EXHIBIT 10.12

CONFORMED COPY




               AMENDED AND RESTATED CREDIT AGREEMENT

                            dated as of


                         January 30, 1997

                              between


                            RHEOX, INC.


              THE SUBSIDIARY GUARANTORS PARTY HERETO,

                                and

                     THE LENDERS PARTY HERETO,


                                and


                     THE CHASE MANHATTAN BANK,
                      as Administrative Agent

                      BANKERS TRUST COMPANY,
                      as Documentation Agent




<PAGE>



                         TABLE OF CONTENTS


                                                               Page


                             ARTICLE I

Definitions.....................................................  1
           SECTION 1.01.  Defined Terms.........................  1
           SECTION 1.02.  Classification of Loans and Borrowings 26
           SECTION 1.03.  Terms Generally....................... 27
           SECTION 1.04.  Accounting Terms; GAAP................ 27

                            ARTICLE II

The Credits..................................................... 27
           SECTION 2.01.  Commitments........................... 27
           SECTION 2.02.  Loans and Borrowings.................. 28
           SECTION 2.03.  Requests for Borrowings............... 29
           SECTION 2.04.  Letters of Credit..................... 29
           SECTION 2.05.  Funding of Borrowings................. 34
           SECTION 2.06.  Interest Elections.................... 35
           SECTION 2.07.  Termination and Reduction of 
                           Commitments.......................... 36
           SECTION 2.08.  Repayment of Loans; Evidence of Debt.. 37
           SECTION 2.09.  Prepayment of Loans................... 38
           SECTION 2.10.  Fees.................................. 41
           SECTION 2.11.  Interest.............................. 43
           SECTION 2.12.  Alternate Rate of Interest............ 44
           SECTION 2.13.  Increased Costs....................... 44
           SECTION 2.14.  Break Funding Payments................ 45
           SECTION 2.15.  Taxes................................. 46
           SECTION 2.16.  Payments Generally; Pro Rata Treatment;
                           Sharing of Set-Offs.................. 47
           SECTION 2.17.  Mitigation Obligations................ 49

                            ARTICLE III

Guarantee by Subsidiary Guarantors.............................. 50
           SECTION 3.01.  The Guarantee......................... 50
           SECTION 3.02.  Obligations Unconditional............. 50
           SECTION 3.03.  Reinstatement......................... 51
           SECTION 3.04.  Subrogation........................... 52
           SECTION 3.05.  Remedies.............................. 52
           SECTION 3.06.  Instrument for the Payment of Money... 52


                              (i)


<PAGE>





                                                               Page

           SECTION 3.07.  Continuing Guarantee.................. 52
           SECTION 3.08.  Rights of Contribution................ 52
           SECTION 3.09.  General Limitation on Guarantee 
                           Obligations.......................... 53

                            ARTICLE IV

Representations and Warranties.................................. 54
           SECTION 4.01.  Organization; Powers.................. 54
           SECTION 4.02.  Authorization; Enforceability......... 54
           SECTION 4.03.  Governmental Approvals; No Conflicts.. 54
           SECTION 4.04.  Financial Condition; No Material 
                           Adverse Change....................... 54
           SECTION 4.05.  Properties............................ 55
           SECTION 4.06.  Litigation and Environmental Matters.. 56
           SECTION 4.07.  Compliance with Laws and Agreements... 58
           SECTION 4.08.  Investment and Holding Company Status. 58
           SECTION 4.09.  Taxes................................. 58
           SECTION 4.10.  ERISA................................. 58
           SECTION 4.11.  Disclosure............................ 58
           SECTION 4.12.  Capitalization........................ 59
           SECTION 4.13.  Material Agreements and Liens......... 59
           SECTION 4.14.  Subsidiaries.......................... 59
           SECTION 4.15.  Certain Documents..................... 60

                             ARTICLE V

Conditions...................................................... 60
           SECTION 5.01.  Effective Date........................ 60
           SECTION 5.02.  Each Extension of Credit.............. 65

                            ARTICLE VI

Affirmative Covenants........................................... 66
           SECTION 6.01.  Financial Statements and Other 
                           Information.......................... 66
           SECTION 6.02.  Notices of Material Events............ 68
           SECTION 6.03.  Existence; Conduct of Business........ 68
           SECTION 6.04.  Payment of Obligations................ 69
           SECTION 6.05.  Maintenance of Properties............. 69
           SECTION 6.06.  Maintenance of Insurance.............. 69
           SECTION 6.07.  Books and Records; Inspection Rights.. 72
           SECTION 6.08.  Fiscal Year........................... 72


                              (ii)


<PAGE>





                                                               Page

           SECTION 6.09.  Compliance with Laws.................. 72
           SECTION 6.10.  Use of Proceeds....................... 72
           SECTION 6.11.  Hedging Agreements.................... 72
           SECTION 6.12.  Certain Obligations Respecting 
                           Subsidiaries and Collateral Security. 73
           SECTION 6.13.  Environmental Laws and Permits........ 74
           SECTION 6.14.  Environmental Notices................. 74
           SECTION 6.15.  Environmental Audit and Remedial
                           Action............................... 75

                            ARTICLE VII

Negative Covenants.............................................. 75
           SECTION 7.01.  Indebtedness.......................... 75
           SECTION 7.02.  Liens................................. 76
           SECTION 7.03.  Fundamental Changes................... 77
           SECTION 7.04.  Investments, Loans, Advances, Guarantees
                           and Acquisitions; Hedging Agreements. 78
           SECTION 7.05.  Restricted Payments................... 79
           SECTION 7.06.  Transactions with Affiliates.......... 79
           SECTION 7.07.  Restrictive Agreements................ 80
           SECTION 7.08.  Certain Financial Covenants........... 80
           SECTION 7.09.  Lines of Business..................... 82
           SECTION 7.10.  Modifications of Certain Documents.... 82
           SECTION 7.11.  Rheox International................... 82
           SECTION 7.12.  Subordinated Notes.................... 82

                           ARTICLE VIII

Events of Default............................................... 83

                            ARTICLE IX

The Administrative Agent........................................ 86

                             ARTICLE X

Miscellaneous................................................... 89
           SECTION 10.01.  Notices.............................. 89
           SECTION 10.02.  Waivers; Amendments.................. 89
           SECTION 10.03.  Expenses; Indemnity; Damage Waiver... 91


                              (iii)


<PAGE>



           SECTION 10.04.  Successors and Assigns............... 93
           SECTION 10.05.  Survival............................. 96
           SECTION 10.06.  Counterparts; Integration;
                            Effectiveness....................... 97
           SECTION 10.07.  Severability......................... 97
           SECTION 10.08.  Right of Setoff...................... 97
           SECTION 10.09.  Governing Law; Jurisdiction; Consent 
                            to Service of Process............... 97
           SECTION 10.10.  WAIVER OF JURY TRIAL................. 98
           SECTION 10.11.  Headings............................. 98
           SECTION 10.12.  Confidentiality...................... 99


SCHEDULES:

Schedule 1.01 -- Ancillary Agreements 
Schedule 2.01 -- Commitments 
Schedule 2.04 -- Existing  Letters of Credit  
Schedule 4.05 -- Intellectual  Property  Matters
Schedule 4.06 -- Disclosed  Matters  
Schedule 4.13 -- Material Agreements and Liens 
Schedule 4.14 -- Subsidiaries
Schedule 6.10 -- Indebtedness To Be Paid From Term Loan Proceeds  
Schedule 7.01 -- Existing  Indebtedness  
Schedule 7.02 --  Existing  Liens  
Schedule 7.04 -- Investments 
Schedule 7.07 -- Existing Restrictions

EXHIBITS:

Exhibit A   --  Form of Assignment and Acceptance
Exhibit B   --  Form of Opinion of Counsel to the Credit Parties and NL
Exhibit C   --  Form of Opinion of Special Counsel
Exhibit D   --  Form of Security Agreement
Exhibit E   --  Form of NL Pledge Agreement
Exhibit F   --  Form of Mortgage
Exhibit G   --  Form of Conditional Assignment of and Security Interest in 
                Patent Rights
Exhibit H   --  Form of Conditional Assignment of and Security Interest in 
                Trademark Rights
Exhibit I   --  Form of Copyright Security Agreement



                              (iv)


<PAGE>





           AMENDED AND RESTATED  CREDIT  AGREEMENT  dated as of January 30, 1997
between RHEOX,  INC., the SUBSIDIARY  GUARANTORS party hereto, the LENDERS party
hereto and THE CHASE MANHATTAN BANK, as Administrative Agent.

           WHEREAS,  the Borrower,  the  Subsidiary  Guarantors,  certain of the
Lenders (the  "Existing  Lenders") and the  Administrative  Agent are party to a
Credit  Agreement  dated  as of  March  20,  1991 (as  heretofore  modified  and
supplemented and in effect on the date hereof  immediately  before giving effect
to the amendment  and  restatement  contemplated  hereby,  the "Existing  Credit
Agreement").  Pursuant  to the  Existing  Credit  Agreement  (a)  certain of the
Existing  Lenders  committed to make  Revolving  Credit Loans (as defined in the
Existing Credit  Agreement and referred to herein as "Existing  Revolving Credit
Loans") in an original aggregate  principal amount not exceeding  $15,000,000 at
any one time outstanding (the "Existing Revolving Credit  Commitments"),  with a
portion of such commitments made available for the issuance of letters of credit
in an aggregate amount not exceeding  $5,000,000 at any one time outstanding and
(b) certain of the Existing Lenders  committed to make Term Loans (as defined in
the Existing  Credit  Agreement and referred to herein as "Existing Term Loans")
to  the  Borrower  in an  original  aggregate  principal  amount  not  exceeding
$115,000,000 (the "Existing Term Loan Commitments");

           WHEREAS,  the Borrower has requested that the Existing Lenders (which
include  all of the  Persons  that on the date  hereof are Banks  under,  and as
defined in, the Existing Credit Agreement) and the Administrative Agent agree to
amend and restate the Existing Credit  Agreement,  and the Existing  Lenders and
the  Administrative  Agent are willing to amend and restate the Existing  Credit
Agreement, in order to, among other things, (a) increase the aggregate amount of
the Existing  Revolving  Credit  Commitments  to  $25,000,000,  redesignate  the
Existing  Revolving  Credit   Commitments  as  "Revolving  Credit   Commitments"
hereunder  and decrease the amount  thereof  available  for Letters of Credit to
$2,500,000  and (b) reinstate the Existing Term Loan  Commitments,  increase the
aggregate  amount thereof to $125,000,000 and redesignate the Existing Term Loan
Commitments as "Term Loan Commitments" hereunder;

           NOW,  THEREFORE,  the parties  hereto  hereby agree that the Existing
Credit  Agreement  shall be amended  and  restated  as of the date  hereof  (but
subject to Section 5.01) to read in its entirety as follows:

                             ARTICLE I

                            Definitions

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



                         Credit Agreement

<PAGE>


                             - 2 -


           "Acquisition"  means  any  transaction,  or  any  series  of  related
transactions,  consummated  after the date  hereof,  by which  (a) the  Borrower
and/or any of its Subsidiaries  acquires the business of or all or substantially
all of the assets of any firm, corporation or division thereof,  whether through
purchase  of  assets,  merger  or  otherwise  or (b)  any  Person  that  was not
theretofore a Subsidiary  of the Borrower  becomes a Subsidiary of the Borrower;
provided  however,  the foregoing  clauses (a) and (b) shall not include (i) any
transaction  between  the  Borrower  and any  direct or  indirect  Wholly  Owned
Subsidiary or between one or more direct or indirect Wholly Owned  Subsidiaries,
or (ii) the  organization  of a newly  formed  Wholly  Owned  Subsidiary  of the
Borrower.

           "Adjusted  Base Rate"  means,  for any day, a rate per annum equal to
the greater of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in
effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. Any change in the Adjusted Base Rate due to a change in
the Prime Rate,  the Base CD Rate or the Federal Funds  Effective  Rate shall be
effective  from and  including  the  effective  date of such change in the Prime
Rate, Base CD Rate or the Federal Funds Effective Rate, respectively.

           "Adjusted LIBO Rate" means, 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 (a) the LIBO Rate for such Interest
Period multiplied by (b) the Statutory Reserve Rate.

           "Administrative Agent" means The Chase Manhattan Bank in its capacity
as administrative agent for the Lenders hereunder.

           "Administrative  Questionnaire" means an Administrative Questionnaire
in a form supplied by the Administrative Agent.

           "Affiliate" means, 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. For purposes
of this  definition,  a Person  shall be deemed to be an Affiliate of the Person
specified if such Person  possesses,  directly or indirectly,  the power to vote
10% or more of the securities  having  ordinary voting power for the election of
directors of the Person specified.  Notwithstanding  anything in this definition
to the contrary,  (a) the Borrower and its Subsidiaries  shall not be Affiliates
of each other and (b) none of the  Administrative  Agent,  the Lenders or the LC
Issuing Lender shall be an Affiliate of the Borrower or any of its Subsidiaries.

           "Ancillary  Agreements"  means the Tax Sharing  Agreement and each of
the other documents listed on Schedule 1.01.

           "Applicable  Percentage"  means  (a) with  respect  to any  Revolving
Credit  Lender for  purposes of Section  2.04 and any related  definitions,  the
percentage of the total Revolving


                         Credit Agreement

<PAGE>


                             - 3 -


Credit Commitments  represented by such Lender's Revolving Credit Commitment and
(b) with respect to any Lender in respect of any  indemnity  claim under Section
10.03(b) or 10.03(c) arising out of an action or omission of the  Administrative
Agent under any Loan Document,  the  percentage of the total  Commitments of all
Classes  hereunder   represented  by  the  aggregate  amount  of  such  Lender's
Commitment of all Classes hereunder.

           "Applicable  Rate" means,  for Loans of any Type and commitment  fees
for each Rate Period (as defined below), the respective rate per annum indicated
below for Loans of such Type or  commitment  fees, as  applicable,  opposite the
applicable Leverage Ratio indicated below for such Rate Period:
<TABLE>
<CAPTION>

=========================================================================
                                            Applicable Rate
                                            ---------------
            Range
              of                Base Rate     Eurodollar     Commitment
        Leverage Ratio            Loans          Loans          Fee
-------------------------------------------------------------------------
<S>                               <C>           <C>            <C>   
Greater than to 3.00 to 1         0.750%        1.750%         0.500%
-------------------------------------------------------------------------
Greater than 2.00 to 1
  but less than or equal to
  3.00 to 1                       0.500%        1.500%         0.500%
-------------------------------------------------------------------------
Greater than 1.50 to 1
  but less than or equal to
  2.00 to 1                       0.250%        1.250%         0.375%
-------------------------------------------------------------------------
Greater than 1.00 to 1
  but less than or equal to
  1.50 to 1                       0.000%        1.000%         0.375%
-------------------------------------------------------------------------
Less than or equal to 1.00 to 1   0.000%        0.750%         0.375%
=========================================================================
</TABLE>


           For purposes  hereof,  (i) a "Rate Period" means (x)  initially,  the
period  commencing  on the date hereof to but not including the first Rate Reset
Date (as defined below) thereafter and (y) thereafter,  the period commencing on
a Rate Reset Date to but not including the immediately following Rate Reset Date
and (ii) a "Rate  Reset  Date"  means,  with  respect to any fiscal  quarters or
fiscal year,  the earlier of (x) the third  Business Day after the date on which
the  Borrower  delivers  the  Financial  Certificate  in respect of such  fiscal
quarter  or  fiscal  year,  as the  case may be,  and (y) the date on which  the
Borrower is required to have  delivered the financial  statements  under Section
6.01(a) or (b) in respect of such fiscal quarter or fiscal year, as the case may
be.

           The Leverage  Ratio for any Rate Period  shall be the Leverage  Ratio
set  forth in the  applicable  Financial  Certificate  as at the last day of the
fiscal quarter or fiscal year, as the


                         Credit Agreement

<PAGE>


                             - 4 -


case may be, in respect of which such Financial  Certificate is delivered (i.e.,
the  Leverage  Ratio  for the Rate  Period  commencing  on the date on which the
Borrower delivers its financial  statements  pursuant to Section 6.01(b) for the
fiscal  quarter  ended on September  30, 1997 shall be the Leverage  Ratio as at
September  30, 1997,  the Leverage  Ratio for the Rate Period  commencing on the
date on which the Borrower delivers its financial statements pursuant to Section
6.01(a)  for the fiscal year ended on  December  31, 1997 shall be the  Leverage
Ratio as at December 31, 1997, and so forth).

           Anything  in this  Agreement  to the  contrary  notwithstanding,  the
Applicable  Rate shall be the highest  rates  provided  for above (i) during any
period when an Event of Default shall have occurred and be  continuing,  or (ii)
if the applicable  Financial  Certificate shall not be delivered within the time
that the applicable financial statements are required to be delivered by Section
6.01(a) or (b), as the case may be, (but only,  in the case of this clause (ii),
with  respect to the portion of such Rate Period  prior to the  delivery of such
Financial Certificate).

           "Assessment  Rate" means, for any day, the annual  assessment rate in
effect  on such  day that is  payable  by a member  of the Bank  Insurance  Fund
classified  as  "well-capitalized"  and within  supervisory  subgroup  "B" (or a
comparable successor risk  classification)  within the meaning of 12 C.F.R. Part
327 (or any successor  provision) to the Federal Deposit  Insurance  Corporation
for  insurance  by such  Corporation  of time  deposits  made in  dollars at the
offices of such member in the United  States;  provided  that if, as a result of
any change in any law, rule or regulation, it is no longer possible to determine
the Assessment Rate as aforesaid,  then the Assessment Rate shall be such annual
rate as shall be determined by the Administrative  Agent to be representative of
the cost of such insurance to the Lenders.

           "Assignment  and  Acceptance"  means  an  assignment  and  acceptance
entered  into by a Lender and an  assignee  (with the consent of any party whose
consent is required by Section 10.04), and accepted by the Administrative Agent,
in the form of Exhibit A or any other form approved by the Administrative Agent.

           "Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate
multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.

           "Base Rate", when used in reference to any Loan or Borrowing,  refers
to whether  such Loan,  or the Loans  comprising  such  Borrowing,  are  bearing
interest at a rate determined by reference to the Adjusted Base Rate.

           "Basic   Documents"  means  the  Loan  Documents  and  the  Ancillary
Agreements.

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


                         Credit Agreement

<PAGE>


                             - 5 -



           "Borrower" means Rheox, Inc., a Delaware corporation.

           "Borrowing" means Loans of a particular Class of the same Type, made,
converted or continued on the same date and, in the case of Eurodollar Loans, as
to which a single Interest Period is in effect.

           "Borrowing  Request"  means a request by the Borrower for a Borrowing
in accordance with Section 2.03.

           "Business"   means  the  development,   licensing,   manufacture  and
distribution  of  rheological  additives and related  and/or  similar  specialty
chemical products and services from time to time, now or hereafter, conducted by
the Borrower and its Subsidiaries.

           "Business Day" means any day that is not a Saturday,  Sunday or other
day on which commercial banks in New York City are authorized or required by law
to remain closed; provided 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 U.S. dollar deposits in the London interbank market.

           "Capital  Assets" means, as to any Person,  all fixed assets,  plant,
equipment,  land (to the extent  the same  constitutes  a capital  asset of such
Person)  and other  assets  (including  intangible  assets) of such  Person that
constitute capital assets of such Person under GAAP.

           "Capital Expenditures" means expenditures made by the Borrower or any
Subsidiary to acquire or construct  Capital Assets,  computed in accordance with
GAAP.

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

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

           "Change in Law" means (a) the adoption of any law, rule or regulation
by any Governmental  Authority after the date of this Agreement,  (b) any change
in any law, rule or regulation or in the  interpretation or application  thereof
by any Governmental Authority after the date of this Agreement or (c) compliance
by any Lender or the LC Issuing Lender (or, for


                         Credit Agreement

<PAGE>


                             - 6 -


purposes of Section  2.13(b),  by any  lending  office of such Lender or by such
Lender's or the LC Issuing Lender's  holding company,  if any) with any request,
guideline  or  directive  (whether  or not  having  the  force  of  law)  of any
Governmental Authority made or issued after the date of this Agreement.

           "Chase"  means  The  Chase   Manhattan   Bank,  a  New  York  banking
corporation.

           "Class", when used in reference to any Loan, Borrowing or Commitment,
refers to whether such Loan,  the Loans  comprising  such Borrowing or the Loans
that a Lender holding such Commitment is obligated to make, are Revolving Credit
Loans or Term Loans.

           "Code" means the Internal  Revenue Code of 1986, as amended from time
to time.

           "Commitments"  means the Revolving  Credit  Commitments and Term Loan
Commitments, as applicable.

           "Conditional  Assignment of and Security  Interest in Patent  Rights"
means an amended and restated Conditional Assignment of and Security Interest in
Patent  Rights  substantially  in the form of Exhibit G between the Borrower and
the Administrative Agent.

           "Conditional Assignment of and Security Interest in Trademark Rights"
means an amended and restated Conditional Assignment of and Security Interest in
Trademark Rights substantially in the form of Exhibit H between the Borrower and
the Administrative Agent.

           "Consolidated  Subsidiary" means, for any Person,  each Subsidiary of
such  Person  (whether  now  existing  or  hereafter  created or  acquired)  the
financial  statements  of which  shall be (or should be)  consolidated  with the
financial statements of such Person in accordance with GAAP.

           "Control" means the possession,  directly or indirectly, of the power
to direct or cause the  direction  of the  management  or  policies of a Person,
whether  through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.

           "Copyright   Security   Agreement"  means  an  amended  and  restated
Copyright Security Agreement  substantially in the form of Exhibit I between the
Borrower and the Administrative Agent.

           "Credit Parties" means the Borrower and the Subsidiary Guarantors.

           "Debt Service" means,  for any period,  the sum, for the Borrower and
its  Subsidiaries  (determined  on a consolidated  basis without  duplication in
accordance with


                         Credit Agreement

<PAGE>


                             - 7 -


GAAP), of the following: (a) all payments of principal of Indebtedness scheduled
(excluding any mandatory  prepayment made pursuant to Section 2.09 hereof) to be
made during such period, plus (b) all Interest Expense for such period.

           "Default" means any event or condition which  constitutes an Event of
Default or which  upon  notice,  lapse of time or both  would,  unless  cured or
waived, become an Event of Default.

           "Disclosed Matters" means the actions,  suits and proceedings and the
environmental matters disclosed in Schedule 4.06.

           "Disposition"   means  any  sale,   assignment,   transfer  or  other
disposition  of any property  (whether  now owned or hereafter  acquired) by the
Borrower or any  Subsidiary  to any other  Person  (other than the Borrower or a
Wholly  Owned  Subsidiary)  excluding  any sale,  assignment,  transfer or other
disposition  of (a) any property  sold or disposed of in the ordinary  course of
business,  (b) any  obsolete or worn-out  tools and  equipment no longer used or
useful  in the  business  of the  Borrower  and  its  Subsidiaries  and  (c) any
Collateral  under  and as  defined  in the  Security  Agreement  pursuant  to an
exercise of remedies by the Administrative Agent under Section 5.05 thereof.

           "Disposition Investment" means, with respect to any Disposition,  any
promissory  notes or other evidences of indebtedness or investments  received by
the Borrower or any Subsidiary in connection with such Disposition.

           "Distributor  Affiliate Credit  Extensions"  shall mean extensions of
credit by the Borrower and its  Subsidiaries to Affiliates of the Borrower under
Ancillary  Agreements to finance the sale and distribution by such Affiliates of
products of the Borrower and its Subsidiaries.

           "Domestic  Subsidiary"  means any  Subsidiary  that is  organized  or
created under the laws of the United  States of America,  any State or Territory
thereof or the District of Columbia.

           "EBITDA" means, for any period, operating income for the Borrower and
its  Subsidiaries  (determined  on a consolidated  basis without  duplication in
accordance with GAAP) for such period (calculated before income taxes,  Interest
Expense,  depreciation,  amortization and any other non-cash charges accrued for
such period and (except to the extent  received or paid in cash by the  Borrower
or any Subsidiary)  income or loss attributable to equity in Affiliates for such
period)  excluding  any  extraordinary  and unusual  gains or losses during such
period and excluding the proceeds of any Casualty Events and Dispositions.

           Notwithstanding the foregoing,  if during any period for which EBITDA
is being  determined  the Borrower  shall have  consummated  any  Acquisition or
Disposition then,


                         Credit Agreement

<PAGE>


                             - 8 -


for all purposes of this Agreement (other than for purposes of the definition of
Excess Cash Flow),  EBITDA shall be  determined  on a pro forma basis as if such
Acquisition or Disposition had been made or consummated on the first day of such
period.

           "Effective Date" means the date on which the conditions  specified in
Section 5.01 are satisfied (or waived in accordance with Section 10.02).

           "Enenco" means Enenco, Inc., a New York corporation that, on the date
hereof, is a joint venture between the Borrower and Witco Corporation.

           "Environmental  Claim" means, with respect to any Person, any written
notice,  claim,  demand or other  communication  by any other Person alleging or
asserting  such  Person's  liability for  investigatory  costs,  cleanup  costs,
governmental  response  costs,  damages to natural  resources or other property,
personal injuries, fines or penalties arising out of, based on or resulting from
(a) the presence or Release into the environment,  of any Hazardous  Material at
any location,  whether or not owned by such Person, or (b) circumstances forming
the basis of any violation, or alleged violation, of any Environmental Law.

           "Environmental  Laws"  means all  laws,  rules,  regulations,  codes,
ordinances,  orders,  decrees,  judgments,   injunctions,   notices  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.

           "Environmental  Liability"  means  any  known or  unknown  liability,
contingent or otherwise (including any claim or liability for damages,  costs of
environmental remediation,  fines, penalties or indemnities), of the Borrower or
any Subsidiary directly or indirectly resulting from or based upon (a) violation
of or  non-compliance  with any  Environmental  Law,  (b) the  generation,  use,
handling,  transportation,  storage,  treatment  or  disposal  of any  Hazardous
Materials,  (c)  exposure  to  any  Hazardous  Materials,  (d)  the  Release  or
threatened  Release of any Hazardous  Materials into the  environment or (e) any
contract,  agreement or other consensual arrangement pursuant to which liability
is assumed or imposed with respect to any of the foregoing.

           "Equity  Issuance" shall mean the sale or issuance by the Borrower to
any  Person  other than NL or a  Subsidiary  of NL or by any  Subsidiary  to any
Person  other  than  the  Borrower  or  any  of  the  Borrower's   Wholly  Owned
Subsidiaries of (a) any capital stock of the Borrower or any Subsidiary, (b) any
options or  warrants  exercisable  in respect of such  capital  stock or (c) any
other security or instrument  representing  an equity  interest (or the right to
obtain an equity  interest) in the Borrower or any Subsidiary;  provided however
the foregoing  clauses (a), (b) and (c) shall not include the issuance of shares
by a Foreign  Subsidiary to a nominee for the Borrower or any of the  Borrower's
Wholly Owned


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<PAGE>


                             - 9 -


Subsidiaries if such issuance is required under the applicable corporate laws of
the country in which such Foreign Subsidiary is organized.

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

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

           "ERISA  Affiliate"  means  any  trade  or  business  (whether  or not
incorporated) that, together with the Borrower,  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" means (a) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder with respect to a Plan (other
than an event for which the 30-day notice  period is waived),  (b) 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, (c) 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, (d) the  incurrence by the Borrower or any of its ERISA  Affiliates of any
liability  under Title IV of ERISA with respect to the  termination of any Plan,
(e) the receipt by the Borrower or any ERISA  Affiliate  from the PBGC or a plan
administrator  of any notice  relating to an intention to terminate  any Plan or
Plans or to appoint a trustee to administer  any Plan, (f) the incurrence by the
Borrower or any of its ERISA  Affiliates  of any  liability  with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan, or (g) the
receipt by the Borrower or any ERISA Affiliate of any notice,  or the receipt by
any  Multiemployer  Plan from the Borrower 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.

           "Eurodollar", when used in reference to any Loan or Borrowing, refers
to whether  such Loan,  or the Loans  comprising  such  Borrowing,  are  bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.

           "Event of Default"  has the meaning  assigned to such term in Article
VIII.

           "Excess  Cash Flow" means,  for any period,  the excess of (a) EBITDA
for  such  period  over  (b)  the  sum for  the  Borrower  and its  Subsidiaries
(determined on a consolidated


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<PAGE>


                             - 10 -


basis without  duplication in accordance with GAAP) of (i) Debt Service for such
period plus (ii) the aggregate  amount of all Capital  Expenditures  made during
such period plus (iii) the  aggregate  amount paid in cash during such period in
respect of income taxes,  including  payments  under the Tax Sharing  Agreement,
plus (iv) any  decrease  in Working  Investment  for such  Period  minus (v) any
increase in Working Investment for such Period.

           "Excluded Taxes" means, with respect to the Administrative Agent, any
Lender,  the LC Issuing Lender or any other  recipient of any payment to be made
by or on account of any obligation of the Borrower  hereunder,  (a) income,  net
worth or franchise taxes imposed on (or measured by) its net income or net worth
by the United States of America,  or by the jurisdiction under the laws of which
such  recipient is organized or in which its principal  office is located or, in
the case of any Lender, in which its applicable  lending office is located,  (b)
any branch  profits taxes imposed by the United States of America and (c) in the
case of a Foreign Lender, any withholding tax that is imposed on amounts payable
to such Foreign  Lender on the date such Foreign  Lender becomes a party to this
Agreement (or, in the case of any Foreign Lender that is a party to the Existing
Credit  Agreement,  on the date hereof) or that is  attributable to such Foreign
Lender's  failure or  inability to comply with  Section  2.15(e),  except to the
extent that such Foreign Lender's assignor (if any) was entitled, at the time of
assignment, to receive additional amounts from the Borrower with respect to such
withholding tax pursuant to Section 2.15(a).

           "Existing Credit  Agreement" has the meaning assigned to such term in
the first paragraph of this Agreement.

           "Existing  Mortgages"  means  (a) the Deed of  Trust,  Assignment  of
Permits,  Rents and Benefits,  Security Agreement and Fixture Filing dated as of
June 5, 1992 by the Borrower,  as trustor,  in favor of Lawyers Title  Insurance
Corporation,  as trustee,  for the benefit of the Administrative  Agent recorded
with the County Recorder in the Official  Records of Alameda County,  California
as  Instrument  Number  92-184190;  (b) the Deed of  Trust,  Mortgage,  Security
Agreement (Personal Property Including Minerals,  Mineral Interests and Products
thereof), Assignment of Benefits and Fixture Filing dated as of June 18, 1992 by
the Borrower,  as trustor, in favor of Lawyers Title Insurance  Corporation,  as
trustee,  for the benefit of the  Administrative  Agent recorded with the County
Recorder  in the  Official  Records  of San  Bernardino  County,  California  as
Instrument No. 91-228659;  (c) the Deed of Trust,  Assignment of Permits,  Rents
and Benefits,  Security Agreement and Fixture Filing dated as of June 5, 1992 by
the  Borrower,  as trustor,  in favor of Kenneth R. Hill,  as  trustee,  for the
benefit of the  Administrative  Agent  recorded in the St. Louis City Records in
Book M919 Page 0651 as amended by Amendment to Deed of Trust dated as of June 5,
1992 recorded in the St. Louis City Records in Book M926 Page 2018;  and (d) the
Deed of Trust, Assignment of Permits, Rents and Benefits, Security Agreement and
Fixture Filing dated as of June 5, 1992 by the Borrower, as trustor, in favor of
Charles E.  Barnett,  as trustee,  for the benefit of the  Administrative  Agent
recorded in the Recorder's Office of Kanawha County, West Virginia in Book 2046,
Page 164.


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<PAGE>


                             - 11 -



           "Fair Market Value" means,  with respect to any property,  the amount
that may be realized  within a  reasonable  period of time from the sale of such
property  at market  value,  such  market  value  being the amount that could be
obtained for such property  within such period by a capable and diligent  seller
from  an  interested  buyer  willing  to  purchase  under   prevailing   selling
conditions.

           "Federal  Funds  Effective  Rate"  means,  for any day,  the weighted
average (rounded upwards, if necessary, to the next 1/100 of l%) 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 (rounded  upwards,  if
necessary,  to the  next  1/100 of 1%) of the  quotations  for such day for such
transactions  received  by the  Administrative  Agent from three  Federal  funds
brokers of recognized standing selected by it.

           "Final Maturity Date" means January 30, 2004 or, if such day is not a
Business Day, the next preceding Business Day.

           "Financial  Certificate"  has the  meaning  assigned  to such term in
Section 6.01(c).

           "Financial  Officer"  means the chief  financial  officer,  principal
accounting officer, treasurer or controller of the Borrower, as the case may be.

