, or 
to be taken into consideration in interpreting, this Restated Credit 
Agreement.

    SECTION 9.15.  Jurisdiction; Consent to Service of Process. (a)  Each of 
Holdings and the Borrowers hereby irrevocably and unconditionally submits, 
for itself and its property, to the nonexclusive jurisdiction of any New York 
State court or Federal court of the United States of America sitting in New 
York City, and any appellate court from any thereof, in any action or 
proceeding arising out of or relating to this Restated Credit Agreement or 
the other Loan Documents, or for recognition or enforcement of any judgment 
relating thereto, and each of the parties hereto hereby irrevocably and 
unconditionally agrees that all claims in respect of any such action or 
proceeding may be heard and determined in such New York State or, to the 
extent permitted by law, in such Federal court.  Each of the parties hereto 
agrees that a final judgment in any such action or proceeding shall be 
conclusive and may be enforced in other jurisdictions by suit on the judgment 
or in any other manner provided by law.  Nothing in this Restated Credit 
Agreement shall affect any right that the Administrative Agent, the 
Collateral Agent, the Issuing Bank or any Lender may otherwise have to bring 
any action or proceeding relating to this Restated Credit Agreement or the 
other Loan Documents against the Borrowers, Holdings or their respective 
properties in the courts of any jurisdiction.

    (b)  Each of Holdings and the Borrowers hereby irrevocably and 
unconditionally waives, to the fullest extent it may legally and effectively 
do so, any objection which it may now or hereafter have to the laying of 
venue of any suit, action or proceeding arising out of or relating to this 
Restated Credit Agreement or the other Loan Documents in any New York State 
or Federal court sitting in New York City.  Each of the parties hereto hereby 
irrevocably waives, to the fullest extent permitted by law, the defense of an 
inconvenient forum to the maintenance of such action or proceeding in any 
such court.

    (c)  Each party to this Restated Credit Agreement irrevocably consents to 
service of process in the manner provided for notices in Section 9.01.  
Nothing in this Restated Credit Agreement will affect the right of any party 
to this Restated Credit Agreement to serve process in any other manner 
permitted by law.

    SECTION 9.16.  Confidentiality.  The Administrative Agent, the Collateral 
Agent, the Issuing Bank and each of the Lenders and participating 
institutions pursuant to Section 9.04(f) agrees to keep confidential and not 
to publish, disclose or otherwise divulge (and to cause its respective 
officers, directors, employees, agents, affiliates and representatives to 
keep confidential and not publish, disclose or otherwise divulge) the 
Information (as defined below), except that the Administrative Agent, the 
Collateral Agent, the Issuing Bank or any Lender shall be permitted to 
disclose Information (a) to such of its respective officers, directors, 
employees, agents, affiliates and representatives (including counsel) as need 
to know such Information (who will be informed of the confidential nature of 
the Information), (b) to the extent otherwise required by applicable laws and 
regulations or by any subpoena or similar legal process, or requested by any 
regulatory authority (in any which event notice thereof will be provided to 
the Parent Borrower and the applicable party to the extent not prohibited by 
applicable law), (c) in connection with any suit, action or proceeding 
relating to the enforcement of its rights hereunder or under the other Loan 
Documents or (d) to the extent such Information (i) becomes publicly 
available other than as a result of a breach of this Section 9.16 or (ii) 
becomes available, or was available, to the Administrative Agent, the Issuing 
Bank, any Lender or the Collateral Agent on a nonconfidential basis from a 
source


<PAGE>

90

other than the Borrowers or Holdings or any of their respective affiliates 
and such source is not bound by a confidentiality agreement to any of the 
Borrowers or Holdings and is not otherwise prohibited from transmitting the 
information to a third party.  For the purposes of this Section, the term 
"Information" shall mean all financial statements, certificates, reports, 
agreements and information (including all analyses, compilations and studies 
prepared by the Administrative Agent, the Collateral Agent, the Issuing Bank 
or any Lender based on any of the foregoing) that are received from any of 
the Borrowers or Holdings or any of their respective affiliates or 
representatives and related to any of the Borrowers or Holdings or any of 
their respective affiliates, any shareholders of any of the Borrowers or 
Holdings or any employee, customer or supplier of any of the Borrowers or 
Holdings or any of their respective affiliates.  The provisions of this 
Section 9.16 shall remain operative and in full force and effect regardless 
of the expiration and term of this Restated Credit Agreement.

