UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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                                                  CHAPTER 11
In re
                                                  Case Nos.  99 B 10432 and
FORSTMANN & COMPANY, INC. and                                99 B 10433 (PCB)
FORSTMANN APPAREL, INC.,

                      Debtors.

                                                  Jointly Administered
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                          FINAL ORDER AUTHORIZING POST-
               PETITION FINANCING, GRANTING SENIOR LIENS, PRIORITY
              ADMINISTRATIVE EXPENSE, AND AUTHORIZING AGREEMENT
              WITH BANK OF AMERICA NT & SA, AS AGENT AND LENDER

            Upon the application of Forstmann & Company, Inc.  ("Forstmann") and
its    subsidiary,    Forstmann    Apparel,    Inc.    ("FAI"),    debtors   and
debtors-in-possession  (each a "Debtor" and  collectively,  the "Debtors") dated
July 23, 1999 (the  "Motion") for entry of an order  authorizing  the Debtors to
(a) obtain  post-petition  financing  in the form of  additional  loans under an
amended and restated loan and security  agreement dated as of September 14, 1998
(as amended and restated from time to time, the  "Pre-Petition  Loan Agreement")
among the  Debtors,  the lender  parties  thereto  (the  "Lenders")  and Bank of
America NT & SA as successor to BankAmerica Business Credit, Inc., as Agent (the
"Agent"), (b) to grant to the Agent, for the benefit of the Lenders, pursuant to
Sections  364(c)(2)  and  364(d)(1)  of title 11 of the United  States Code (the
"Bankruptcy  Code"),  security  interests for the Obligations1 of the Debtors to
the Agent and the  Lenders  pursuant  to the  Pre-Petition  Loan  Agreement,  as
amended by the Acknowledgement and Amendment (the "Amendment"),  a copy of which
is annexed hereto as an Exhibit A, (the  Pre-Petition  Loan Agreement as amended
by the Amendment  shall  hereinafter be referred to as the  "Post-Petition  Loan
Agreement"),  and (c) to grant to the Agent,  for the  benefit  of the  Lenders,
super-priority administrative status, pursuant to 11 U.S.C.ss. 364(c)(1), all as
more fully set forth herein;  and a copy of the Motion and the Interim Financing
Order having been served on the twenty (20) largest creditors of each Debtor and
the Lenders as required by the Court and  evidenced by the  affidavit of service
with respect  thereto as filed by the Debtors  with the Clerk of the Court;  and
the Office of the United States  Trustee having filed an objection to Motion and
the proposed interim financing  requested  thereunder,  dated July 28, 1999 (the
"UST Objection") and Newco Holdings, LLC having filed an objection to the Motion
to  the   extent   Forstmann   Apparel,   Inc.   seeks   authority   to   obtain
debtor-in-possession financing, dated July 29, 1999 (the "Newco Objection"); and
an interim hearing (the "Interim Hearing") as scheduled by the Court pursuant to
an Order (1) Granting  the Debtors  Emergency  Authorization  to Borrow from the
Debtors'  Pre-petition  Lenders (2)  Scheduling  Interim  and Final  Hearings to
Consider Entry of Further Orders: (A) Approving and Authorizing Debtors to Enter
into  Post-Petition  Credit  Agreement  with Lenders  Pursuant to 11 U.S.C.  ss.
364(c) and (d); (C) Approving  Form and Manner of Notice  Regarding  Interim and
Final  Hearings;  and (D)  Granting  Related  Relief,  dated July 23,  1999 (the
"Emergency  Order")  entered  by the Court at the  conclusion  of a  hearing  to
consider emergency relief under the Motion held on July 23, 1999 (the "Emergency
Hearing")  having been held by the Court on July 30, 1999 to consider the Motion
and the interim relief sought  therein,  and at the Interim  Hearing,  the Court
having  granted the Motion on an interim  basis as to  Forstmann  and  thereupon
having entered an Interim Order Authorizing  Post-Petition  Financing,  Granting
Senior Liens,  Priority  Administrative  Expense, and Authorizing Agreement with
Bank of America NT & SA, as Agent and Lender, dated August 4, 1999 (the "Interim
Order")  which  Order set a final  hearing on the Motion for August 11,  1999 at
2:30 p.m.  (the  "Final  Hearing");  and no  objections  in  addition to the UST
Objection and the Newco Objection having been filed or received after due notice
of the Final Hearing having been given;  and good and sufficient cause appearing
for entry of this Order;
            THE COURT  HEREBY  FINDS,  upon the full  record of the  proceedings
heretofore held before this Court with respect to the Motion, as follows:
            A. On July 23, 1999 (the "Petition Date"),  the Debtors each filed a
voluntary  petition for relief under Chapter 11 of the Bankruptcy  Code and have
been continued as debtors-in-possession.
            B. Prior to the  commencement of these Chapter 11 cases, the Lenders
made loans and  advances  to the  Debtors,  and  caused to be issued  letters of
credit on the Debtors' behalf,  pursuant to the Pre-Petition  Loan Agreement and
related  documents  executed  by the Debtor,  secured by a first lien on,  among
other things,  substantially all of the Debtors' property,  including all of the
Debtors'  then  existing  and after  acquired  Accounts,  Inventory,  Equipment,
General Intangibles (including,  but not limited to inventions,  designs, patent
applications,  trademarks,  and trade secrets) and other non-real Property,  and
Real Estate,  as those terms are described in the  Pre-Petition  Loan Agreement,
and the proceeds and products,  whether  tangible or  intangible,  of any of the
foregoing,  including proceeds of insurance covering any or all of the foregoing
property,  and any property  resulting from the sale or other disposition of any
of the foregoing property interests, or any portion thereof or interest therein,
and the proceeds thereof (the "Pre-Petition Collateral").
            C. As of the close of business on July 22,  1999,  the Debtors  were
indebted to the Lenders under the  Pre-Petition  Loan Agreement in the aggregate
sum of principal and interest of not less than  $44,271,769.98  plus  additional
costs, fees and expenses thereon (the "Pre-Petition Indebtedness");  the Debtors
(a) admit the validity and enforceability of the Pre-Petition Indebtedness owing
to the Agent and the Lenders as shown on the books of the Agent or the  Lenders,
and (b) admit  that the  security  interests  and liens held by the Agent in and
upon the Pre-Petition  Collateral to fully secure the Pre-Petition  Indebtedness
and are duly  perfected,  valid and  enforceable  and not subject to any claims,
defenses, set-offs or off-sets.
            D. The Motion was filed on July 23,  1999,  and prior to the Interim
Hearing,  the Debtors  provided actual notice of the terms of the Motion and the
interim  relief  requested  thereunder  to (i) the Office of the  United  States
Trustee,  (ii) all known  creditors  who may have  liens  against  the  Debtors'
assets,  (iii) the twenty (20) largest unsecured  creditors of each Debtor, (iv)
counsel for the Agent and (v) parties in interest that as of the date of notice,
had filed a notice of  appearance  and  request  for papers in these  chapter 11
cases, if any, by hand delivery,  overnight courier, or mail as evidenced by the
affidavit of service filed by counsel for the Debtors.
            E. At the  Interim  Hearing  held on July 30,  1999 the Court  heard
evidence  and  statements  of counsel and,  except as otherwise  provided in the
Interim  Order,  overruled or disposed of both the UST  Objection  and the Newco
Objection and entered the Interim Order on August 4, 1999 and therein  scheduled