           "Fixed Charges Ratio" means,  as at any date, the ratio of (a) EBITDA
for the period of four  consecutive  fiscal  quarters ending on or most recently
ended prior to such date to (b) the sum for the  Borrower  and its  Subsidiaries
(determined  on a  consolidated  basis without  duplication  in accordance  with
GAAP),  of the  following:  (i) all Debt Service for such period  (excluding the
principal  amount of the Subordinated  Intercompany  Note payable at maturity to
the extent the same is extended, renewed or refinanced on substantially the same
terms) plus (ii) the aggregate amount paid in cash during such period in respect
of income taxes, including payments under the Tax Sharing Agreement,  plus (iii)
Restricted  Payments  (other than payments of the Special  Dividend) made during
such period. Notwithstanding the foregoing, payments or prepayments of principal
of the  Subordinated  Note shall not be deemed to increase or decrease the Fixed
Charges Ratio.

           "Foreign Intellectual Property" means,  collectively,  all non-United
States  copyrights,  copyright  registrations  and  applications  for  copyright
registrations,  including  all renewals  and  extensions  thereof,  the right to
recover for all past, present and future  infringements  thereof,  and all other
rights of any kind whatsoever  accruing  thereunder or pertaining  thereto,  all
non-United States patents and patent applications,  including the inventions and
improvements   described  and  claimed  therein   together  with  the  reissues,
divisions,   continuations,   renewals,   extensions  and  continuations-in-part
thereof, all income,


                         Credit Agreement

<PAGE>


                             - 12 -


royalties,  damages and payments now or hereafter  due and/or  payable under and
with  respect  thereto,  including  damages  and  payments  for  past or  future
infringements   thereof,   the  right  to  sue  for  past,  present  and  future
infringements thereof and all rights corresponding thereto throughout the world,
and all non-United  States trade names,  trademarks  and service  marks,  logos,
trademark and service mark  registrations,  and  applications  for trademark and
service mark registrations, including all renewals of trademark and service mark
registrations,   the  right  to  recover  for  all  past,   present  and  future
infringements  thereof,  all  other  rights  of  any  kind  whatsoever  accruing
thereunder or pertaining thereto, together, in each case, with the product lines
and goodwill of the business  connected with the use of, and symbolized by, each
such  trade  name,  trademark  and  service  mark,  in each  case,  now owned or
hereafter  acquired by any of the Borrower or any Subsidiary,  together with (a)
all inventions, processes, production methods, proprietary information, know-how
and trade  secrets  used or useful in the  Business;  (b) all  licenses or other
agreements  granted to the Borrower or any Subsidiary with respect to any of the
foregoing  to the  extent  legally  assignable,  in  each  case  whether  now or
hereafter owned or used including the licenses and other agreements with respect
to the  Foreign  Intellectual  Property;  (c) all  existing,  from time to time,
information,   customer  lists,   identification  of  suppliers,   data,  plans,
blueprints,  specifications,  designs,  drawings,  recorded knowledge,  surveys,
engineering reports,  test reports,  manuals,  materials  standards,  processing
standards,  performance  standards,  catalogs,  computer and automatic machinery
software and programs  (to the extent a security  interest may be granted),  and
the like pertaining to the operation by the Borrower or any of its  Subsidiaries
of the Business;  (d) all existing,  from time to time, field repair data, sales
data and other  information  relating  to sales or  service of  products  now or
hereafter manufactured and which pertain to the Business; (e) all existing, from
time to time,  accounting  information  which  pertains to the  Business and all
media in  which  or on which  any of the  information  or  knowledge  or data or
records which pertain to the Business may be recorded or stored and all computer
programs used for the  compilation or printout of such  information,  knowledge,
records or data; (f) all licenses, consents, permits, variances,  certifications
and approvals of governmental  agencies now or hereafter held by the Borrower or
any of its  Subsidiaries  pertaining to the  operation,  by the Borrower and its
Subsidiaries,  of the  Business;  and (g)  all  causes  of  action,  claims  and
warranties now or hereafter  owned or required by the Borrower or any Subsidiary
in respect of any of the items listed above.

           "Foreign Lender" means any Lender that is organized under the laws of
a jurisdiction  other than the United States of America,  a State thereof or the
District of Columbia.

           "Foreign  Subsidiary"  means any  Subsidiary  that is not a  Domestic
Subsidiary.

           "GAAP" means generally accepted  accounting  principles in the United
States of America.



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<PAGE>


                             - 13 -


           "General Assignment" has the meaning assigned to that term in Section
1(e) of the Restructuring Agreement.

           "Generator" means any Person whose act or process produces  Hazardous
Materials  or whose act first causes a Hazardous  Material to become  subject to
regulation.

           "Governmental Authority" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local,  and any agency,  authority,  instrumentality,  regulatory  body,  court,
central  bank or  other  entity  exercising  executive,  legislative,  judicial,
taxing,  regulatory  or  administrative  powers or functions of or pertaining to
government.

           "Guarantee" means a guarantee, an endorsement, a contingent agreement
to purchase or to furnish funds for the payment or maintenance  of, or otherwise
to be or become  contingently liable under or with respect to, the Indebtedness,
other  obligations,  net worth,  working capital or earnings of any Person, or a
guarantee of the payment of dividends or other  distributions  upon the stock or
equity interests of any Person,  or an agreement to purchase,  sell or lease (as
lessee or lessor) property, products,  materials, supplies or services primarily
for the  purpose  of  enabling  a  debtor  to  make  payment  of  such  debtor's
obligations  or an agreement to assure a creditor  against  loss,  and including
causing  a bank or other  financial  institution  to issue a letter of credit or
other  similar  instrument  for the  benefit of another  Person,  but  excluding
endorsements  for collection or deposit in the ordinary course of business.  The
terms  "Guarantee"  and  "Guaranteed"  used as a verb shall  have a  correlative
meaning.

           "Guaranteed  Obligations"  has the  meaning  assigned to such term in
Section 3.01.

           "Hazardous  Materials" means all explosive or radioactive  substances
or wastes and all  hazardous or toxic  substances,  wastes or other  pollutants,
including  petroleum or petroleum  distillates,  asbestos or asbestos containing
materials,  polychlorinated  biphenyls,  radon gas, infectious or medical wastes
and all other  substances  or wastes of any  nature  regulated  pursuant  to any
Environmental Law.

           "Hedging  Agreement"  means any interest rate  protection  agreement,
foreign currency  exchange  agreement,  commodity price protection  agreement or
other interest or currency exchange rate or commodity price hedging arrangement.

           "Inactive Subsidiary" means, as at any date, any Subsidiary which, as
at the end of and for the quarterly accounting period ending on or most recently
ended prior to such date,  shall have less than  $50,000 in assets and less than
$25,000 in gross revenues.



                         Credit Agreement

<PAGE>


                             - 14 -


           "Indebtedness"  of any Person  means,  without  duplication:  (a) all
obligations  of such Person for  borrowed  money or with  respect to deposits or
advances of any kind;  (b) all  obligations  of such Person  evidenced by bonds,
debentures,  notes or similar  instruments;  (c) all  obligations of such Person
under conditional sale or other title retention  agreements relating to property
acquired by such Person;  (d) all  obligations  of such Person in respect of the
deferred purchase price of property or services;  (e) 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  Indebtedness  secured  thereby has
been assumed;  (f) all Guarantees by such Person of Indebtedness of others;  (g)
all Capital Lease Obligations of such Person; (h) all obligations, contingent or
otherwise,  of such  Person as an account  party in respect of letters of credit
and letters of guaranty; (i) all obligations,  contingent or otherwise,  of such
Person in respect of bankers' acceptances[;  and (j) in the case of the Borrower
or any Subsidiary, Indebtedness of Enenco, Inc. (but only to the extent that the
Borrower or such Subsidiary is obligated in respect of such  Indebtedness  under
any  arrangement  entered  into  primarily  for  the  benefit  of  one  or  more
creditors)].  The  Indebtedness of any Person shall include the  Indebtedness of
any other Person  (including  any  partnership in which such Person is a general
partner)  to the  extent  such  Person  is liable  therefor  as a result of such
Person's  ownership  interest in or other  relationship  with such other Person,
except to the extent the terms of such Indebtedness  provide that such Person is
not liable  therefor.  Notwithstanding  the  foregoing,  Indebtedness  shall not
include (x) obligations under Hedging  Agreements and (y) trade accounts payable
(other than for borrowed money) arising,  and accrued expenses incurred,  in the
ordinary  course of business so long as such trade  accounts are payable  within
180  days of the date the  respective  goods  are  delivered  or the  respective
services are rendered.

           "Indemnified Taxes" means all Taxes other than (a) Excluded Taxes and
Other Taxes and (b) amounts  constituting  penalties  or interest  imposed  with
respect to Excluded Taxes or Other Taxes.

           "Intangible  Assets" means the book value of all properties of any of
the Borrower and its  Subsidiaries  that would be treated as  intangibles  under
GAAP,  including  goodwill,  patents,  trademarks,  service marks,  trade names,
copyrights and organization,  reorganization  and developmental  expense and any
write-up  in  the  book  value  of  the  properties  of  the  Borrower  and  its
Subsidiaries  resulting  from a revaluation  thereof  subsequent to December 31,
1996.

           "Intercompany Note  Subordination  Agreement" means the Subordination
Agreement,  satisfactory in form and substance to each of the Lenders,  dated as
of January  30,  1997  between  NL,  Rheox  Inc.  and the  Administrative  Agent
providing for the  subordination  of the Subordinated  Intercompany  Note to the
Indebtedness of the Borrower hereunder.



                         Credit Agreement

<PAGE>


                             - 15 -


           "Interest  Coverage  Ratio" means,  as at any date,  the ratio of (a)
EBITDA  for the period of four  consecutive  fiscal  quarters  ending on or most
recently ended prior to such date to (b) Interest Expense for such period.

           "Interest  Election  Request"  means a  request  by the  Borrower  to
convert or continue a Borrowing in accordance with Section 2.06.

           "Interest  Expense" means, for any period,  the sum, for the Borrower
and its Subsidiaries  (determined on a consolidated basis without duplication in
accordance  with GAAP),  of all interest in respect of  Indebtedness  (including
imputed interest expense in respect of Capital Lease Obligations,  if any) paid,
accrued or capitalized during such period.

           Notwithstanding  the  foregoing,  if  during  any  period  for  which
Interest  Expense is being  determined the Borrower shall have  consummated  any
Acquisition or Disposition  then, for all purposes of this Agreement (other than
for purposes of the definition of Excess Cash Flow),  Interest  Expense shall be
determined on a pro forma basis as if such  Acquisition or Disposition  (and any
Indebtedness  incurred by the Borrower or any of its  Subsidiaries in connection
with such  Acquisition or repaid as a result of such  Disposition) had been made
or consummated  (and such  Indebtedness  incurred or repaid) on the first day of
such period.

           "Interest Payment Date" means (a) with respect to any Base Rate Loan,
each  Quarterly  Date and (b) with  respect  to any  Eurodollar  Loan,  the last
Business 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 Business Day prior to the last
day of such Interest  Period that occurs at intervals of three months'  duration
after the first day of such Interest Period.

           "Interest Period" means with respect to any Eurodollar Borrowing, the
period  commencing on the date of such  Borrowing and ending on the  numerically
corresponding  day in the calendar  month that is one, two,  three or six months
thereafter, as the Borrower may elect; provided, that (a) 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  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 and (b) any Interest Period
that  commences on the last  Business  Day of a calendar  month (or on a day for
which there is no  numerically  corresponding  day in the last calendar month of
such  Interest  Period)  shall end on the last Business Day of the last calendar
month of such  Interest  Period.  For purposes  hereof,  the date of a Borrowing
initially shall be the date on which such Borrowing is made and thereafter shall
be the  effective  date of the most recent  conversion or  continuation  of such
Borrowing. Notwithstanding the foregoing,



                         Credit Agreement

<PAGE>


                             - 16 -


              (i) if any  Interest  Period for any  Revolving  Credit  Borrowing
      would  otherwise end after the Final Maturity Date,  such Interest  Period
      shall not be available hereunder,

             (ii) no Interest  Period for any Term Loan  Borrowing  may commence
      before and end after any  Principal  Payment  Date  unless,  after  giving
      effect thereto,  the aggregate  principal  amount of the Term Loans having
      Interest Periods that end after such Principal Payment Date shall be equal
      to or less than the aggregate principal amount of the Term Loans scheduled
      to be  outstanding  after  giving  effect  to the  payments  of  principal
      required to be made on such Principal Payment Date, and

           (iii) notwithstanding the foregoing clauses (i) and (ii), no Interest
      Period  shall have a duration of less than one month and, if the  Interest
      Period for any Eurodollar Loan would  otherwise be a shorter period,  such
      Loan  shall  not be  available  hereunder  as a  Eurodollar  Loan for such
      period.

           "Investment" means, for any Person, the acquisition of capital stock,
evidences of Indebtedness or other securities or ownership interests  (including
any option, warrant or other right to acquire any of the foregoing) of any other
Person,  or the making of any loans or advances to, Guarantee of any obligations
of, or  extensions  of credit to any other  Person  (other than in the  ordinary
course of business  with  respect to purchase  or sale of  inventory,  supplies,
product or services).

           "LC  Collateral  Account"  has the  meaning  assigned to such term in
Section 2.04(i).

           "LC  Disbursement"  means a  payment  made by the LC  Issuing  Lender
pursuant to a Letter of Credit.

           "LC  Exposure"  means,  at any  time,  the sum of (a)  the  aggregate
undrawn  amount of all  outstanding  Letters of Credit at such time plus (b) the
aggregate amount of all LC Disbursements that have not yet been reimbursed by or
on behalf of the Borrower at such time. The LC Exposure of any Revolving  Credit
Lender at any time shall be its  Applicable  Percentage of the total LC Exposure
at such time.

           "LC Issuing  Lender" means The Chase  Manhattan Bank, in its capacity
as the issuer of Letters of Credit hereunder.

           "Lenders"  means the Persons  listed on  Schedule  2.01 and any other
Person  that shall have become a party  hereto  pursuant  to an  Assignment  and
Acceptance, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Acceptance.

           "Letter of Credit" means any letter of credit issued pursuant to this
Agreement.


                         Credit Agreement

<PAGE>


                             - 17 -



           "Leverage  Ratio"  means,  as at any  date,  the  ratio  of  (a)  all
Indebtedness of the Borrower and its Subsidiaries  (determined on a consolidated
basis without  duplication  in accordance  with GAAP) on such date to (b) EBITDA
for the period of four  consecutive  fiscal  quarters ending on or most recently
ended prior to such date.

           "LIBO Rate" means,  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  such  Service,  as  determined  by  the
Administrative  Agent from time to time for purposes of providing  quotations of
interest  rates  applicable  to U.S.  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 U.S. dollar deposits with
a maturity  comparable to such Interest  Period.  In the event that such rate is
not 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
U.S.  dollar  deposits  of  $5,000,000,  and for a maturity  comparable  to such
Interest  Period,  are  offered  by the  principal  London  office  of  Chase 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" means,  with respect to any asset,  (a) any mortgage,  deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such  asset,  (b) the  interest  of a  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"   means  this  Agreement,   any  promissory  notes
evidencing Loans hereunder and the Security Documents.

           "Loans" means the loans made by the Lenders to the Borrower  pursuant
to this Agreement.

           "Material  Adverse Effect" means a material adverse effect on (a) the
business,  assets,  operations  or  condition,  financial or  otherwise,  of the
Borrower and its  Subsidiaries  taken as a whole,  (b) the ability of any Credit
Party to perform any of its  obligations  under this  Agreement,  the other Loan
Documents  or the  Tax  Sharing  Agreement  or (c)  the  rights  of or  benefits
available to the Lenders under this Agreement or the other Loan Documents.

           "Material  Obligations" means  Indebtedness  (other than the Loans or
Letters  of  Credit  and  other  than  Indebtedness  owed by the  Borrower  to a
Subsidiary or by a Subsidiary to the Borrower or a  Subsidiary),  or obligations
in respect of one or more Hedging Agreements, of any one or more of the Borrower
or any Subsidiary in an aggregate principal


                         Credit Agreement

<PAGE>


                             - 18 -


amount exceeding  $2,000,000.  For purposes of determining Material Obligations,
the  "principal  amount"  of the  obligations  of any  Person in  respect of any
Hedging  Agreement  at any time shall be the maximum  aggregate  amount  (giving
effect to any netting  agreements)  that such Person would be required to pay if
such Hedging Agreement were terminated at such time.

           "Mortgage"  means  the  Mortgage,   Assignment  of  Rents,   Security
Agreement and Fixture  Filing  executed by the Borrower,  for the benefit of the
Administrative  Agent  substantially  in the form of Exhibit F and  covering the
leasehold interest of the Borrower located in Mercer county, New Jersey pursuant
to that  certain  lease dated as of August 17, 1994  between  the  Borrower,  as
tenant, and ABCJ East Windsor Associates L.P., as landlord.

           "Mortgage  Amendments"  means  amendments  to the Existing  Mortgages
satisfactory to the Agent in form and substance.

           "Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.

           "Net Available Proceeds" means:

           (a) in the case of any Disposition,  the aggregate amount of all cash
      payments  received  by the  Borrower  and  its  Subsidiaries  directly  or
      indirectly in  connection  with such  Disposition,  whether at the time of
      such  Disposition  or  after  such  Disposition   under  deferred  payment
      arrangements  or investments  entered into or received in connection  with
      such Disposition (including Disposition Investments) net of (i) the amount
      of any legal, title, transfer and recording tax expenses,  commissions and
      other fees and expenses  payable by the Borrower and its  Subsidiaries  in
      connection with such Disposition, (ii) any Federal, state and local income
      or  other  taxes   estimated  to  be  payable  by  the  Borrower  and  its
      Subsidiaries as a result of such Disposition,  but only to the extent that
      such estimated  taxes are in fact paid to the relevant  Federal,  state or
      local  governmental  authority  or to NL under the Tax  Sharing  Agreement
      within  twelve  months  of the  date of such  Disposition  and  (iii)  any
      repayments by the Borrower or any of its  Subsidiaries  of Indebtedness to
      the extent that (x) such Indebtedness is secured by a Lien on the property
      that is the  subject of such  Disposition  and (y) the  transferee  of (or
      holder of a Lien on) such  property  requires  that such  Indebtedness  be
      repaid as a condition to the purchase of such property;

           (b) in the  case of any  Casualty  Event,  the  aggregate  amount  of
      proceeds of insurance, condemnation awards and other compensation received
      by the Borrower and its Subsidiaries in respect of such Casualty Event net
      of (i) reasonable  expenses  incurred by the Borrower and its Subsidiaries
      in connection  therewith  and (ii)  contractually  required  repayments of
      Indebtedness to the extent secured by a Lien


                         Credit Agreement

<PAGE>


                             - 19 -


      on such property and any income and transfer taxes payable by the Borrower
      or any of its Subsidiaries in respect of such Casualty Event; and

           (c) in the case of any Equity  Issuance,  the aggregate amount of all
      cash  received by the  Borrower  and its  Subsidiaries  in respect of such
      Equity  Issuance net of reasonable  expenses  incurred by the Borrower and
      its Subsidiaries in connection therewith.

           "NL" means NL  Industries,  Inc., a corporation  organized  under the
laws of New Jersey.

           "NL Pledge  Agreement" means an amended and restated Pledge Agreement
substantially in the form of Exhibit E between NL and the Administrative Agent.

           "Note  Subordination  Agreement"  means the  Subordination  Agreement
dated as of September  17, 1996 between NL, the Borrower and the  Administrative
Agent  providing  for  the   subordination  of  the  Subordinated  Note  to  the
Indebtedness of the Borrower hereunder.

           "Other   Taxes"  means  any  and  all  present  or  future  stamp  or
documentary  taxes or any other  excise or  property  taxes,  charges or similar
levies arising from any payment made  hereunder or from the execution,  delivery
or  enforcement  of, or otherwise  with respect to, this Agreement and the other
Loan Documents (and any Uniform Commercial Code financing statements required by
any  Security  Document to be filed with  respect to the  security  interests in
personal property and fixtures created pursuant to any Security Document) or any
amendments thereof or supplements thereto, provided that there shall be excluded
from "Other Taxes" all Excluded Taxes.

           "PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.

           "Permitted Investments" means:

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

           (b) Investments in commercial paper maturing within 270 days from the
      date of acquisition  thereof and having,  at such date of  acquisition,  a
      credit rating  obtainable from Standard & Poor's Ratings Service of A-1 or
      better or from Moody's Investors Service of P-1 or better;



                         Credit Agreement

<PAGE>


                             - 20 -


           (c) Investments in certificates of deposit,  banker's acceptances and
      time deposits (including  Euro-deposits) maturing within 180 days from the
      date of  acquisition  thereof  issued or guaranteed by or placed with, and
      money  market  deposit  accounts  issued or offered  by, any office of any
      commercial  bank organized  under the laws of the United States of America
      or any State  thereof,  or under the laws of any other member state of the
      Organization  for  Economic  Cooperation  and  Development,  which  has  a
      combined  capital  and  surplus  and  undivided  profits  of not less than
      $500,000,000; and

           (d) fully  collateralized  repurchase  agreements  with a term of not
      more  than 180 days for  securities  described  in  clause  (a)  above and
      entered  into  with  a  financial  institution   satisfying  the  criteria
      described in clause (c) above or with an investment  bank organized  under
      the laws of the United  States or any State  thereof  which has a combined
      capital and surplus and undivided profits of not less than $500,000,000.

           "Permitted Liens" means:

           (a) Liens  imposed by law for taxes that are not yet due or are being
      contested in compliance with Section 6.04;

           (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
      and other like Liens  imposed by law,  arising in the  ordinary  course of
      business  and  securing  obligations  that are not overdue by more than 30
      days or are being  contested  in  compliance  with  Section 6.04 and Liens
      securing  judgments  but only to the extent for an amount and for a period
      not resulting in an Event of Default under Article VIII(k);

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

           (d)  deposits to secure the  performance  of bids,  trade  contracts,
      leases, statutory obligations,  surety and appeal bonds, performance bonds
      and other  obligations  of a like  nature,  in each  case in the  ordinary
      course of business;

           (e)   easements,   reservations,    covenant   restrictions,   zoning
      restrictions,  rights-of-way  and similar  encumbrances or restrictions on
      real property imposed by law or arising in the ordinary course of business
      that do not materially  detract from the value of the affected property or
      materially interfere with the ordinary conduct of business of the Borrower
      or any Subsidiary;

           (f) Liens  arising under  workers'  compensation  laws,  unemployment
      insurance  laws  or  similar   legislation  or  progress   payments  under
      government contracts, deposits


                         Credit Agreement

<PAGE>


                             - 21 -


      as security  for import  duties;  deposits to secure  public or  statutory
      obligations of the Borrower or any of its Subsidiaries; and

           (g) Liens incident to the conduct of, or the operation of property or
      assets in the ordinary course of the Business and not securing obligations
      in the aggregate amount exceeding $500,000 at any one time outstanding.

           "Person" means any natural  person,  corporation,  limited  liability
company, trust, joint venture, association,  company, partnership,  Governmental
Authority or other entity.

           "Plan"  means  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 302 of ERISA, and in respect of which the Borrower or
any ERISA  Affiliate is (or, if such plan were  terminated,  would under Section
4069 of ERISA be deemed to be) an  "employer"  as  defined  in  Section  3(5) of
ERISA.

           "Prime Rate" means the rate of interest per annum publicly  announced
from time to time by The Chase  Manhattan  Bank,  as its prime rate in effect at
its  principal  office in New York City;  each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.

           "Principal  Payment  Dates"  means the (a) 25  consecutive  Quarterly
Dates  falling on or nearest to March 31, June 30,  September 30 and December 31
of each year,  commencing  with the Quarterly  Date in September of 1997 and (b)
the Final Maturity Date.

           "Quarterly  Dates"  means  the  last  Business  Day of  March,  June,
September and December in each year,  the first of which shall be the first such
day after the date of this Agreement.

           "Register" has the meaning assigned to such term in Section 10.04.

           "Related Parties" means,  with respect to any specified Person,  such
Person's Affiliates and the respective directors,  officers,  employees,  agents
and advisors of such Person and such Person's Affiliates.

           "Release"  means any  "release"  as such term is defined in 42 U.S.C.
Section 9601 (22), as amended, or any successor statute.

           "Required  Lenders"  means,  at any time,  Lenders  having Loans,  LC
Exposure  and unused  Commitments  representing  more than 50% of the sum of the
total Loans, LC Exposure and unused Commitments at such time.



                         Credit Agreement

<PAGE>


                             - 22 -


           "Required  Revolving  Credit  Lenders"  means,  at any time,  Lenders
having   Revolving  Credit  Loans,  LC  Exposure  and  unused  Revolving  Credit
Commitments  representing more than 50% of the sum of the total Revolving Credit
Loans, LC Exposure and unused Revolving Credit Commitments at such time.

           "Required Term Loan Lenders" means, at any time,  Lenders having Term
Loans and unused Term Loan Commitments  representing more than 50% of the sum of
the total Term Loans and unused Term Loan Commitments at such time.

           "Restricted   Payment"  means  any  dividend  or  other  distribution
(whether in cash,  securities or other  property)  with respect to any shares of
any class of capital  stock of the  Borrower,  or any payment  (whether in cash,
securities or other property), including any sinking fund or similar deposit, on
account of the purchase, redemption,  retirement,  acquisition,  cancellation or
termination of any such shares of capital stock of the Borrower.

           "Restructuring"   means  the  separation  of  NL's  titanium  dioxide
operations from the rheological  additives  operations,  as effected through the
Restructuring Agreement.

           "Restructuring Agreement" means that certain agreement dated June 30,
1990,  between NL, Rheox  International,  Inc.,  Kronos,  Inc. and the Borrower,
effecting the Restructuring.

           "Restructuring  Documents"  means the  Restructuring  Agreement,  the
Rheox Int'l IP Assignment,  the Rheox IP Assignment,  the General Assignment and
the Supplemental Agreements.

           "Revolving  Credit  Availability  Period"  means the period  from and
including  the  Effective  Date to but  excluding  the  earlier of (a) the Final
Maturity  Date  and  (b)  the  date  of  termination  of  the  Revolving  Credit
Commitments.

           "Revolving Credit Commitment" means, with respect to each Lender, the
commitment  of such  Lender  to  make  Revolving  Credit  Loans  and to  acquire
participations  in Letters of Credit  hereunder,  as such  commitment may be (a)
reduced from time to time  pursuant to Sections 2.07 and 2.09 and (b) reduced or
increased  from  time to  time  pursuant  to  assignments  by or to such  Lender
pursuant to Section 10.04. The initial amount of each Lender's  Revolving Credit
Commitment is set forth on Schedule  2.01, or in the  Assignment  and Acceptance
pursuant  to  which  such  Lender  shall  have  assumed  its  Revolving   Credit
Commitment, as applicable. The aggregate original amount of the Revolving Credit
Commitments is $25,000,000.

           "Revolving  Credit  Exposure"  means,  with respect to any  Revolving
Credit Lender at any time, the sum of the outstanding  principal  amount of such
Lender's Revolving Credit Loans and its LC Exposure at such time.


                         Credit Agreement

<PAGE>


                             - 23 -



           "Revolving Credit Lender" means (a) initially,  any Lender that has a
Revolving Credit Commitment set forth opposite its name on Schedule 2.01 and (b)
thereafter,  the Lenders  from time to time holding  Revolving  Credit Loans and
Revolving  Credit  Commitments,  after giving effect to any assignments  thereof
permitted by Section 10.04.

           "Revolving Credit Loan" means a Loan made pursuant to Section 2.01(a)
that utilizes the Revolving Credit Commitments.

           "Rheox Int'l IP Assignment" has the meaning  assigned to that term in
Section l(c) of the Restructuring Agreement.

           "Rheox  International"  means Rheox  International,  Inc., a Delaware
corporation.

           "Rheox  IP  Assignment"  has the  meaning  assigned  to that  term in
Section 1(d) of the Restructuring Agreement.

           "Security Agreement" means an amended and restated Security Agreement
substantially  in the form of Exhibit D between  the  Borrower,  the  Subsidiary
Guarantors and the Administrative Agent.

           "Security  Documents"  means the Copyright  Security  Agreement,  the
Conditional  Assignment  of and  Security  Interest  in  Patent  Rights  and the
Conditional  Assignment  of and  Security  Interest  in  Trademark  Rights,  the
Security  Agreement,  the NL  Pledge  Agreement,  the  Mortgage,  each  Existing
Mortgage and each Mortgage Amendment.

           "Special  Counsel"  means  Milbank,  Tweed,  Hadley & McCloy,  in its
capacity as special counsel to The Chase Manhattan Bank, as Administrative Agent
of the credit facilities contemplated hereby.

           "Special  Dividend"  means a dividend in an  aggregate  amount not to
exceed  $30,000,000  to be paid by the  Borrower to NL with the proceeds of Term
Loans and Revolving Credit Loans as provided herein.

           "Statutory  Reserve Rate" means 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 to which the  Administrative  Agent is subject (a) with
respect to the Base CD Rate,  for new  negotiable  nonpersonal  time deposits in
dollars of over $100,000 with maturities approximately equal to three months and
(b) with respect to the Adjusted LIBO Rate, for eurocurrency  funding (currently
referred to as  "Eurocurrency  Liabilities" 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  funding and to be
subject to


                         Credit Agreement

<PAGE>


                             - 24 -


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 or any comparable  regulation.  The Statutory Reserve Rate shall be
adjusted  automatically  on and as of the  effective  date of any  change in any
reserve percentage.

           "Subordinated  Note" means the $100,000,000  subordinated  note dated
September 30, 1996 issued by the Borrower to NL.

           "Subordinated Intercompany Note" means the (Pound Sterling) 3,423,292
note dated February 2, 1996 issued by Rheox Limited to NL.

           "Subsidiary"  means, with respect to any Person (the "parent") at any
date, any corporation,  limited liability company,  partnership,  association or
other  entity the  accounts  of which  would be  consolidated  with those of the
parent in the  parent's  consolidated  financial  statements  if such  financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership,  association or other
entity (a) of which securities or other ownership  interests  representing  more
than 50% of the  ordinary  voting power or, in the case of a  partnership,  more
than 50% of the  general  partnership  interests  are,  as of such date,  owned,
controlled or held, or (b) that is, as of such date,  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.  References  herein to  "Subsidiaries"  shall,
unless  the  context  requires   otherwise,   be  deemed  to  be  references  to
Subsidiaries of the Borrower.

           "Subsidiary  Guarantors"  means the Persons  listed under the caption
"SUBSIDIARY  GUARANTORS" on the signature pages hereto and any other Person that
shall have become a party hereto pursuant to Section 6.12(a).

           "Supplemental  Agreements"  has the meaning  assigned to that term in
Section 6(a) of the Restructuring Agreement.

           "Tangible  Net Worth" means,  at any time,  the sum, for the Borrower
and its Consolidated  Subsidiaries  (determined on a consolidated  basis without
duplication in accordance with GAAP), of the following:  (a) the amount of share
capital (less cost of treasury shares) but excluding share capital in respect of
any  preferred  or  similar  stock  which,  by its terms or at the option of the
holder or the issuer, is under any circumstances  redeemable,  or is convertible
into Indebtedness,  or which requires payments to a sinking fund, on or prior to
the Final  Maturity Date;  plus (b) the amount of surplus and retained  earnings
(or, in the case of a surplus or retained earnings deficit,  minus the amount of
such deficit); minus (c) Intangible Assets of the Borrower and its Subsidiaries.
Notwithstanding anything in this definition to the contrary,  cumulative foreign
currency  translation  gains (or  losses)  shall not be deemed to  increase  (or
decrease) Tangible Net Worth.



                         Credit Agreement

<PAGE>


                             - 25 -


           "Tax Sharing  Agreement" means the Tax Agreement between NL and Rheox
dated as of July 1, 1990.

           "Taxes" means any and all present or future taxes,  levies,  imposts,
duties,  deductions,  charges  or  withholdings  of any  nature  imposed  by any
Governmental  Authority,  and any interest,  penalties or fines thereon or other
additions thereto.

           "Term  Loan"  means a Loan made  pursuant  to  Section  2.01(b)  that
utilizes the Term Loan Commitments.

           "Term Loan  Availability  Period" means the period from and including
the Effective Date to but excluding the earlier of (a) the Term Loan  Commitment
Termination Date and (b) the date of termination of the Term Loan Commitments.

           "Term  Loan  Commitment"  means,  with  respect to each  Lender,  the
commitment  of such Lender to make Term  Loans,  as such  commitment  may be (a)
reduced from time to time  pursuant to Sections 2.07 and 2.09 and (b) reduced or
increased  from  time to  time  pursuant  to  assignments  by or to such  Lender
pursuant  to  Section  10.04.  The  initial  amount of each  Lender's  Term Loan
Commitment is set forth on Schedule  2.01, or in the  Assignment  and Acceptance
pursuant to which such Lender  shall have assumed its Term Loan  Commitment,  as
applicable.  The  aggregate  original  amount  of the Term Loan  Commitments  is
$125,000,000.

           "Term Loan Commitment Termination Date" means the Effective Date.

           "Term Loan Lender"  means (a)  initially,  any Lender that has a Term
Loan Commitment set forth opposite its name on Schedule 2.01 and (b) thereafter,
the  Lenders  from time to time  holding  Term Loans and Term Loan  Commitments,
after giving effect to any assignments thereof permitted by Section 10.04.