    SECTION 9.17.  Obligations Joint and Several.  (a)  Each Borrower agrees 
that it shall, jointly with the other Borrowers and severally, be liable for 
all the Obligations.  Each Borrower further agrees that the Obligations of 
the other Borrowers may be extended and renewed, in whole or in part, without 
notice to or further assent from it, and that it will remain bound upon its 
agreement hereunder notwithstanding any extension or renewal of any 
Obligation of the other Borrowers.

    (b)  Each Borrower waives presentment to, demand of payment from and 
protest to the other Borrowers of any of the Obligations, and also waives 
notice of acceptance of its obligations and notice of protest for nonpayment. 
 The obligations of a Borrower hereunder shall not be affected by (i) the 
failure of any Lender or the Administrative Agent to assert any claim or 
demand or to enforce any right or remedy against the other Borrowers under 
the provisions of this Restated Credit Agreement or any of the other Loan 
Documents or otherwise, or (ii) any rescission, waiver, amendment or 
modification of any of the terms or provisions of this Restated Credit 
Agreement, any of the other Loan Documents or any other agreement.

    (c)  Each Borrower further agrees that its agreement hereunder 
constitutes a promise of payment when due and not of collection, and waives 
any right to require that any resort be had by any Lender to any balance of 
any deposit account or credit on the books of any Lender in favor of any 
other Borrower or any other person.

    (d)  The Obligations of each Borrower hereunder shall not be subject to 
any reduction, limitation, impairment or termination for any reason, 
including compromise, and shall not be subject to any defense or setoff, 
counterclaim, recoupment or termination whatsoever by reason of the 
invalidity, illegality or unenforceability of the Obligations of the other 
Borrowers or otherwise.  Without limiting the generality of the foregoing, 
the obligations of each Borrower hereunder shall not be discharged or 
impaired or otherwise affected by the failure of the Administrative Agent or 
any Lender to assert any claim or demand or to enforce any remedy under this 
Restated Credit Agreement or under any other Loan Document or any other 
agreement, by any waiver or modification in respect of any thereof, by any 
default, failure or delay, wilful or otherwise, in the performance of the 
Obligations of the other Borrowers, or by any other act or omission which may 
or might in any manner or to any extent vary the risk of such Borrower or 
otherwise operate as a discharge of such Borrower as a matter of law or 
equity.

    (e)  Each Borrower further agrees that its obligations hereunder shall 
continue to be effective or be reinstated, as the case may be, if at any time 
payment, or any part thereof, of


<PAGE>

                                                                              91

principal of or interest on any Obligation of the other Borrowers is 
rescinded or must otherwise be restored by the Administrative Agent or any 
Lender upon the bankruptcy or reorganization of any of the other Borrowers or 
otherwise.

    (f)  In furtherance of the foregoing and not in limitation of any other 
right which the Administrative Agent or any Lender may have at law or in 
equity against any Borrower by virtue hereof, upon the failure of a Borrower 
to pay any Obligation when and as the same shall become due, whether at 
maturity, by acceleration, after notice of prepayment or otherwise, each 
other Borrower hereby promises to and will, upon receipt of written demand by 
the Administrative Agent, forthwith pay, or cause to be paid, in cash the 
amount of such unpaid Obligations, and thereupon each Lender shall, in a 
reasonable manner, assign the amount of the Obligations of the other 
Borrowers owed to it and paid by such Borrower pursuant to this guarantee to 
such Borrower, such assignment to be pro tanto to the extent to which the 
Obligations in question were discharged by such Borrower, or make such 
disposition thereof as such Borrower shall direct (all without recourse to 
any Lender and without any representation or warranty by any Lender).

    (g)  Upon payment by a Borrower of any sums as provided above, all rights 
of such Borrower against another Borrower, as the case may be, arising as a 
result thereof by way of right of subrogation or otherwise shall in all 
respects be subordinated and junior in right of payment to the prior 
indefeasible payment in full of all the Obligations to the Lenders.