the Final Hearing for August 11, 1999,  and no  objections  having been filed or
received as required  under the Interim  Order with  respect to the final relief
requested in the Motion or to the entry of this Order.
            F. [Sufficient and adequate notice of the Motion,  Final Hearing has
been given  pursuant  to  Bankruptcy  Rules  2002,  4001(c) and (d) and 9014 and
Section 102(1) as required by Sections 364(c) and (d) of the Bankruptcy Code and
in  accordance  with the Interim  Order,  as evidenced by  affidavits of service
filed by counsel to the Debtors.
            G.  Consideration of the Motion constitutes a  "core-proceeding"  as
defined in 28 U.S.C. ss.ss. 157(b)(2)(A), (D), (G), (K), (M) and (O). This Order
is subject to, and the Agent and the Lenders are each  entitled to the  benefits
of, the provisions of Sections  363(m) and 364(e) of the Bankruptcy  Code.  This
Court has  jurisdiction  over  this  proceeding  and the  parties  and  property
affected hereby pursuant to 28 U.S.C. ss.ss. 157 and 1334.
            H. The financing  arrangements  between  Forstmann and the Agent and
the Lenders,  pursuant to which post-petition  loans,  advances and other credit
accommodations  may be made or  provided  under  this final  financing  Order to
Forstmann  by the Agent and the  Lenders,  are  entered  into by the Agent,  the
Lenders  and the  Debtors in good  faith as  required  by Section  364(e) of the
Bankruptcy Code and are in the best interests of the Debtors.
            I. The relief  requested in the Motion is  necessary,  essential and
appropriate  for the continued  survival and operation of Forstmann's  business,
absent  which  Forstmann's  ability to maximize  the value of its estate for the
benefit of its creditors  will be  irreparably  jeopardized  to the detriment of
such creditors.  Forstmann is unable to obtain  unsecured credit allowable under
11 U.S.C. ss. 503(b)(1) as an administrative expense.
            J. The  Lenders  will not  provide  financing  absent  the terms and
conditions set forth herein and the financing  hereinafter  ordered is necessary
to avoid immediate and irreparable harm to Forstmann's estate.
            K. On July 29, 1999,  an Official  Committee of Unsecured  Creditors
(the  "Committee")  was appointed in these chapter 11 cases by the Office of the
United States Trustee pursuant to Section 1102 of the Bankruptcy Code.
            L. Good and  sufficient  cause has been  shown for the entry of this
Order.  Among other  things,  entry of this Order will  minimize  disruption  of
Forstmann's  business and  operations  and permit them to meet payroll and other
operating expenses,  and maximize value for the benefit of creditors.  The final
financing  arrangement  authorized  hereunder  is vital to avoid  immediate  and
irreparable harm to Forstmann's estate. Consummation of such financing therefore
is in the best interests of Forstmann's estate.
            M. The UST  Objection and the Newco  Objection  having been resolved
between the parties as reflected on the record of the Interim Hearing and/or the
Final  Hearing,  or  the  Court  having  denied  or  otherwise  determined  said
objections  in their  entirety,  or to the extent  applicable  to  Forstmann  or
necessary with respect to the relief granted by this Order.
            N. Good, adequate and sufficient cause has been shown to justify the
granting of the relief  requested  in the Motion,  with  respect to the proposed
financing as provided in this Order.
            NOW,  THEREFORE upon the record of the  proceedings  heretofore held
before  this  Court with  respect to the  Motion,  the  evidence  adduced at the
Interim and Final Hearings,  and the statements of counsel at such Hearings,  IT
IS HEREBY ORDERED THAT:
            1. Forstmann be, and it hereby is, authorized to borrow funds and to
obtain credit from the Lenders,  said borrowing and credit  accommodations to be
made in all  respects  in  accordance  with  and  subject  to the  terms  of the
Post-Petition  Loan Agreement.  All of such  post-petition  borrowing and credit
accommodations  will be  evidenced  by such  documents  as the Agent  and/or the
Lenders shall reasonably require to be signed by Forstmann, and shall be secured
and shall bear  interest at the rate or rates as set forth in the  Post-Petition
Loan Agreement.  The terms of the Post-Petition  Loan Agreement are incorporated
herein by  reference,  and  Forstmann's  entry  into and  performance  under the
Post-Petition  Loan Agreement is ratified,  authorized  and approved.  Forstmann
hereby assumes and agrees to be bound by and shall comply with the terms of, the
Post-Petition  Loan Agreement,  except to the extent such terms are inconsistent
with this Order, and as to any  inconsistencies  between the Post-Petition  Loan
Agreement and this Order, the terms of this Order shall govern.
            2. Unless terminated earlier according to the terms of this Order or
the Post-Petition Loan Agreement, Forstmann's authority to borrow money from the
Lenders pursuant to this Order shall expire on July 31, 2000. All  post-petition
loans from the Lenders to the Debtors pursuant to the terms of the Post-Petition
Loan Agreement as approved under the Emergency Order, the Interim Order and this
Order shall be due and payable in full on the earlier of the expiration  date of
this (i)  Financing  Order;  (ii) July 31,  2000;  (iii) such earlier time as is
provided for in the  Post-Petition  Loan Agreement;  or (iv)  immediately upon a
default under those documents.
            3. The loans and  advances  made,  and other  credit  accommodations
provided,  by the Agent or the  Lenders  to  Forstmann  shall be used  solely by
Forstmann for the purposes and in the amounts set forth in the Budget annexed as
Exhibit B hereto, and any subsequent Budget satisfactory to the Lenders, for the
payment of employee  salaries,  and other general  operating and working capital
purposes  in the  ordinary  course of  business,  including  any other  expenses
approved by the Court in accordance  with the terms and conditions of this Order
and the Post-Petition Loan Agreement.
            4. The Debtors have  acknowledged and agreed,  and this Court hereby
finds for all purposes in these chapter 11 cases  (subject only to the rights as
hereinafter  set forth in  paragraph 5 below of the  Committee),  that as of the
Petition Date: (a) the Pre-Petition  Indebtedness  constituted valid and binding
obligations of the Debtors, (b) the amount of the Pre-Petition  Indebtedness due
and  payable  to the Agent and the  Lenders  is the amount due the Agent and the
Lenders  according to their books and records as of the Petition  Date,  (c) the
Agent's  security  interests  in and  liens  upon  the  Pre-Petition  Collateral
securing the  Pre-Petition  Indebtedness are valid,  perfected,  enforceable and
non-voidable,  and each of the Lenders'  pre-petition claims against the Debtors
and the  estates of the  Debtors  are  allowed  and are valid,  enforceable  and
non-voidable  in the amount of the  Pre-Petition  Indebtedness  according to the
Agent's and the Lenders' books and records,  (d) the Debtors do not possess, may
not assert and hereby waive any claim,  counterclaim,  set-off or defense of any
kind or nature which would in any way affect the  validity,  enforceability  and
non-avoidability  of the Pre-Petition  Indebtedness or the security interests in
and liens upon the Pre-Petition Collateral or reduce or affect the obligation of
the Debtors to pay the  Pre-Petition  Indebtedness,  and (e) the Lenders and the
Agent,  and their  respective  agents and  employees,  are hereby  released  and
discharged  by the Debtors  from all claims and causes of action  arising out of