           "Three-Month  Secondary  CD Rate" means,  for any day, the  secondary
market rate for three-month  certificates of deposit reported as being in effect
on such day (or, if such day is not a Business Day, the next preceding  Business
Day) by the Board through the public  information  telephone line of the Federal
Reserve  Bank of New York (which rate will,  under the current  practices of the
Board, be published in Federal Reserve  Statistical Release H.15(519) during the
week  following  such day),  or, if such rate is not so  reported on such day or
such next preceding Business Day, the average of the secondary market quotations
for three-month  certificates of deposit of major money center banks in New York
City received at approximately  10:00 a.m., New York City time, on such day (or,
if such day is not a Business  Day, on the next  preceding  Business Day) by the
Administrative  Agent from three  negotiable  certificate of deposit  dealers of
recognized standing selected by it.



                         Credit Agreement

<PAGE>


                             - 26 -


           "Transactions" means (a) with respect to the Borrower, the execution,
delivery and  performance by the Borrower of the Loan Documents to which it is a
party,  the  borrowing  of Loans and the use of the  proceeds  thereof,  and the
issuance of Letters of Credit hereunder and (b) with respect to any Credit Party
(other than the  Borrower),  the  execution,  delivery and  performance  by such
Credit Party of the Loan Documents to which it is a party.

           "Type",  when used in reference to any Loan or  Borrowing,  refers to
whether  the rate of  interest  on such Loan,  or on the Loans  comprising  such
Borrowing,  is determined by reference to the Adjusted LIBO Rate or the Adjusted
Base Rate.

           "UCP" means the Uniform Customs and Practices for Documentary Credits
(1993 Revision),  International  Chamber of Commerce Publication No. 500, or any
successor publication.

           "U.S.  dollars" or "$" refers to lawful money of the United States of
America.

           "Wholly Owned  Subsidiary"  means,  with respect to any Person at any
date, any corporation,  limited liability company,  partnership,  association or
other entity of which securities or other ownership interests  representing 100%
of the equity or ordinary voting power (other than directors' qualifying shares)
or, in the case of a partnership, 100% of the general partnership interests are,
as of such date, directly or indirectly owned, controlled or held by such Person
or one or more Wholly  Owned  Subsidiaries  of such Person or by such Person and
one or more Wholly Owned Subsidiaries of such Person.

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

           "Working  Investment"  means,  at any time,  the sum of the following
(without  duplication)  for  the  Borrower  and  its  Consolidated  Subsidiaries
(determined  on a  consolidated  basis in  accordance  with GAAP),  in each case
generated in the ordinary  course of business:  (a) net  inventory at such time;
plus (b) net accounts and current notes  receivable at such time;  minus (c) net
accounts and current notes payable (excluding current notes payable to financial
institutions  in  respect  of  Indebtedness)  at such  time;  minus (d)  accrued
expenses at such time; minus (e) current accrued taxes at such time.

           SECTION 1.02. Classification of Loans and Borrowings. For purposes of
this  Agreement,  Loans may be  classified  and  referred to by Class  (e.g.,  a
"Revolving  Credit Loan" or "Term Loan") or by Type (e.g., a "Base Rate Loan" or
a "Eurodollar Loan") or by Class and Type (e.g., a "Eurodollar  Revolving Credit
Loan"  or a  "Base  Rate  Revolving  Credit  Loan").  In  similar  fashion,  (i)
Borrowings may be classified and referred to by Class,  by Type and by Class and
Type, and (ii) Commitments may be classified and referred to by Class.


                         Credit Agreement

<PAGE>


                             - 27 -



           SECTION 1.03. Terms Generally.  The definitions of terms herein shall
apply  equally to the singular and plural forms of the terms  defined.  Whenever
the context may require, any pronoun shall include the corresponding  masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed  by the phrase  "without  limitation".  The word "will"
shall be  construed  to have the same  meaning  and effect as the word  "shall".
Unless the context requires  otherwise (a) any definition of or reference to any
agreement,  instrument or other document  herein shall be construed as referring
to such  agreement,  instrument or other  document as from time to time amended,
supplemented  or  otherwise  modified  (subject  to  any  restrictions  on  such
amendments,  supplements or modifications  set forth herein),  (b) any reference
herein to any Person shall be construed to include such Person's  successors and
assigns, (c) the words "herein", "hereof" and "hereunder",  and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any  particular  provision  hereof,  (d)  all  references  herein  to  Articles,
Sections,  Exhibits  and  Schedules  shall be construed to refer to Articles and
Sections  of, and  Exhibits  and  Schedules  to, this  Agreement,  (e) the words
"asset" and  "property"  shall be  construed to have the same meaning and effect
and to refer to any and all  tangible  and  intangible  assets  and  properties,
including cash,  securities,  accounts and contract rights and (f) references to
"the date hereof" and "the date of this Agreement" and similar  references shall
be construed to mean January 30, 1997.

           SECTION 1.04.  Accounting Terms; GAAP. Except as otherwise  expressly
provided  herein,  all  terms of an  accounting  or  financial  nature  shall be
construed  in  accordance  with GAAP,  as in effect from time to time;  provided
that,  if the  Borrower  notifies  the  Administrative  Agent that the  Borrower
requests an amendment  to any  provision  hereof to eliminate  the effect of any
change occurring after the date hereof in GAAP or in the application  thereof on
the operation of such  provision (or if the  Administrative  Agent  notifies the
Borrower that the Required  Lenders request an amendment to any provision hereof
for such  purpose),  regardless  of whether any such  notice is given  before or
after such change in GAAP or in the  application  thereof,  then such  provision
shall be interpreted  on the basis of GAAP as in effect and applied  immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.


                            ARTICLE II

                            The Credits

           SECTION 2.01.  Commitments.

           (a) Revolving  Credit Loans.  Subject to the terms and conditions set
forth herein, each Revolving Credit Lender agrees to make Revolving Credit Loans
to the  Borrower  from time to time  during the  Revolving  Credit  Availability
Period in an aggregate principal


                         Credit Agreement

<PAGE>


                             - 28 -


amount that will not result in such Lender's Revolving Credit Exposure exceeding
such Lender's  Revolving  Credit  Commitment.  Within the  foregoing  limits and
subject to the terms and conditions  set forth herein,  the Borrower may borrow,
prepay and reborrow  Revolving Credit Loans;  provided that the Borrower may not
borrow  Revolving  Credit  Loans  hereunder  unless  it shall  have  theretofore
borrowed  or is  concurrently  borrowing  hereunder  Term Loans in an  aggregate
principal amount of $125,000,000.

           (b) Term Loans. Subject to the terms and conditions set forth herein,
each Term Loan  Lender  agrees to make Term  Loans to the  Borrower  in a single
drawing  on a date  falling  during  the Term  Loan  Availability  Period  in an
aggregate principal amount equal to such Lender's Term Loan Commitment.

           SECTION 2.02.  Loans and Borrowings.

           (a) Subject to Section 2.01(b), each Loan of a particular Class shall
be made as part of a  Borrowing  consisting  of Loans of such  Class made by the
Lenders ratably in accordance with their  respective  Commitments of such Class.
The  failure of any Lender to make any Loan  required to be made by it shall not
relieve  any  other  Lender  of its  obligations  hereunder;  provided  that the
Commitments  of the Lenders are several and no Lender shall be  responsible  for
any other Lender's failure to make Loans as required.

           (b)  Subject to  Section  2.12,  each  Borrowing  shall be  comprised
entirely of Base Rate Loans or  Eurodollar  Loans as the Borrower may request in
accordance  herewith.  Each Lender at its option may make any Eurodollar Loan by
causing any domestic or foreign  branch or Affiliate of such Lender to make such
Loan;  provided  that (i) any  exercise  of such  option  shall not  affect  the
obligation  of the Borrower to repay such Loan in  accordance  with the terms of
this Agreement and (ii) the Borrower shall not be required to pay any additional
amounts under Section  2.15(a) as a result of the exercise of such option unless
amounts  payable by the  Borrower  to the  relevant  Lender  under said  Section
immediately after such exercise do not exceed amounts payable by the Borrower to
the relevant Lender under said Section immediately prior to such exercise.

           (c) At the  commencement  of each  Interest  Period for a  Eurodollar
Borrowing,  such  Borrowing  shall be in an  aggregate  amount at least equal to
$5,000,000 or any greater integral multiple of $1,000,000 with respect to a Term
Loan, and at least equal to $1,000,000 with respect to a Revolving  Credit Loan.
At the time that each Base Rate Borrowing is made, such Borrowing shall be in an
aggregate amount at least equal to $1,000,000 or any greater  integral  multiple
of $1,000,000;  provided that a Base Rate Borrowing of Loans of any Class may be
in an aggregate  amount that is equal to the entire unused  balance of the total
Commitments  of such  Class.  Borrowings  of more than one Type and Class may be
outstanding at the same time;  provided that there shall not at any time be more
than a total of six Eurodollar Borrowings outstanding.



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<PAGE>


                             - 29 -


           SECTION 2.03.  Requests for Borrowings.  To request a Borrowing,  the
Borrower shall notify the Administrative  Agent of such request by telephone (a)
in the case of a Eurodollar Borrowing,  not later than 11:00 a.m., New York City
time,  three  Business Days before the date of the proposed  Borrowing or (b) in
the case of a Base Rate  Borrowing,  not later  than 11:00  a.m.,  New York City
time,  on the date of the proposed  Borrowing.  Each such  telephonic  Borrowing
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the  Administrative  Agent of a written  Borrowing Request in a form
approved  by the  Administrative  Agent and  signed by the  Borrower.  Each such
telephonic and written Borrowing Request shall specify the following information
in compliance with Section 2.02:

           (i)  whether the  requested  Borrowing  is to be a  Revolving  Credit
      Borrowing or Term Loan Borrowing;

             (ii)  the aggregate amount of such Borrowing;

            (iii)  the date of such Borrowing, which shall be a Business Day;

           (iv)  whether  such  Borrowing  is to be a Base Rate  Borrowing  or a
      Eurodollar Borrowing;

              (v) in the case of a Eurodollar  Borrowing,  the initial  Interest
      Period to be applicable  thereto,  which shall be a period contemplated by
      the definition of the term "Interest Period"; and

             (vi) the  location  and number of the  Borrower's  account to which
      funds are to be  disbursed,  which shall comply with the  requirements  of
      Section 2.05.

If no election as to the Type of  Borrowing  is  specified,  then the  requested
Borrowing  shall be a Base Rate  Borrowing.  If no Interest  Period is specified
with respect to any requested Eurodollar  Borrowing,  then the Borrower shall be
deemed to have  selected an Interest  Period of one month's  duration.  Promptly
following  receipt of a Borrowing  Request in accordance with this Section 2.03,
the Administrative  Agent shall advise each Lender of the details thereof and of
the amount of such Lender's Loan to be made as part of the requested Borrowing.

           SECTION 2.04.  Letters of Credit.

           (a) General. Subject to the terms and conditions set forth herein, in
addition to the  Revolving  Credit Loans  provided for in Section  2.01(a),  the
Borrower  may request  the  issuance of Letters of Credit for its own account or
for the account of a Subsidiary by the LC Issuing  Lender,  in a form acceptable
to the LC Issuing Lender in its reasonable  determination,  at any time and from
time to time during the Revolving Credit Availability Period. Letters of


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<PAGE>


                             - 30 -


Credit issued  hereunder shall  constitute  utilization of the Revolving  Credit
Commitments.  In the event of any inconsistency between the terms and conditions
of this  Agreement and the terms and  conditions of any form of letter of credit
application or other agreement  submitted by the Borrower to, or entered into by
the Borrower with, the LC Issuing Lender  relating to any Letter of Credit,  the
terms and conditions of this Agreement shall control.

           (b)  Notice  of  Issuance,  Amendment,  Renewal,  Extension;  Certain
Conditions.  To request the  issuance  of a Letter of Credit (or the  amendment,
renewal or extension of an  outstanding  Letter of Credit),  the Borrower  shall
hand  deliver  or  telecopy  (or  transmit  by  electronic   communication,   if
arrangements for doing so have been approved by the LC Issuing Lender) to the LC
Issuing  Lender  and the  Administrative  Agent  (reasonably  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) of this Section  2.04),  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, amend, renew or extend such Letter
of Credit. If requested by the LC Issuing Lender, the Borrower also shall submit
a letter of credit  application  on the LC  Issuing  Lender's  standard  form in
connection with any request for a Letter of Credit.  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  Borrower  shall be deemed to
represent and warrant that),  after giving effect to such  issuance,  amendment,
renewal or  extension  (i) the  aggregate  LC Exposure of the LC Issuing  Lender
(determined  for these  purposes  without  giving  effect to the  participations
therein of the  Revolving  Credit  Lenders  pursuant  to  paragraph  (d) of this
Section 2.04) shall not exceed  $2,500,000 and (ii) the total  Revolving  Credit
Exposures shall not exceed the total Revolving Credit Commitments.

           (c) Expiration  Date.  Each Letter of Credit shall expire at or prior
to the close of  business on the earlier of (i) the date one year after the date
of the  issuance  of such  Letter of Credit  (or,  in the case of any renewal or
extension  thereof,  one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Final Maturity Date.

           (d)  Participations.  By the  issuance  of a Letter of Credit  (or an
amendment to a Letter of Credit increasing the amount thereof) by the LC Issuing
Lender, and without any further action on the part of the LC Issuing Lender, the
LC Issuing  Lender  hereby  grants to each  Revolving  Credit  Lender,  and each
Revolving  Lender hereby acquires from the LC Issuing Lender, a participation in
such  Letter  of  Credit  equal to such  Revolving  Credit  Lender's  Applicable
Percentage  of the aggregate  amount  available to be drawn under such Letter of
Credit.  In  consideration  and in furtherance of the foregoing,  each Revolving
Credit  Lender  hereby  absolutely  and  unconditionally  agrees  to  pay to the
Administrative  Agent, for the account of the LC Issuing Lender,  such Revolving
Credit Lender's  Applicable  Percentage of each LC  Disbursement  made by the LC
Issuing Lender and not reimbursed by the


                         Credit Agreement

<PAGE>


                             - 31 -


Borrower on the date due as provided in paragraph  (e) of this Section  2.04, or
of any  reimbursement  payment  required to be refunded to the  Borrower for any
reason. Each Revolving Credit 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 any amendment,  renewal or extension of any
Letter of Credit or the occurrence and  continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.

           (e)  Reimbursement.  If the  LC  Issuing  Lender  shall  make  any LC
Disbursement in respect of a Letter of Credit,  the Borrower shall reimburse the
LC  Issuing  Lender  in  respect  of  such  LC  Disbursement  by  paying  to the
Administrative  Agent an amount  equal to such LC  Disbursement  not later  than
12:00 noon,  New York City time, on the Business Day  immediately  following the
day that the Borrower  receives such notice,  provided  that,  the Borrower may,
subject to the  conditions to borrowing set forth herein,  request in accordance
with  Section 2.03 that such  payment be financed  with a Revolving  Credit Base
Rate  Borrowing  in an  equivalent  amount and, to the extent so  financed,  the
Borrower's  obligation to make such payment shall be discharged  and replaced by
the resulting Revolving Credit Base Rate Borrowing.

           If  the   Borrower   fails  to  make  such   payment  when  due,  the
Administrative Agent shall notify each Revolving Credit Lender of the applicable
LC  Disbursement,  the payment then due from the Borrower in respect thereof and
such Revolving Credit Lender's Applicable Percentage thereof. Promptly following
receipt  of  such  notice,  each  Revolving  Credit  Lender  shall  pay  to  the
Administrative Agent its Applicable  Percentage of the payment then due from the
Borrower,  in the same  manner as  provided  in  Section  2.05 with  respect  to
Revolving  Credit  Loans made by such  Lender  (and  Section  2.05 shall  apply,
mutatis mutandis,  to the payment  obligations of the Revolving Credit Lenders),
and the  Administrative  Agent shall  promptly pay to the LC Issuing  Lender the
amounts so received by it from the Revolving Credit Lenders.  Promptly following
receipt by the Administrative Agent of any payment from the Borrower pursuant to
this paragraph, the Administrative Agent shall distribute such payment to the LC
Issuing  Lender or, to the extent that the  Revolving  Credit  Lenders have made
payments pursuant to this paragraph to reimburse the LC Issuing Lender,  then to
such  Lenders  and the LC Issuing  Lender as their  interests  may  appear.  Any
payment  made  by a  Revolving  Credit  Lender  pursuant  to this  paragraph  to
reimburse the LC Issuing Lender for any LC  Disbursement  shall not constitute a
Loan and shall not  relieve  the  Borrower of its  reimbursement  obligation  in
respect of such LC Disbursement.

           (f) Obligations  Absolute.  The Borrower's obligation to reimburse LC
Disbursements  as  provided  in  paragraph  (e) of this  Section  2.04  shall be
absolute,  unconditional  and  irrevocable,  and shall be performed  strictly in
accordance  with the terms of this  Agreement  under  any and all  circumstances
whatsoever and irrespective of (i) any lack of


                         Credit Agreement

<PAGE>


                             - 32 -


validity or  enforceability  of any Letter of Credit,  or any term or  provision
therein,  (ii) any draft or other  document  presented  under a Letter of Credit
proving to be forged,  fraudulent  or  invalid in any  respect or any  statement
therein being untrue or inaccurate in any respect, (iii) in the absence of gross
negligence  or  wilful  misconduct  on the  part of the LC  Issuing  Lender  (as
determined  by a court of  competent  jurisdiction),  payment  by the LC Issuing
Lender  under a  Letter  of  Credit  against  presentation  of a draft  or other
document that does not comply strictly or  substantially  with the terms of such
Letter of Credit and (iv) any other event or circumstance whatsoever, whether or
not similar to any of the foregoing,  that might, but for the provisions of this
Section  2.04,  constitute  a legal or  equitable  discharge  of the  Borrower's
obligations hereunder.

           Neither  the  Administrative  Agent,  the  Lenders nor the LC Issuing
Lender,  nor  any  of  their  Related  Parties,  shall  have  any  liability  or
responsibility  by reason of or in  connection  with the issuance or transfer of
any Letter of Credit by the LC Issuing  Lender or any payment or failure to make
any payment thereunder  (irrespective of any of the circumstances referred to in
the preceding sentence), or any error, omission,  interruption, loss or delay in
transmission or delivery of any draft,  notice or other  communication  under or
relating  to any Letter of Credit  (including  any  document  required to make a
drawing  thereunder),  any error in  interpretation  of  technical  terms or any
consequence  arising  from causes  beyond the control of the LC Issuing  Lender;
provided  that the  foregoing  shall not be  construed  to excuse the LC Issuing
Lender from  liability to the  Borrower to the extent of any direct  damages (as
opposed to consequential  damages,  claims in respect of which are hereby waived
by the  Borrower to the extent  permitted  by  applicable  law)  suffered by the
Borrower  that are caused by the LC Issuing  Lender's  failure to  exercise  the
standard of care agreed  hereunder to be  applicable  when  determining  whether
drafts and other  documents  presented  under a Letter of Credit comply with the
terms  thereof.  The parties hereto  expressly  agree that such standard of care
shall be as  follows,  and that the LC  Issuing  Lender  shall be deemed to have
exercised  such  standard of care in the absence of gross  negligence  or wilful
misconduct on its part (as determined by a court of competent jurisdiction):

              (i) the LC  Issuing  Lender may accept  documents  that  appear on
      their face to be in substantial  compliance  with the terms of a Letter of
      Credit without responsibility for further investigation, regardless of any
      notice  or  information  to  the  contrary,  and  may  make  payment  upon
      presentation  of documents  that appear on their face to be in substantial
      compliance with the terms of such Letter of Credit; and

             (ii)  the LC  Issuing  Lender  shall  have the  right,  in its sole
      discretion,  to decline to accept such  documents and to make such payment
      if such  documents  are not in  strict  compliance  with the terms of such
      Letter of Credit.

           (g)  Disbursement  Procedures.  The LC Issuing  Lender shall,  to the
extent  required by the UCP,  examine all  documents  purporting  to represent a
demand for payment under any Letter of Credit. The LC Issuing Lender shall, when
required by the UCP, notify


                         Credit Agreement

<PAGE>


                             - 33 -


the Administrative  Agent and the Borrower by telephone  (confirmed by telecopy)
of such demand for  payment  and whether the LC Issuing  Lender has made or will
make an LC Disbursement  thereunder;  provided that any failure to give or delay
in giving such  notice  shall not relieve  the  Borrower  of its  obligation  to
reimburse the LC Issuing Lender and the Revolving Credit Lenders with respect to
any such LC Disbursement.

           (h)  Interim  Interest.  If the LC Issuing  Lender  shall make any LC
Disbursement in respect of any Letter of Credit, then, unless the Borrower shall
reimburse such LC Disbursement in full on the date such LC Disbursement is made,
the unpaid amount thereof shall bear  interest,  for each day from and including
the  date  such LC  Disbursement  is made to but  excluding  the  date  that the
Borrower reimburses such LC Disbursement,  at the rate per annum then applicable
to Revolving  Credit Base Rate Loans;  provided  that, if the Borrower  fails to
reimburse  such LC  Disbursement  when due  pursuant  to  paragraph  (e) of this
Section 2.04, then Section  2.11(c) shall apply.  Interest  accrued  pursuant to
this paragraph  shall be for the account of the LC Issuing  Lender,  except that
interest accrued on and after the date of payment by any Revolving Credit Lender
pursuant to  paragraph  (e) of this  Section  2.04 to  reimburse  the LC Issuing
Lender shall be for the account of such Lender to the extent of such payment.

           (i) Cash  Collateralization.  If either (i) an Event of Default shall
occur and be continuing and the Borrower receives notice from the Administrative
Agent or the Required  Revolving  Credit  Lenders  demanding the deposit of cash
collateral pursuant to this paragraph, or (ii) the Borrower shall be required to
provide cover for LC Exposure  pursuant to Section  2.09(b),  the Borrower shall
immediately  deposit  into an account  (the "LC  Collateral  Account")  with the
Administrative  Agent,  in the  name  of the  Administrative  Agent  and for the
benefit of the  Lenders,  an amount in cash equal to, in the case of an Event of
Default,  the LC Exposure  as of such date plus any accrued and unpaid  interest
thereon  and,  in the case of cover  pursuant  to  Section  2.09(b),  the amount
required  under  2.09(b);  provided  that the  obligation  to deposit  such cash
collateral  shall become  effective  immediately,  and such deposit shall become
immediately  due and payable,  without demand or other notice of any kind,  upon
the occurrence of any Event of Default described in clause (h) or (i) of Article
VIII.  Such deposit shall be held by the  Administrative  Agent as collateral in
the first  instance for the LC Exposure  under this Agreement and thereafter for
the payment of any other  obligations of the Credit Parties  hereunder and under
the other Loan Documents. The Administrative Agent shall have exclusive dominion
and control, including the exclusive right of withdrawal, over the LC Collateral
Account.  Such deposits shall not accrue interest other than any interest earned
on the  investment  of such  deposits,  which  investments  shall  be  Permitted
Investments  made at the option and sole  discretion of the Borrower prior to an
Event of Default and made at the sole  discretion  of the  Administrative  Agent
after the occurrence and during the  continuance of an Event of Default,  and in
any event  shall be at the  Borrower's  risk and  expense.  Prior to an Event of
Default, income and profits, if any, on such investments shall be distributed to
the Borrower upon request. After the occurrence and during the continuance of an
Event of  Default,  interest  and  profits,  if any, on such  investments  shall
accumulate in


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<PAGE>


                             - 34 -


such  account.  If the  Borrower  is  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
Borrower  upon request  within three  Business  Days after all Events of Default
have been cured or waived.

           (j)  Existing  Letters of Credit.  There is  outstanding  on the date
hereof pursuant to the Existing Credit  Agreements one or more letters of credit
issued  by Chase (as the  "Issuing  Bank"  thereunder)  for the  account  of the
Borrower as set forth on Schedule  2.04.  Upon the  Effective  Date each of such
letters of credit is hereby  designated  a "Letter of Credit"  under and for all
purposes of this Agreement.  In that connection,  the Borrower hereby represents
and warrants to the LC Issuing  Lender,  each  Revolving  Credit  Lender and the
Administrative  Agent that each such letter of credit satisfies the requirements
of this Section 2.04 (including paragraph (c) above).

           SECTION 2.05.  Funding of Borrowings.

           (a) Each Lender  shall make each Loan to be made by it  hereunder  on
the proposed date thereof by wire  transfer of  immediately  available  funds by
1:00 p.m., New York City time, to the account of the  Administrative  Agent most
recently  designated  by it for such  purpose  by  notice  to the  Lenders.  The
Administrative  Agent will make such Loans available to the Borrower by promptly
crediting the amounts so received,  in like funds, to an account of the Borrower
maintained with the Administrative  Agent in New York City and designated by the
Borrower in the applicable  Borrowing  Request;  provided that Revolving  Credit
Base Rate Loans made to finance the  reimbursement  of an LC Disbursement  under
any Letter of Credit as  provided  in Section  2.04(e)  shall be remitted by the
Administrative Agent to the LC Issuing Lender.

           (b) Unless the Administrative Agent shall have received notice from a
Lender prior to the  proposed  date of any  Borrowing  that such Lender will not
make  available  to  the  Administrative  Agent  such  Lender's  share  of  such
Borrowing,  the  Administrative  Agent may assume that such Lender has made such
share  available on such date in accordance  with  paragraph (a) of this Section
2.05 and may, in reliance upon such assumption, make available to the Borrower a
corresponding  amount. In such event, if a Lender has not in fact made its share
of the applicable  Borrowing  available to the  Administrative  Agent,  then the
applicable Lender and the Borrower  severally agree to pay to the Administrative
Agent forthwith on demand such corresponding  amount with interest thereon,  for
each day from and  including  the date  such  amount  is made  available  to the
Borrower to but excluding the date of payment to the  Administrative  Agent,  at
(i) in the case of such Lender,  the Federal Funds Effective Rate or (ii) in the
case of the Borrower,  the interest rate  applicable to Base Rate Loans. If such
Lender  pays such amount to the  Administrative  Agent,  then such amount  shall
constitute such Lender's Loan included in such Borrowing.



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<PAGE>


                             - 35 -


           SECTION 2.06.  Interest Elections.

           (a) Each  Borrowing  initially  shall be of the Type specified in the
applicable Borrowing Request and, in the case of a Eurodollar  Borrowing,  shall
have  an  initial  Interest  Period  as  specified  in such  Borrowing  Request.
Thereafter, the Borrower may elect to convert such Borrowing to a different Type
or to continue such  Borrowing and, in the case of a Eurodollar  Borrowing,  may
elect  Interest  Periods  therefor,  all as provided in this Section  2.06.  The
Borrower may elect different  options for  continuations  and  conversions  with
respect to different portions of the affected Borrowing, in which case each such
portion  shall  be  allocated  ratably  among  the  Lenders  holding  the  Loans
comprising such Borrowing,  and the Loans  comprising each such portion shall be
considered a separate Borrowing.

           (b) To make an election  pursuant to this Section 2.06,  the Borrower
shall notify the Administrative  Agent of such election by telephone by the time
that a Borrowing  Request  would be required  under Section 2.03 if the Borrower
were  requesting a Borrowing of the Type resulting from such election to be made
on the effective date of such election.  Each such telephonic  Interest Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Interest Election Request in a
form approved by the Administrative Agent and signed by the Borrower.

           (c) Each  telephonic  and written  Interest  Election  Request  shall
specify the following information in compliance with Section 2.02:

              (i) the Borrowing to which such Interest  Election Request applies
      and, if  different  options for  continuations  or  conversions  are being
      elected with respect to different  portions thereof,  the portions thereof
      to be allocated to each resulting Borrowing (in which case the information
      to be  specified  pursuant  to  clauses  (iii)  and  (iv)  below  shall be
      specified for each resulting Borrowing);

             (ii) the  effective  date of the  election  made  pursuant  to such
      Interest Election Request, which shall be a Business Day;

           (iii) whether the resulting  Borrowing is to be a Base Rate Borrowing
      or a Eurodollar Borrowing; and

             (iv) if the  resulting  Borrowing  is a Eurodollar  Borrowing,  the
      Interest  Period to be  applicable  thereto  after  giving  effect to such
      election,  which shall be a period  contemplated  by the definition of the
      term "Interest Period".

If any such Interest  Election Request requests a Eurodollar  Borrowing but does
not  specify  an  Interest  Period,  then the  Borrower  shall be deemed to have
selected an Interest Period of one month's duration.


                         Credit Agreement

<PAGE>


                             - 36 -



           (d) Promptly  following receipt of an Interest Election Request,  the
Administrative  Agent shall advise each affected  Lender of the details  thereof
and of such Lender's portion of each resulting Borrowing.

           (e) If the  Borrower  fails to  deliver  a timely  Interest  Election
Request with respect to a Eurodollar  Borrowing prior to the end of the Interest
Period  applicable  thereto,  then,  unless such Borrowing is repaid as provided
herein,  at the end of such Interest Period such Borrowing shall be converted to
a Base Rate Borrowing.  Notwithstanding  any contrary  provision  hereof,  if an
Event of Default has occurred and is continuing and the Administrative Agent, at
the request of the Required Lenders, so notifies the Borrower,  then, so long as
an Event of Default is continuing (i) no outstanding  Borrowing may be converted
to  or  continued  as a  Eurodollar  Borrowing  and  (ii)  unless  repaid,  each
Eurodollar  Borrowing  shall be converted to a Base Rate Borrowing at the end of
the Interest Period applicable thereto.

           SECTION 2.07.  Termination and Reduction of Commitments.

           (a)  Unless   previously   terminated,   (i)  the  Revolving   Credit
Commitments  shall terminate at the close of business on the Final Maturity Date
and (ii) the Term Loan  Commitments  shall terminate at the close of business on
the Term Loan Commitment Termination Date.

           (b) The  Borrower  may at any time  terminate,  or from  time to time
reduce,  the  Commitments of any Class;  provided that (i) each reduction of the
Commitments  of such  Class  shall  be in an  amount  that  at  least  equal  to
$1,000,000 or any greater integral multiple of $500,000, (ii) the Borrower shall
not terminate or reduce the Term Loan Commitments if, after giving effect to any
concurrent  prepayment  of Term  Loans in  accordance  with  Section  2.09,  the
outstanding  Term Loans would exceed the total Term Loan  Commitments  and (iii)
the Borrower shall not terminate or reduce the Revolving Credit  Commitments if,
after giving effect to any concurrent  prepayment of the Revolving  Credit Loans
in accordance  with Section 2.09, the total  Revolving  Credit  Exposures  would
exceed the total Revolving Credit Commitments.

           (c)  The  Borrower  shall  notify  the  Administrative  Agent  of any
election to terminate or reduce  Commitments under paragraph (b) of this Section
2.07  at  least  three  Business  Days  prior  to the  effective  date  of  such
termination  or  reduction,  specifying  such  election and the  effective  date
thereof. Promptly following receipt of any such notice, the Administrative Agent
shall advise the Lenders of the contents  thereof.  Each notice delivered by the
Borrower  pursuant to this Section 2.07 shall be  irrevocable;  provided  that a
notice of termination  of  Commitments  delivered by the Borrower may state that
such notice is conditioned upon the effectiveness of other credit facilities, in
which  case  such  notice  may be  revoked  by the  Borrower  (by  notice to the
Administrative  Agent  on or  prior  to the  specified  effective  date) if such
condition is not satisfied. Any termination or reduction of Commitments shall be
permanent. Each reduction of Commitments of any Class shall be


                         Credit Agreement

<PAGE>


                             - 37 -


made ratably among the Lenders in accordance with their  respective  Commitments
of such Class.

           SECTION 2.08.  Repayment of Loans; Evidence of Debt.

           (a)  The  Borrower  hereby  unconditionally  promises  to  pay to the
Administrative  Agent for the account of each  Revolving  Credit Lender the then
unpaid  principal  amount of such Lender's  Revolving  Credit Loans on the Final
Maturity Date.