    SECTION 9.18.  Replacement of Existing Credit Agreement. Notwithstanding 
anything to the contrary, the parties hereto acknowledge and agree that this 
Restated Credit Agreement (a) is set forth in the form of an amendment and 
restatement agreement for convenience only and (b) replaces the Existing 
Credit Agreement in its entirety.


<PAGE>

92

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

                                       LIFESTYLE FURNISHINGS 
                                       INTERNATIONAL LTD., as the
                                       Parent Borrower,

                                         by
                                            /s/ RONALD J. HOFFMAN        
                                            ---------------------------------
                                            Name: Ronald J. Hoffman
                                            Title:  Vice President

                                       AMETEX FABRICS, INC.
                                       THE BERKLINE CORPORATION,
                                       DREXEL HERITAGE FURNISHINGS
                                       INC.,
                                       HENREDON FURNITURE INDUSTRIES,
                                       INC.,
                                       INTERIOR FABRIC DESIGN, INC.,
                                       INTRO EUROPE, INC.,
                                       LA BARGE, INC.,
                                       LEXINGTON FURNITURE
                                       INDUSTRIES, INC.,
                                       MAITLAND-SMITH, INC.,
                                       MARBRO LAMP COMPANY,
                                       RAMM, SON & CROCKER, INC.,
                                       ROBERT ALLEN FABRICS, INC.,
                                       ROBERT ALLEN FABRICS OF N.Y.,
                                       INC.,
                                       SUNBURY TEXTILE MILLS, INC.,
                                       UNIVERSAL FURNITURE LIMITED, 
                                       each as a Subsidiary Borrower,

                                         by
                                             /s/ RONALD  J.HOFFMAN         
                                             -----------------------------
                                             Name:  Ronald J. Hoffman 
                                             Title:  Vice President 


                                       LIFESTYLE HOLDINGS, LTD.,

                                         by

                                            /s/ RONALD R. KASS             
                                            -------------------------------
                                            Name:  Ronald R. Kass
                                            Title:  President


<PAGE>

                                                                              93


                                       FURNISHINGS INTERNATIONAL
                                       INC.,

                                         by
                                            /s/ RONALD J. HOFFMAN          
                                            ------------------------------
                                            Name:  Ronald J. Hoffman
                                            Title:  Vice President


<PAGE>

94

                                       THE CHASE MANHATTAN BANK, 
                                       individually and as
                                       Administrative Agent, 
                                       Collateral Agent and Swingline
                                       Lender,

                                         by
                                           /s/ MARIAN N. SCHULMAN         
                                           -------------------------------
                                           Name:  Marian N. Schulman
                                           Title:  Vice President


                                       THE FIRST NATIONAL BANK OF 
                                       CHICAGO, individually and as 
                                       Issuing Bank,

                                         by
                                            /s/ CHRISTINE DAVIS           
                                            -------------------------------
                                           Name: Christine Davis
                                           Title:  Authorized Agent


                                       CIBC INC., individually and as
                                       Co-Agent,

                                         by
                                            /s/ WILLIAM C. HUMPHRIES       
                                            -------------------------------
                                            Name:  William C. Humphries
                                            Title: Director, CIBC Wood
                                                   Gundy Securities Corp. as
                                                   Agent


<PAGE>

                                                                              95


                                       WACHOVIA BANK,

                                         by
                                            /s/ HAYWOOD EDMUNDSON, V      
                                            ------------------------------
                                           Name:  Haywood Edmundson, V
                                           Title:  Vice President


                                       COMERICA BANK,

                                         by
                                           /s/ JAMES R. GROSSETT          
                                           -----------------------------
                                           Name:  James R. Grossett
                                           Title:  First Vice President


                                       BANK OF TOKYO-MITSUBISHI,
                                       TRUST COMPANY,

                                         by
                                           /s/ PAUL P. MALECKI           
                                           ----------------------------
                                           Name:  Paul P. Malecki
                                           Title:  Vice President