any loan agreement or other  relationship with the Debtors prior to the entry of
this Order.
            5. The  extent,  validity,  perfection,  and  enforceability  of the
Agent's and the Lenders' claims, security interests and liens, and the waiver of
any other  claims  whatsoever  against the Agent or the Lenders are approved and
authorized  for all purposes,  subject only to the rights of the  Committee,  no
later than sixty (60) days after the date of entry of the Interim  Order (August
4,  1999),  subject to  extension  by further  order of this  Court,  or written
consent of the Agent,  and without the need of obtaining  further  order of this
Court,  to (i) file a complaint  pursuant to Bankruptcy Rule 7001 to invalidate,
set aside or subordinate the  Pre-Petition  Indebtedness  (standing for which is
hereby  granted)  and/or (ii) file a complaint  pursuant to Bankruptcy Rule 7001
challenging, or otherwise file an objection to, the amount claimed to be owed to
the  Agent or the  Lenders  as the  Pre-Petition  Indebtedness,  or the  extent,
validity or  perfection  of the  Lenders'  liens and  security  interests on and
against the Pre-Petition Collateral.  If such complaint is not timely filed, (a)
the Pre-Petition  Indebtedness  shall be allowed,  validated,  and recognized in
full,  and (b) the  Agent's  security  interests  and liens on and  against  the
Pre-Petition  Collateral securing the Pre-Petition  Indebtedness shall be deemed
allowed,  duly perfected,  fully enforceable,  and in full force and effect, and
the same shall be  binding on all  parties  in this  proceeding,  including  any
successor trustee appointed hereafter.  In the event that the Committee contests
the  amount  owed  to the  Lenders  or the  Agent  or the  extent,  validity  or
perfection  of the Lenders' or the Agent's  liens and  security  interest on and
against the  Pre-Petition  Collateral,  the Agent and the Lenders shall,  absent
further  Order  of this  Court,  continue  to  receive  all  proceeds  from  the
liquidation,  sale  or  disposition  of  the  Pre-Petition  Collateral  and  the
Post-Petition  Collateral which shall be applied by the Agent and the Lenders in
accordance  with the terms of this Order  subject to the rights of the Committee
(i) set forth in this paragraph 5, (ii) to seek  disgorgement  of all or part of
the  proceeds  received  by the Agent and the  Lenders,  and (iii) as  otherwise
provided by law.
            6. In  accordance  with  Sections  364(c)(2)  and  364(d)(1)  of the
Bankruptcy Code, any and all of the Post-Petition  Indebtedness  incurred by the
Debtors to the Agent and the  Lenders  under the  Post-Petition  Loan  Agreement
shall be secured other than for Permitted  Liens as defined in the Existing Loan
Agreement,  by first and  senior  security  interests  and liens in favor of the
Agent for the benefit of the  Lenders,  in and on all  property of  Forstmann' s
estate,  including  but not limited to all now existing  and  hereafter-acquired
assets or  property of  Forstmann  of any kind and  nature,  including,  but not
limited to, the Pre-Petition Collateral, Forstmann's existing and after-acquired
Accounts,  Inventory,  Equipment,  vehicles, fixtures, General Intangibles, Real
Estate, licenses, permits, trademarks,  contract rights, insurance proceeds, tax
refunds, documents,  instruments,  investment property,  merchandise returns and
chattel paper, together with all monies, deposit accounts or other assets in its
possession or in the custody or control of the Lenders,  as well as the proceeds
and products thereof,  excluding,  however,  all rights and avoidance actions of
the Debtors (the "Avoidance  Actions") arising under Chapter 5 of the Bankruptcy
Code (the "Post-Petition  Collateral").  Provided, however, and not withstanding
any other  provision  of this Order,  that the liens and  security  interests in
favor of the Agent and Lenders on  pre-Petition  Date  assets as granted  hereby
shall only be to the extent of actual post-Petition Date advances, and shall not
extend to any assets  against  which the  pre-Petition  Date liens and  security
interests are avoided as contemplated in paragraph 5 hereof ("Excluded Assets").
            7. The  Debtors  shall  remit to the Agent,  for the  benefit of the
Lenders,  as provided in the Post-Petition  Loan Agreement,  all funds and other
property in its  possession  from and after the Petition Date  representing  the
proceeds  of any  and  all  of  the  Pre-Petition  Collateral  or  Post-Petition
Collateral.  During the term of this  Order,  any and all funds  received by the
Debtors  from  operations  or  lease,  use or  sale  of any of the  Pre-Petition
Collateral or the Post-Petition  Collateral shall be deposited in the manner and
in such amounts as provided for in the Post-Petition Loan Agreement,  subject to
the  provisions of this  paragraph.  The Agent is authorized to apply such funds
received  in such  order and  manner as the  Agent may deem  appropriate  in its
discretion,  including,  without  limitation,  to payment of its costs, fees and
expenses,  then to interest  and then to  principal  of all of the  Pre-Petition
Indebtedness,  including to accrued and accruing  interest on such  Pre-Petition
Indebtedness at the rates set forth in the  Post-Petition  Loan  Agreement,  and
after all of  Pre-Petition  Indebtedness  has been paid in full,  to  payment of
Post-Petition  Indebtedness,  subject,  however,  that proceeds of  Pre-Petition
Collateral  that are assets of FAI and  received on or after the  Petition  Date
shall not be  applied  to the  Post-Petition  Indebtedness,  and  shall  only be
applied to the Pre-Petition Indebtedness.  No funds generated from operations of
the Debtors or from the sale,  lease or use of any  Pre-Petition  Collateral  or
Post-Petition  Collateral  shall be deposited in any bank account  except in the
manner provided in the Post-Petition Loan Agreement.
            8. Forstmann  irrevocably waives any right to seek any modifications
or extensions  of this Order without the prior written  consent of the Agent and
the Lenders and no such consent shall be implied by any other  action,  inaction
or acquiescence by the Lenders.
            9. In the manner and as expressly  provided for in the Post-Petition
Loan  Agreement,  the  Debtors are  authorized  and  directed to continue  their
existing  Collection  Account  arrangements as provided for in the  Pre-Petition
Loan  Agreement  and,  upon the  Agent's  request  after an event of Default has
occurred and remains uncured, instruct all account debtors and other parties now
or hereafter  obligated to pay the Debtors for services  provided by the Debtors
to them or for inventory or other property of the estates of the Debtors sold by
Debtors to them to remit any such payments to the Collection Account established
or to be  established  by or for  the  benefit  of the  Agent  at  such  banking
institution  or  institutions  as may be  designated in the  Post-Petition  Loan
Agreement or designated by the Agent,  subject,  however,  that any Pre-Petition
Collateral that are accounts receivables or other rights to payment of FAI shall
only be applied to the Pre-Petition Indebtedness.
            10.  Any  equity in the  Pre-Petition  Collateral  that  constitutes
assets of  Forstmann,  after payment in full of the  Pre-Petition  Indebtedness,
shall  constitute  further  security for the  Post-Petition  Indebtedness to the
Agent and the Lenders under the  Post-Petition  Loan Agreement,  and for any and
all  post-petition  loans and advances  made by the Agent or the Lenders and all
letters of credit  issued or caused to be issued by the Agent or the  Lenders to
or for the account of Forstmann.