           (b)  The  Borrower  hereby  unconditionally  promises  to  pay to the
Administrative  Agent for the account of the Term Loan Lenders the  principal of
the Term Loans in twenty-six installments payable on the Principal Payment Dates
as follows:
<TABLE>
<CAPTION>

   Principal Payment Date
  Falling on or Nearest to:                           Amount of Installment ($):
  ------------------------                             -------------------------

<S>                                                                   <C>       
September 30, 1997 ....................................               $3,750,000
December 31, 1997 .....................................               $3,750,000

March 31, 1998 ........................................               $3,750,000
June 30, 1998 .........................................               $3,750,000
September 30, 1998 ....................................               $3,750,000
December 31, 1998 .....................................               $3,750,000

March 31, 1999 ........................................               $3,750,000
June 30, 1999 .........................................               $3,750,000
September 30, 1999 ....................................               $3,750,000
December 31, 1999 .....................................               $3,750,000

March 31, 2000 ........................................               $3,750,000
June 30, 2000 .........................................               $3,750,000
September 30, 2000 ....................................               $3,750,000
December 31, 2000 .....................................               $3,750,000

March 31, 2001 ........................................               $5,625,000
June 30, 2001 .........................................               $5,625,000
September 30, 2001 ....................................               $5,625,000
December 31, 2001 .....................................               $5,625,000

March 31, 2002 ........................................               $6,250,000
June 30, 2002 .........................................               $6,250,000
September 30, 2002 ....................................               $6,250,000
December 31, 2002 .....................................               $6,250,000
March 31, 2003 ........................................               $6,250,000
June 30, 2003 .........................................               $6,250,000
September 30, 2003 ....................................               $6,250,000

January 30, 2004 ......................................               $6,250,000

</TABLE>

                         Credit Agreement

<PAGE>


                             - 38 -




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

           (d) The  Administrative  Agent  shall  maintain  accounts in which it
shall  record  (i) the  amount of each Loan made  hereunder,  the Class and 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
Borrower to each Lender  hereunder  and (iii) the amount of any sum  received by
the  Administrative  Agent  hereunder  for the  account of the  Lenders and each
Lender's share thereof.

           (e) The entries made in the accounts maintained pursuant to paragraph
(c) or (d) of this Section 2.08 shall be prima facie  evidence of the  existence
and amounts of the obligations  recorded  therein;  provided 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  obligation of the Borrower to repay
the Loans in accordance with the terms of this Agreement.

           (f) Any  Lender  may  request  that  Loans of any Class made by it be
evidenced by a promissory  note.  In such event,  the  Borrower  shall  prepare,
execute  and deliver to such Lender a  promissory  note  payable to the order of
such Lender (or, if requested by such Lender,  to such Lender and its registered
assigns)  and in a form  reasonably  acceptable  to  the  Administrative  Agent.
Thereafter,  the  Loans of such  Class  evidenced  by such  promissory  note and
interest  thereon shall at all times  (including  after  assignment  pursuant to
Section  10.04)  be  represented  by one or more  promissory  notes in such form
payable to the order of the payee named therein (or, if such  promissory note is
a registered note, to such payee and its registered assigns).

           SECTION 2.09.  Prepayment of Loans.

           (a) Optional  Prepayments.  The Borrower  shall have the right at any
time and from time to time to prepay any Borrowing in whole or in part,  subject
to prior notice in accordance  with  paragraph  (c) of this Section  2.09.  Each
prepayment of Term Loans shall be applied to the  installments  thereof pro rata
in accordance with the respective  aggregate principal amounts of the Term Loans
outstanding on the date of such prepayment.



                         Credit Agreement

<PAGE>


                             - 39 -


           (b) Mandatory Prepayments. The Borrower shall make prepayments of the
Loans hereunder (and reduce the Commitments hereunder) as follows:

              (i) Casualty Events. On the date of receipt by the Borrower or any
      Subsidiary  of  Net  Available  Proceeds  in  excess  of  $100,000  of any
      insurance,  condemnation  award or other  compensation  in  respect of any
      Casualty  Event  (excluding  Net  Available  Proceeds  from  (x)  business
      interruption  coverage or (y) other  insurance  coverage  unrelated to the
      repair  and/or  replacement  of the damaged  assets) the  Borrower or such
      Subsidiary,  as the case may be, shall deposit such Net Available Proceeds
      into  the  Collateral  Account  (under  and as  defined  in  the  Security
      Agreement).  Upon request by the Borrower,  the Administrative Agent shall
      (unless a Default shall have occurred and be  continuing)  release the Net
      Available  Proceeds to the Borrower in an amount not  exceeding the amount
      required  for repair or  replacement  of the  property  for which such Net
      Available  Proceeds  were  received;  provided  that if such Net Available
      Proceeds  have not been released or committed to be expended in respect of
      such repair or replacement in an amount and manner  reasonably  acceptable
      to the Administrative  Agent within 180 days of receipt by the Borrower or
      such Subsidiary,  as the case may be, such Net Available Proceeds,  to the
      extent  that  such Net  Available  Proceeds,  together  with all other Net
      Available  Proceeds  received by the Borrower or any Subsidiary in respect
      of Casualty Events, not released or committed to be expended in respect of
      repair or  replacement  within 180 days of receipt by the  Borrower or any
      Subsidiary  exceeds  $500,000,  shall be used to prepay the Loans  (and/or
      provide  cover for LC  Exposure  as  specified  in  Section  2.04(i))  and
      automatically  reduce the  Revolving  Credit  Commitments  in an aggregate
      amount,  if any,  equal  to 100% of the  Net  Available  Proceeds  of such
      Casualty  Event not  theretofore  applied to the repair or  replacement of
      such property  (such  prepayment and reduction to be effected in each case
      in the manner and to the extent  specified  in clause (vi) of this Section
      2.09).

             (ii)  Sale  of  Assets.  Without  limiting  the  obligation  of the
      Borrower to obtain the consent of the Required  Lenders to any Disposition
      not otherwise permitted hereunder, the Borrower agrees, on or prior to the
      occurrence  of any  Disposition  which,  together  with the  aggregate Net
      Available  Proceeds of all other  Dispositions to date in the then current
      fiscal year,  would generate Net Available  Proceeds in excess of $100,000
      to  deliver  to  the  Administrative  Agent  a  statement  certified  by a
      Financial  Officer,  in form and  detail  reasonably  satisfactory  to the
      Administrative  Agent,  of  the  estimated  amount  of the  Net  Available
      Proceeds of such Disposition  that will (on the date of such  Disposition)
      be received by the  Borrower or any  Subsidiary  in cash and the  Borrower
      will  prepay the Loans  hereunder  (and  provide  cover for LC Exposure as
      specified in Section  2.04(i)),  and the  Commitments  hereunder  shall be
      subject to automatic reduction, as follows:

                (x) upon the date of such  Disposition,  in an aggregate  amount
           equal to 100% of the  amount of the Net  Available  Proceeds  of such
           Disposition which,


                         Credit Agreement

<PAGE>


                             - 40 -


           together  with the  aggregate  Net  Available  Proceeds  of all other
           Dispositions to date in the then current fiscal year,  would generate
           Net Available Proceeds in excess of $100,000,  to the extent received
           by the  Borrower  or any of its  Subsidiaries  in cash on the date of
           such Disposition; and

                (y)  thereafter,  quarterly,  on the date of the delivery by the
           Borrower to the Administrative  Agent pursuant to Section 6.01 of the
           financial  statements for any quarterly fiscal period or fiscal year,
           to the  extent the  Borrower  or any  Subsidiary  shall  receive  Net
           Available  Proceeds during the quarterly  fiscal period ending on the
           date of such  financial  statements  in cash under  deferred  payment
           arrangements or Disposition  Investments  entered into or received in
           connection with any  Disposition,  an amount equal to (A) 100% of the
           aggregate amount of such Net Available  Proceeds received during such
           quarterly fiscal period minus (B) any transaction expenses associated
           with Dispositions and not previously deducted in the determination of
           Net Available  Proceeds  plus (or minus,  as the case may be) (C) any
           other  adjustment  received or paid by the Borrower or any Subsidiary
           pursuant to the respective agreements giving rise to Dispositions and
           not  previously  taken into account in the  determination  of the Net
           Available  Proceeds of  Dispositions,  provided  that if prior to the
           date upon which the  Borrower  would  otherwise be required to make a
           prepayment under this clause (y) with respect to any quarterly fiscal
           period the  aggregate  amount of such Net Available  Proceeds  (after
           giving  effect to the  adjustments  provided  for in this clause (y))
           shall  exceed  $1,000,000,  then  the  Borrower  shall  within  three
           Business  Days  after  receipt  of  such  aggregate   amount  make  a
           prepayment  under this clause (y) in an amount equal to such required
           prepayment.

      Prepayments  of Loans  (and  cover  for LC  Exposure)  and  reductions  of
      Commitments shall be effected in each case in the manner and to the extent
      specified in clause (vi) of this Section 2.09(b).

            (iii)  Excess Cash Flow.  Not later than the date 120 days after the
      end of each fiscal year of the  Borrower  beginning  with Excess Cash Flow
      for the fiscal year ending  December 31, 1997,  the Borrower  shall prepay
      the Loans  (and/or  provide  cover for LC Exposure as specified in Section
      2.04(i)), and the Commitments shall be subject to automatic reduction,  in
      an aggregate amount equal to the excess of (x) 60% of Excess Cash Flow for
      such  fiscal year over (y) the  aggregate  amount of  prepayments  of Term
      Loans made during such fiscal year pursuant to Section 2.09(a) (other than
      that portion,  if any, of such prepayments  applied to installments of the
      Term Loans falling due in such fiscal year) and, after the payment in full
      of the Term  Loans,  the  aggregate  amount  of  voluntary  reductions  of
      Revolving  Credit  Commitments  made during  such fiscal year  pursuant to
      Section 2.07(b), such prepayment and reduction to be effected in each case
      in the manner and to the extent  specified  in clause (vi) of this Section
      2.09(b).


                         Credit Agreement

<PAGE>


                             - 41 -



             (iv) Equity Issuance.  Upon any Equity Issuance, the Borrower shall
      prepay the Loans  (and/or  provide  cover for LC Exposure as  specified in
      Section  2.04(i)),  and the  Commitments  shall be  subject  to  automatic
      reduction,  in an  aggregate  amount  equal  to 100% of the Net  Available
      Proceeds  thereof,  such  prepayment  and reduction to be effected in each
      case in the  manner  and to the extent  specified  in clause  (vi) of this
      Section 2.09(b).

              (v) Application.  Upon each required  reduction of Commitments and
      prepayment  of Loans (and cover for LC  exposure)  pursuant to clauses (i)
      through  (iv)  of  this  Section  2.09(b),  the  amount  of  the  required
      prepayment shall be applied (x) first, to reduce the Term Loan Commitments
      and if, after giving effect to such  reduction,  the  aggregate  principal
      amount of Term Loans exceeds the amount of the Term Loan Commitments,  the
      Borrower  shall  prepay the Term Loans in an amount  equal to such excess,
      such  prepayment to be applied to the  installments  of the Term Loans pro
      rata in accordance with the respective aggregate principal amounts thereof
      outstanding on the date of such  prepayment and (y) second,  to the reduce
      the  Revolving  Credit  Commitments  and if, after  giving  effect to such
      reduction,  the  aggregate  principal  amount of  Revolving  Credit  Loans
      exceeds the amount of the Revolving Credit Commitments, the Borrower shall
      prepay the Revolving Credit Loans (and, to the extent  necessary,  provide
      cover for LC Exposure  pursuant to Section  2.04(i)) in an amount equal to
      such excess.


           (c)   Notice  of   Prepayment.   The   Borrower   shall   notify  the
Administrative  Agent by telephone  (confirmed  by  telecopy) of any  prepayment
under this Section 2.09 (i) in the case of prepayment of a Eurodollar Borrowing,
not later than 11:00 a.m.,  New York City time,  three  Business Days before the
date of prepayment and (ii) in the case of a Base Rate Borrowing, not later than
11:00 a.m.,  New York City time, one Business Day before the date of prepayment.
Each such notice shall be irrevocable  and shall specify the prepayment date and
the  principal  amount of each  Borrowing  or  portion  thereof  to be  prepaid;
provided  that,  if a  notice  of  prepayment  is  given  in  connection  with a
conditional  notice of termination of the Commitments as contemplated by Section
2.07,  then  such  notice  of  prepayment  may be  revoked  if  such  notice  of
termination  is revoked in  accordance  with Section  2.07.  Promptly  following
receipt of any such notice  related to a prepayment,  the  Administrative  Agent
shall advise the Lenders of the contents thereof.  Each partial  prepayment of a
Borrowing  shall  be in an  amount  that  would  be  permitted  in the case of a
Borrowing  of the  same  Class  and  Type as  provided  in  Section  2.02.  Each
prepayment  of a  Revolving  Credit  Borrowing  shall be applied  ratably to the
Revolving Credit Loans included in the prepaid  Borrowing.  Prepayments shall be
accompanied by accrued interest to the extent required by Section 2.11.


           SECTION 2.10.  Fees.



                         Credit Agreement

<PAGE>


                             - 42 -


           (a) The Borrower  agrees to pay to the  Administrative  Agent for the
account of each Lender a commitment  fee, which shall accrue at a rate per annum
equal  to the  Applicable  Rate  on  the  daily  average  unused  amount  of the
respective  Commitments  of such Lender during the period from and including the
Effective  Date to but excluding the date on which such  Commitment  terminates.
Accrued  commitment fees shall be payable in arrears on each Quarterly Date and,
in  respect  of  any  Commitments,  on  the  date  such  Commitments  terminate,
commencing on the first such date to occur after the date hereof. All commitment
fees shall be  computed  on the basis of a year of 360 days and shall be payable
for the actual number of days elapsed (including the first day but excluding the
last day).

           (b) The  Borrower  agrees to pay with  respect  to  Letters of Credit
outstanding hereunder the following fees:

              (i) to the Administrative  Agent for the account of each Revolving
      Credit Lender a participation  fee with respect to its  participations  in
      Letters of Credit,  which  shall  accrue at a rate per annum  equal to the
      Applicable  Rate  used  in  determining   interest  on  Revolving   Credit
      Eurodollar  Loans on the average daily amount of such Lender's LC Exposure
      (excluding  any  portion   thereof   attributable   to   unreimbursed   LC
      Disbursements)  during the period from and including the Effective Date to
      but  excluding  the  later of the date on which  such  Lender's  Revolving
      Credit  Commitment  terminates and the date on which there shall no longer
      be any Letters of Credit outstanding hereunder, and

           (ii) to the LC Issuing  Lender (x) a fronting fee, which shall accrue
      at the rate or rates per annum separately agreed upon between the Borrower
      and the LC Issuing  Lender on the average  daily amount of the LC Exposure
      of the LC Issuing Lender  (determined  for these  purposes  without giving
      effect to the  participations  therein  of the  Revolving  Credit  Lenders
      pursuant to  paragraph  (d) of Section  2.04,  and  excluding  any portion
      thereof  attributable to unreimbursed LC Disbursements)  during the period
      from and including  the  Effective  Date to but excluding the later of the
      date of termination of the Revolving  Credit  Commitments  and the date on
      which  there  shall no longer be any  Letters  of Credit of the LC Issuing
      Lender  outstanding  hereunder,  and (y) the LC Issuing Lender's  standard
      fees with respect to the issuance,  amendment, renewal or extension of any
      Letter of Credit or processing of drawings thereunder.

Accrued participation fees and fronting fees shall be payable in arrears on each
Quarterly  Date and on the  date the  Revolving  Credit  Commitments  terminate,
commencing on the first such date to occur after the date hereof,  provided that
any such fees accruing after the date on which the Revolving Credit  Commitments
terminate shall be payable on demand.  All participation  fees and fronting fees
shall be  computed  on the basis of a year of 360 days and shall be payable  for
the actual  number of days elapsed  (including  the first day but  excluding the
last day).



                         Credit Agreement

<PAGE>


                             - 43 -


           (c) The Borrower agrees to pay to the  Administrative  Agent, for its
own account,  fees payable in the amounts and at the times separately  agreed in
writing between the Borrower and the Administrative Agent.

           (d) All fees  payable  hereunder  shall be paid on the dates due,  in
immediately available funds, to the Administrative Agent for distribution to the
Lenders  entitled  thereto.   Fees  paid  shall  not  be  refundable  under  any
circumstances, absent manifest error in the determination thereof.

           SECTION 2.11.  Interest.

           (a) The Loans comprising each Base Rate Borrowing shall bear interest
at a rate per annum equal to the Adjusted Base Rate plus the Applicable Rate.

           (b)  The  Loans  comprising  each  Eurodollar  Borrowing  shall  bear
interest at a rate per annum equal to the  Adjusted  LIBO Rate for the  Interest
Period in effect for such Borrowing plus the Applicable Rate.

           (c) Notwithstanding the foregoing, if any principal of or interest on
any Loan or any fee or other  amount  payable by the  Borrower  hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise,  such
overdue amount shall bear interest,  after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise  applicable to such Loan as provided above or (ii) in the case of
any other  amount,  2% plus the rate  applicable  to Base Rate Loans as provided
above.

           (d) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan; provided that (i) interest accrued pursuant
to paragraph  (c) of this  Section 2.11 shall be payable on demand,  (ii) in the
event of any  repayment or  prepayment of any Loan (other than a prepayment of a
Base  Rate  Revolving  Credit  Loan  prior  to the end of the  Revolving  Credit
Availability Period), accrued interest on the principal amount repaid or prepaid
shall be payable on the date of such repayment or prepayment, (iii) in the event
of any  conversion  of any  Eurodollar  Loan  prior  to the  end of the  current
Interest Period therefor,  accrued interest on such Loan shall be payable on the
effective  date of such  conversion  and (iv) all accrued  interest on Revolving
Credit  Loans  shall  be  payable  upon  termination  of  the  Revolving  Credit
Commitments.

           (e) All interest  hereunder  shall be computed on the basis of a year
of 360 days,  except that  interest  computed by reference to the Adjusted  Base
Rate at times  when the  Adjusted  Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed  (including the
first day but  excluding  the last  day).  The  applicable  Adjusted  Base Rate,
Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent,
and such determination shall be conclusive absent manifest error.


                         Credit Agreement

<PAGE>


                             - 44 -



           SECTION  2.12.   Alternate   Rate  of  Interest.   If  prior  to  the
commencement of any Interest Period for a Eurodollar Borrowing:

           (a) the Administrative Agent determines (which determination shall be
      conclusive  absent manifest  error) that adequate and reasonable  means do
      not exist for  ascertaining  the Adjusted  LIBO Rate or the LIBO Rate,  as
      applicable, for such Interest Period; or

           (b)  if  such  Borrowing  is of a  particular  Class  of  Loans,  the
      Administrative  Agent is advised by the Required  Revolving Credit Lenders
      or the Required Term Loan  Lenders,  as the case may be, that the Adjusted
      LIBO Rate or the LIBO Rate, as applicable,  for such Interest  Period will
      not  adequately  and fairly  reflect the cost to such Lenders of making or
      maintaining  their Loans of such Class included in such Borrowing for such
      Interest Period;

then the Administrative  Agent shall give notice thereof to the Borrower and the
affected Lenders by telephone or telecopy as promptly as practicable  thereafter
and, until the Administrative  Agent notifies the Borrower and such Lenders that
the  circumstances  giving rise to such notice no longer exist, (i) any Interest
Election  Request that  requests the  conversion  of any such  Borrowing  to, or
continuation  of  any  such  Borrowing  as,  a  Eurodollar  Borrowing  shall  be
ineffective and (ii) if any Borrowing  Request requests a Eurodollar  Borrowing,
such Borrowing shall be made as a Base Rate Borrowing.

           SECTION 2.13.  Increased Costs.

           (a)  If any Change in Law shall:

              (i) 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 (except any such reserve requirement
      reflected in the Adjusted LIBO Rate) or the LC Issuing Lender; or

             (ii)  impose on any Lender or the LC  Issuing  Lender or the London
      interbank   market  any  other  condition   affecting  this  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 of  maintaining  its
obligation  to make any such Loan) or to increase the cost to such Lender or the
LC Issuing Lender of  participating  in,  issuing or  maintaining  any Letter of
Credit or to reduce the amount of any sum received or  receivable by such Lender
or  the  LC  Issuing  Lender  hereunder  (whether  of  principal,   interest  or
otherwise),  then,  upon  delivery of the  certificate  provided  for in Section
2.13(c),  the Borrower will pay to such Lender or the LC Issuing Lender,  as the
case may be, such additional amount


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                             - 45 -


or amounts as will compensate such Lender or the LC Issuing Lender,  as the case
may be, for such additional costs incurred or reduction suffered.

           (b) If any Lender or the LC Issuing Lender reasonably determines that
any Change in Law regarding capital requirements has or would have the effect of
reducing the rate of return on such Lender's or the LC Issuing  Lender's capital
or on the capital of such Lender's or the LC Issuing  Lender's  holding company,
if  any,  as  a  consequence  of  this  Agreement  or  the  Loans  made  by,  or
participations  in Letters of Credit  held by,  such  Lender,  or the Letters of
Credit issued by the LC Issuing Lender,  to a level below that which such Lender
or the LC Issuing  Lender or such  Lender's or the LC Issuing  Lender's  holding
company   could  have   achieved  but  for  such  Change  in  Law  (taking  into
consideration such Lender's or the LC Issuing Lender's policies and the policies
of such  Lender's or the LC Issuing  Lender's  holding  company  with respect to
capital  adequacy),  then from time to time the Borrower will pay to such Lender
or the LC Issuing Lender,  as the case may be, such additional amount or amounts
as will compensate such Lender or the LC Issuing Lender, or such Lender's or the
LC Issuing Lender's holding company, for any such reduction suffered.

           (c) A certificate  of a Lender or the LC Issuing Lender setting forth
the amount or amounts  necessary  to  compensate  such  Lender or the LC Issuing
Lender or its holding company, as the case may be, as specified in paragraph (a)
or (b) of this  Section  2.13 shall be  delivered  to the  Borrower and shall be
conclusive so long as it reflects a reasonable  basis for the calculation of the
amounts set forth therein and does not contain any manifest error.  The Borrower
shall pay such  Lender or the LC Issuing  Lender the amount  shown as due on any
such certificate within 10 days after receipt thereof.

           (d)  Failure  or delay on the part of any  Lender  or the LC  Issuing
Lender to demand compensation pursuant to this Section 2.13 shall not constitute
a waiver of such  Lender's  or the LC  Issuing  Lender's  right to  demand  such
compensation;  provided that the Borrower  shall not be required to compensate a
Lender or the LC Issuing Lender  pursuant to this Section 2.13 for any increased
costs or  reductions  incurred  more than six months prior to the date that such
Lender or the LC Issuing  Lender,  as the case may be,  notifies the Borrower of
the Change in Law giving rise to such increased  costs or reductions and of such
Lender's or the LC Issuing Lender's  intention to claim  compensation  therefor;
provided  further that, if the Change in Law giving rise to such increased costs
or reductions is retroactive,  then the six-month period referred to above shall
be extended to include the period of retroactive effect thereof.

           SECTION 2.14. Break Funding Payments. In the event of (a) the payment
of any  principal  of any  Eurodollar  Loan  other  than on the  last  day of an
Interest  Period  applicable  thereto  (including  as a  result  of an  Event of
Default),  (b) the conversion of any Eurodollar  Loan other than on the last day
of the Interest Period applicable thereto or (c) the failure to borrow, convert,
continue  or  prepay  any Loan on the date  specified  in any  notice  delivered
pursuant hereto  (regardless of whether such notice is permitted to be revocable
and


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                             - 46 -


is revoked in accordance herewith),  then, in any such event, the Borrower shall
compensate  each  Lender for the loss,  cost and  expense  attributable  to such
event.

           In the case of a Eurodollar Loan, the loss to any Lender attributable
to any such event shall be deemed to include an amount determined by such Lender
to be equal to the excess, if any, of

              (i) the  amount  of  interest  that  such  Lender  would pay for a
      deposit  equal to the  principal  amount of such Loan for the period  (the
      "Breakage Period") from the date of such payment,  conversion,  failure or
      assignment  to the last day of the then current  Interest  Period for such
      Loan (or,  in the case of a failure to borrow,  convert or  continue,  the
      duration  of the  Interest  Period  that  would  have  resulted  from such
      borrowing,  conversion  or  continuation)  if the interest rate payable on
      such  deposit  were  equal to the  Adjusted  LIBO  Rate for such  Interest
      Period,

over

             (ii) the amount of  interest  that such  Lender  would earn on such
      principal  amount for the  Breakage  Period if such  Lender were to invest
      such  principal  amount for the Breakage  Period at the interest rate that
      would be bid by such  Lender (or an  affiliate  of such  Lender)  for U.S.
      dollar  deposits  from  other  banks  in  the  eurodollar  market  at  the
      commencement of the Breakage Period.

A certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive  pursuant to this  Section 2.14 shall be delivered to the
Borrower and shall be conclusive  absent manifest error.  The Borrower shall pay
such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.

           SECTION 2.15.  Taxes.

           (a) Any and all  payments by or on account of any  obligation  of the
Borrower hereunder shall be made free and clear of and without deduction for any
Indemnified  Taxes  or  Other  Taxes;  provided  that if the  Borrower  shall be
required to deduct any Indemnified Taxes or Other Taxes from such payments, then
(i) the sum payable  shall be  increased  as  necessary so that after making all
required deductions  (including deductions applicable to additional sums payable
under this  Section  2.15) the  Administrative  Agent,  Lender or the LC Issuing
Lender (as the case may be)  receives  an amount  equal to the sum it would have
received had no such  deductions  been made,  (ii) the Borrower  shall make such
deductions  and (iii) the  Borrower  shall pay the full  amount  deducted to the
relevant Governmental Authority in accordance with applicable law.

           (b) In  addition  the  Borrower  shall  pay any  Other  Taxes  to the
relevant Governmental Authority in accordance with applicable law.



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                             - 47 -


           (c) The Borrower  shall  indemnify  the  Administrative  Agent,  each
Lender and the LC Issuing Lender,  within 10 days after written demand therefor,
for  the  full  amount  of any  Indemnified  Taxes  or  Other  Taxes  (including
Indemnified  Taxes or Other  Taxes  imposed or asserted  on or  attributable  to
amounts payable under this Section 2.15) paid by the Administrative  Agent, such
Lender or the LC Issuing Lender, as the case may be, and any penalties, interest
and reasonable  expenses arising  therefrom or with respect thereto,  whether or
not such  Indemnified  Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental  Authority. A certificate as to the amount
of such  payment or  liability  delivered  to the Borrower by a Lender or the LC
Issuing Lender, or by the Administrative Agent on its own behalf or on behalf of
a Lender or the LC Issuing Lender, shall be conclusive absent manifest error.

           (d) As soon as practicable  after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a  Governmental  Authority,  the  Borrower  shall
deliver  to the  Administrative  Agent the  original  or a  certified  copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return  reporting such payment or other evidence of such payment  reasonably
satisfactory to the Administrative Agent.

           (e) Any  Foreign  Lender  that is  entitled  at any time  under  then
current law to an exemption from or reduction of  withholding  tax under the law
of the  jurisdiction  in which the  Borrower is located,  or any treaty to which
such  jurisdiction  is a party,  with respect to payments  under this  Agreement
shall deliver to the Borrower (with a copy to the  Administrative  Agent), on or
before  Effective Date or such later date on which such Person becomes a Foreign
Lender  and at the time or times  prescribed  by  applicable  law or  reasonably
requested by the Borrower,  such properly  completed and executed  documentation
prescribed  by  applicable  law as will permit such  payments to be made without
withholding or at a reduced rate.

           SECTION 2.16.  Payments  Generally;  Pro Rata  Treatment;  Sharing of
Set-Offs.

           (a) The Borrower  shall make each  payment  required to be made by it
hereunder  (whether  of  principal,   interest,  fees  or  reimbursement  of  LC
Disbursements, or under Section 2.13, 2.14 or 2.15, or otherwise) prior to 12:00
noon, New York City time, on the date when due, in immediately  available funds,
without  set-off or  counterclaim.  Any amounts  received after such time on any
date may, in the discretion of the Administrative  Agent, be deemed to have been
received  on the  next  succeeding  Business  Day for  purposes  of  calculating
interest thereon. All such payments shall be made to the Administrative Agent at
such of its  offices  in New  York  City as shall be  notified  to the  relevant
parties from time to time, except payments to be made directly to the LC Issuing
Lender as  expressly  provided  herein  and except  that  payments  pursuant  to
Sections 2.13,  2.14, 2.15, 3.03 and 10.03 shall be made directly to the Persons
entitled thereto.  The  Administrative  Agent shall distribute any such payments
received by it for the account of any other Person to the appropriate  recipient
promptly  following receipt thereof.  If any payment hereunder shall be due on a
day that is


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                             - 48 -


not a  Business  Day,  the  date  for  payment  shall  be  extended  to the next
succeeding  Business  Day,  and, in the case of any payment  accruing  interest,
interest thereon shall be payable for the period of such extension. All payments
hereunder shall be made in U.S. dollars.

           (b) If at any time  insufficient  funds are received by and available
to the Administrative Agent to pay fully all amounts of principal,  unreimbursed
LC  Disbursements,  interest  and fees then due  hereunder,  such funds shall be
applied (i) first,  to pay interest and fees then due  hereunder,  ratably among
the parties entitled thereto in accordance with the amounts of interest and fees
then due to such parties,  and (ii) second, to pay principal and unreimbursed LC
Disbursements then due hereunder,  ratably among the parties entitled thereto in
accordance with the amounts of principal and unreimbursed LC Disbursements  then
due to such parties.

           (c)  Except  to  the  extent  otherwise  provided  herein:  (i)  each
borrowing of Loans of a  particular  Class from the Lenders  under  Section 2.01
shall be made from the relevant  Lenders,  each payment of commitment  fee under
Section 2.10 in respect of Commitments  of a particular  Class shall be made for
account of the relevant Lenders, and each termination or reduction of the amount
of the Commitments of a particular  Class under Section 2.03 shall be applied to
the  respective  Commitments  of such Class of the  relevant  Lenders,  pro rata
according to the amounts of their  respective  Commitments  of such Class;  (ii)
Eurodollar Loans of any Class having the same Interest Period shall be allocated
pro  rata  among  the  relevant  Lenders  according  to  the  amounts  of  their
Commitments  of such  Class  (in the  case of the  making  of  Loans)  or  their
respective Loans of such Class (in the case of conversions and  continuations of
Loans);  (iii) each payment or  prepayment by the Borrower of principal of Loans
of a particular Class shall be made for account of the relevant Lenders pro rata
in accordance with the respective  unpaid principal amounts of the Loans of such
Class held by them;  (iv) each payment by the Borrower of interest on Loans of a
particular  Class shall be made for account of the relevant  Lenders pro rata in
accordance  with the  amounts of  interest on such Loans then due and payable to
the respective  Lenders;  and (v) each payment by the Borrower of  participation
fees in  respect  of  Letters  of Credit  shall be made for the  account  of the
Revolving Credit Lenders pro rata in accordance with the amount of participation
fees then due and payable to the Revolving Credit Lenders.

           (d) If any  Lender  shall,  by  exercising  any right of  set-off  or
counterclaim  or  otherwise,  obtain  payment in respect of any  principal of or
interest  on any of its Loans (or  participations  in LC  Disbursements)  of any
Class resulting in such Lender receiving payment of a greater  proportion of the
aggregate principal amount of its Loans (and participations in LC Disbursements)
of such Class and accrued  interest  thereon than the proportion of such amounts
received by any other Lender of any other Class,  then the Lender receiving such
greater proportion shall purchase (for cash at face value) participations in the
Loans (and LC  Disbursements)  of the other  Lenders to the extent  necessary so
that the benefit of such payments shall be shared by all the Lenders  ratably in
accordance  with the  aggregate  amount of principal of and accrued  interest on
their respective Loans (and  participations in LC Disbursements);  provided that
(i) if any such participations are purchased and all or any


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                             - 49 -


portion of the payment  giving rise thereto is  recovered,  such  participations
shall be  rescinded  and the  purchase  price  restored  to the  extent  of such
recovery,  without interest, and (ii) the provisions of this paragraph shall not
be construed to apply to any payment obtained by a Lender as  consideration  for
the  assignment  of  or  sale  of a  participation  in  any  of  its  Loans  (or
participations in LC  Disbursements) to any assignee or participant,  other than
to any Credit  Party or any  subsidiary  or  Affiliate  thereof (as to which the
provisions  of  this  paragraph  shall  apply).  The  Borrower  consents  to the
foregoing and agrees,  to the extent it may  effectively do so under  applicable
law,  that any  Lender  acquiring  a  participation  pursuant  to the  foregoing
arrangements   may  exercise   against  the  Borrower   rights  of  set-off  and
counterclaim with respect to such  participation as fully as if such Lender were
a direct creditor of the Borrower in the amount of such participation.

           (e) Unless the  Administrative  Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders or the LC Issuing Lender  entitled  thereto
(the  "Applicable  Recipient")  hereunder  that the Borrower  will not make such
payment,  the  Administrative  Agent may assume that the  Borrower has made such
payment on such date in  accordance  herewith  and may,  in  reliance  upon such
assumption,  distribute  to the  Applicable  Recipient  the amount  due. In such
event,  if the Borrower has not in fact made such payment,  then each Applicable
Recipient  severally  agrees to repay to the  Administrative  Agent forthwith on
demand the amount so  distributed  to such  Applicable  Recipient  with interest
thereon,  for each day from and including the date such amount is distributed to
it to but  excluding  the date of payment to the  Administrative  Agent,  at the
Federal Funds Effective Rate.

           (f) If any Lender shall fail to make any payment  required to be made
by it  pursuant  to  Section  2.04(d),  2.04(e),  2.05(b) or  2.16(e),  then the
Administrative  Agent  may,  in its  discretion  (notwithstanding  any  contrary
provision hereof),  apply any amounts thereafter  received by the Administrative
Agent for the account of such Lender to satisfy such Lender's  obligations under
such Section until all such unsatisfied obligations are fully paid.