                                       CREDIT LYONNAIS,

                                         by
                                           /s/ ALAIN PANIAESE             
                                           ----------------------------
                                           Name:  Alain Paniaese
                                           Title:  Executive Vice
                                                   President


                                       DRESDNER BANK,

                                         by
                                           /s/ B. CRAIG ERICKSON          
                                           ---------------------------
                                           Name:  B. Craig Erickson
                                           Title:  Vice President


                                         by
                                           /s/ ANTHONY J. BERTI           
                                           -----------------------------
                                           Name:  Anthony J. Berti
                                           Title:  Assistant Treasurer



<PAGE>

96

                                       FIRST UNION NATIONAL BANK,

                                         by
                                           /s/ RICHARD J. RIZZO, JR.      
                                           -------------------------------
                                           Name:  Richard J. Rizzo, Jr.
                                           Title:  Vice President



                                       THE LONG-TERM CREDIT BANK OF
                                       JAPAN, LIMITED, New York
                                       Branch,

                                         by
                                           /s/ SATORU OTSUBO           
                                           ------------------------------
                                           Name:  Satoru Otsubo
                                           Title:  Joint General Manager


                                       THE MITSUBISHI TRUST & BANKING
                                       CORPORATION,

                                         by
                                           /s/ TOSHIHIRO HAYASHI          
                                           ----------------------------
                                           Name:  Toshihiro Hayashi
                                           Title:  Senior Vice President


                                       SANWA BANK LTD.,
                                         by
                                           /s/ RICHARD H. AULT         
                                           --------------------------- 
                                           Name:  Richard H. Ault
                                           Title:  Vice President


                                       THE BANK OF NEW YORK,

                                         by
                                           /s/ ANNE MARIE HUGHES         
                                           ----------------------------
                                           Name:  Anne Marie Hughes
                                           Title:  Assistant Vice
                                                   President



                                       THE BANK OF SCOTLAND,

                                         by
                                           /s/ ANNIE CHIN TAT           
                                           ----------------------------- 
                                           Name:  Annie Chin Tat
                                           Title:  Vice President


<PAGE>

                                                                              97




                                       BANQUE NATIONALE DE PARIS,

                                         by
                                           /s/ HENRY F. SETINA           
                                           -----------------------------
                                           Name:  Henry F. Setina
                                           Title:  Vice President


                                       DG BANK,

                                         by
                                           /s/ NORAH MCCANN             
                                           ----------------------------
                                           Name:  Norah McCann
                                           Title:  Senior Vice President

                                         by
                                           /s/ MARK CONNELLY           
                                           ---------------------------
                                           Name:  Mark Connelly
                                           Title:  Vice President


                                       DAI ICHI KANGYO BANK LTD.,

                                         by
                                           /s/ SEIICHIRO INO             
                                           --------------------------
                                           Name:  Seiichiro Ino
                                           Title:  Vice President

                                       FIRST AMERICAN NATIONAL BANK,

                                         by
                                           /s/ H. HOPE STEWART           
                                           --------------------------
                                           Name:  H. Hope Stewart
                                           Title:  Assistant Vice
                                                   President


                                       SAKURA BANK LTD.,

                                         by
                                           /s/ HIROYASHU IMANISHI        
                                           ------------------------------
                                          Name:  Hiroyashu Imanishi
                                           Title:  Vice President & 
                                                   Senior Manager


                                       THE SUMITOMO BANK, LTD.,

                                         by
                                           /s/ GARY P. FRANKE            
                                           ----------------------------
                                           Name:  Gary P. Franke



<PAGE>

98
                                           Title:  Vice President


                                       SUNTRUST BANKS INC.,

                                         by
                                           /s/ JASON P. OWEN             
                                           ----------------------------
                                           Name:  Jason P. Owen
                                           Title:  Banking Officer


                                         by        
                                           /s/ CHRIS H. COTTER            
                                           ---------------------------
                                           Name:  Chris H. Cotter  
                                           Title:  Banking Officer



                                       PNC BANK, National
                                       Association,

                                         by                       
                                           /s/ ROSE M. CRUMP         
                                           --------------------------
                                           Name:  Rose M. Crump
                                           Title:  Vice President