<PAGE>




            11. In addition to the above,  in accordance  with Section 364(b) of
the Bankruptcy Code, any and all Post-Petition  Indebtedness  incurred under the
Post-Petition  Loan  Agreement and pursuant to this Order,  shall  constitute an
administrative  expense in these  Chapter 11 cases and shall  have  priority  in
payment  over  any  and all  obligations  of the  Debtors  now in  existence  or
hereinafter incurred by Debtors and over all administrative expenses of the kind
specified in or authorized by Sections 326, 330, 331, 503(b), 506(c), and 507(b)
of the  Bankruptcy  Code,  whether  incurred in these Chapter 11 cases or in any
subsequent  liquidation  proceeding(s)  under Chapter 7 of the Bankruptcy  Code,
except as  provided  in  paragraph  17 of this  Order.  No costs or  expenses of
administration  which have been or may be incurred in these Chapter 11 cases are
or will be prior to or on a parity  with the claims of the Lenders and the Agent
against the  Debtors,  and no such cost or expenses of  administration  shall be
imposed against the Lenders or the Agent, or their claims or their Post-Petition
Collateral,  unless the Lenders and the Agent have given their  respective prior
written  consent to same.  The Agent and the Lenders shall not be deemed to have
consented  to payment  of any  administrative  expenses  from  Lenders'  and the
Agent's Pre-Petition or Post-Petition  Collateral,  or be deemed to have granted
any claimant  priority over the Lenders'  super-priority  administrative  claim,
unless the Lenders and the Agent shall have given their prior consent thereto in
writing.  Notwithstanding  the  foregoing,  in  the  event  that  no  equity  or
insufficient equity is realized from the sale,  liquidation or other disposition
of  the  Post-Petition   Collateral  in  excess  of  the  aggregate  outstanding
Pre-Petition  Indebtedness,  the outstanding Post-Petition  Indebtedness and all
other  amounts due and owing to the  Lenders and the Agent,  the Lenders and the
Agent each agree to  subordinate  their  super-priority  administrative  expense
claim,  and their  liens on the  Post-Petition  Collateral,  (i) up to a maximum
amount of $450,000,  (accruing at a rate not to exceed  $100,000 per month until
fully  funded,   whether  or  not  there  is  actual   availability   under  the
Post-Petition Loan Agreement,  or an Event of Default has occurred) exclusive of
all retainers paid pre-petition to any  professional,  for purposes of providing
funds to pay administrative  expense claims of the professionals retained by the
Debtors,  excluding,  however,  (A) those professionals which are engaged by the
Debtors in the  ordinary  course of business  pursuant to an order of this Court
approving such engagements  ("Ordinary Course  Professionals"),  and (B) Butler,
Chapman & Co., Inc. ("Butler") and the attorneys and accountants retained by the
Committee,  and Court  allowed  out of pocket  expenses  of the  members  of the
Committee (the  "Professional  Carve Out"), (ii) statutory fees of the Office of
the United  States  Trustee that are due or may become due ("U.S.  Trustee Carve
Out") and (iii) retention  bonuses for certain  employees of the Debtors up to a
maximum of $547,000  ("Retention  Carve Out"),  (collectively  the "Professional
Carve Out", "U.S.  Trustee Carve Out", and "Retention Carve Out" are referred to
as "Carve  Out").  The Carve Out shall be applied on the books of the Lenders to
reduce the Debtors'  Availability  under the Post-Petition  Loan Agreement.  The
Carve Out shall not be used to challenge  the amount or validity of the Agent or
Lender's  Claims or the extent,  validity or priority of the Agent's liens,  and
shall not be used to contest any plan  proposed or supported by the Agent or the
Lenders. This subordination provision shall not be effective with respect to any
claimant who makes a claim against the Agent or the Lenders or the Post-Petition
Collateral  for  payment of any  administrative  expenses in excess of the Carve
Out, and shall not apply to any compensation or reimbursable expense of Ordinary
Course Professionals and Butler. The super-priority administrative claim granted
hereby to the Agent and Lenders shall not, under any circumstances, be satisfied
from the proceeds of any Avoidance Actions or Excluded Assets.
            12.  Without the  necessity of the filing of  financing  statements,
mortgages or other  documents,  this Order shall be  sufficient  evidence of the
Agent's  perfected  liens and  security  interests  in and to the  Post-Petition
Collateral as described  herein to secure the Obligations.  Notwithstanding  the
foregoing,  Forstmann  is  authorized  and  directed to execute  such  documents
including,  without limitation,  mortgages,  pledges and Uniform Commercial Code
financing  statements  and to pay such costs and  expenses as may be  reasonably
required to provide further  evidence of the perfection of the Agent's  security
interests in the collateral as provided herein.
            13.  Forstmann is authorized and directed to perform all acts and to
make,  execute  and  deliver  any and all  instruments  as may be  necessary  to
implement the terms and conditions of this Order and the transactions  described
herein and in the  Motion.  The stay of Section  362 of the  Bankruptcy  Code is
hereby   modified  to  permit  the  parties  to  accomplish   the   transactions
contemplated  herein,  and for the Agent and the Lenders to apply  proceeds  and
funds  received  in  satisfaction   of  the   Pre-Petition   and   Post-Petition
Indebtedness.
            14. In the event of (i) a default hereunder by Forstmann or upon the
occurrence of Events of Default under the Post-Petition Loan Agreement, (ii) the
expiration of authority to borrow hereunder,  (iii) the appointment of a Chapter
11 Trustee or Examiner with expanded  powers,  (iv) the  conversion of either or
both of these Chapter 11 cases to cases under Chapter 7 of the Bankruptcy  Code,
(v) the  transfer of venue of either or both of these cases from this  district,
(vi) the dismissal of either or both of these Chapter 11 cases,  (vii) the entry
of an  order  granting,  in whole or in part,  an  application  of any  party in
interest  to incur  debt prior in right or on a parity  with the  Agent's or the
Lenders'  debt,  (ix)  Forstmann's  failure  to  comply  with the  Budget in any
material respect, or (x) the entry of any order modifying,  reversing, revoking,
staying,  rescinding,  vacating or amending this Order without the express prior
written consent of the Agent or the Lenders,  which shall not be implied,  then,
and upon the  occurrence of any of the foregoing,  and at all times  thereafter,
the Agent or the Lenders may, at their absolute and sole  discretion and option,
cease  lending or issuing or causing the  issuance of  post-petition  letters of
credit  and all  post-petition  loans  and  all  other  amounts  due  under  the
Post-Petition Loan Agreement shall become due and payable in full, and the Agent
and the Lenders,  after first  providing  five (5) business  days' prior written
notice by telecopier of the occurrence of a default  hereunder to counsel to the
Debtors,  counsel to the Committee and the Office of the United States  Trustee,
without further order of the Court, shall thereafter be entitled to take any and
all actions necessary or appropriate  under the Post-Petition  Loan Agreement or
applicable  law to collect  their claims  against the Debtors,  and to foreclose
upon and liquidate the Pre- and Post-Petition  Collateral and apply the proceeds
to  payment  first  of the  unpaid  Pre-Petition  Indebtedness,  and then to the
Post-Petition  Indebtedness  unencumbered by any stay otherwise applicable under
Sections  105  and  362 of the  Bankruptcy  Code.  For  purposes  of  evaluating
Forstmann's  compliance with the Budget,  the Agent and the Lenders agree that a
deviation of greater than five percent (5%) in each line item  measured  weekly,
or for the entire  Budget on a  cumulative  basis,  shall  constitute a material
deviation from the Budget and, at the option of the Majority  Lenders,  an event
of Default  under the  Post-Petition  Loan  Agreement.  From and after a default
hereunder  until  such  default is cured,  the  Lenders  may charge the  Debtors
interest at the Default Rate set forth in the  Post-Petition  Loan  Agreement on
the aggregate of all outstanding  Pre-Petition  Indebtedness  and  Post-Petition
Indebtedness.
            15.  Except  for sales of  inventory  or  services  rendered  in the
ordinary  course of its business  and as otherwise  provided in the various July
23, 1999,  and July 29, 1999,  orders of the Court,  the Debtors shall not sell,
transfer,  lease,  encumber or otherwise dispose of any of the property of their
estates  without the prior  written  consent of the Agent,  and no such  consent
shall ever be implied from any other  action,  inaction or  acquiescence  by the
Agent or the Lenders,  unless such sale, transfer,  lease,  encumbrance or other
disposition is approved by this Court.
            16. Forstmann shall provide the Agent with additional and/or updated
budgets  and  projections  in such  form and such  detail  as may be  reasonably
requested by the Agent.
            17. The  provisions  of this Order shall be binding upon any trustee
appointed  during these  Chapter 11 cases,  or upon a  conversion  to Chapter 7,
provided, however, that the super-priority  administrative expense claims status
provided  to the  Lenders  under  paragraph  11 of this Order shall not apply to
commissions,  fees, or costs of such a trustee,  and any such commissions,  fees
and costs shall have  priority in payment as is  provided  under the  Bankruptcy
Code.
            18. The Lenders and the Agent shall be entitled to  reimbursement by
the Debtors of all  reasonable  and  necessary  costs and  expenses  incurred in
connection  with  negotiating and drafting the  Pre-Petition  Loan Agreement and
Post-Petition  Loan  Agreement  and  documents  related  thereto  and actions to
preserve  and  protect   Agent's  and  Lenders'  claims  and  rights  under  the