           (g) Anything in this Agreement to the contrary notwithstanding,  each
Lender hereby agrees with each other Lender that no Lender shall take any action
to protect or enforce its rights arising out of this Agreement or any promissory
notes  prepared  pursuant to Section  2.09(f)  (including,  without  limitation,
exercising  any rights of setoff)  without  first  obtaining  the prior  written
consent of the Administrative Agent or the Required Lenders, it being the intent
of the  Lenders  that any such  action to protect or enforce  rights  under this
Agreement and any promissory notes prepared pursuant to Section 2.09(f) shall be
taken in concert and at the direction or with the consent of the  Administrative
Agent or the Required Lenders and not individually by a single Lender.

           SECTION 2.17. Mitigation  Obligations.  Upon the earliest to occur of
(i) notice or knowledge by Lender of any event that could result in or provide a
basis for a request for  compensation  under Section 2.13 and a determination by
such Lender that it will request such compensation, (ii) a request by Lender for
compensation under Section 2.13, or


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<PAGE>


                             - 50 -


(iii) the Borrower being required to pay any additional  amount to any Lender or
any  Governmental  Authority  for the account of any Lender  pursuant to Section
2.15,  then such Lender  shall use  reasonable  efforts to designate a different
lending  office  for  funding or booking  its Loans  hereunder  or to assign its
rights  and  obligations,  hereunder  to  another of its  offices,  branches  or
affiliates,  if, in the judgment of such Lender,  such designation or assignment
(i) would eliminate or reduce amounts payable  pursuant to Section 2.13 or 2.15,
as the case may be, in the future and (ii) would not subject  such Lender to any
unreimbursed cost or expense and would not otherwise be  disadvantageous to such
Lender;  provided  that  such  Lender  shall  not be  required  to make any such
designation  or  assignment  unless the  Borrower  agrees to pay all  reasonable
out-of-pocket costs and expenses incurred by any Lender in connection therewith.


                            ARTICLE III

                Guarantee by Subsidiary Guarantors

           SECTION 3.01. The Guarantee. The Subsidiary Guarantors hereby jointly
and  severally  guarantee  to  each  Lender,  the  LC  Issuing  Lender  and  the
Administrative  Agent and their  respective  successors  and  assigns the prompt
payment  in full  when due  (whether  at stated  maturity,  by  acceleration  or
otherwise)  of the principal of and interest on the Loans made by the Lenders to
the Borrower, all LC Disbursements and all other amounts from time to time owing
to the  Lenders,  the LC  Issuing  Lender  or the  Administrative  Agent  by the
Borrower hereunder or under any other Loan Document,  and all obligations of the
Borrower to any Lender  under any Hedging  Agreement,  in each case  strictly in
accordance with the terms thereof and including any interest  accruing after the
commencement of any proceeding  referred to in Article VIII (h) or (i),  whether
or not allowed as a claim in such  proceeding  (such  obligations  being  herein
collectively  called the "Guaranteed  Obligations").  The Subsidiary  Guarantors
hereby  further  jointly and severally  agree that if the Borrower shall fail to
pay in full when due (whether at stated maturity,  by acceleration or otherwise)
any of the Guaranteed  Obligations,  the Subsidiary Guarantors will promptly pay
the same, without any demand or notice  whatsoever,  and that in the case of any
extension  of time of payment or renewal of any of the  Guaranteed  Obligations,
the same will be promptly  paid in full when due (whether at extended  maturity,
by  acceleration or otherwise) in accordance with the terms of such extension or
renewal.

           SECTION  3.02.  Obligations  Unconditional.  The  obligations  of the
Subsidiary  Guarantors under Section 3.01 are absolute and unconditional,  joint
and several,  irrespective of the value,  genuineness,  validity,  regularity or
enforceability  of  this  Agreement,  the  other  Loan  Documents  or any  other
agreement  or  instrument  referred to herein or therein,  or any  substitution,
release  or  exchange  of any  other  guarantee  of or  security  for any of the
Guaranteed Obligations,  and, to the fullest extent permitted by applicable law,
irrespective  of  any  other   circumstance   whatsoever  that  might  otherwise
constitute a legal or equitable


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                             - 51 -


discharge  or  defense  of a surety or  guarantor,  it being the  intent of this
Section 3.02 that the obligations of the Subsidiary  Guarantors  hereunder shall
be  absolute  and   unconditional,   joint  and  several,   under  any  and  all
circumstances.  Without  limiting the generality of the foregoing,  it is agreed
that the  occurrence  of any one or more of the  following  shall  not  alter or
impair the liability of the Subsidiary  Guarantors  hereunder which shall remain
absolute and unconditional as described above:

           (a) at  any  time  or  from  time  to  time,  without  notice  to the
      Subsidiary Guarantors,  the time for any performance of or compliance with
      any of the Guaranteed  Obligations shall be extended,  or such performance
      or compliance shall be waived;

           (b) any of the acts mentioned in any of the  provisions  hereof or of
      the other Loan Documents or any other agreement or instrument  referred to
      herein or therein shall be done or omitted;

           (c)  the  maturity  of any of the  Guaranteed  Obligations  shall  be
      accelerated,  or any of the  Guaranteed  Obligations  shall  be  modified,
      supplemented  or amended in any respect,  or any right  hereunder or under
      the other Loan Documents or any other agreement or instrument  referred to
      herein or  therein  shall be waived or any other  guarantee  of any of the
      Guaranteed  Obligations  or any  security  therefor  shall be  released or
      exchanged in whole or in part or otherwise dealt with; or

           (d) any lien or  security  interest  granted  to, or in favor of, the
      Administrative  Agent,  the LC Issuing  Lender or any Lender or Lenders as
      security for any of the Guaranteed Obligations shall fail to be perfected.

The Subsidiary Guarantors hereby expressly waive diligence,  presentment, demand
of payment,  protest and all notices  whatsoever,  and any requirement  that the
Administrative  Agent,  the LC Issuing  Lender or any Lender  exhaust any right,
power or remedy or proceed  against the  Borrower  hereunder  or under the other
Loan  Documents  or any other  agreement  or  instrument  referred  to herein or
therein,  or against any other Person under any other  guarantee of, or security
for, any of the Guaranteed Obligations.

           SECTION  3.03.  Reinstatement.  The  obligations  of  the  Subsidiary
Guarantors  under this Article III shall be  automatically  reinstated if and to
the extent  that for any reason any  payment by or on behalf of the  Borrower in
respect of the Guaranteed Obligations is rescinded or must be otherwise restored
by any holder of any of the Guaranteed  Obligations,  whether as a result of any
proceedings  in bankruptcy or  reorganization  or otherwise,  and the Subsidiary
Guarantors   jointly  and   severally   agree  that  they  will   indemnify  the
Administrative  Agent,  the LC Issuing  Lender and each Lender on demand for all
reasonable  costs and  expenses  (including  fees of  counsel)  incurred  by the
Administrative  Agent,  any Lender or the LC Issuing  Lender in connection  with
such rescission or restoration,  including any such costs and expenses  incurred
in defending against any claim alleging that such payment constituted a


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                             - 52 -


preference,  fraudulent  transfer  or  similar  payment  under  any  bankruptcy,
insolvency or similar law.

           SECTION 3.04.  Subrogation.  Each Subsidiary  Guarantor hereby waives
all rights of  subrogation  or  contribution,  whether  arising by  contract  or
operation of law (including any such right arising under the Federal  Bankruptcy
Code of 1978,  as amended) or  otherwise by reason of any payment by it pursuant
to the  provisions of this Article III and further  agrees,  to the extent valid
under applicable law, with the Borrower for the benefit of each of its creditors
(including the LC Issuing Lender, each Lender and the Administrative Agent) that
any such payment by it shall constitute a dividend by such Subsidiary  Guarantor
to the Borrower.

           SECTION  3.05.  Remedies.   The  Subsidiary  Guarantors  jointly  and
severally  agree that, as between the Subsidiary  Guarantors on the one hand and
the  Administrative  Agent,  the Lenders and the LC Issuing  Lender on the other
hand, the obligations of the Borrower  hereunder may be declared to be forthwith
due and payable as provided in Article VIII or Section  2.04(i),  as  applicable
(and  shall be  deemed  to have  become  automatically  due and  payable  in the
circumstances  provided in Article VIII or Section  2.04(i),  as applicable) for
purposes  of  Section  3.01  notwithstanding  any  stay,   injunction  or  other
prohibition  preventing  such  declaration  (or such  obligations  from becoming
automatically due and payable) as against the Borrower and that, in the event of
such declaration (or such obligations being deemed to have become  automatically
due and  payable),  such  obligations  (whether  or not due and  payable  by the
Borrower)  shall forthwith  become due and payable by the Subsidiary  Guarantors
for purposes of Section 3.01.

           SECTION 3.06.  Instrument for the Payment of Money.  Each  Subsidiary
Guarantor hereby acknowledges that the guarantee in this Article III constitutes
an  instrument  for the payment of money,  and  consents  and agrees that the LC
Issuing Lender, any Lender or the  Administrative  Agent, at its sole option, in
the event of a dispute by the Subsidiary Guarantors in the payment of any moneys
due hereunder, shall have the right to bring a motion-action under New York CPLR
Section 3213.

           SECTION 3.07. Continuing Guarantee. The guarantee in this Article III
is a  continuing  guarantee,  and  shall  apply  to all  Guaranteed  Obligations
whenever arising.

           SECTION  3.08.  Rights of  Contribution.  The  Subsidiary  Guarantors
hereby agree,  as between  themselves,  that if any Subsidiary  Guarantor  shall
become an Excess  Funding  Guarantor (as defined below) by reason of the payment
by  such  Subsidiary  Guarantor  of  any  Guaranteed  Obligations,   each  other
Subsidiary  Guarantor  shall,  on demand of such Excess  Funding  Guarantor (but
subject to the next  sentence),  pay to such Excess Funding  Guarantor an amount
equal to such  Subsidiary  Guarantor's  Pro Rata  Share  (as  defined  below and
determined,  for this purpose,  without  reference to the properties,  debts and
liabilities of such Excess Funding  Guarantor) of the Excess Payment (as defined
below) in respect of such


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<PAGE>


                             - 53 -


Guaranteed Obligations.  The payment obligation of a Subsidiary Guarantor to any
Excess  Funding  Guarantor  under this  Section  3.08 shall be  subordinate  and
subject in right of payment to the prior payment in full of the  obligations  of
such  Subsidiary  Guarantor  under the other  provisions of this Article III and
such  Excess  Funding  Guarantor  shall not  exercise  any right or remedy  with
respect to such excess  until  payment and  satisfaction  in full of all of such
obligations.

           For purposes of this Section  3.08,  (a) "Excess  Funding  Guarantor"
means, in respect of any Guaranteed Obligations, a Subsidiary Guarantor that has
paid an amount in excess of its Pro Rata Share of such  Guaranteed  Obligations,
(b) "Excess Payment" means, in respect of any Guaranteed Obligations, the amount
paid by an Excess  Funding  Guarantor  in  excess of its Pro Rata  Share of such
Guaranteed  Obligations  and (c) "Pro  Rata  Share"  means,  for any  Subsidiary
Guarantor,  the ratio (expressed as a percentage) of (i) the amount by which the
aggregate  fair saleable value of all  properties of such  Subsidiary  Guarantor
(excluding  any  shares  of stock  of,  or  ownership  interest  in,  any  other
Subsidiary  Guarantor)  exceeds the amount of all the debts and  liabilities  of
such Subsidiary Guarantor  (including  contingent,  subordinated,  unmatured and
unliquidated  liabilities,  but excluding  the  obligations  of such  Subsidiary
Guarantor  hereunder and any obligations of any other Subsidiary  Guarantor that
have been Guaranteed by such  Subsidiary  Guarantor) to (ii) the amount by which
the aggregate fair saleable value of all properties of all of the Credit Parties
exceeds  the  amount  of all the debts and  liabilities  (including  contingent,
subordinated,   unmatured  and  unliquidated  liabilities,   but  excluding  the
obligations  of the Borrower and the Subsidiary  Guarantors  hereunder and under
the other Loan  Documents)  of all of the Credit  Parties,  determined  (x) with
respect to any  Subsidiary  Guarantor  that is a party  hereto on the  Effective
Date, as of the  Effective  Date,  and (y) with respect to any other  Subsidiary
Guarantor,  as of the  date  such  Subsidiary  Guarantor  becomes  a  Subsidiary
Guarantor hereunder.

           SECTION 3.09.  General  Limitation on Guarantee  Obligations.  In any
action or proceeding  involving any state corporate law, or any state or Federal
bankruptcy,  insolvency,  reorganization  or other law  affecting  the rights of
creditors  generally,  if the  obligations  of any  Subsidiary  Guarantor  under
Section  3.01 would  otherwise,  taking into account the  provisions  of Section
3.08,  be  held  or  determined  to  be  void,  invalid  or  unenforceable,   or
subordinated to the claims of any other  creditors,  on account of the amount of
its liability  under Section 3.01,  then,  notwithstanding  any other  provision
hereof to the contrary,  the amount of such liability shall, without any further
action by such Subsidiary Guarantor, any Lender, the Administrative Agent or any
other Person, be automatically limited and reduced to the highest amount that is
valid and enforceable  and not  subordinated to the claims of other creditors as
determined in such action or proceeding.




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                             - 54 -


                            ARTICLE IV

                  Representations and Warranties

           The Borrower and each Subsidiary Guarantor represents and warrants to
the Lenders,  the LC Issuing Lender and the  Administrative  Agent, as to itself
and each of its Subsidiaries, that:

           SECTION 4.01. Organization;  Powers. The Borrower and each Subsidiary
is duly organized,  validly  existing and in good standing under the laws of its
jurisdiction of organization. The Borrower and each Subsidiary has all requisite
power and authority under its organizational  documents to carry on its business
as now conducted and, except where the failure to do so,  individually or in the
aggregate,  could not  reasonably  be expected  to result in a Material  Adverse
Effect,  is  qualified  to do business  in, and is in good  standing  in,  every
jurisdiction where such qualification is required.

           SECTION 4.02.  Authorization;  Enforceability.  The  Transactions are
within the corporate power of each Credit Party and have been duly authorized by
all necessary corporate and, if required, stockholder action on the part of such
Credit Party.  Each of this Agreement and the other Loan Documents has been duly
executed  and  delivered by each Credit Party party  thereto and  constitutes  a
legal,  valid and  binding  obligation  of such  Credit  Party,  enforceable  in
accordance  with  its  terms,  subject  to  applicable  bankruptcy,  insolvency,
reorganization,  moratorium or other laws affecting  creditors' rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.

           SECTION 4.03. Governmental Approvals; No Conflicts.  The Transactions
(a) do not require any consent or approval of,  registration  or filing with, or
any other  action by,  any  Governmental  Authority,  (b) will not  violate  any
applicable  law,  policy  or  regulation  or  the  charter,   by-laws  or  other
organizational  documents of any Credit  Party or any order of any  Governmental
Authority,  (c) will not  violate  or result in a default  under any  indenture,
agreement  or other  instrument  binding  upon any Credit  Party,  or any of its
assets,  or give rise to a right thereunder to require any payment to be made by
any  Credit  Party,  and  (d)  except  for the  Liens  created  by the  Security
Documents,  will not result in the  creation  or  imposition  of any Lien on any
asset of the Credit Parties.

           SECTION 4.04.  Financial Condition; No Material Adverse Change.

           (a)  The  Borrower  has  heretofore  delivered  to  the  Lenders  the
following financial statements:

           (i) the respective audited  consolidated balance sheet and statements
      of  income,  retained  earnings  and  cash  flow of the  Borrower  and its
      Consolidated


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                             - 55 -


      Subsidiaries  as of and for the fiscal  years ended  December 31, 1994 and
      December 31, 1995,  reported on by Coopers & Lybrand,  independent  public
      accountants; and

             (ii) the unaudited  consolidated  balance  sheet and  statements of
      income,   retained  earnings  and  cash  flow  of  the  Borrower  and  its
      Consolidated  Subsidiaries  as of and  for  the  nine-month  period  ended
      September 30, 1996, certified by a Financial Officer.

Such  financial  statements  present  fairly,  in  all  material  respects,  the
consolidated  financial position and results of operations and cash flows of the
Borrower and its Consolidated Subsidiaries as of such dates and for such periods
in accordance with GAAP,  subject to year-end audit  adjustments and the absence
of footnotes in the case of such unaudited statements.

           (b) Since  December  31,  1995,  there has been no  material  adverse
change in the business, assets, operations, prospects or condition, financial or
otherwise, of the Borrower and its Consolidated Subsidiaries taken as a whole.

           (c) None of the Borrowers nor any of its Subsidiaries has on the date
of this Agreement any contingent  liabilities,  liabilities  for taxes,  unusual
forward or long-term  commitments or unrealized or  anticipated  losses from any
unfavorable  commitments  in each  case  that are  material  (as  determined  in
accordance with GAAP), except as referred to or reflected or provided for in the
balance sheets as at September 30, 1996 referred to above.

           SECTION 4.05.  Properties.

           (a) Each of the Borrower and its  Subsidiaries  has good title to, or
valid leasehold interests in, all its real and personal property material to its
business,  except for minor  defects in title that do not  materially  interfere
with its ability to conduct its  business as  currently  conducted or to utilize
such properties for their intended purposes.

           (b)  Except  as set forth on  Schedule  4.05  hereto,  as of the date
hereof,  (i) each of the Borrower and its  Subsidiaries  owns, or is licensed to
use, all  trademarks,  tradenames,  copyrights,  patents and other  intellectual
property  material to its business,  and (ii) the conduct of the business of the
Borrower and its  Subsidiaries  does not  infringe  upon the rights of any other
Person,  in both cases  except for any such  failure to own or have a license to
use,  and  except  for any  such  infringements,  that,  individually  or in the
aggregate,  could not  reasonably  be expected  to result in a Material  Adverse
Effect.  In the opinion of the Borrower,  the matters set forth on Schedule 4.05
hereto, both individually and in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect.



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                             - 56 -


           SECTION 4.06.  Litigation and Environmental Matters.

           (a) There  are no  actions,  suits or  proceedings  by or before  any
arbitrator or Governmental Authority pending against or, to the knowledge of any
of the Credit  Parties,  threatened  against or  affecting,  the Borrower or any
Subsidiary  (i) as to which  there is a  reasonable  possibility  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 (other
than the Disclosed  Matters listed on Schedule 4.06) or (ii) that involve any of
the Loan Documents, the Tax Sharing Agreement or the Transactions.

           (b) The  Borrower  and each of its  Subsidiaries  have  obtained  all
permits,  licenses,  registrations and other  authorizations  which are required
under all  Environmental  Laws,  except to the  extent  failure to have any such
permit, license,  registration or authorization could not reasonably be expected
to have a Material Adverse Effect. The Borrower and each of its Subsidiaries are
in  compliance  with the terms and  conditions  of all such  permits,  licenses,
registrations  and  authorizations,  and are also in  compliance  with all other
limitations,  restrictions,  conditions, standards, prohibitions,  requirements,
obligations,  schedules and timetables contained in any applicable Environmental
Law or in any judgment,  injunction,  notice or demand letter  issued,  entered,
promulgated or approved  thereunder except to the extent failure to comply could
not  reasonably  be expected  to have a Material  Adverse  Effect.  No action to
revoke any  permit,  license  or other  authorization,  the lack of which  could
reasonably  be  expected  to have a  Material  Adverse  Effect,  is  pending  or
threatened in writing.  In addition,  except for the Disclosed Matters listed on
Schedule 4.06, as of the date of this Agreement:

              (i) No notice,  notification,  demand,  request  for  information,
      citation,  summons or order has been issued,  no complaint has been filed,
      no penalty has been assessed and no investigation or review is pending or,
      to the best knowledge of the Borrower,  threatened by any  governmental or
      other  entity with  respect to any alleged  failure by the Borrower or any
      Subsidiary  to have any  permit,  license  or  authorization  required  in
      connection  with  the  conduct  of the  business  of the  Borrower  or any
      Subsidiary or with respect to any handling generation, treatment, storage,
      recycling,  transportation,  discharge  or  disposal,  or  any  threatened
      Release or Release of any Hazardous Materials generated by the Borrower or
      any Subsidiary  that has not been fully  satisfied or discharged as of the
      date hereof.

             (ii) Neither the Borrower nor any Subsidiary has Released Hazardous
      Material on any property now or previously owned or leased by the Borrower
      or any  Subsidiary  in a  manner  or to an  extent  that  it  has,  or may
      reasonably be expected to have, a Material Adverse Effect; and to the best
      knowledge  of the  Borrower  after  due  inquiry,  (w) no  polychlorinated
      biphenyl  is present,  (x) no  asbestos  is present,  and (y) there are no
      underground storage tanks, active or abandoned,  at, or under any property
      now or  previously  owned or leased  by the  Borrower  or any  Subsidiary,
      during any


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                             - 57 -


      period that the Borrower or any  Subsidiary  owned or leased such property
      or, to the knowledge of the Borrower or any Subsidiary, prior thereto.

            (iii) To the best  knowledge  of the  Borrower  after  due  inquiry,
      neither the Borrower nor any  Subsidiary  has  transported or arranged for
      the  transportation  of any  Hazardous  Material to any location  which is
      listed or proposed for listing on the National  Priorities  List under the
      Comprehensive  Environmental  Response,  Compensation and Liability Act of
      1980, as amended ("CERCLA"), or any similar state list.

             (iv) No written  notification of a Release of a Hazardous  Material
      has been filed by or on behalf of the  Borrower or any  Subsidiary  and no
      property  now  or  previously  owned  or  leased  by the  Borrower  or any
      Subsidiary is listed or, to the best  knowledge of the Borrower,  proposed
      for  listing on the  National  Priorities  list  promulgated  pursuant  to
      CERCLA.

              (v) To the best  knowledge of the  Borrower,  no Liens have arisen
      under or pursuant to any Environmental Laws on any of the real property or
      properties owned or leased by the Borrower or any Subsidiary,  and, to the
      best knowledge of the Borrower,  no government  actions have been taken or
      are in process  which could  subject any of such  properties to such Liens
      and neither the Borrower nor any Subsidiary would be required to place any
      notice or restriction  relating to the presence of Hazardous  Materials at
      any property owned by it in any deed to such property.

             (vi)  There  have been no  environmental  investigations,  studies,
      audits,  tests,  reviews  or  other  analyses  conducted  by  third  party
      consultants  which are in the possession of the Borrower or any Subsidiary
      in relation to any property or facility now or previously  owned or leased
      by the Borrower or any  Subsidiary  which have not been made  available to
      the Lenders except  analyses  conducted in the ordinary course of business
      including  without  limitation,  waste water  monitoring and air emissions
      measurements.

            (vii)  Neither  the  Borrower  nor any  Subsidiary  has  retained or
      assumed  any  liabilities  (contingent  or  otherwise)  in  respect of any
      Environmental  Claims (x) under the terms of any  contract or agreement or
      (y) by operation of law as a result of the sale of assets or stock,  which
      liabilities  could  reasonably  be  expected  to have a  Material  Adverse
      Effect.

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



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<PAGE>


                             - 58 -


           SECTION  4.07.  Compliance  with  Laws  and  Agreements.  Each of the
Borrower  and its  Subsidiaries  is in  compliance  with all laws,  regulations,
policies  and  orders  of any  Governmental  Authority  applicable  to it or its
property and all indentures, agreements and other instruments binding upon it or
its property,  except where the failure to be in compliance,  individually or in
the aggregate,  could not reasonably be expected to result in a Material Adverse
Effect.

           SECTION 4.08.  Investment  and Holding  Company  Status.  Neither the
Borrower nor any  Subsidiary  is (a) an  "investment  company" as defined in, or
subject to regulation under, the Investment Company Act of 1940, as amended,  or
(b) a "holding  company"  as defined  in, or subject to  regulation  under,  the
Public Utility Holding Company Act of 1935, as amended.

           SECTION 4.09.  Taxes. Each of the Credit Parties and their respective
subsidiaries  has timely filed or caused to be filed all Tax returns and reports
required to have been filed and has paid or caused to be paid all Taxes required
to have been paid by it, except (a) Taxes that are being contested in good faith
by appropriate  proceedings and for which such Credit Party has set aside on its
books adequate  reserves with respect  thereto in accordance with GAAP or (b) to
the extent that the failure to do so could not  reasonably be expected to result
in a Material Adverse Effect.

           SECTION  4.10.  ERISA.  No ERISA Event has occurred or is  reasonably
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a  Material  Adverse  Effect.  The  present  value of all  accumulated
benefit  obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial  Accounting  Standards No. 87) did not, as of the date
hereof,  exceed by more than  $13,000,000 the fair market value of the assets of
such Plan, and the present value of all accumulated  benefit  obligations of all
underfunded  Plans (based on the  assumptions  used for purposes of Statement of
Financial Accounting Standards No. 87) did not, as of the date hereof, exceed by
more  than  $13,000,000  the  fair  market  value  of the  assets  of  all  such
underfunded Plans.

           SECTION  4.11.   Disclosure.   None  of  the  financial   statements,
certificates  or  other  information   (including,   without   limitation,   the
Information  Memorandum  dated  December,  1996  prepared  by  the  Borrower  in
contemplation hereof) furnished in writing by or on behalf of the Credit Parties
to the  Administrative  Agent or any Lender in connection with this Agreement or
delivered  hereunder  (as  modified  or  supplemented  by other  information  so
furnished) contain, as of the date hereof, any material  misstatement of fact or
omits to state any material fact  necessary to make the statements  therein,  in
the light of the  circumstances  under  which  they were  made,  not  materially
misleading;  provided that, with respect to projected financial information, the
Borrower and its Subsidiaries  represent only that such information was prepared
in good faith based upon assumptions believed to be reasonable at the time.


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<PAGE>


                             - 59 -



           SECTION 4.12.  Capitalization.  The  authorized  capital stock of the
Borrower  consists,  on  the  date  hereof,  of an  aggregate  of  1,000  shares
consisting of (i) 1,000 shares of common stock,  par value $10.00 per share,  of
which,  as at the date  hereof,  1,000  shares are duly and  validly  issued and
outstanding,  each of which  shares is fully paid and  nonassessable.  As of the
date  hereof,  (x) there are no  outstanding  Equity  Rights with respect to the
Borrower  and (y) there are no  outstanding  obligations  of the Borrower or any
Subsidiary to  repurchase,  redeem,  or otherwise  acquire any shares of capital
stock of the Borrower nor are there any outstanding  obligations of the Borrower
or any  Subsidiary  to make  payments  to any Person,  such as  "phantom  stock"
payments,  where the amount  thereof is  calculated  with  reference to the fair
market value or equity value of the Borrower or any Subsidiary.

           SECTION 4.13.  Material Agreements and Liens.

           (a) Schedule  4.13 is a complete and correct  list, as of the date of
this Agreement, of each credit agreement, loan agreement,  indenture,  guarantee
or other arrangement providing for or otherwise relating to any Indebtedness of,
the  Borrower  or any  Subsidiary  (other  than such  arrangements  between  the
Borrower and a Subsidiary  or between one or more  Subsidiaries),  the aggregate
principal  or face  amount of which  equals or exceeds  (or may equal or exceed)
$100,000  (other than the Loan Documents) and, as of the date of this Agreement,
the  aggregate  principal  or  face  amount  outstanding  or  which  may  become
outstanding under each such arrangement is correctly described in Schedule 4.13.

           (b) Schedule  4.13 hereto is a complete and correct  list,  as of the
date of this  Agreement,  of each Lien securing  Indebtedness  of any Person the
aggregate  principal  or face amount of which equals or exceeds (or may equal or
exceed)  $100,000 and  covering any property of the Borrower or any  Subsidiary,
and the  aggregate  Indebtedness  secured (or which may be secured) by each such
Lien and the  Property  covered  by each such  Lien is  correctly  described  in
Schedule 4.13.

           SECTION 4.14.  Subsidiaries.

           (a) Set forth in Schedule  4.14 is a complete and correct list of all
of the Subsidiaries of the Borrower as of the date hereof and of all Investments
held by the Borrower or any of its  Subsidiaries  in any joint  venture or other
Persons of the date hereof  together  with,  for each such  Subsidiary,  (i) the
jurisdiction  of  organization  of such  Subsidiary,  (ii) each  Person  holding
ownership  interests in such  Subsidiary  and (iii) the nature of the  ownership
interests  held by each such  Person and the  percentage  of  ownership  of such
Subsidiary  represented  by such  ownership  interests.  Except as  disclosed in
Schedule 4.14, (x) the Borrower and its respective  subsidiaries  owns, free and
clear of Liens (other than Liens  created  pursuant to the Security  Documents),
and has the unencumbered right to vote, all outstanding  ownership  interests in
each Person and all Investments shown to be held by it in Schedule 4.14, (y) all
of the issued and outstanding  capital stock of each such Person  organized as a
corporation is validly issued, fully paid and nonassessable and (z) there are no


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                             - 60 -


outstanding  Equity  Rights with respect to such Person.  Except as set forth on
Schedule 4.14, all of the capital stock of each of the Foreign Subsidiaries that
is  owned,  directly  or  indirectly,  by the  Borrower  is owned,  directly  or
indirectly, by Rheox International.

           (b) Except as provided in the arrangements described on Schedule 4.13
or on Schedule 4.14, as of the date of this Agreement,  none of the Subsidiaries
of the  Borrower is subject to any  indenture,  agreement,  instrument  or other
arrangement containing any provision of the type described in Section 7.07.

           SECTION 4.15.  Certain Documents.  The Borrower  heretofore or on the
date hereof has furnished to the  Administrative  Agent true and complete copies
of (a) the Tax  Sharing  Agreement,  as amended and in effect on the date hereof
or, if not in effect on the date hereof, in substantially the form in which such
Tax Sharing  Agreement will be executed,  (b) each other Ancillary  Agreement in
effect  on  the  date  hereof  or if not  in  effect  on  the  date  hereof,  in
substantially  the form in which such  Ancillary  Agreement will be executed and
(c) the Restructuring Documents, as amended and in effect on the date hereof.


                             ARTICLE V

                            Conditions

           SECTION 5.01.  Effective  Date. The amendment and  restatement of the
Existing Credit  Agreement  provided for herein shall not become effective until
the date on which each of the  following  conditions  is satisfied (or waived in
accordance with Section 10.02):

           (a) Counterparts of Agreement.  The Administrative  Agent (or Special
      Counsel)  shall  have  received  from  each  party  hereto  either  (i)  a
      counterpart  of this  Agreement  signed on  behalf  of such  party or (ii)
      written  evidence  satisfactory  to the  Administrative  Agent  (which may
      include  telecopy   transmission  of  a  signed  signature  page  of  this
      Agreement) that such party has signed a counterpart of this Agreement.

           (b) Opinions of Counsel to Credit Parties and NL. The  Administrative
      Agent (or Special Counsel) shall have received a favorable written opinion
      (addressed  to the  Administrative  Agent  and the  Lenders  and dated the
      Effective Date) of (i) Bartlit,  Beck, Herman,  Palenchar & Scott, counsel
      to the  Credit  Parties,  substantially  in the  form of  Exhibit  B,  and
      covering  such  other  matters  relating  to  the  Credit  Parties,   this
      Agreement,  the other Loan Documents or the  Transactions  as the Required
      Lenders shall request and (ii) counsel to the Borrower in the states where
      the  properties  covered by the  Mortgage  and each  Existing  Mortgage is
      located,  satisfactory to the  Administrative  Agent in form and substance
      (and each  Credit  Party  hereby  requests  such  counsel to deliver  such
      opinion).


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                             - 61 -



           (c) Opinion of Special Counsel.  The Administrative  Agent shall have
      received  a   favorable   written   legal   opinion   (addressed   to  the
      Administrative  Agent and the  Lenders  and dated the  Effective  Date) of
      Special  Counsel,  substantially  in  the  form  of  Exhibit  C  (and  the
      Administrative Agent requests Special Counsel to deliver such opinion).

           (d) Corporate Matters.  The Administrative Agent (or Special Counsel)
      shall have received such documents and certificates as the  Administrative
      Agent  or  Special  Counsel  may  reasonably   request   relating  to  the
      organization, existence and good standing of each Credit Party and NL, the
      authorization  of the Transactions and any other legal matters relating to
      the Credit Parties,  NL, this  Agreement,  the other Loan Documents or the
      Transactions,  all in form and substance  reasonably  satisfactory  to the
      Administrative Agent and its counsel.

           (e)  Financial  Officer  Certificate.  The  Administrative  Agent (or
      Special  Counsel) shall have received a  certificate,  dated the Effective
      Date and signed by the President,  a Vice President or a Financial Officer
      of the Borrower,  confirming  compliance  with the conditions set forth in
      paragraphs (a) and (b) of Section 5.02.

           (f) Notes. The  Administrative  Agent (or Special Counsel) shall have
      received for each Lender that shall have  requested a  promissory  note, a
      duly completed and executed promissory note for such Lender.

           (g)  NL  Pledge  Agreement.  The  Administrative  Agent  (or  Special
      Counsel)  shall have received (i) from NL a  counterpart  of the NL Pledge
      Agreement  signed  on  behalf  of  NL  and  (ii)  the  stock  certificates
      identified under the name of NL in Annex 1 thereto, accompanied by undated
      stock  powers  executed in blank.  In  addition,  NL shall have taken such
      other  action  (including  delivering  to the  Administrative  Agent,  for
      filing,  appropriately  completed  and duly  executed  copies  of  Uniform
      Commercial Code financing  statements) as the  Administrative  Agent shall
      have requested in order to perfect the security interests created pursuant
      to the NL Pledge  Agreement  to give effect to the  priority  contemplated
      therefor.

           (h) Security Agreement. The Administrative Agent (or Special Counsel)
      shall have received (i) from the Borrower and each Subsidiary Guarantor, a
      counterpart  of the  Security  Agreement  signed on behalf of such  Credit
      Party and (ii) the stock  certificates  identified  under the name of such
      Credit  Party in Annex 1  thereto,  accompanied  by undated  stock  powers
      executed in blank.  In addition,  each of the Borrower and the  Subsidiary
      Guarantors shall have taken such other action (including delivering to the
      Administrative  Agent,  for  filing,   appropriately  completed  and  duly
      executed copies of Uniform  Commercial  Code financing  statements) as the
      Administrative Agent shall have requested in order to perfect the security
      interests


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                             - 62 -


      created pursuant to the Security  Agreement to give effect to the priority
      contemplated therefor.

           (i)  Mortgage  and  Title  Insurance.  The  Administrative  Agent (or
      Special Counsel) shall have received (i) from the Borrower,  a counterpart
      of the  Mortgage  signed  on  behalf  of the  Borrower,  (ii)  one or more
      mortgagee  policies  of title  insurance  on forms of and issued by one or
      more title companies  satisfactory to the Administrative Agent (the "Title
      Companies"), insuring the validity and priority of the Liens created under
      the Mortgage for and in amounts satisfactory to the Administrative  Agent,
      subject only to such exceptions as are satisfactory to the  Administrative
      Agent and containing  such  affirmative  coverage and  endorsements as the
      Lenders may require and, to the extent necessary under applicable law, for
      filing in the appropriate  county land office(s),  Uniform Commercial Code
      financing  statements  covering  fixtures,   in  each  case  appropriately
      completed and duly  executed,  (iii) an as-built  survey of recent date of
      the facilities to be covered by the Mortgage,  showing such matters as may
      be required by the  Administrative  Agent,  which surveys shall be in form
      and content acceptable to the  Administrative  Agent, and certified to the
      Administrative Agent and the Title Companies, and shall have been prepared
      by a registered surveyor acceptable to the Administrative  Agent, and (iv)
      certified copies of permanent and unconditional  certificates of occupancy
      (or, if it is not the practice to issue  certificates  of occupancy in the
      jurisdiction  in which the  facilities  to be covered by the  Mortgage  is
      located, then such other evidence reasonably  satisfactory to each Lender)
      permitting  the fully  functioning  operation  and  occupancy of each such
      facility and of such other permits as the Administrative Agent may request
      necessary for the use and  operation of each such  facility  issued by the
      respective  Governmental  Authorities  having  jurisdiction over each such
      facility. In addition, the Borrower shall have paid to the Title Companies
      all expenses and premiums of the Title  Companies in  connection  with the
      issuance of such  policies  and in  addition  shall have paid to the Title
      Companies  an amount  equal to the  recording  and stamp taxes  payable in
      connection  with  recording  the Mortgage in the  appropriate  county land
      office(s).

           (j)  Mortgage  Amendments.   The  Administrative  Agent  (or  Special
      Counsel)  shall  have  received  (i) from any  Credit  Party  party to any
      Existing Mortgage,  a counterpart of a Mortgage Amendment signed on behalf
      of such Credit Party and amending such Mortgage and (ii)  commitments  for
      title  insurance  policies or  endorsements  to existing  title  insurance
      policies in a form  acceptable to the  Administrative  Agent  insuring the
      validity  and  priority of the Liens  created  under each of the  Existing
      Mortgages  (as  amended  by the  Mortgage  Amendments)  for and in amounts
      satisfactory to the Administrative  Agent, subject only to such exceptions
      as are satisfactory to the Agent and containing such affirmative  coverage
      and  endorsements as the Lenders may require and, to the extent  necessary
      under  applicable law, for filing in the  appropriate  county and offices,
      Uniform Commercial Code financing  statements  covering fixtures,  in each
      case appropriately completed and duly


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                             - 63 -


      executed. In addition, the applicable Credit Parties shall have (x) caused
      to be delivered to the  applicable  title  companies  such  affidavits and
      other documents required by such title companies,  including,  if required
      by the  respective  title  companies in order to provide  title  insurance
      coverage  acceptable to the Administrative  Agent, a re-certification by a
      registered surveyor acceptable to the applicable title company of as-built
      surveys of each of the facilities covered by the Existing Mortgages, which
      surveys shall be in form and content  acceptable to the  applicable  title
      company and certified to the Administrative Agent and the applicable title
      insurance company,  necessary to omit from the title insurance policies or
      endorsements  thereto the standard  survey  exception and (y) caused to be
      paid to the applicable  title insurance  company all expenses and premiums
      in connection with the issuance of the title insurance and an amount equal
      to the recording and stamp taxes payable in connection with recording each
      Mortgage Amendment in the appropriate county land office.

           (k) Intercompany Note  Subordination  Agreement.  The  Administrative
      Agent (or Special  Counsel)  shall have  received  (i) from each of NL and
      Rheox,   Inc.,  a  counterpart  of  the  Intercompany  Note  Subordination
      Agreement signed on behalf of NL and Rheox Inc.

           (l) Insurance.  The  Administrative  Agent (or Special Counsel) shall
      have received  certificates  of insurance  evidencing the existence of all
      insurance  required to be maintained by the Borrower and its  Subsidiaries
      pursuant to Section 6.06 and the designation of the  Administrative  Agent
      as the loss payee  thereunder  to the extent  required by Section  6.06 in
      respect of all insurance covering tangible property,  such certificates to
      be in such form and contain  such  information  as is specified in Section
      6.06.

           (m) Other  Loan  Documents.  The  Administrative  Agent  (or  Special
      Counsel)  shall have  received (i) from the  Borrower and each  Subsidiary
      Guarantor,  a counterpart  of the  Conditional  Assignment of and Security
      Interest in Patent  Rights,  the  Conditional  Assignment  of and Security
      Interest in Trademark Rights and the Copyright  Security  Agreement signed
      on behalf of such Credit Party. In addition,  each of the Borrower and the
      Subsidiary  Guarantors  shall  have taken  such  other  action  (including
      delivering  to  the  Administrative   Agent,  for  filing,   appropriately
      completed and duly executed  copies of Uniform  Commercial  Code financing
      statements) as the  Administrative  Agent shall have requested in order to
      perfect the security  interests created pursuant to the Security Agreement
      to give effect to the priority contemplated therefor.

           (n) Solvency Analysis.  The Administrative Agent (or Special Counsel)
      shall have received (i) analyses from Valuation Research  Corporation,  or
      any other firm of independent  solvency analysts of nationally  recognized
      standing, to the effect that, as


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                             - 64 -


      of the  Effective  Date and after giving effect to the making of the Loans
      hereunder  and to the  other  transactions  contemplated  hereby,  (x) the
      aggregate value of all properties of the Borrower and its  Subsidiaries at
      their present fair saleable value (i.e.,  the amount which may be realized
      within a reasonable time,  considered to be six months to one year, either
      through  collection or sale at the regular  market value,  conceiving  the
      latter as the amount  which could be obtained for the property in question
      within  such  period  by  a  capable  and  diligent  businessman  from  an
      interested  buyer  who is  willing  to  purchase  under  ordinary  selling
      conditions),   exceeds  the  amount  of  all  the  debts  and  liabilities
      (including   contingent,    subordinated,   unmatured   and   unliquidated
      liabilities)  of the Borrower and its  Subsidiaries,  (y) the Borrower and
      its Subsidiaries  will not, on a consolidated  basis, have an unreasonably
      small  capital  with  which  to  conduct  their  business   operations  as
      heretofore  conducted and (z) the Borrower and its Subsidiaries will have,
      on a consolidated basis,  sufficient cash flow to enable them to pay their
      debts as they mature and (ii) a  certificate  from a Financial  Officer of
      the Borrower  certifying that the financial  projections  were at the time
      made, and on the Effective Date are, based on reasonable  assumptions  and
      are accurately  computed based on such  assumptions,  and containing  such
      other   certifications   relating  to  the   valuation   analyses  as  the
      Administrative Agent may reasonably request.

           (o)  Financial  Projections.  The  Administrative  Agent  shall  have
      received  financial  projections  prepared  in good  faith  and  based  on
      reasonable  assumptions by a Financial Officer,  satisfactory in scope and
      substance  to the  Lenders,  as to the  annual  financial  results  of the
      Borrower  and its  Subsidiaries  for a period  of seven  years  after  the
      Effective Date.

           (p)  Ancillary  Agreements.  The  Administrative  Agent  (or  Special
      Counsel)  shall  have  received  (i)  copies  of  each  of  the  Ancillary
      Agreements,  including,  but not limited to, the Tax Sharing  Agreement as
      executed and delivered by the parties thereto, and (ii) a certificate from
      a senior  officer of the  Borrower to the effect that such copies are true
      and complete copies the Ancillary Agreements as in effect on the Effective
      Date.

           (q) Other  Documents.  The  Administrative  Agent shall have received
      such other documents as the Administrative  Agent or any Lender or Special
      Counsel shall have reasonably requested.

           (r)  Amounts  Owing  under  the  Existing   Credit   Agreement.   The
      Administrative  Agent shall have received evidence that the Borrower shall
      have paid or  provided  for the  payment to the Agent  under the  Existing
      Credit Agreement the principal amount of all loans outstanding  thereunder
      and all  accrued  and  unpaid  interest,  fees and  expenses  owing by the
      Borrower thereunder.



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                             - 65 -


           (s) Fees and Expenses.  The Administrative  Agent shall have received
      all fees and other  amounts due and  payable on or prior to the  Effective
      Date, including,  to the extent invoiced,  reimbursement or payment of all
      legal fees and expenses and other  out-of-pocket  expenses  required to be
      reimbursed or paid by the Borrower hereunder.

           (t) Special Dividend.  The Administrative Agent shall have received a
      certificate  of a Financial  Officer of the Borrower,  dated the Effective
      Date,  confirming that the Special Dividend, in the amount of $30,000,000,
      will be paid on the Effective Date.

The  Administrative  Agent  shall  notify the  Borrower  and the  Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing,  the amendment and restatement of the Existing  Credit  Agreement
contemplated  hereby  shall not become  effective  unless each of the  foregoing
conditions  is satisfied  (or waived  pursuant to Section  10.02) at or prior to
3:00 p.m.,  New York City time,  on February  28,  1997 (and,  in the event such
conditions are not so satisfied or waived,  the  Commitments  shall terminate at
such time).

           SECTION 5.02. Each Extension of Credit. The obligation of each Lender
to make a Loan on the occasion of any Borrowing, and of the LC Issuing Lender to
issue,  amend,  renew  or  extend  any  Letter  of  Credit,  is  subject  to the
satisfaction of the following conditions:

           (a)   Representations   and  Warranties.   The   representations  and
      warranties of each Credit Party set forth in this  Agreement and the other
      Loan Documents,  and the representations and warranties of NL set forth in
      the NL Pledge  Agreement,  shall be true and correct on and as of the date
      of such Borrowing,  or (as  applicable)  the date of issuance,  amendment,
      renewal  or  extension  of such  Letter of Credit,  both  before and after
      giving effect  thereto and to the use of the proceeds  thereof (or, if any
      such  representation  or warranty is expressly stated to have been made as
      of a specific  date,  such  representation  or warranty  shall be true and
      correct as of such specific date).

           (b) No Defaults.  At the time of such  Borrowing,  and based upon the
      intended use thereof and immediately after giving effect to such Borrowing
      and the  intended use thereof,  or (as  applicable)  the date of issuance,
      amendment, renewal or extension of such Letter of Credit, no Default shall
      have occurred and be continuing.

Each Borrowing Request, or request for issuance, amendment, renewal or extension
of a Letter of  Credit,  shall be  deemed to  constitute  a  representation  and
warranty by the  Borrower  (both as of the date of such  Borrowing  Request,  or
request for issuance, amendment, renewal or extension, and as of the date of the
related  Borrowing  or  issuance,  amendment,  renewal or  extension)  as to the
matters specified in paragraphs (a) and (b) of this Section 5.02.



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                             - 66 -



                            ARTICLE VI

                       Affirmative Covenants

           Until  the  Commitments  have  expired  or  been  terminated  and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full and all Letters of Credit shall have expired or terminated and
all LC Disbursements  shall have been  reimbursed,  each of the Borrower and the
Subsidiary Guarantors covenants and agrees with the Lenders that:

           SECTION  6.01.  Financial  Statements  and  Other  Information.   The
Borrower will furnish to the Administrative Agent and each Lender:

           (a) as soon as  available  and in any event within 105 days after the
      end of each fiscal year of the Borrower:

                   (i) consolidated and  consolidating  statements of income and
           retained  earnings and  consolidated  statements  of cash flow of the
           Borrower  and its  Subsidiaries  for such fiscal year and the related
           consolidated and consolidating balance sheets of the Borrower and its
           Subsidiaries as at the end of such fiscal year, setting forth in each
           case in  comparative  form with  respect to  consolidated  statements
           only, the corresponding consolidated figures for the preceding fiscal
           year,

                  (ii) an opinion of independent certified public accountants of
           recognized  national  standing  (without  a "going  concern"  or like
           qualification or exception and without any qualification or exception
           as to the  scope  of  such  audit)  stating  that  said  consolidated
           financial  statements referred to in the preceding clause (i) present
           fairly,  in  all  material  respects,   the  consolidated   financial
           condition and consolidated  results of operations of the Borrower and
           its  Subsidiaries  as at the end of,  and for,  such  fiscal  year in
           conformity with generally accepted accounting principles, and

                 (iii) a certificate  of a Financial  Officer  stating that said
           consolidating  financial  statements  referred  to in  the  preceding
           clause (i) present fairly,  in all material  respects,  the financial
           condition and results of operations on a  consolidating  basis of the
           Borrower and of each of its Subsidiaries,  in each case in accordance
           with generally accepted accounting principles,  consistently applied,
           as at the end of, and for, such fiscal year;

           (b) as soon as  available  and in any event  within 60 days after the
      end of each of the first  three  quarterly  fiscal  periods of each fiscal
      year of the Borrower:



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                             - 67 -


                   (i) consolidated  statements of income and retained  earnings
           and  consolidated  statements  of cash flow of the  Borrower  and its
           Subsidiaries for such period and for the period from the beginning of
           the respective fiscal year to the end of such period, and the related
           consolidated balance sheet of the Borrower and its Subsidiaries as at
           the end of such  period,  setting  forth in each case in  comparative
           form, the  corresponding  consolidated  figures for the corresponding
           period in the  preceding  fiscal year  (except  that,  in the case of
           balance sheets, such comparison shall be to the last day of the prior
           fiscal year),

                  (ii) a certificate of a Financial  Officer,  which certificate
           shall  state  that  said  financial  statements  referred  to in  the
           preceding clause (i) present fairly,  in all material  respects,  the
           consolidated  financial  condition  and results of  operations of the
           Borrower and its Subsidiaries;

           (c)  concurrently  with any  delivery of financial  statements  under
      clause  (a) or (b)  above,  a  certificate  of a  Financial  Officer  (the
      "Financial  Certificate")  (i)  certifying  as to  whether a  Default  has
      occurred and, if a Default has occurred,  specifying  the details  thereof
      and any action  taken or proposed to be taken with respect  thereto,  (ii)
      setting forth reasonably detailed  calculations  demonstrating  compliance
      with Section 7.08, including a calculation of the Leverage Ratio as at the
      last day of the  fiscal  quarter  or fiscal  year,  as the case may be, in
      respect of which such  financial  statements  are  delivered,  and setting
      forth a reasonably  detailed  calculation of EBITDA for (x) in the case of
      financial  statements delivered under clause (a) above, the fiscal year in
      respect of which such financial  statements are being delivered and (y) in
      the case of financial  statements  delivered  under clause (b) above,  the
      period of the four  consecutive  fiscal quarters ending on the last day of
      the fiscal quarter in respect of which such financial statements are being
      delivered and (iii) stating  whether any material change in GAAP or in the
      application thereof has been adopted by the Borrower since the date of the
      audited financial  statements referred to in Section 4.04 and, if any such
      change has been  adopted by the  Borrower,  specifying  the effect of such
      change on the financial statements accompanying such certificate;

           (d)  concurrently  with any  delivery of financial  statements  under
      clause (a) above, a certificate  of the  accounting  firm that reported on
      such financial  statements  stating whether they obtained knowledge during
      the  course  of their  examination  of such  financial  statements  of any
      Default  (which  certificate  may be  limited to the  extent  required  by
      accounting rules or guidelines);

           (e) within 105 days following the last day of each fiscal year of the
      Borrower,  commencing  with  fiscal  year  1997,  a report of a  qualified
      employee or agent (familiar with the identification of toxic and hazardous
      substances) stating that, except as expressly described in such report, to
      the best of such Person's knowledge, after due


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                             - 68 -


      inquiry,  each of the Borrower and its Subsidiaries is, as of the last day
      of such fiscal year, in compliance with all applicable  Environmental Laws
      (except  to the  extent  failure  so to  comply  could not  reasonably  be
      expected to have a Material Adverse Effect); and

           (f) not later than April 15 of each year,  commencing  with April 15,
      1998,  financial  projections  prepared in good faith based on  reasonable
      assumptions by a Financial Officer,  of the projected annual  consolidated
      financial  statements  of the  Borrower and its  Subsidiaries  through the
      period ending on December 31, 2003;

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

           SECTION 6.02.  Notices of Material Events.  The Borrower will furnish
to the  Administrative  Agent  and each  Lender  prompt  written  notice  of the
following:

           (a) the  occurrence of any Default  describing the same in reasonable
      detail and describing the steps being taken to remedy same;

           (b) the filing or commencement  of any action,  suit or proceeding by
      or before any arbitrator or  Governmental  Authority  against or affecting
      the  Borrower,  any  Subsidiary  that,  if  adversely  determined,   could
      reasonably be expected to result in a Material Adverse Effect;

           (c) the  occurrence  of any ERISA Event that,  alone or together with
      any other ERISA Events that have occurred, could reasonably be expected to
      result in liability of the Borrower and its  Subsidiaries  in an aggregate
      amount exceeding $2,000,000; and

           (d) any other event that results in, or could  reasonably be expected
      to result in, a Material Adverse Effect.

Each  notice  delivered  under  this  Section  6.02  shall be  accompanied  by a
statement  of a Financial  Officer or other  executive  officer of the  Borrower
setting forth the details of the event or development  requiring such notice and
any action taken or proposed to be taken with respect thereto.

           SECTION 6.03. Existence;  Conduct of Business. The Borrower will, and
will cause each of its Subsidiaries (other than Inactive Subsidiaries) to, do or
cause to be done all things necessary to preserve,  renew and keep in full force
and effect its legal existence and the rights, licenses, permits, privileges and
franchises  material  to the conduct of its  business,  except to the extent the
failure to preserve, renew and keep in full force and effect any thereof


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                             - 69 -


could not  reasonably be expected to have a Material  Adverse  Effect;  provided
that the foregoing shall not prohibit any merger, consolidation,  liquidation or
dissolution permitted under Section 7.03.

           SECTION 6.04.  Payment of  Obligations.  The Borrower  will, and will
cause  each  of  its  Subsidiaries  to,  pay  its  obligations,   including  Tax
liabilities, that, if not paid, could result in a Material Adverse Effect before
the same shall become delinquent or in default, except where (a) the validity or
amount thereof is being contested in good faith by appropriate proceedings,  (b)
the Borrower or such  Subsidiary  has set aside on its books  adequate  reserves
with respect thereto in accordance with GAAP and (c) the failure to make payment
pending such contest  could not  reasonably  be expected to result in a Material
Adverse Effect.

           SECTION 6.05. Maintenance of Properties.  The Borrower will, and will
cause each of its  Subsidiaries  to, keep and maintain all property  material to
the conduct of its business in good working order and  condition,  ordinary wear
and tear excepted, except where the failure to so maintain such properties could
not reasonably be expected to have a Material Adverse Effect.

           SECTION 6.06.  Maintenance of Insurance.  The Borrower will, and will
cause  each of its  Subsidiaries  to,  keep  insured  by  financially  sound and
reputable  insurers all property of a character  usually insured by corporations
engaged in the same or  similar  business  similarly  situated  against  loss or
damage of the kinds  and in the  amounts  customarily  insured  against  by such
corporations  and carry  such  other  insurance  as is  usually  carried by such
corporations,  provided  that in any  event the  Borrower  will  maintain  (with
respect to itself and each of its Subsidiaries):

           (a) Property  Insurance -- insurance  against loss or damage covering
      all of the tangible  real and personal  property and  improvements  of the
      Borrower and each of its  Subsidiaries  by reason of any Peril (as defined
      below) in such amounts  (subject to  reasonable  deductibles)  as shall be
      reasonable and customary and sufficient to avoid the insured named therein
      from  becoming a co-insurer of any loss under such policy but in any event
      in an amount (i) in the case of fixed assets and equipment, at least equal
      to  100%  of the  actual  replacement  cost of  such  assets,  subject  to
      deductibles as aforesaid and (ii) in the case of inventory,  not less than
      the fair  market  value  thereof,  subject to  deductibles  as  aforesaid.
      Without limiting the foregoing,  the Borrower shall in any event cover any
      property  constituting  improved real estate  located in a "special  flood
      hazard area" in a "participating community" as described in 12 CFR Part 22
      with  flood  insurance  in an amount at least  equal to the  lesser of the
      outstanding principal amount of the Obligations or the replacement cost of
      that property in the "special flood hazard area".

           (b)  Automobile  Liability  Insurance  for Bodily Injury and Property
      Damage  --insurance in respect of all vehicles  (whether  owned,  hired or
      rented by the Borrower or


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                             - 70 -


      any of its  Subsidiaries)  at any time  located at, or used in  connection
      with, its properties or operations against liability for bodily injury and
      property damage in such amounts as are then customary for vehicles used in
      connection with similar properties and businesses, but in any event to the
      extent required by applicable law.

           (c) Comprehensive  General  Liability  Insurance -- insurance against
      claims for bodily  injury,  death or property  damage  occurring on, in or
      about the properties (and adjoining  streets,  sidewalks and waterways) of
      the Borrower and its  Subsidiaries,  in such amounts as are then customary
      for property similar in use in the jurisdictions where such properties are
      located.

           (d)  Workers'   Compensation   Insurance  --  workers'   compensation
      insurance  (including   Employers'  Liability  Insurance)  to  the  extent
      required by applicable law.

           (e) Product  Liability  Insurance  --  insurance  against  claims for
      bodily injury, death or property damage resulting from the use of products
      sold by the  Borrower or any of its  Subsidiaries  in such  amounts as are
      then customarily  maintained by responsible  persons engaged in businesses
      similar to that of the Borrower and its Subsidiaries.

           (f) Business  Interruption  Insurance  --  insurance  against loss of
      operating income (subject to a deductible,  or self-insured amount, not in
      excess of $1,000,000) by reason of any Peril.

           (g)  Other  Insurance  --  such  other  insurance,  in  each  case as
      generally  carried by owners of similar  properties  in the  jurisdictions
      where such properties are located,  in such amounts and against such risks
      as are then customary for property similar in use.

Such insurance shall be written by financially responsible companies selected by
the  Borrower  and having an A.M.  Best  rating of "A+" or better and being in a
financial  size  category  of XIV or larger,  or by other  companies  reasonably
acceptable  to  the  Administrative  Agent  (including  an  insurer  that  is an
Affiliate of the Borrower  provided  that all insurance  with such  Affiliate is
reinsured on terms  (including  an  insolvency  provision)  and with  reinsurers
reasonably  acceptable to the  Administrative  Agent),  and (other than workers'
compensation)  shall name the  Administrative  Agent as an additional insured to
the extent of the Borrower's  liability under this Agreement,  or loss payee, as
its  interests  may appear.  Each policy  referred to in this Section 6.06 shall
provide  that it will not be canceled or  reduced,  or allowed to lapse  without
renewal,   except  after  not  less  than  30  days'   written   notice  to  the
Administrative   Agent  and  shall  also  provide  that  the  interests  of  the
Administrative  Agent,  the  Lenders  and the LC  Issuing  Lender  shall  not be
invalidated  by any act or  negligence  of the Borrower or any Person  having an
interest in any property  covered by any mortgage nor by occupancy or use of any
such property for purposes more hazardous than permitted by such policy nor by


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                             - 71 -


any  foreclosure or other  proceedings  relating to such property.  The Borrower
will  advise the  Administrative  Agent  promptly  of any  policy  cancellation,
material reduction or other material amendment.

           On or before the  Effective  Date the  Borrower  will  deliver to the
Administrative   Agent   certificates   of   insurance   satisfactory   to   the
Administrative  Agent  evidencing the existence of all insurance  required to be
maintained by the Borrower  hereunder  setting forth the  respective  coverages,
limits of liability,  carrier,  policy number and period of coverage and showing
that such  insurance  is in  effect.  Thereafter,  on or before the date 30 days
after the expiration or renewal date of each insurance policy required hereunder
the Borrower will deliver to the Administrative  Agent certificates of insurance
evidencing  that  all  insurance  required  to be  maintained  by  the  Borrower
hereunder  is in  effect.  In  addition,  the  Borrower  will not  modify in any
material  (in  the  reasonable  judgment  of the  Borrower)  respect  any of the
provisions of any policy with respect to property  insurance,  without notifying
the  Administrative  Agent and providing such  information in respect thereof as
the  Administrative  Agent may request.  The  Borrower  will not obtain or carry
separate insurance  concurrent in form or contributing in the event of loss with
that  required  by this  Section  6.06  unless  the  Administrative  Agent is an
additional  insured  thereunder,  with loss  payable  as  provided  herein.  The
Borrower will  immediately  notify the  Administrative  Agent  whenever any such
separate insurance is obtained and shall deliver to the Administrative Agent the
certificates evidencing the same.

           Without  limiting the obligations of the Borrower under the foregoing
provisions  of this  Section  6.06,  in the event  the  Borrower  shall  fail to
maintain  in full  force and  effect  insurance  as  required  by the  foregoing
provisions of this Section 6.06,  then the  Administrative  Agent may, but shall
have no obligation  so to do,  procure  insurance  covering the interests of the
Administrative  Agent, the Lenders and the LC Issuing Lender in such amounts and
against such risks as the  Administrative  Agent (or the Required Lenders) shall
deem  appropriate and the Borrower shall reimburse the  Administrative  Agent in
respect of any reasonable  premiums paid by the Administrative  Agent in respect
thereof.

           For purposes  hereof,  the term "Peril"  means,  collectively,  fire,
lightning,  flood,  windstorm,  hail,  earthquake,  explosion,  riot  and  civil
commotion,  vandalism and malicious mischief, damage from aircraft, vehicles and
smoke and all other perils covered by the "all-risk"  endorsement then in use in
the jurisdictions  where the properties of the Borrower and its Subsidiaries are
located.

           The  requirements  of this Section 6.06 shall apply only to insurance
coverage with respect to the Borrower and its  Subsidiaries and shall not affect
or limit any insurance, amendments,  cancellations or any changes with regard to
insurance coverage for other entities insured under policies that also cover the
Borrower and its Subsidiaries.



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                             - 72 -


           SECTION  6.07.  Books and Records;  Inspection  Rights.  The Borrower
will,  and will cause each of its  Subsidiaries  to, keep proper books of record
and account in which full, true and correct entries are made of all dealings and
transactions  in relation to its  business  and  activities.  Subject to Section
10.12, the Borrower will, and will cause each of its Subsidiaries to, permit any
representatives  designated  by the  Administrative  Agent or any  Lender,  upon
reasonable  prior notice,  to visit and inspect its  properties,  to examine and
make extracts from its books and records,  and to discuss its affairs,  finances
and  condition  with  its  officers  and  independent  accountants,  all at such
reasonable times and as often as reasonably requested.

           SECTION 6.08. Fiscal Year. The Borrower and its Subsidiaries will not
change the last day of their fiscal year from  December 31 of each year,  or the
last days of the first three fiscal  quarters in each of their fiscal years from
March 31, June 30, and September 30 of each year, respectively.

           SECTION 6.09. Compliance with Laws. The Borrower will, and will cause
each of its Subsidiaries (other than Inactive  Subsidiaries) to, comply with all
laws, rules,  regulations and orders of any Governmental Authority applicable to
it or its property,  except where the failure to do so,  individually  or in the
aggregate,  could not  reasonably  be expected  to result in a Material  Adverse
Effect.

           SECTION 6.10.  Use of Proceeds.

           (a) Term Loans.  The  proceeds of the Term Loans shall be used solely
(i) to pay certain  Indebtedness of the Borrower,  including  interest  thereon,
outstanding on the date hereof listed on Schedule 6.10, (ii) to finance,  on the
Effective Date, the payment of $15,000,000 of the Special  Dividend and (iii) to
pay related fees and expenses of the Borrower.  The Borrower shall repay in full
the indebtedness evidenced by the Subordinated Note on the Effective Date.

           (b)  Revolving  Credit Loans.  The proceeds of the  Revolving  Credit
Loans  shall be used  solely  (i) for  working  capital  and  general  corporate
purposes and (ii) to finance,  on the Effective  Date, the payment,  in a single
installment, of $15,000,000 of the Special Dividend.

           No part of the proceeds of any Loan will be used, whether directly or
indirectly,  for any purpose that entails a violation of any of the  Regulations
of the Board, including Regulations G, U and X.

           SECTION 6.11. Hedging Agreements. Within 120 days after the Effective
Date,  the Borrower will enter into and,  thereafter  maintain in full force and
effect for a period at all times of at least  four  years,  one or more  Hedging
Agreements with one or more of the


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<PAGE>


                             - 73 -


Lenders  (and/or  with a bank or other  financial  institution  having  capital,
surplus  and  undivided  profits of at least  $500,000,000),  that  satisfy  the
following requirements:

           (a) the notional principal amount of such Hedging Agreement(s), shall
      be at least equal to $50,000,000; and

           (b) each such Hedging Agreement shall enable the Borrower,  as at any
      date,  to  protect  itself  in a  manner  reasonably  satisfactory  to the
      Required Lenders against interest rate fluctuations.

           SECTION  6.12.  Certain  Obligations   Respecting   Subsidiaries  and
Collateral Security.

           (a) Subsidiary  Guarantors.  The Borrower shall take such action, and
shall cause each of its  Subsidiaries to take such action,  from time to time as
shall be necessary to ensure that all Domestic Subsidiaries (other than Inactive
Subsidiaries)  are  Subsidiary  Guarantors,   and,  thereby,   "Credit  Parties"
hereunder and under the Security  Agreement.  Without limiting the generality of
the  foregoing,  in the event that the  Borrower  shall form or acquire  any new
Domestic  Subsidiary after the date hereof which the Borrower or such Subsidiary
anticipates  will  not be an  Inactive  Subsidiary  (or in the  event  that  any
theretofore  Inactive Subsidiary that is a Domestic Subsidiary shall cease to be
an  Inactive  Subsidiary),  the  Borrower  will,  and  will  cause  each  of its
Subsidiaries  to,  cause  such new  Domestic  Subsidiary  (or  such  theretofore
Inactive  Subsidiary)  within ten Business Days of such formation or acquisition
notify the  Administrative  Agent of such formation or acquisition  and promptly
take all such  actions  as the  Administrative  Agent may  request to cause such
Subsidiary to become a "Subsidiary  Guarantor"  (and thereby,  a "Credit Party")
hereunder and under the Security  Agreement  pursuant to a written instrument in
form and substance  reasonably  satisfactory  to the  Administrative  Agent,  to
become a party to the Security  Agreement and to deliver such proof of corporate
action,  incumbency  of  officers,  opinions  of  counsel  and  other  documents
(including Uniform Commercial Code Financing  Statements) as are consistent with
those  delivered  by Credit  Party  pursuant to Section  5.01 or as the Required
Lenders or the Administrative Agent shall have requested.