Pre-Petition  Loan Agreement and the  Post-Petition  Loan  Agreement,  including
reasonable  counsel fees,  filing fees,  audit expenses,  and field  examination
expenses.  All of such costs and  expenses,  when  incurred  by the Agent or the
Lenders,  shall be treated as and  included as part of the  principal  amount of
Post-Petition Indebtedness outstanding, for purposes of calculating the Debtors'
Availability under the Post-Petition Loan Agreement.
            19. The Agent and  Lenders  shall have the  right,  upon  reasonable
prior notice to the Debtors,  at any time,  during  normal  business  hours,  to
inspect,  audit, examine, check and make copies of, and extract information from
their  records,  and to obtain  information  from  Debtors'  employees,  and the
Debtors  shall make its records  and  employees  available  to the Agent and the
Lenders for such purposes,  upon the premises of the Debtors.  The Debtors shall
timely file and serve upon the Agent all pleadings and other  documents filed in
these Chapter 11 cases or otherwise  disseminated to creditors or the Committee,
including  monthly financial reports required by the Office of the United States
Trustee,  and shall continue to supply to the Agent such reports as are required
under the  Post-Petition  Loan  Agreement  or as  requested  by the Agent or the
Lenders.
            20.  Nothing  contained  herein  shall be  construed to obligate the
Agent or any Lender to make any loans or  advances  not in  accordance  with the
terms of the Post-Petition Loan Agreement.
            21. Pursuant to Section 364(e) of the Bankruptcy Code, the Agent and
the Lenders are each hereby  found to be an entity that  extended or will extend
credit in good faith and are entitled to all of the  protections  provided to an
entity that extended credit in good faith as set forth in Section  364(e),  with
respect to all loans and  advances  made and  letters of credit  issued or to be
issued pursuant to this Order and the Post-Petition Loan Agreement.
            22. All of the conditions  precedent under Section 364(b) and (c) of
the Bankruptcy Code to the granting of all of the rights or interests  herein to
the Agent and the Lenders  will be deemed  satisfied  in the Agent's and Lenders
sole  discretion.  The  provisions of this Order and any actions taken  pursuant
hereto shall survive entry of any order which may be entered converting Debtors'
Chapter 11 cases to ones under  Chapter 7 of the  Bankruptcy  Code, or any order
which may be entered confirming or consummating any plan of reorganization,  and
the terms and  provisions of this Order,  as well as the  priorities in payment,
liens and security  interests  granted  pursuant to this Order shall continue in
this or any superseding  case under the Bankruptcy  Code, until the Pre-Petition
and Post-Petition Indebtedness are indefeasibly satisfied and discharged in full
in cash.
            23. Forstmann hereby  irrevocably  waives the right to seek entry in
these Chapter 11 cases or any subsequent  Chapter 7 proceeding any further order
which  authorizes (a) the use of cash collateral of Forstmann or the sale, lease
or other  disposition  of property of the estate of Forstmann in which Agent and
the Lenders have an interest,  or (b) under Section 364 of the Bankruptcy  Code,
the  obtaining of credit or the incurring of  indebtedness  secured by a lien or
security  interest which is equal or senior to a lien or security  interest held
by the Agent or the  Lenders or which is  entitled  to  priority  administrative
status  which is equal or superior to that granted to the Agent and the Lenders;
unless  (i) the Agent and the  Lenders  shall  have given  their  prior  written
consent  thereto,  or (ii)  such  other  order  requires  that the Agent and the
Lenders shall first be indefeasibly  paid in full all Obligations of the Debtors
to the Agent and the Lenders.
            24. In  making  the  decision  to  provide  loans  and  advances  to
Forstmann  pursuant to this Order, or to issue or cause to be issued any letters
of credit for Forstmann's account, the Agent and the Lenders shall not be deemed
to be in  "control"  of  the  operations  of  the  Debtors,  to be  acting  as a
"Responsible  Person" or "Owner" or "Operator"  with respect to the operation or
management of the Debtors (as such terms or similar terms are used in the United
States Comprehensive  Environmental Response,  Compensation and Liability Act of
1980 or any similar federal or state statute).
            25.  Nothing  contained in this Order shall be deemed to  terminate,
modify or release any  obligations of any  non-debtor  guarantor to the Agent or
the Lenders with respect to the Pre-Petition or Post-Petition Indebtedness.
            26.  Except as otherwise  provided in this  paragraph,  the terms of
this Order shall be valid and binding  upon the  Debtors,  all  creditors of the
Debtors and all other  parties in interest  from and after the execution of this
Order by this Court.  In the event this Court  modifies any of the provisions of
this Order following any further hearing,  such  modifications  shall not affect
the rights and priorities of the Agent or the Lenders  granted  pursuant to this
Order with  respect to the  Pre-Petition  Indebtedness  and that  portion of the
Post-Petition Indebtedness which is advanced prior to such modifications.
            27. If any or all of the  provisions of this final  financing  Order
are hereafter  modified,  vacated or stayed by subsequent order of this Court or
any other court,  without the Agent's and Lender's written  consent,  such stay,
modification  or vacation  shall not affect (a) the validity of any  obligation,
indebtedness or liability incurred by Forstmann to the Agent or the Lenders that
is or was incurred  pursuant to this final financing Order before the Agent's or
the Lenders' receipt of notice of the effective date of such stay,  modification
or  vacation,  (b) the  validity  and  enforceability  of the lien and  security
interest authorized and created by this final financing Order or (c) the Agent's
and each  Lender's  right and ability to collect all amounts due to it under the
Credit Facility as approved by this Order.
            28.  Notwithstanding  any such stay,  modification or vacation,  any
indebtedness,  obligation  or liability  incurred by Forstmann  pursuant to this
final  financing  Order  arising  prior to the Agent's  receipt of notice of the
effective date of such stay,  modification  or vacation shall be governed in all
respects by the original provisions of this Order, and the Agent and the Lenders
shall  continue to be entitled to all of the rights,  remedies,  privileges  and
benefits,  including any payments  authorized herein and the security  interests
and liens granted herein,  with respect to all such indebtedness,  obligation or
liability,  and the validity of any payments made or obligations  owed or credit
extended or lien or  security  interests  granted  pursuant to this Order is and
shall remain  subject to the  protection  afforded  under Section  364(e) of the
Bankruptcy Code.
            29. Notwithstanding anything herein to the contrary, commencing upon
the approval of this order and on a monthly basis  thereafter for so long as the
Agent and the Lenders seek payment of their  reasonable legal fees and expenses,
counsel to the Agent shall  submit an invoice to  Forstmann  with a statement of
individual time entries  requesting  compensation and  reimbursement of expenses
for the prior  month (the  "Monthly  Invoice"),  and shall  serve a copy of said
Monthly  Invoice via  telecopier  or overnight  delivery  for next  business day
receipt to counsel to the Debtors,  counsel to the  Committee  and the Office of
the United  States  Trustee.  Each  Monthly  Invoice  shall  indicate the amount
requested,  broken down as to fees and  disbursements,  and shall  indicate  the
total time expended,  the names of the professionals  performing the service and
the  hourly  rate for each  professional.  In the event  that the  Debtors,  the
Committee or the Office of the United  States  Trustee  desires to object to the
payment of fees and/or  reimbursement of expenses sought pursuant to the Monthly
Invoice, the same shall serve a written objection hereto on counsel to the Agent
by no later than five (5)  business  days after the date the Monthly  Invoice is
received. If no written objection is received within five (5) business days, the
Debtors are  authorized to pay and shall  promptly pay all of the fees requested
and expenses incurred, as set forth in the Monthly Invoice, from the proceeds of
the  Collateral.  If there is a  timely  objection  to  payment  of fees  and/or
reimbursement of expenses sought pursuant to the Monthly  Invoice,  that portion
of the Monthly  Invoice  objected to shall  nevertheless be paid by the Debtors,
unless counsel to the Debtors,  or counsel to the Committee or the Office of the
United States Trustee,  within ten (10) business days of such objection brings a
motion  before  the  Bankruptcy   Court  seeking  a  determination   as  to  the
reasonableness of such disputed fees. Notwithstanding the foregoing, the Debtors
shall promptly pay that portion of the Monthly Invoice which is not subject to a
timely objection.
            30. This Order constitutes a final order pursuant to Rule 4001(c) of
the Federal Rules of Bankruptcy Procedure. The Debtors shall effect service of a
copy of this Order upon the  following  parties on or before August 17, 1999, by
U.S.P.S.  first class mail: (a) the Office of the United States Trustee; (b) the
attorneys  for the  Agent;  (c) the  counsel  for the  Committee;  (d) all other
creditors  known to the Debtors who may have or who may assert liens against the
Debtors'  assets;  (d) The  Securities and Exchange  Commission;  (e) the United
States Internal Revenue Service;  (f) The Pension Benefit Guaranty  Corporation;
(g) the  United  States  Environmental  Protection  Agency;  (h) all  landlords,
operators  and/or  mortgagors  of the  premises  at  which  any of the  Debtors'
inventory or equipment is located, (i) all equipment lessors of Debtors; and (j)
counsel to Newco Holdings, LLC