           (b) Ownership of Subsidiaries. The Borrower will, and will cause each
of its Subsidiaries to, take such action from time to time as shall be necessary
to ensure  that the  Borrower  and each of its  Subsidiaries  at all times  owns
(subject  only  to the  Lien  of the  Security  Agreement)  at  least  the  same
percentage  of the  issued and  outstanding  shares of each class of stock of or
other  ownership  interest in each of its  Subsidiaries  as is owned on the date
hereof  (except as  otherwise  permitted  by Section 7.03 and subject to Section
7.11).  Without  limiting the generality of the foregoing,  none of the Borrower
nor any of its  Subsidiaries  shall sell,  transfer or otherwise  dispose of any
shares of stock of or other ownership  interest in any Subsidiary owned by them,
nor permit any  Subsidiary to issue any shares of stock of any class  whatsoever
to any Person (except as otherwise permitted by


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                             - 74 -


Section 7.03 and, subject to Section 7.11, to the Borrower or a Subsidiary).  In
the event that any such additional  shares of stock or other ownership  interest
shall be issued by any Domestic  Subsidiary,  the respective Credit Party agrees
forthwith  to deliver  to the  Administrative  Agent  pursuant  to the  Security
Agreement  the  certificates  evidencing  such shares of stock,  accompanied  by
undated  stock powers duly executed in blank and shall take such other action as
the Administrative  Agent shall request to perfect the security interest created
therein pursuant to the Security Agreement.

           SECTION 6.13.  Environmental  Laws and Permits.  Without limiting the
Borrower's  obligations  under Section 6.09,  the Borrower  will, and will cause
each of its  Subsidiaries  to,  (a)  comply in all  material  respects  with all
Environmental  Laws  now  or  hereafter  applicable  to  the  Borrower  and  its
Subsidiaries,  (b) when and to the extent required by any Governmental Authority
after exhaustion of all available  administrative and judicial  remedies,  carry
out  environmental  investigatory  and  response  actions at any property of the
Borrower or any of its Subsidiaries under applicable Environmental Laws, and (c)
obtain, at or prior to the time required by applicable  Environmental  Laws, all
environmental,  health and safety  permits,  licenses  and other  authorizations
necessary for its operations and maintain such  authorizations in full force and
effect.

           SECTION 6.14.  Environmental Notices.

           (a) The Borrower  will, and will cause each of its  Subsidiaries  to,
promptly  and in no event later than thirty days after it has received the same,
furnish  to the  Administrative  Agent (i) all  written  notices  of  violation,
orders,  claims,  citations,  complaints,  penalty  assessments,  suits or other
proceedings, administrative, civil or criminal, at law or in equity, received by
the Borrower or any Subsidiary or of which it has notice,  pending or threatened
against the  Borrower  or any  Subsidiary  by any  Governmental  Authority  with
respect to any alleged  violation of or  non-compliance  with any  Environmental
Laws or any permits,  licenses or  authorizations,  if such alleged violation or
non-compliance  could  reasonably be expected to have a Material  Adverse Effect
and (ii) written  notification of any condition or occurrence at, on, or arising
from  the  property  of the  Borrower  or any  Subsidiary  that  results  in its
non-compliance  with  any  applicable  Environmental  Law,  which  violation  or
non-compliance could reasonably be expected to have a Material Adverse Effect.

           (b) The Borrower  will, and will cause each of its  Subsidiaries  to,
promptly  and in no event later than thirty days after it has received the same,
furnish to the  Administrative  Agent all requests for  information,  notices of
claim, demand letters, and other notifications,  received by the Borrower or any
Subsidiary,  that in connection  with its ownership or use of any real estate or
the conduct of its business,  it may be potentially  responsible with respect to
any  investigation  or clean-up of  Hazardous  Material at any  location,  which
investigation  or  clean-up  could  reasonably  be  expected  to have a Material
Adverse Effect.



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                             - 75 -


           (c) Upon receipt of any notice provided to the  Administrative  Agent
pursuant to clause (a) or (b) of this Section 6.14,  the Required  Lenders shall
have the right to retain the services of an independent environmental consulting
firm acceptable to the Borrower (the  "Environmental  Consultant") to conduct an
environmental  assessment of the property,  operation or environmental condition
described  in such notice.  As a result of such  environmental  assessment,  the
Environmental  Consultant may prepare a written  recommendation of what, if any,
technical  action should be taken by the Borrower or its  Subsidiaries to remedy
the environmental  condition in accordance with good commercial  practices or in
compliance  with applicable  Environmental  Laws. The  environmental  assessment
shall be conducted during normal business hours and with reasonable prior notice
to the Borrower but such environmental assessment shall not include the physical
collection of any samples.  The Borrower shall have sole  responsibility for all
costs and reasonable  out-of-pocket  expenses associated with such environmental
assessment.

           SECTION  6.15.  Environmental  Audit and  Remedial  Action.  Upon the
occurrence  and during the  continuation  of an Event of Default,  the  Borrower
will,  and will cause each of its  Subsidiaries  to,  conduct and  complete  all
investigations,  studies,  sampling  and testing and all  remedial,  removal and
other actions reasonably  requested by the Administrative Agent on behalf of the
Required Lenders.


                            ARTICLE VII

                        Negative Covenants

           Until the Commitments have expired or terminated and the principal of
and interest on each Loan and all fees payable  hereunder have been paid in full
and  all  Letters  of  Credit  shall  have  expired  or  terminated  and  all LC
Disbursements  shall  have been  reimbursed,  the  Borrower  and the  Subsidiary
Guarantors covenant and agree with the Lenders that:

           SECTION  7.01.  Indebtedness.  The  Borrower  will not,  and will not
permit  any  Subsidiary  to,  create,  incur,  assume  or  permit  to exist  any
Indebtedness, except:

           (a)  Indebtedness created hereunder;

           (b)  Indebtedness  existing  on the  date  hereof  and set  forth  in
      Schedule 7.01, and any extensions, renewals, refinancings and replacements
      of any such Indebtedness that do not increase the principal amount thereof
      from the amount set forth in Schedule 7.01 or, in the case of the lines of
      credit, the aggregate amount of lines of credit set forth on Schedule 7.01
      and that do not contain  terms and  conditions  that are  materially  more
      restrictive  to the  Borrower  and its  Subsidiaries  than the  terms  and
      conditions  of  the  Indebtedness  so  extended,  renewed,  refinanced  or
      replaced;



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                             - 76 -


           (c)  Indebtedness of the Borrower and its Subsidiaries to each other,
      provided  that (i) no such  Indebtedness  shall be owed by the Borrower or
      any of the Domestic  Subsidiaries other than Rheox International to any of
      the Foreign  Subsidiaries and no such Indebtedness shall be owed by any of
      the  Foreign  Subsidiaries  to  any  of  the  Borrower  and  the  Domestic
      Subsidiaries  other than  Rheox  International  and (ii) if the  aggregate
      outstanding  principal amount of Indebtedness owed by Rheox  International
      to the Borrower and the Domestic  Subsidiaries  exceeds  $2,000,000 at any
      time,  an amount equal to the excess  shall be evidenced  solely by one or
      more promissory notes of Rheox International pledged to the Administrative
      Agent under the Security Agreement;

           (d)  until  the  initial  borrowing  hereunder,  Indebtedness  of the
      Borrower to NL evidenced by the Subordinated Note;

           (e) Indebtedness of Rheox Limited to NL evidenced by the Subordinated
      Intercompany Note;

           (f)  Indebtedness  of up to  $500,000  in the form of  Guarantees  of
      Indebtedness  of  Enenco,  so  long  as the  Borrower  owns,  directly  or
      indirectly, at least 50% of the equity interests in Enenco; and

           (g) additional Indebtedness of the Borrower in an aggregate principal
      amount up to but not exceeding $2,000,000 at any one time outstanding.

           SECTION 7.02.  Liens.  The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter  acquired by it, or assign or sell any income or
revenues  (including  accounts  receivable) or rights in respect of any thereof,
except:

           (a)  Liens created under the Security Documents;

           (b)  Permitted Liens; and

           (c) Liens (including Capital Leases) on real and/or personal property
      acquired  and/or  constructed by the Borrower or any Subsidiary  after the
      date hereof  securing  Indebtedness  of the  Borrower  or such  Subsidiary
      permitted  by  Section  7.01  in  respect  of the  purchase  price  and/or
      construction  cost of such property  (including  Indebtedness  incurred to
      finance such acquisition and/or construction), provided that the aggregate
      principal amount of Indebtedness secured by each such Lien does not at any
      time exceed (i) the acquisition  and/or  construction  cost of the related
      property  referred to above or (ii) in the case of  property  subject to a
      Capital Lease, the Fair Market Value of the related  property  referred to
      above; and



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                             - 77 -


           (d)  any  Lien  on any  property  or  asset  of the  Borrower  or any
      Subsidiary  existing on the date hereof and set forth in Schedule 7.02 and
      Liens  securing  any   Indebtedness   incurred  in  connection   with  the
      refinancing of any  Indebtedness  secured by any Lien existing on the date
      hereof and set forth in Schedule 7.02,  provided  however that no property
      or asset may secure such Liens other than the property or asset covered by
      the related  Lien  existing on the date hereof and  provided  further that
      such Liens may not secure  Indebtedness in a principal amount in excess of
      the principal amount set forth on Schedule 7.02.

           SECTION 7.03.  Fundamental  Changes.  The Borrower will not, and will
not permit any Subsidiary  to, 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 substantial part of its assets, or all or substantially
all of the stock of any of its Subsidiaries (in each case,  whether now owned or
hereafter  acquired),  or  liquidate or  dissolve,  except that,  if at the time
thereof  and  immediately  after  giving  effect  thereto no Default  shall have
occurred and be continuing:

           (a) any Subsidiary other than Rheox  International may merge into the
      Borrower  in  a  transaction  in  which  the  Borrower  is  the  surviving
      corporation;

           (b) any  Subsidiary  other  than Rheox  International  may merge into
      another  Subsidiary;  provided that (i) if any such  transaction  shall be
      between a  Subsidiary  and a Wholly  Owned  Subsidiary,  the Wholly  Owned
      Subsidiary  shall be the continuing or surviving  corporation  and (ii) if
      any such  transaction  shall  be  between  a  Subsidiary  Guarantor  and a
      Subsidiary not a Subsidiary  Guarantor,  and such Subsidiary  Guarantor is
      not the  continuing  or  surviving  corporation,  then the  continuing  or
      surviving  corporation  shall have assumed all of the  obligations of such
      Subsidiary Guarantor hereunder and under the other Loan Documents;

           (c) any Subsidiary may sell, transfer,  lease or otherwise dispose of
      its assets or property to the Borrower or to another Subsidiary;

           (d) the Borrower or any  Subsidiary  may make  Dispositions  to third
      parties with the approval of the Required Lenders;

           (e) the  Borrower  or any  Subsidiary  may sell,  transfer,  lease or
      otherwise  dispose of any  inventory  or other  assets or  property in the
      ordinary course of business;

           (f) the  Borrower  or any  Subsidiary  may sell,  transfer,  lease or
      otherwise dispose of obsolete or worn-out property,  tools or equipment no
      longer used or useful in its  business so long as the amount  thereof sold
      in any single fiscal year by the Borrower and its  Subsidiaries  shall not
      have a Fair Market Value in excess of $500,000; and


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                             - 78 -



           (g) the Borrower may sell,  transfer,  lease or otherwise  dispose of
      the surplus parcels of real property in Alameda County,  California  owned
      by the Borrower and encumbered for the benefit of the Lenders as described
      in section (b) of the definition of "Existing Mortgages".

           SECTION  7.04.   Investments,   Loans,   Advances,   Guarantees   and
Acquisitions; Hedging Agreements.

           (a) The Borrower will not, and will not permit any its Subsidiary to,
purchase, hold or acquire (including pursuant to any merger with any Person that
was not a Wholly  Owned  Subsidiary  prior to such  merger) any  Investment,  or
purchase or otherwise  acquire (in one transaction or a series of  transactions)
any assets of any other Person constituting a business unit, except:

              (i)  Investments  outstanding  on the date hereof and set forth in
      Schedule 7.04, including such Investments in Enenco so set forth;

              (ii) Permitted Investments;

              (iii)  Investments  by the  Borrower  and  any  Subsidiary  in the
      capital  stock of and  other  ownership  interests  in other  Subsidiaries
      (subject to Section 7.11);

              (iv) Indebtedness and advances permitted by Section 7.01(c);

              (v)  Guarantees  constituting  Indebtedness  permitted  by Section
      7.01;

              (vi) operating deposit accounts with banks;

              (vii)  Distributor   Affiliate  Credit  Extensions  not  exceeding
      $5,000,000  in the  aggregate at any one time  outstanding,  provided that
      each Distributor Affiliate Credit Extension shall mature and be payable no
      later than the date 45 days after the date made;

              (viii)  Capital   Expenditures   (including  but  not  limited  to
      Acquisitions  constituting  Capital  Expenditures) made by the Borrower or
      any Subsidiary as permitted under Section 7.08(e); and

              (ix)  Investments in Enenco after the date of this Agreement of up
      to  $750,000  in the form of capital  contributions  or loans and of up to
      $500,000 in the form of Guarantees of Indebtedness  of Enenco,  so long as
      the  Borrower  owns,  directly or  indirectly,  at least 50% of the equity
      interests in Enenco; and



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                             - 79 -


              (x)  Investments  of the LC  Collateral  Account  as  provided  in
      Section 2.04(i).

           (b) The  Borrower  will not, and will not permit any  Subsidiary  to,
enter into any Hedging Agreement,  other than (i) Hedging Agreements required by
Section 6.11 and (ii) any other Hedging  Agreements entered into in the ordinary
course of  business  to hedge or  mitigate  risks to which the  Borrower  or any
Subsidiary  is exposed in the conduct of its business or the  management  of its
liabilities.

           SECTION 7.05.  Restricted  Payments.  The Borrower will not, and will
not permit any Subsidiary to, declare or make, or agree to pay or make, directly
or indirectly,  any Restricted Payment, except that so long as no Default exists
or would result therefrom:

           (a) the  Borrower  may (i) declare and pay the portion of the Special
      Dividend  payable  from the  proceeds of the Term Loans in cash;  and (ii)
      declare  and pay the  portion of the  Special  Dividend  payable  from the
      proceeds of the Revolving Credit Loans in cash, provided that after giving
      effect  thereto the aggregate  unutilized  amount of the Revolving  Credit
      Commitments shall not be less than $7,500,000; and

           (b) the Borrower  may declare and pay  dividends in cash with respect
      to its capital stock after the second  anniversary of the Effective  Date,
      provided  that  (i) at the  time  of the  declaration  and at the  time of
      payment of such  dividends  (and after giving effect  thereto),  the Fixed
      Charges  Ratio  shall not be less  than  1.10 to 1 and (ii) the  aggregate
      amount of such  dividends paid in such fiscal year shall not exceed 40% of
      Excess Cash Flow for the immediately preceding fiscal year.

           SECTION  7.06.  Transactions  with  Affiliates.  Except as  expressly
permitted  by this  Agreement,  the  Borrower  will not, and will not permit any
Subsidiary to, sell,  lease or otherwise  transfer any property or assets to, or
purchase,  lease or otherwise  acquire any property or assets from, or otherwise
engage in any other transactions with, any of its Affiliates, except that:

           (a) the Borrower or any Subsidiary may enter into  transactions  with
      Affiliates  (other than extension of  Indebtedness  by the Borrower or any
      Subsidiary to an  Affiliate) in the ordinary  course of business at prices
      and on terms and  conditions  not less  favorable  to the Borrower or such
      Subsidiary than could be obtained on an arm's-length  basis from unrelated
      third parties;

           (b) any  Affiliate  who is an  individual  may  serve as a  director,
      officer,  employee or consultant of the Borrower or any of Subsidiary  and
      receive reasonable compensation for his or her services in such capacity;



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<PAGE>


                             - 80 -


           (c)  Rheox  GmbH,  a German  corporation,  may pay  dividends  to all
      holders of interests in Rheox GmbH,  provided that any such  dividends are
      paid  together  with  dividends  to each  holder of interest in Rheox GmbH
      ratably in accordance with their respective interests;

           (d) the Borrower and its  Subsidiaries may enter into and perform the
      Tax  Sharing   Agreement,   the  other   Ancillary   Agreements   and  the
      Restructuring Documents;

           (e) the Borrower may engage in the transactions with Enenco permitted
      under Sections 7.01, 7.03 and 7.04; and

           (f) the  Borrower  and its  Subsidiaries  may enter into  Distributor
      Affiliate Credit Extensions permitted by Section 7.04.

           SECTION 7.07. Restrictive Agreements. The Borrower will not, and will
not permit any of its Subsidiaries to, directly or indirectly, enter into, incur
or permit to exist any agreement or other arrangement that prohibits,  restricts
or imposes any condition  upon the ability of any Subsidiary to pay dividends or
other  distributions  with respect to any shares of its capital stock or to make
or repay  loans or  advances  to the  Borrower  or any  other  Subsidiary  or to
Guarantee  Indebtedness of the Borrower or any other  Subsidiary;  provided that
(i) the foregoing shall not apply to restrictions and conditions  imposed by law
or by this Agreement,  (ii) the foregoing  shall not apply to  restrictions  and
conditions existing on the date hereof identified on Schedule 7.07 or related to
the Indebtedness set forth in Schedule 7.01 (but shall apply to any extension or
renewal of, or any amendment or modification  resulting in any such  restriction
or condition becoming more restrictive),  (iii) the foregoing shall not apply to
customary  restrictions and conditions  contained in agreements  relating to the
sale of a Subsidiary  pending such sale,  provided  that such  restrictions  and
conditions  apply  only to the  Subsidiary  that is to be sold and such  sale is
permitted hereunder,  and (iv) the foregoing shall not apply to (x) restrictions
or  conditions  imposed  by  any  agreement  relating  to  secured  Indebtedness
permitted by this Agreement if such restrictions or conditions apply only to the
property or assets securing such Indebtedness and (y) to customary provisions in
leases and other contracts restricting the assignment thereof.

           SECTION 7.08.  Certain Financial Covenants.

           (a) Leverage  Ratio.  The Borrower will not permit the Leverage Ratio
at any time  during any of the  periods  set forth below to exceed the ratio set
opposite such period below:


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                             - 81 -

                     Period                                              Ratio
                     ------                                              -----

From and including the Effective Date
through June 30, 1997 .......................................          3.75 to 1

From and including July 1, 1997
through September 30, 1997 ..................................          3.60 to 1

From and including October 1, 1997
through December 31, 1997 ...................................          3.50 to 1

From and including January 1, 1998
through December 31, 1998 ...................................          3.25 to 1

From and including January 1, 1999
through December 31, 2000 ...................................          3.00 to 1

From and including January 1, 2001 ..........................          2.50 to 1
and at all times thereafter

           (b) Tangible Net Worth.  The  Borrower  will not permit  Tangible Net
Worth on any date to be less than an amount  equal to negative  (-)  $52,000,000
plus the sum,  for all of the fiscal  quarters  of the  Borrower  starting on or
after  January  1,  1997  and  ending  on or  before  such  date for  which  the
consolidated  net income of the Borrower and its  Subsidiaries  was greater than
zero (and excluding each fiscal quarter for which the consolidated net income of
the  Borrower  and  its  Subsidiaries  was  less  than  zero),  of  60%  of  the
consolidated  net income of the  Borrower and its  Subsidiaries  for such fiscal
quarters minus the Special Dividend.

           (c) Fixed  Charges  Ratio.  The  Borrower  will not  permit the Fixed
Charges  Ratio to be less  than  1.000 to 1 at any time from and  including  the
Effective Date through June 30, 1997 or 1.025 at any time thereafter.

           (d)  Interest  Coverage  Ratio.  The  Borrower  will not  permit  the
Interest Coverage Ratio at any time during any of the periods set forth below to
be less than the ratio set opposite such period below:
<TABLE>
<CAPTION>

                   Period                                                Ratio
                   ------                                                -----

<S>                                                                    <C>
From and including the Effective
Date through December 31, 1998 .............................           3.00 to 1

From and including January 1, 1999
and at all times thereafter ................................           3.50 to 1
</TABLE>

           (e) Capital Expenditures.  The Borrower will not permit the aggregate
amount of Capital Expenditures to exceed $5,000,000 in any calendar year.



                         Credit Agreement

<PAGE>


                             - 82 -


           SECTION 7.09. Lines of Business.  Neither the Borrower nor any of its
Subsidiaries  shall  engage  to any  substantial  extent in any line or lines of
business activity other than the Business.

           SECTION 7.10.  Modifications of Certain Documents.  The Borrower will
not,  and  will  not  permit  any   Subsidiary  to,  agree  or  consent  to  any
modification,  supplement  or waiver of (a) any of the  provisions of any of the
Restructuring  Documents or the Ancillary Agreements (other than the Tax Sharing
Agreement)  if such  modification,  supplement  or waiver  could  reasonably  be
expected to have a Material  Adverse  Effect or (b) the  Subordinated  Note, the
Subordinated Intercompany Note (excluding any modification, supplement or waiver
regarding  waiver or  deferral  of the  payment  of  interest  or  principal  or
extending the final maturity  thereof),  the Note Subordination  Agreement,  the
Intercompany Note Subordination  Agreement or the Tax Sharing Agreement, in each
case without the prior consent of the Administrative Agent (with the approval of
the Required Lenders).

           SECTION 7.11. Rheox  International.  Notwithstanding  anything to the
contrary contained in this Agreement, but without limiting the effect of Section
6.12(b):

           (a) the  Borrower  will cause all  shares of  capital  stock or other
      ownership  interests in any of the Foreign  Subsidiaries at any time owned
      by any of the Borrower and the Domestic Subsidiaries to be owned solely by
      Rheox   International,   directly  or  indirectly  through  other  Foreign
      Subsidiaries; and

           (b) the Borrower will not permit Rheox  International to (i) merge or
      consolidate  with any Person,  (ii) engage in any business  other than (x)
      owning  and  administering  the  business  of  the  Foreign   Subsidiaries
      (including,  but not limited to, owning,  licensing and  administering the
      Foreign Intellectual Property) and (y) extending Indebtedness permitted by
      Sections 7.04(iii) and 7.04(viii) and incurring  Indebtedness permitted by
      Section  7.01(c)  hereof  or  (iii)  incur  any  Indebtedness  other  than
      Indebtedness of (A) Rheox  International  under the Loan Documents and (B)
      Indebtedness  of  Rheox  International  to  the  Borrower  and  its  other
      Subsidiaries permitted by Section 7.01(c).

           SECTION 7.12. Subordinated Notes. The Borrower will not (except, with
respect to the Subordinated Note, as required by Section 6.10(a)),  and will not
permit any  Subsidiary to,  purchase,  redeem,  retire or otherwise  acquire for
value, or set apart any money for a sinking,  defeasance or other analogous fund
for the purchase,  redemption,  retirement or other  acquisition of, or make any
voluntary payment or prepayment of the principal of or interest on, or any other
amount  owing  in  respect  of,  the  Subordinated   Note  or  the  Subordinated
Intercompany  Note,  except  (a) in the case of the  Subordinated  Note,  (i) as
required  by  Section  6.10(a)  and  (ii)  subject  to  the  Note  Subordination
Agreement,  for  regularly  scheduled  payments  of  interest  thereon  required
pursuant  thereto  and (b) in the case of the  Subordinated  Intercompany  Note,
subject to the Intercompany Note Subordination


                         Credit Agreement

<PAGE>


                             - 83 -


Agreement,  for regularly  scheduled  payments of principal and interest thereon
required pursuant thereto.


                           ARTICLE VIII

                         Events of Default

           If any of the following  events ("Events of Default") shall occur and
be continuing:

           (a) the Borrower  shall fail to pay any  principal of any Loan or any
      reimbursement obligation in respect of any LC 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 otherwise;

           (b) any Credit  Party  shall fail to pay any  interest on any Loan or
      any fee or other amount (other than an amount referred to in clause (a) of
      this Article VIII)  payable  under this  Agreement or under any other Loan
      Document,  when and as the same  shall  become  due and  payable  and such
      failure shall  continue  unremedied for a period of three or more Business
      Days;

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

           (d) the  Borrower  shall fail to observe  or  perform  any  covenant,
      condition or agreement contained in Section 6.02(a), 6.03 (with respect to
      the Borrower's existence), 6.09 or 6.10 or in Article VII;

           (e) any Credit  Party or NL shall  fail to  observe  or  perform  any
      covenant,  condition or agreement  contained in this Agreement (other than
      those specified in clause (a), (b) or (d) of this Article VIII), any other
      Loan  Document  or the Tax  Sharing  Agreement,  and  such  failure  shall
      continue  unremedied for a period of 30 days after notice thereof from the
      Administrative Agent (given at the request of any Lender) to the Borrower;

           (f) the Borrower or any  Subsidiary  shall fail after any  applicable
      period of grace to make any payment of principal  of,  interest on or fees
      payable to lenders in


                         Credit Agreement

<PAGE>


                             - 84 -


      respect of any Material Obligations, when and as the same shall become due
      and payable;

           (g) any  event or  condition  occurs  that  results  in any  Material
      Obligations  becoming due prior to its scheduled  maturity or, for so long
      as such event or condition is continuing, that enables or permits (with or
      without  the  giving of  notice,  the lapse of time or both) the holder or
      holders  of any  Material  Obligations  or any  trustee or agent on its or
      their  behalf or cause any  Material  Obligations  to  become  due,  or to
      require the  prepayment,  repurchase,  redemption or  defeasance  thereof,
      prior to its scheduled  maturity;  provided that this clause (g) shall not
      apply  to  secured  Indebtedness  that  becomes  due  as a  result  of the
      voluntary  sale or  transfer  of the  property  or  assets  securing  such
      Indebtedness or the voluntary termination of a Hedging Agreement;

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

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

           (j) NL,  the  Borrower  or any  Subsidiary  other  than  an  Inactive
      Subsidiary shall become unable,  admit in writing or fail generally to pay
      its debts as they become due;

           (k) one or more final judgments for the payment of money in excess of
      $2,500,000 shall be rendered against the Borrower or any Subsidiary or any


                         Credit Agreement

<PAGE>


                             - 85 -


      combination  thereof and the same shall not be discharged  for a period of
      30  consecutive  days during which the execution  shall not be effectively
      stayed,  or any action  shall be legally  taken by a judgment  creditor to
      attach  or levy upon any  assets  of the  Borrower  or any  Subsidiary  to
      enforce  any such  judgment,  or any action  shall be  legally  taken by a
      judgment  creditor  of NL to attach or levy  upon the  collateral  pledged
      under the NL Pledge Agreement;

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

           (m) A reasonable basis shall exist for the assertion  against NL, the
      Borrower or any  Subsidiary of (or there shall have been asserted  against
      NL,  the  Borrower  or any  Subsidiary)  claims  or  liabilities,  whether
      accrued, absolute or contingent,  based on or arising from the generation,
      storage, transport, handling or disposal of Hazardous Materials by NL, the
      Borrower  or any of the  Borrower's  Subsidiaries  or  Affiliates,  or any
      predecessor  in  interest  of NL, the  Borrower  or any of the  Borrower's
      Subsidiaries  or  Affiliates,  or relating to any site or facility  owned,
      operated  or  leased  by  NL,  the  Borrower  or  any  of  the  Borrower's
      Subsidiaries or Affiliates,  which claims or liabilities  (insofar as they
      are payable by NL, the Borrower or any Subsidiary but after  deducting any
      portion  thereof  which  is  reasonably  expected  to  be  paid  by  other
      creditworthy  Persons  jointly  and  severally  liable  therefor),  in the
      judgment of the Required  Lenders are  reasonably  likely to be determined
      adversely to NL, the Borrower or any  Subsidiary,  and the amount  thereof
      is,  singly or in the  aggregate,  reasonably  likely  to have a  Material
      Adverse Effect;

           (n) NL  shall  at  any  time  and  for  any  reason  cease  to be the
      beneficial owner of 100% of the outstanding shares of capital stock of the
      Borrower;  or any Person or Persons not having beneficial ownership in the
      aggregate of 50% or more of the outstanding  shares of capital stock of NL
      on the date hereof shall acquire beneficial  ownership in aggregate of 50%
      or more of the  outstanding  shares of capital  stock of NL; or during any
      period  of 25  consecutive  calendar  months,  (i)  individuals  who  were
      directors of NL on the first day of such period and (ii) other individuals
      whose  election or nomination by the Board of Directors of NL was approved
      by at least a majority  of the Board of  Directors  of NL who either  were
      directors on the first day of such period or whose  election or nomination
      was  previously so approved  shall no longer  constitute a majority of the
      Board of Directors of NL; or

           (o) Any of the  following  shall  occur:  (i) the Lien created by any
      Security  Document  shall  at  any  time  (other  than  by  reason  of the
      Administrative Agent relinquishing  possession of certificates  evidencing
      shares of stock of Subsidiaries  pledged thereunder) cease to constitute a
      valid and  perfected  (to the extent such Lien is required to be perfected
      under the Security Documents) Lien on the collateral intended


                         Credit Agreement

<PAGE>


                             - 86 -


      to be covered  thereby;  (ii) except for expiration in accordance with its
      terms, any Security  Document shall for whatever reason be terminated,  or
      shall cease to be in full force and effect; or (iii) the enforceability of
      any Security  Document or the validity of any  subordination  provision in
      the Note Subordination Agreement or in the Intercompany Note Subordination
      Agreement shall be contested by any Credit Party or by NL;

then,  and in every such event  (other than an event  described in clause (h) or
(i) of this Article),  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 notice to the Borrower,  take either or both of the following actions,
at the same or different times: (i) terminate the Commitments, and thereupon the
Commitments  shall  terminate  immediately,  and (ii)  declare  the  Loans  then
outstanding  to be due and  payable  in  whole  (or in part,  in which  case any
principal not so declared to be due and payable may thereafter be declared to be
due and payable), and thereupon the principal of the Loans so declared to be due
and  payable,  together  with  accrued  interest  thereon and all fees and other
obligations  of the  Borrower  accrued  hereunder,  shall become due and payable
immediately,  without presentment,  demand, protest or other notice of any kind,
all of which are  hereby  waived by the  Borrower;  and in the case of any event
described  in  clause  (h)  or  (i)  of  this  Article,  the  Commitments  shall
automatically  terminate  and  the  principal  of the  Loans  then  outstanding,
together with accrued interest thereon and all fees and other obligations of the
Borrower accrued hereunder,  shall automatically become due and payable, without
presentment,  demand,  protest  or other  notice of any  kind,  all of which are
hereby waived by the Borrower.


                            ARTICLE IX

                     The Administrative Agent

           Each of the  Lenders  and the LC Issuing  Lender  hereby  irrevocably
appoints the Administrative Agent as its agent and authorizes the Administrative
Agent to take such  actions  on its behalf and to  exercise  such  powers as are
delegated to the  Administrative  Agent by the terms of this  Agreement  and the
other Loan  Documents,  together with such actions and powers as are  reasonably
incidental thereto.

           Chase  shall have the same  rights and  powers in its  capacity  as a
Lender  hereunder  as any other Lender and may exercise the same as though Chase
were not the  Administrative  Agent,  and Chase and its  Affiliates  may  accept
deposits from,  lend money to and generally  engage in any kind of business with
any Credit Party or any  Subsidiary  or other  Affiliate of any thereof as if it
were not the Administrative Agent hereunder.

           The  Administrative  Agent  shall not have any duties or  obligations
except those expressly set forth in this Agreement and the other Loan Documents.
Without limiting the


                         Credit Agreement

<PAGE>


                             - 87 -


generality of the foregoing,  (a) the Administrative  Agent shall not be subject
to any  fiduciary or other implied  duties,  regardless of whether a Default has
occurred and is continuing, (b) the Administrative Agent shall not have any duty
to take any discretionary  action or exercise any discretionary  powers,  except
discretionary rights and powers expressly contemplated by this Agreement and the
other Loan  Documents that the  Administrative  Agent is required to exercise in
writing by the Required  Lenders,  and (c) except as expressly  set forth herein
and in the other Loan  Documents,  the  Administrative  Agent shall not have any
duty to  disclose,  and shall not be liable  for the  failure to  disclose,  any
information  relating  to  any  Credit  Party,  NL or any  of  their  respective
Subsidiaries  that  is  communicated  to or  obtained  by  Chase  or  any of its
Affiliates in any capacity. The Administrative Agent shall not be liable for any
action  taken or not  taken  by it with the  consent  or at the  request  of the
Required Lenders or, if provided  herein,  with the consent or at the request of
the Required  Revolving  Credit or the  Required  Term Loan  Lenders,  or in the
absence of its own gross  negligence or wilful  misconduct.  The  Administrative
Agent  shall not be deemed to have  knowledge  of any  Default  unless and until
written notice thereof is given to the Administrative Agent by the Borrower or a
Lender (whereupon the Administrative Agent shall promptly deliver a copy thereof
to the Lenders),  and the  Administrative  Agent shall not be responsible for or
have any duty to  ascertain  or  inquire  into (i) any  statement,  warranty  or
representation  made in or in connection  with this  Agreement or the other Loan
Documents,  (ii) the  contents  of any  certificate,  report  or other  document
delivered  hereunder or under any of the other Loan  Documents or in  connection
herewith  of  therewith,  (iii)  the  performance  or  observance  of any of the
covenants,  agreements or other terms or  conditions  set forth herein or in any
other  Loan  Document,  (iv)  the  validity,  enforceability,  effectiveness  or
genuineness of this Agreement,  the other Loan Documents or any other agreement,
instrument or document,  or (v) the  satisfaction  of any condition set forth in
Article V or elsewhere herein,  other than to confirm receipt of items expressly
required to be delivered to the Administrative Agent.