Dated: New York, New York
       August 11, 1999




                                           s/ Prudence Carter Beatty
                                          ------------------------------
                                          United States Bankruptcy Judge




<PAGE>


EXHIBIT 1


                                   EXHIBIT "1"
                            To Final Financing Order

                          ACKNOWLEDGEMENT AND AMENDMENT


<PAGE>




                                   EXHIBIT "1"
                            To Final Financing Order

                               ACKNOWLEDGEMENT AND
                     AMENDMENT NO. 2 TO AMENDED AND RESTATED
                           LOAN AND SECURITY AGREEMENT
                            (DIP FINANCING AMENDMENT)

            ACKNOWLEDGEMENT AND AMENDMENT NO. 2 TO AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT (DIP FINANCING  AMENDMENT) (this "DIP Amendment") dated as of
July 23,  1999 among  Forstmann  & Company,  Inc.  ("Forstmann")  and  Forstmann
Apparel, Inc. ("FAI"), as Debtors and Debtors-in-Possession,  Bank of America NT
and SA  successor  to  BankAmerica  Business  Credit,  Inc.,  as agent  (in such
capacity,  the  "Agent"),  and the  lender  parties  to the  Loan  and  Security
Agreement referred to below (the "Lenders").

                             W I T N E S S E T H:

            WHEREAS,  Forstmann, FAI, the Lenders and the Agent are parties to a
certain  Amended and Restated Loan and Security  Agreement dated as of September
14, 1998, as amended by a Waiver and Amendment No. 1 to Loan Agreement  dated as
of February 8, 1999 (the "Existing Loan  Agreement",  and as amended by this DIP
Amendment and as further amended,  restated,  modified or supplemented from time
to time, the "Loan Agreement"); and

            WHEREAS, Forstmann filed in the United States Bankruptcy Court
for the Southern District of New York (the "Bankruptcy Court") a petition for
relief under Chapter 11 of the Bankruptcy Code, 11 U.S.C. ss. 101 et. seq. and
proposed a Plan of Reorganization; and

            WHEREAS, by Order dated July 9, 1997, the Bankruptcy Court confirmed
Forstmann's Plan of Reorganization; and

            WHEREAS, on July 23, 1999 (the "Petition Date"), the Borrowers filed
voluntary  petitions for relief under Chapter 11 of the  Bankruptcy  Code in the
Bankruptcy Court, thereby commencing the Second Chapter 11 Cases; and

            WHEREAS,  the  Borrowers  have  requested  that (a) the Lenders make
available  to the  Borrowers an  additional  loan  commitment  pursuant to which
Additional  Loans will be made by the Lenders to the Borrowers from time to time
after the Additional Loan Closing Date and prior to the Stated  Termination Date
to be used by the  Borrowers  for the  purposes  and  pursuant  to the terms and
conditions  set  forth  herein;  and (b) the  Agent  issue or cause to be issued
Additional  Letters  of  Credit  to or for  Forstmann's  account,  to be used in
connection  with the operation of  Forstmann's  business in accordance  with the
terms herein stated; and

            WHEREAS,  the  Lenders and the Agent are  willing,  on the terms and
conditions  hereinafter  set forth,  to extend  such  commitments,  to make such
additional loans and to issue additional letters of credit; and

            WHEREAS,  in  connection  with the  Second  Chapter  11  Cases,  the
Borrowers have requested that the Lenders and the Agent amend the Loan Agreement
in certain  respects,  and the Lenders and the Agent are willing to so amend the
Loan Agreement on the terms and conditions set forth herein;

            NOW,  THEREFORE,  in consideration of the mutual covenants contained
herein and for other good and valuable  consideration,  the receipt and adequacy
of which are hereby acknowledged, the parties hereto hereby agree as follows:

      A.    DEFINED TERMS.

            1. Definitions.  Unless otherwise defined herein,  capitalized terms
used herein have the  respective  meaning  ascribed to them in the Existing Loan
Agreement.

      B.    ACKNOWLEDGEMENTS.  The Borrowers acknowledge and agree as follows:

            1.  The  Agent  and the  Lenders  have  and  shall  have no  further
obligation  under  the Loan  Agreement  (a) to make  any  Loans  under  the Loan
Agreement  other than  Additional  Loans  according to the terms and  conditions
herein stated, or (b) to issue or cause to be issued any Letters of Credit other
than Additional  Letters of Credit according to the terms and conditions  herein
stated.

            2. Prior to the  Petition  Date and  continuing  as of the  Petition
Date, Events of Default (as defined in the Existing Loan Agreement) had occurred
and were continuing.

            3. As of the close of  business  on July 22,  1999,  the  Borrowers,
jointly and severally,  owed  Pre-Petition  Indebtedness  to the Lenders and the
Agent in an  aggregate  amount of not less  than  $44,260,198.79  including  all
accrued but unpaid  interest,  Letter of Credit  Fees and Unused Line Fees,  but
excluding  certain  additional  costs,  fees and  expenses  which the  Borrowers
acknowledge  and agree the  Lenders and the Agent are  entitled to recover.  The
Pre-Petition  Indebtedness is due and payable in full without any further demand
or  notice  from the  Agent or the  Lenders,  constitutes  a valid  and  binding
obligation of the Borrowers without offset,  setoff,  recoupment,  counterclaim,
deduction, defense of any kind, and is secured by Liens granted by the Borrowers
in and to the Pre-Petition Collateral.

            4. The  Agent's  Liens  in and to the  Pre-Petition  Collateral  are
valid,  properly  perfected and recorded and are unavoidable and indefeasible in
the Second Chapter 11 Cases or otherwise.

            5. The  Borrowers  must  promptly  borrow  money  and  otherwise  be
extended  credit  in the form of  Additional  Loans to meet  their  payroll  and
otherwise to pay their continuing obligations incurred in the operation of their
business in order to maximize recoveries to their creditors.

      C.    AMENDMENTS.

            1. Section 1.1 of the Existing Loan  Agreement is hereby  amended by
adding the following new definitions thereto, in appropriate alphabetical order:

            "Additional Letter of Credit" means any additional standby letter of
credit issued or caused to be issued for the account of the  Borrowers  pursuant
to Section 2.4 and shall include any Credit Support provided by Agent in respect
thereto.  All Additional  Letters of Credit shall  constitute  Letters of Credit
hereunder and shall be subject to all  conditions,  fees,  procedures  and other
terms to which all other Letters of Credit are subject.

            "Additional  Loan Closing Date" means the date upon which all of the
conditions  precedent  to the  effectiveness  of the  DIP  Amendment  have  been
satisfied  or  waived  in the  Agent's  and  each  Lender's  sole  and  absolute
discretion.

            "Additional Loans" means all Additional Revolving Loans and Over
Advances made after the Petition Date.

            "Additional Revolving Loans" has the meaning specified in Article 4.
All Additional Revolving Loans shall constitute Revolving Loans hereunder, shall
constitute  Base Rate  Revolving  Loans and shall be subject to all  conditions,
fees, procedures and other terms to which all other Revolving Loans are subject.

            "Budgets" has the meaning specified in Section 9.31.

            "Carve Out Reserve"  means any and all reserves which the Agent from
time to time establishes,  in its sole discretion, with respect to the Carve Out
(as that term is defined in the Financing Orders).

            "Collateral  Management  Fee" has the meaning  specified  in Section
3.7.

            "DIP Amendment" has the meaning specified in the preamble.

            "Existing Loan Agreement" has the meaning specified in the preamble.

            "Final  Financing  Order" means an order  entered in the  Bankruptcy
Court in the Second Chapter 11 Cases, in form and substance  satisfactory to the
Agent and Majority Lenders in their sole discretion  approving the making of the
Additional  Loans and the  issuing  of the  Additional  Letters of Credit on the
terms herein contained.

               "Financing  Orders" means the Interim  Financing  Order and Final
Financing Order, collectively.

            "Interim  Financing  Order"  means an interim  order  entered in the
Bankruptcy  Court in the Second Chapter 11 Cases,  substantially  in the form of
Exhibit 1.1-A,  approving the making of the Additional  Loans and the issuing of
the Additional Letters of Credit on the terms herein contained.

            "Interim Order Date" means the date upon which the Bankruptcy  Court
enters the Interim Financing Order,  which date shall not be later than July 27,
1999.

            "Petition Date" means July 23, 1999.