           The  Administrative  Agent shall not, except to the extent  expressly
instructed by the Required Lenders with respect to collateral security under the
Security  Documents,  be  required to  initiate  or conduct  any  litigation  or
collection proceedings hereunder or under any other Loan Document.

           The  Administrative  Agent shall be entitled to rely upon,  and shall
not incur any  liability  for relying upon,  any notice,  request,  certificate,
consent, statement,  instrument,  document or other writing believed by it to be
genuine and to have been signed or sent by the proper Person. The Administrative
Agent also may rely upon any  statement  made to it orally or by  telephone  and
believed  by it to be made  by the  proper  Person,  and  shall  not  incur  any
liability for relying thereon.  The Administrative  Agent may consult with legal
counsel (who may be counsel for the Borrower), independent accountants and other
experts  selected  by it, and shall not be liable  for any  action  taken or not
taken by it in accordance  with the advice of any such counsel,  accountants  or
experts.



                         Credit Agreement

<PAGE>


                             - 88 -


           The  Administrative  Agent may perform any and all of its duties, and
exercise  its  rights  and  powers,  by or  through  any one or more  sub-agents
appointed by the  Administrative  Agent. The  Administrative  Agent and any such
sub-agent  may perform any and all its duties and exercise its rights and powers
through  its  Related  Parties.  The  exculpatory  provisions  of the  preceding
paragraphs  shall apply to any such sub-agent and to the Related  Parties of the
Administrative  Agent and any such sub-agent,  and shall apply to its activities
in connection with the syndication of the credit facilities  provided for herein
as well as activities as the Administrative Agent.

           Subject  to  the   appointment   and   acceptance   of  a   successor
Administrative  Agent, as provided in this paragraph,  the Administrative  Agent
may resign at any time by notifying the Lenders,  the LC Issuing  Lender and the
Borrower. Upon any such resignation,  the Required Lenders shall have the right,
in consultation with the Borrower, to appoint a successor  Administrative Agent.
If no  successor  shall  have been so  appointed  and shall have  accepted  such
appointment within 30 days after such retiring Administrative Agent gives notice
of its resignation,  then such retiring  Administrative  Agent may, on behalf of
the Lenders and the LC Issuing Lender, appoint a successor Administrative Agent,
which shall be a bank with an office in New York,  New York,  or an Affiliate of
any such bank. Upon the acceptance of its appointment as  Administrative  Agent,
by a successor,  such successor  shall succeed to and become vested with all the
rights, powers,  privileges and duties of the retiring Administrative Agent, and
the  retiring  Administrative  Agent  shall be  discharged  from its  duties and
obligations  hereunder and under the other Loan  Documents.  The fees payable by
the  Borrower  to a  successor  Administrative  Agent shall be the same as those
payable to its predecessor unless otherwise agreed between the Borrower and such
successor. After an Administrative Agent's resignation hereunder, the provisions
of this Article IX and Sections 3.03 and 10.03 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 Administrative Agent.

           Each  Lender  acknowledges  that it has,  independently  and  without
reliance  upon the  Administrative  Agent,  the LC  Issuing  Lender 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  Agreement.  Each
Lender also acknowledges  that it will,  independently and without reliance upon
the Administrative Agent, the LC Issuing Lender 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 Agreement and the other Loan Documents,  any related  agreement or any
document furnished hereunder or thereunder.

           The  Documentation  Agent  identified  on  the  cover  page  of  this
Agreement  shall have no duties or  responsibilities  hereunder  other than as a
Lender hereunder.



                         Credit Agreement

<PAGE>


                             - 89 -


                             ARTICLE X

                           Miscellaneous

           SECTION  10.01.  Notices.  Except  in the case of  notices  and other
communications  expressly  permitted to be given by  telephone,  all 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 Borrower, (i) to Rheox, Inc. c/o NL Industries, Inc. at
      70 East 55th  Street,  New York,  New York  10022,  Attention  of Susan E.
      Alderton  (Telecopy No. (212) 421-7209) and (ii) to Rheox,  Inc., P.O. Box
      700, Wycoffs Mill Road, Hightstown,  New Jersey 08520, Attention of Debbie
      Young;

           (b) if to the Administrative Agent, to The Chase Manhattan Bank, Loan
      and Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New York,
      New York 10081, Attention of Terri Williams (Telecopy No. (212) 552-5277),
      with a copy to The Chase  Manhattan  Bank, 1 Chase  Manhattan  Plaza,  5th
      Floor, New York, New York 10081, Attention of Peter Dedousis (Telecopy No.
      (212) 552-7175); and

           (c) if to any Lender  (including  to Chase in its  capacity as the LC
      Issuing  Lender),  to it at its address (or telecopy  number) set forth in
      its Administrative Questionnaire.

Any party hereto may change its address or telecopy number for notices and other
communications  hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.

           SECTION 10.02.  Waivers; Amendments.

           (a) No failure or delay by the  Administrative  Agent, the LC Issuing
Lender or any Lender in exercising any right or power hereunder 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
LC Issuing Lender and the Lenders hereunder are cumulative and are not exclusive
of any rights or  remedies  that they  would  otherwise  have.  No waiver of any
provision  of this  Agreement  or consent to any  departure  by any Credit Party
therefrom shall in any event be effective  unless the same shall be permitted by
paragraph  (b) of this Section  10.02,  and then such waiver or consent shall be
effective  only in the  specific  instance  and for the purpose for which given.
Without limiting the generality of the foregoing, the making of


                         Credit Agreement

<PAGE>


                             - 90 -


a Loan or issuance of a Letter of Credit  shall not be  construed as a waiver of
any Default,  regardless of whether the Administrative  Agent, any Lender or the
LC Issuing Lender may have had notice or knowledge of such Default at the time.

           (b) Neither this  Agreement nor any  provision  hereof may be waived,
amended or modified  except  pursuant to an agreement or  agreements  in writing
entered into by the Borrower and the Required Lenders or by the Borrower and the
Administrative Agent with the consent of the Required Lenders;  provided that no
such agreement shall:

              (i)  increase  the  Commitment  of any Lender  without the written
      consent of such Lender;

              (ii) reduce the principal amount of any Loan or LC Disbursement or
      reduce the rate of interest thereon, or reduce any fees payable hereunder,
      without the written consent of each Lender affected thereby;

              (iii)  postpone  the  scheduled  date of payment of the  principal
      amount of any Loan or LC  Disbursement,  or any interest  thereon,  or any
      fees payable hereunder,  or reduce the amount of, waive or excuse any such
      payment,  or postpone the scheduled date of expiration of any  Commitment,
      without the written consent of each Lender affected thereby;

              (iv) change  Section  2.09 in a manner that would  reduce or alter
      the application of prepayments thereunder,  or change Section 2.16(b), (c)
      or (d) in a manner  that  would  alter the pro rata  sharing  of  payments
      required thereby, without in each case the written consent of each Lender;

              (v) alter the  rights or  obligations  of the  Borrower  to prepay
      Loans without the written consent of each Lender;

              (vi) change any of the  provisions  of this  Section  10.02 or the
      definition of "Required Lenders",  "Required Revolving Credit Lenders", or
      "Required Term Loan Lenders", or any other provision hereof specifying the
      number or  percentage  of Lenders  required to waive,  amend or modify any
      rights   hereunder   or  under  any  other  Loan   Document  or  make  any
      determination  or grant any consent  hereunder or thereunder,  without the
      written consent of each Lender; or

              (vii)  release  all  or   substantially   all  of  the  Subsidiary
      Guarantors  from their  obligations  in respect of their  Guarantee  under
      Article III, without the written consent of each Lender;



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                             - 91 -


provided further that no such agreement shall amend,  modify or otherwise affect
the  rights or  duties  of the  Administrative  Agent or the LC  Issuing  Lender
hereunder without the prior written consent of the  Administrative  Agent or the
LC Issuing Lender, as the case may be.

           Anything in this Agreement to the contrary notwithstanding, no waiver
or  modification  of any provision of this Agreement that has the effect (either
immediately  or at some  later  time) of  enabling  the  Borrower  to  satisfy a
condition  precedent to the making of Revolving Credit Loans or Term Loans shall
be  effective  against  the  Revolving  Credit  Lenders  or Term  Loan  Lenders,
respectively, unless the Required Revolving Credit Lenders or Required Term Loan
Lenders, respectively, shall have concurred with such waiver or modification.

           (c) Neither any Security  Document nor any  provision  thereof may be
waived,  amended or modified  except  pursuant to an agreement or  agreements in
writing  entered  into  by  the  Credit  Parties  party  thereto,   and  by  the
Administrative  Agent with the consent of the Required  Lenders,  provided that,
without the prior  consent of each Lender,  the  Administrative  Agent shall not
(except as provided herein or in the applicable  Security  Document) release all
or  substantially  all of the collateral  thereunder or otherwise  terminate any
Lien under any Security Document,  agree to additional obligations being secured
by such  collateral  (unless the Lien for such additional  obligations  shall be
junior to the Lien in favor of the other  obligations  secured by such  Security
Document,  in which  event the  Administrative  Agent may consent to such junior
Lien  provided  that it obtains the consent of the  Required  Lenders  thereto),
alter the relative priorities of the obligations entitled to the benefits of the
Liens created under such Security Document, except that no such consent shall be
required, and the Administrative Agent is hereby authorized, to release any Lien
covering  property  that is the  subject  of either a  Disposition  of  property
permitted  hereunder  or a  Disposition  to  which  the  Required  Lenders  have
consented.

           SECTION 10.03.  Expenses; Indemnity; Damage Waiver.

           (a) The  Credit  Parties  jointly  and  severally  agree  to pay,  or
reimburse the  Administrative  Agent or Lenders for paying,  (i) all  reasonable
out-of-pocket  expenses incurred by the Administrative Agent and its Affiliates,
including the reasonable fees, charges and disbursements of Special Counsel,  in
connection  with the syndication of the credit  facilities  provided for herein,
the  preparation of this Agreement and the other Loan Documents (and any Uniform
Commercial  Code financing  statements  required by any Security  Document to be
filed with respect to the security  interests in personal  property and fixtures
created  pursuant  thereto) or any amendments,  modifications  or waivers of the
provisions  hereof or  thereof  (whether  or not the  transactions  contemplated
hereby  or  thereby  shall  be  consummated),  (ii) all  out-of-pocket  expenses
incurred by the LC Issuing  Lender in connection  with the issuance,  amendment,
renewal  or  extension  of any  Letter  of  Credit  or any  demand  for  payment
thereunder,  (iii) all  out-of-pocket  expenses  incurred by the  Administrative
Agent,  the LC Issuing  Lender or any Lender,  including  the fees,  charges and
disbursements of any


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                             - 92 -


counsel  for  such  Administrative  Agent,  LC  Issuing  Lender  or  Lender,  in
connection  with the  enforcement or protection of its rights in connection with
this  Agreement  and the other Loan  Documents,  including its rights under this
Section 10.03,  or in connection with the Loans made or Letters of Credit issued
hereunder,   including  in  connection  with  any  workout,   restructuring   or
negotiations in respect thereof,  and (iv) all transfer,  stamp,  documentary or
other  similar  taxes,  assessments  or charges  levied by any  governmental  or
revenue  authority  in  respect  of  this  Agreement  or any of the  other  Loan
Documents  or any other  document  referred  to herein or therein and all costs,
expenses,  taxes,  assessments and other charges incurred in connection with any
filing,   registration,   recording  or  perfection  of  any  security  interest
contemplated by any Security Document,  by any Uniform Commercial Code financing
statements  required by any  Security  Document to be filed with  respect to the
security  interests in personal  property and fixtures created pursuant thereto,
or by any other document  referred to therein.  Notwithstanding  anything to the
contrary in this Section  10.03(a),  the Borrower  shall not be obligated to pay
the fees and expenses of more than one law firm representing the  Administrative
Agent and the Lenders  (which law firm shall be  selected by the  Administrative
Agent, or if the Required Lenders so decide, by the Required Lenders) unless (x)
the Administrative  Agent or the Required Lenders reasonably  determine that the
retention of more than one law firm is advisable  because  questions arise under
laws of  jurisdictions in which the principal law firm engaged is not authorized
to  practice  law or (y)  in  the  case  of  the  foregoing  clause  (iii),  the
Administrative  Agent or any Lender or Lenders  have  different  or  conflicting
interests.

           (b) The Credit Parties  jointly and severally  agree to indemnify the
Administrative  Agent,  the LC Issuing Lender and each Lender,  and each Related
Party  of any of the  foregoing  Persons  (each  such  Person  being  called  an
"Indemnitee")  against,  and hold each  Indemnitee  harmless  from,  any and all
losses, claims, damages,  liabilities and related expenses,  including the fees,
charges and  disbursements  of any counsel  for any  Indemnitee,  incurred by or
asserted  against any  Indemnitee  arising out of, in  connection  with, or as a
result of (i) the  execution  or  delivery  of this  Agreement,  the other  Loan
Documents or any agreement or instrument contemplated hereby, the performance by
the parties  hereto and thereto of their  respective  obligations  hereunder  or
thereunder or the  consummation of the  Transactions  or any other  transactions
contemplated hereby or thereby,  (ii) any Loan or Letter of Credit or the use of
the proceeds therefrom  (including any refusal by the LC Issuing Lender to honor
a demand for  payment  under a Letter of Credit if the  documents  presented  in
connection with such demand do not strictly comply with the terms of such Letter
of Credit), (iii) any actual or alleged presence,  Release or threatened Release
of Hazardous  Materials  related to any property owned or operated by any Credit
Party or any of their  Subsidiaries,  or any Environmental  Liability related in
any way to any Credit Party or any of their Subsidiaries,  or (iv) any actual or
prospective claim,  litigation,  investigation or proceeding  relating to any of
the  foregoing,  whether  based  on  contract,  tort  or any  other  theory  and
regardless  of whether any  Indemnitee  is a party  thereto;  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


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                             - 93 -


nonappealable  judgment to have)  resulted  from the gross  negligence or wilful
misconduct of such Indemnitee.  Notwithstanding anything to the contrary in this
Section  10.03(b),  the  Borrower  shall not be  obligated  to pay or  otherwise
indemnify  the  Administrative  Agent or any Lender for the fees and expenses of
more than one law firm  representing  the  Administrative  Agent and the Lenders
(which  law firm  shall  be  selected  by the  Administrative  Agent,  or if the
Required   Lenders  so  decide,   by  the  Required   Lenders)  unless  (x)  the
Administrative  Agent or the  Required  Lenders  reasonably  determine  that the
retention of more than one law firm is advisable  because  questions arise under
laws of  jurisdictions in which the principal law firm engaged is not authorized
to practice  law or (y) the  Administrative  Agent or any Lender or Lenders have
different or conflicting interests.

           (c) To the  extent  that the  Credit  Parties  fail to pay any amount
required to be paid by them to the  Administrative  Agent under paragraph (a) or
(b)  of  this  Section  10.03,  each  Lender  severally  agrees  to  pay  to the
Administrative Agent such Lender's Applicable  Percentage  (determined as of the
time that the applicable unreimbursed expense or indemnity payment is sought) of
such unpaid amount;  provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted  against the  Administrative  Agent in its capacity as such.  To the
extent  that the Credit  Parties  fail to pay any amount  required to be paid by
them to the LC Issuing Lender under  paragraph (a) or (b) of this Section 10.03,
each Revolving  Credit Lender  severally  agrees to pay to the LC Issuing Lender
such  Lender's  Applicable  Percentage  (determined  as of  the  time  that  the
applicable  unreimbursed  expense or indemnity payment is sought) of such unpaid
amount;  provided that the  unreimbursed  expense or  indemnified  loss,  claim,
damage,  liability  or related  expense,  as the case may be, was incurred by or
asserted against the Administrative Agent in its capacity as such.

           (d) To the extent  permitted by  applicable  law,  none of the Credit
Parties shall assert, and each Credit Party hereby waives, any claim against any
Indemnitee, on any theory of liability, for special, indirect,  consequential or
punitive  damages  (as opposed to direct or actual  damages)  arising out of, in
connection with, or as a result of, this Agreement,  the other Loan Documents or
any agreement or instrument  contemplated  hereby or thereby,  the Transactions,
any Loan or Letter of Credit or the use of the proceeds thereof.

           (e) All  amounts  due  under  this  Section  10.03  shall be  payable
promptly after written demand therefor.

           SECTION 10.04.  Successors and Assigns.

           (a) The provisions of this Agreement  shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
permitted hereby,  except that the Borrower may not assign or otherwise transfer
any of its rights or obligations  hereunder without the prior written consent of
each Lender (and any attempted  assignment  or transfer by the Borrower  without
such consent shall be null and void). Nothing in this


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<PAGE>


                             - 94 -


Agreement,  expressed  or implied,  shall be construed to confer upon any Person
(other  than  the  parties  hereto,  their  respective  successors  and  assigns
permitted hereby and, to the extent expressly  contemplated  hereby, the Related
Parties of each of the Administrative Agent, the Issuing Lender and the Lenders)
any  legal or  equitable  right,  remedy  or claim  under or by  reason  of this
Agreement.

           (b) Any Lender may assign to one or more  assignees  all or a portion
of its rights and obligations  under this Agreement  (including all or a portion
of its Commitment and the Loans at the time owing to it); provided that

              (i)  except  in  the  case  of an  assignment  to a  Lender  or an
      Affiliate of a Lender, the Borrower and the Administrative  Agent (and, in
      the case of an  assignment  of all or a  portion  of a  Commitment  or any
      Lender's obligations in respect of its LC Exposure, the LC Issuing Lender)
      must give its prior  written  consent to such  assignment  (which  consent
      shall not be unreasonably withheld or delayed),

              (ii)  except  in the  case  of an  assignment  to a  Lender  or an
      Affiliate of a Lender or an assignment of the entire  remaining  amount of
      the  assigning   Lender's   Commitment  and  Loans,  the  amount  (without
      duplication)  of the Commitment and Loans 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  $10,000,000  unless each of
      the Borrower and the Administrative Agent otherwise consent,

              (iii) the parties to each assignment  shall execute and deliver to
      the  Administrative  Agent an Assignment and  Acceptance,  together with a
      processing and recordation fee of $3,500,

              (iv) the assignee,  if it shall not be a Lender,  shall deliver to
      the Administrative Agent an Administrative Questionnaire, and

              (v) written notice of each assignment and the forms required under
      Section 2.15(e) are given to the Borrower.

provided further that any consent of the Borrower  otherwise required under this
paragraph  shall not be  required  if an Event of Default  has  occurred  and is
continuing.

           Upon  acceptance  and  recording  pursuant to  paragraph  (d) of this
Section 10.04,  from and after the effective  date specified in each  Assignment
and  Acceptance,  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  Agreement,  and the  assigning
Lender  thereunder  shall,  to the  extent  of the  interest  assigned  by  such
Assignment and Acceptance, be released from its obligations under this Agreement
(and,


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<PAGE>


                             - 95 -


in the  case of an  Assignment  and  Acceptance  covering  all of the  assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall  continue to be entitled to the benefits of Sections
2.13,  2.14,  2.15,  3.03 and 10.03).  Any assignment or transfer by a Lender of
rights or  obligations  under  this  Agreement  that does not  comply  with this
paragraph (b) shall be treated for purposes of this  Agreement as a sale by such
Lender of a  participation  in such rights and  obligations  in accordance  with
paragraph (e) of this Section.

           (c) The Administrative  Agent, acting for this purpose as an agent of
the  Borrower,  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  Commitment of,
and  principal  amount of the Loans and LC  Disbursements  owing to, each Lender
pursuant to the terms hereof from time to time (the "Register").  The entries in
the Register shall be conclusive,  and the Borrower,  the Administrative  Agent,
the LC  Issuing  Lender and the  Lenders  may treat  each  Person  whose name is
recorded in the Register  pursuant to the terms hereof as a Lender hereunder for
all purposes of this  Agreement,  notwithstanding  notice to the  contrary.  The
Register  shall be available  for  inspection  by the  Borrower,  the LC Issuing
Lender  and any  Lender,  at any  reasonable  time  and from  time to time  upon
reasonable prior notice.

           (d) Upon its receipt of a duly  completed  Assignment  and Acceptance
executed  by an  assigning  Lender and an  assignee,  the  assignee's  completed
Administrative  Questionnaire  (unless the  assignee  shall  already be a Lender
hereunder),  the processing and  recordation fee referred to in paragraph (b) of
this  Section  10.04 and any  written  consent to such  assignment  required  by
paragraph (b) of this Section 10.04, the Administrative  Agent shall accept such
Assignment and Acceptance and record the  information  contained  therein in the
Register. No assignment shall be effective for purposes of this Agreement unless
and until it has been recorded in the Register as provided in this paragraph.

           (e)  Any  Lender  may,  without  the  consent  of the  Borrower,  the
Administrative  Agent or the LC Issuing Lender,  sell  participations  to one or
more  banks or other  entities  (a  "Participant")  in all or a portion  of such
Lender's rights and obligations under this Agreement (including all or a portion
of its  Commitment  and the Loans owing to it);  provided that (i) such Lender's
obligations under this Agreement shall remain unchanged,  (ii) such Lender shall
remain solely  responsible  to the other parties  hereto for the  performance of
such  obligations;  and (iii) the Borrower,  the  Administrative  Agent,  the LC
Issuing  Lender and the other Lenders shall continue to deal solely and directly
with such Lender in connection with such Lender's  rights and obligations  under
this  Agreement.  Any agreement or  instrument  pursuant to which a Lender sells
such a participation  shall provide that such Lender shall retain the sole right
to enforce this Agreement and to approve any amendment,  modification  or waiver
of any provision of this  Agreement;  provided that such agreement or instrument
may provide that such Lender will not,  without the consent of the  Participant,
agree to any amendment, modification or waiver described in the first proviso to
Section 10.02(b), or the


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<PAGE>


                             - 96 -


first provision to Section 10.02(c),  that affects such Participant.  Subject to
paragraph (f) of this Section 10.04,  the Borrower agrees that each  Participant
shall be entitled,  subject to the  obligations of Section 2.17, to the benefits
of  Sections  2.13,  2.14 and 2.15 to the same extent as if it were a Lender and
had  acquired  its  interest by  assignment  pursuant to  paragraph  (b) of this
Section 10.04.

           (f) A  Participant  shall not be  entitled  to  receive  any  greater
payment  under Section 2.13 or 2.15 than the  applicable  Lender would have been
entitled to receive with respect to the participation  sold to such Participant,
and shall be subject to the obligations of Section 2.17,  unless the sale of the
participation  to such  Participant  is made with the  Borrower's  prior written
consent.  A Participant that would be a Foreign Lender if it were a Lender shall
not be entitled to the  benefits of Section 2.15 unless the Borrower is notified
of the participation  sold to such Participant and such Participant  agrees, for
the benefit of the Borrower,  to comply with Section 2.15(e) and Section 2.17 as
though it were a Lender.

           (g) Any Lender may at any time  pledge or assign a security  interest
in all or any portion of its rights under this  Agreement to secure  obligations
of such Lender,  including any such pledge or  assignment  to a Federal  Reserve
Bank,  and this Section  shall not apply to any such pledge or  assignment  of a
security  interest;  provided  that no such pledge or  assignment  of a security
interest  shall  release  a Lender  from  any of its  obligations  hereunder  or
substitute any such assignee for such Lender as a party hereto.

           (h) Anything in this Section  10.04 to the contrary  notwithstanding,
no  Lender  may  assign  or  participate  any  interest  in any Loan  held by it
hereunder to the Borrower or any of its Affiliates or  Subsidiaries  without the
prior consent of each Lender.

           SECTION 10.05. Survival. All covenants,  agreements,  representations
and  warranties  made  by the  Credit  Parties  herein  and in  the  other  Loan
Documents,  and in the certificates or other instruments delivered in connection
with or  pursuant  to this  Agreement  and the other  Loan  Documents,  shall be
considered  to have been  relied  upon by the  other  parties  hereto  and shall
survive  the  execution  and  delivery  of this  Agreement  and the  other  Loan
Documents  and the making of any Loans and  issuance  of any  Letters of Credit,
regardless  of any  investigation  made by any such other party or on its behalf
and notwithstanding that the Administrative  Agent, the LC Issuing Lender or any
Lender  may  have  had  notice  or   knowledge   of  any  Default  or  incorrect
representation  or warranty at the time any credit is  extended  hereunder,  and
shall  continue  in full  force and  effect so long as the  principal  of or any
accrued  interest on any Loan or any fee or any other amount  payable under this
Agreement or the other Loan Documents is outstanding and unpaid or any Letter of
Credit  is  outstanding  and so long as the  Commitments  have  not  expired  or
terminated.  The provisions of Sections 2.13,  2.14,  2.15, 2.17, 3.03 and 10.03
and Article IX shall  survive and remain in full force and effect  regardless of
the consummation of the transactions  contemplated  hereby, the repayment of the
Loans, the expiration or termination of the Letters


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<PAGE>


                             - 97 -


of Credit and the  Commitments or the termination of this Agreement or any other
Loan Document or any provision hereof or thereof.

           SECTION  10.06.  Counterparts;   Integration;   Effectiveness.   This
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. This Agreement and
any   separate   letter   agreements   with  respect  to  fees  payable  to  the
Administrative  Agent  constitute the entire contract among the parties relating
to the subject  matter hereof and supersede any and all previous  agreements and
understandings,  oral or written,  relating to the subject matter hereof. Except
as provided in Section 5.01, this Agreement shall become effective when it shall
have been executed by 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
successors and assigns.  Delivery of an executed counterpart of a signature page
of this  Agreement  by  telecopy  shall be  effective  as delivery of a manually
executed counterpart of this Agreement.

           SECTION 10.07. Severability.  Any provision of this Agreement held to
be invalid,  illegal or  unenforceable  in any  jurisdiction  shall,  as to such
jurisdiction,  be  ineffective to the extent of such  invalidity,  illegality or
unenforceability without affecting the validity,  legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a  particular  jurisdiction  shall not  invalidate  such  provision in any other
jurisdiction.

           SECTION  10.08.  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 the  Borrower  against  any of and all the
obligations of the Borrower now or hereafter  existing under this Agreement held
by such Lender,  irrespective  of whether or not such Lender shall have made any
demand under this Agreement and although such obligations may be unmatured.  The
rights of each  Lender  under this  Section  10.08 are in  addition to any other
rights and remedies  (including  other  rights of setoff)  which such Lender may
have.

           SECTION  10.09.  Governing Law;  Jurisdiction;  Consent to Service of
Process.

           (a) This Agreement shall be construed in accordance with and governed
by the law of the State of New York.

           (b) Each party hereto hereby irrevocably and unconditionally submits,
for itself and its property,  to the  nonexclusive  jurisdiction  of the Supreme
Court of the State of New


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<PAGE>


                             - 98 -


York sitting in New York County and of the United States  District  Court of the
Southern District of New York, and any appellate court from any thereof,  in any
action or proceeding  arising out of or relating to this  Agreement or the other
Loan Documents,  or for recognition or enforcement of any judgment,  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  court (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 Agreement shall affect any right that the Administrative  Agent,
the LC Issuing  Lender or any Lender may  otherwise  have to bring any action or
proceeding relating to this Agreement against any Credit Party or its properties
in the courts of any jurisdiction.

           (c) Each party hereto 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  Agreement  or the other  Loan
Documents in any court referred to in paragraph (b) of this Section 10.09.  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.

           (d) Each party to this Agreement  irrevocably  consents to service of
process in the manner  provided  for notices in Section  10.01.  Nothing in this
Agreement  will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.

           SECTION 10.10. 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 ANY LEGAL PROCEEDING  DIRECTLY OR INDIRECTLY  ARISING OUT OF OR
RELATING TO THIS  AGREEMENT OR THE  TRANSACTIONS  CONTEMPLATED  HEREBY  (WHETHER
BASED ON CONTRACT,  TORT OR ANY OTHER  THEORY).  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 AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.10.

           SECTION 10.11.  Headings.  Article and Section headings and the Table
of Contents used herein are for  convenience of reference  only, are not part of
this  Agreement  and shall not  affect  the  construction  of, or be taken  into
consideration in interpreting, this Agreement.


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<PAGE>


                             - 99 -



           SECTION 10.12.  Confidentiality.  Each Lender and the  Administrative
Agent  agrees  (on  behalf of itself  and each of its  Related  Parties)  to use
reasonable precautions to keep confidential,  in accordance with their customary
procedures  for  handling  confidential  information  of the same  nature and in
accordance  with safe and sound banking  practices,  any non-public  information
supplied to it by the Borrower  pursuant to this Agreement that is identified by
the  Borrower as being  confidential  at the time the same is  delivered  to the
Lenders or the  Administrative  Agent,  provided that nothing herein shall limit
the disclosure of any such  information  (i) after such  information  shall have
become  public (other than through a violation of this Section  10.12),  (ii) to
the extent required by statute,  rule, regulation or judicial process,  (iii) to
counsel  for  any of the  Lenders  or the  Administrative  Agent,  (iv)  to bank
examiners (or any other regulatory authority having jurisdiction over any Lender
or  the  Administrative  Agent),  or to  auditors  or  accountants,  (v)  to the
Administrative Agent or any other Lender, (vi) in connection with any litigation
to which any one or more of the Lenders or the Administrative  Agent is a party,
or in connection with the  enforcement of rights or remedies  hereunder or under
any other Loan  Document,  (vii) to a Related  Party of such Lender or (viii) to
any assignee or participant (or prospective  assignee or participant) so long as
such assignee or participant  (or  prospective  assignee or  participant)  first
executes and delivers to such Lender an acknowledgement to the effect that it is
bound by the provisions of this Section  10.12;  provided,  further,  that in no
event shall any Lender or the  Administrative  Agent be obligated or required to
return any materials furnished by the Borrower.




                         Credit Agreement

<PAGE>


                             - 100 -


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


                               RHEOX, INC.


                               by / s / William R. Bronner
                                 Name:  William R. Bronner
                                 Title:  Vice President

                          SUBSIDIARY GUARANTORS

                               RHEOX INTERNATIONAL, INC.


                               by / s / William R. Bronner
                                 Name:  William R. Bronner
                                 Title:  Vice President

                          ADMINISTRATIVE AGENT

                               THE CHASE MANHATTAN BANK,
                               as Administrative Agent


                               by / s / Robert T. Sacks
                                 Name:  Robert T. Sacks
                                 Title:  Vice President

                          LENDERS

                               THE CHASE MANHATTAN BANK


                               by / s / Robert T. Sacks
                                 Name:  Robert T. Sacks
                                 Title:  Vice President




                         Credit Agreement

<PAGE>


                             - 101 -


                               BANKERS TRUST COMPANY


                               by / s / Mary Zadroga
                                 Name:  Mary Zadroga
                                 Title:  Vice President


                               LASALLE NATIONAL BANK


                               by / s / Mark E. McCarthy
                                 Name:  Mark E. McCarthy
                                 Title:  Senior Vice President


                               THE NIPPON CREDIT BANK, LTD.


                               by / s / David C. Carrington
                                 Name:  David C. Carrington
                                 Title: Vice President & Manager


                               VAN KAMPEN AMERICAN CAPITAL


                               by / s / Brian Good
                                 Name:  Brian Good
                                 Title :  Vice President


                               GIRO CREDIT BANK


                               by / s / T. Daileader
                                 Name:  T. Daileader
                                 Title: Assistant Vice President



                         Credit Agreement

<PAGE>





                              Schedule 1.01

                         [Ancillary Agreements]


                              Schedule 1.01

<PAGE>





                              Schedule 2.01
<TABLE>
<CAPTION>

                                              Term Loan       Revolving Credit
               Lender                         Commitment         Commitment
               ------                         ----------      ----------------


<S>                                        <C>                 <C>           
The Chase Manhattan Bank ................  $ 61,250,000.00     $ 8,750,000.00
Bankers Trust Company ...................    18,750,000.00       6,250,000.00
LaSalle National Bank ...................    11,250,000.00       3,750,000.00
The Nippon Credit Bank, Ltd. ............    11,250,000.00       3,750,000.00
Van Kampen American Capital .............    15,000,000.00              --
Giro Credit Bank ........................     7,500,000.00       2,500,000.00
                                           ---------------     --------------
</TABLE>



                              Schedule 2.01

<PAGE>





                              Schedule 4.06

                           [Disclosed Matters]


                              Schedule 4.06

<PAGE>





                              Schedule 4.13

                     [Material Agreements and Liens]


                              Schedule 4.13

<PAGE>





                              Schedule 4.14

                             [Subsidiaries]


                              Schedule 4.14

<PAGE>





                              Schedule 7.01

                         [Existing Indebtedness]


                              Schedule 7.01

<PAGE>





                              Schedule 7.02

                            [Existing Liens]


                              Schedule 7.02

<PAGE>




                              Schedule 7.07

                         [Existing Restrictions]


<PAGE>