            "Post-Petition  Indebtedness"  means all present  and future  loans,
advances, liabilities,  obligations,  covenants, duties, and debts owing by each
of the Borrowers to the Agent and/or any Lender, arising after the Interim Order
Date,  whether arising on or after conversion or dismissal of the Second Chapter
11 Case, or before or after any Second Chapter 11 Plan and whether arising under
or related to this  Agreement,  any other Loan Document or any Financing  Order,
whether or not evidenced by any note, or other  instrument or document,  whether
arising from an extension of credit, opening of a letter of credit,  acceptance,
loan,  guaranty,  indemnification  or  otherwise,  whether  direct  or  indirect
(including,  without  limitation,  those acquired by assignment from others, and
any  participation  by the Agent and/or any Lender in any Borrower's debts owing
to others), absolute or contingent,  due or to become due, primary or secondary,
as principal or guarantor,  and including,  without  limitation,  all principal,
interest,  charges,  expenses, fees, reasonable attorneys' fees, filing fees and
any other sums  chargeable to any Borrower  under this Agreement or under any of
the  other  Loan  Documents  including,   without  limitation,  (a)  all  debts,
liabilities,  and  obligations  now or hereafter  owing from any Borrower to the
Agent  and/or any Lender  under or in  connection  with the Letters of Credit or
Credit Support, and (b) all debts,  liabilities and obligations now or hereafter
owing from any Borrower to the Agent and Lenders  arising from or related to ACH
Transactions.  "Pre-Petition Collateral" means all of the Collateral (as defined
in the Existing Loan Agreement) as of the Petition Date.

            "Pre-Petition  Indebtedness"  means all  present  and future  loans,
advances, liabilities,  obligations, covenants, duties, and debts, owing by each
of the  Borrowers to the Agent and/or any Lender,  arising  under or pursuant to
the Existing Loan Agreement or any of the other Loan  Documents,  whether or not
evidenced by any note, or other instrument or document,  whether arising from an
extension of credit, opening of a letter of credit, acceptance,  loan, guaranty,
indemnification  or otherwise,  whether direct or indirect  (including,  without
limitation,  those acquired by assignment from others,  and any participation by
the Agent and/or any Lender in any Borrower's  debts owing to others),  absolute
or  contingent,  due or to become due,  primary or  secondary,  as  principal or
guarantor, and including, without limitation, all principal,  interest, charges,
expenses,  fees,  reasonable  attorneys'  fees,  filing  fees and any other sums
chargeable  to any Borrower  hereunder or under any of the other Loan  Documents
including,  without limitation, (a) all debts, liabilities,  and obligations now
or hereafter  owing from any Borrower to the Agent and/or any Lender under or in
connection  with the  Letters  of  Credit  or  Credit  Support,  (b) all  debts,
liabilities  and  obligations  now or  hereafter  owing from any Borrower to the
Agent and  Lenders  arising  from or  related  to ACH  Transactions  and (c) all
interest  and all  other  amounts  referred  to above,  on the  terms  provided,
accruing after the filing of any proceeding  under any  bankruptcy,  insolvency,
reorganization or similar law.

            "Second  Chapter  11  Cases"  means  the  Chapter  11  cases  of the
Borrowers  under  Case  Nos.  99 B  10432  (PBC)  and 99 B  10433  (PCB)  in the
Bankruptcy Court.

            2. The  definitions of  "Applicable  Margin",  "Availability",  "L/C
Subfacility",  "Maximum Revolver Amount",  "Stated Termination Date" and "Unused
Letter of Credit  Subfacility"  contained  in Section 1.1 of the  Existing  Loan
Agreement are hereby amended in its entirety to read as follows:

            "Applicable  Margin" is amended as follows:  (i) "one quarter of one
percent (.25%)" is amended to "one and one quarter percent  (1.25%)" (ii) "three
quarters of one percent  (.75%)" is amended to "one and three  quarters  percent
(1.75%)";  (iii) "two and one half percent (2.50%)" is amended to "three and one
half  percent  (3.50%)";  and (iv) "three  percent  (3.00%)" is amended to "four
percent (4.00%)".

            "Availability" means, at any time of determination, for any
Borrower,

            (a)   the lesser of:

                  (i)   the Maximum Revolver Amount; or

                  (ii)  the sum of:

                                          (A)    eighty-five    percent    (85%)
                        (reducing to eighty  percent  (80%) on December 1, 1999)
                        of the Net  Amount  of  Eligible  Accounts  (other  than
                        Eligible Bill and Hold Accounts) owed to the Borrowers,

                                          (B)  the  lesser  of  (1)  eighty-five
                        percent  (85%)  (reducing  to  eighty  percent  (80%) on
                        December  31,  1999) of the Net Amount of Eligible  Bill
                        and Hold  Accounts owed to the Borrowers or (2)(X) prior
                        to September 30, 1999,  $15 million and (Y)on  September
                        30, 1999 to December 1, 1999,  $5 million,  and (2) from
                        January 1, 2000 until Termination $15 million.

                                          (C) in the case of Eligible  Inventory
                        of the Borrowers  consisting of work-in-process or yarn,
                        the  lesser  of (1) fifty  percent  (50%)  (reducing  to
                        forty-five  percent  (45%) on December 1, 1999 and forty
                        percent  (40%) on January 1, 2000) of the lower of cost,
                        determined on a  first-in-first-out  ("FIFO")  basis, or
                        market  value  of  such  Eligible  Inventory  (the  "WIP
                        Borrowing  Base")  or  (2)  (during  each  fiscal  month
                        indicated below) up to 107% of the lesser of (i) the WIP
                        Borrowing  Base as of the close of  business on the last
                        business  day of the  prior  fiscal  month  or (ii)  the
                        amount  set  forth  below  for the  indicated  preceding
                        fiscal month:

                        Fiscal Month                          Amount
                        July 1999                           $3,100,000
                        August 1999                         $3,150,000
                        September 1999                      $3,050,000
                        October 1999                        $3,100,000
                        November 1999 and each
                            fiscal month thereafter         $3,000,000;

                                          (D) in the case of Eligible  Inventory
                        of the Borrowers consisting of raw materials, the lesser
                        of (1)  sixty-five  percent  (65%)  (reducing  to  sixty
                        percent  (60%) on January 1, 2000) of the lower of cost,
                        determined on a  first-in-first-out  ("FIFO")  basis, or
                        market  value  of  such  Eligible   Inventory  (the  "RM
                        Borrowing  Base")  or  (2)  (during  each  fiscal  month
                        indicated  below) up to 107% of the lesser of (i) the RM
                        Borrowing  Base as of the close of  business on the last
                        business  day of the  prior  fiscal  month  or (ii)  the
                        amount  set  forth  below  for the  indicated  preceding
                        fiscal month:

                        Fiscal Month                          Amount
                        July 1999                           $2,350,000
                        August 1999                         $2,325,000
                        September 1999                      $2,310,000
                        October 1999                        $2,310,000
                        November 1999 and
                           each fiscal month thereafter     $2,300,000;

                                          (E) in the case of Eligible  Inventory
                        of the Borrowers  consisting of greige cloth, the lesser
                        of (1)  sixty-five  percent  (65% )  (reducing  to sixty
                        percent (60%) on December 1, 1999 and fifty five percent
                        (55%)  on  January  1,  2000)  of  the  lower  of  cost,
                        determined on a  first-in-first-out  ("FIFO")  basis, or
                        market  value of such  Eligible  Inventory  (the  "Cloth
                        Borrowing  Base")  or  (2)  (during  each  fiscal  month
                        indicated  below)  up to 107% of the  lesser  of (i) the
                        Cloth  Borrowing Base as of the close of business on the
                        last  business day of the prior fiscal month or (ii) the
                        amount  set  forth  below  for the  indicated  preceding
                        fiscal month:

                        Fiscal Month                          Amount
                        July 1999                           $3,950,000
                        August 1999                         $3,850,000
                        September 1999                      $3,525,000
                        October 1999                        $3,500,000
                        November 1999 and each
                           fiscal month thereafter          $3,250,000;

                                          (F) in the case of Eligible  Inventory
                        of the  Borrowers  consisting  of  finished  goods,  the
                        lesser of (1)  sixty-five  percent  (65% ) (reducing  to
                        sixty  percent (60%) on January 1, 2000) of the lower of
                        cost, determined on a first-in-first-out ("FIFO") basis,
                        or  market  value of such  Eligible  Inventory  (the "FG
                        Borrowing  Base")  or  (2)  (during  each  fiscal  month
                        indicated  below) up to 107% of the lesser of (i) the FG
                        Borrowing  Base as of the close of  business on the last
                        business  day of the  prior  fiscal  month  or (ii)  the
                        amount  set  forth  below  for the  indicated  preceding
                        fiscal month:

                        Period                               Amount
                        July 1999                          $3,190,000
                        August 1999                        $2,625,000
                        September 1999                     $2,400,000
                        October 1999                       $2,200,000
                        November 1999 and each fiscal
                           month thereafter                $2,100,000; plus

                                          (G) until and including  September 30,
                        1999, $1,750,000, and after September 30, 1999, $0;

                                          provided  however that the sum of (C),
                        (D), (E), and (F) (such sum  hereinafter  referred to as
                        the "Inventory  Borrowing Base") shall not exceed (1) At
                        any fiscal month end, the amount set forth below for the
                        subsequent fiscal month or (2) (by more than $300,00) at
                        any time in any  fiscal  month,  the  lesser  of (i) the
                        Inventory  Borrowing Base as of the close of business on
                        the last business day of the prior fiscal month; or (ii)
                        the amount set forth below for the  indicated  preceding
                        fiscal month:

                        Fiscal Month                         Amount
                        August 1999                       $12,590,000
                        September 1999                    $11,950,000
                        October 1999                      $11,285,000
                        November 1999                     $11,110,000
                        December 1999 and each fiscal
                           month thereafter               $10,650,000

minus

            (b)   the sum of:

                  (i)   the Revolver Outstandings for the Borrowers,

                  (ii)  reserves for accrued interest on the Obligations,

                              (iii) the Environmental Compliance Reserves,

                              (iv)  the ACH Settlement Risk Reserves,

                              (v) the  cumulative  aggregate  amount  of the net
                  proceeds of sale or other disposition of Inventory on or after
                  the Interim Order Date not in the ordinary  course of business
                  in excess of the aggregate  applicable  advance rate set forth
                  above in clause (a)(ii) above for such Inventory,

                              (vi) after  repayment  in full in cash of the Term
                  Loan, the  cumulative  aggregate net proceeds of sale or other
                  disposition of Equipment or Real Estate,

                              (vii) the cumulative aggregate amount of other net
                  proceeds  or  cash  received  by  the  Borrowers  (other  than
                  collections of Accounts) after the Interim Order Date,

                  (viii)      the Carve Out Reserve, and

                              (ix)  all  other  reserves   (including,   without
                  limitation,  any and all reserves  established by the Agent in
                  respect of waivers  referenced  in  Section  6.2(b)  which any
                  Borrower  has failed to obtain,  Liens  referenced  in Section
                  9.1,  judgments   referenced  in  Section  11.1(m)  or  taxes,
                  assessments  or other  similar  charges of any Borrower  under
                  Section 9.1) which the Agent deems necessary in the reasonable
                  exercise of its credit  judgment to maintain  with  respect to
                  the  Borrowers'  accounts,   including,   without  limitation,
                  reserves for any amounts  which the Agent or any Lender may be
                  obligated  to  pay  in  the  future  for  the  account  of any
                  Borrower.

             "L/C Subfacility" means that portion of the Maximum Revolver Amount
available  for the  issuance  of  Additional  Letters of Credit in an  aggregate
amount  outstanding  at any time not to exceed the sum of (i)  $3,000,000  minus
(ii) the sum of (a) the aggregate  undrawn amount of all outstanding  Letters of
Credit  issued  prior  to the  Petition  Date  plus  (b)  the  aggregate  unpaid
reimbursement  obligations with respect to all Letters of Credit issued prior to
the Petition Date.  "Maximum  Revolver  Amount" means to and before  November 1,
1999,  $40,000,000,  and from and after  November  1, 1999 to  January  1, 2000,
$19,000,000  and from  January  1,  2000  until  the  Stated  Termination  Date,
$40,000,000.

            "Stated  Termination  Date" means the  earliest to occur of (i) July
28, 1999, if the Interim Financing Order has not been entered by such date, (ii)
August  31,1999,  if the Final  Financing Order has not been entered before such
date,  (iii) July 31, 2000, or (iv) the date of termination  of the  Commitments
pursuant to Section 12.1 upon the occurrence of an Event of Default.

            "Unused Letter of Credit  Subfacility"  means an amount equal to the
Letter of Credit  Subfacility  minus the sum of (a) the aggregate undrawn amount
of all outstanding  Additional  Letters of Credit plus (b) the aggregate  unpaid
reimbursement obligations with respect to all Additional Letters of Credit.

            3. The  definitions  of  "Borrower"  and  "Borrowers"  contained  in
Section 1.1 of the Existing Loan  Agreement are hereby amended in their entirety
to read as follows:

            "Borrower"  and  "Borrowers"  means (a) prior to the Petition  Date,
      Forstmann & Company,  Inc.,  and Forstmann  Apparel,  Inc., and (b) on and
      after the Petition Date, Forstmann & Company, Inc., and Forstmann Apparel,
      Inc., as debtors and debtors-in-possession under the Bankruptcy Code.

            4. The  definition of "Eligible  Accounts" as defined in Section 1.1
of the  Existing  Loan  Agreement is modified by adding to the end of clause (i)
(A) thereof the following  sentence  "(c) Borrower  agrees that there will be no
"dated"  Accounts  from  October  1, 1999 to  January 1 of any year and all such
"dated"  Accounts  created in any year shall be ineligible after September 30 of
such year."

            5. The definition of "Letter of Credit"  contained in Section 1.1 of
the Existing Loan Agreement is hereby amended to include the following  sentence
at the end thereof:

            The term "Letter of Credit" shall also include any Additional Letter
of Credit.

            6. The  definition of "Loan  Documents"  contained in Section 1.1 of
the Existing Loan Agreement is hereby amended to include the following  sentence
at the end thereof:

            The term "Loan Documents" shall also include the DIP Amendment,  the
      Financing Orders and all amendments,  modifications  and revisions thereto
      and documents executed or delivered in connection herewith.

            7. The  definition  of "Loans"  contained in Section 1.1 of the Loan
Agreement  is hereby  amended  to  include  the  following  sentence  at the end
thereof:

            The term "Loans" shall also include the Additional Loans.

            8. The definition of  "Obligations"  contained in Section 1.1 of the
Existing Loan Agreement is hereby amended in its entirety to read as follows:

          Obligations" means the Pre-Petition Indebtedness and the Post-Petition
     Indebtedness, collectively.


            9. The definition of "Revolver  Outstandings" is amended by removing
the  period  at the end of the  definition  and  adding  an "and (f)  Additional
Revolving Loans and Additional L/C's".

            10. The definition of "Revolving  Loans" contained in Section 1.1 of
the Existing Loan Agreement is hereby amended to include the following  sentence
at the end thereof:

            The  term  "Revolving  Loans"  shall  also  include  any  Additional
      Revolving Loans.

            11.  Section 2.1 of the Existing Loan Agreement is hereby amended by
deleting  such  Section  in its  entirety  and  substituting  in its  place  the
following:

            2.1 Total  Facility.  Subject to all of the terms and  conditions of
      this  Agreement,  the Lenders  severally  agree to make  available a total
      credit  facility of up to  $49,500,000  until  October 31, 1999,  and from
      November 1, 1999 until  January 1, 2000  $28,500,000  and after January 1,
      2000 until the Stated  Termination Date $49,500,000 (the "Total Facility")
      for  the  Borrowers'  use  from  time  to  time  during  the  term of this
      Agreement.   The  Total   Facility   shall  consist  of  (a)  a  revolving
      post-petition line of credit consisting of Additional Loans and Additional
      Letters of Credit, and (b) the Pre-Petition Indebtedness.

            12.  Section 2.2(a) of the Existing Loan Agreement is hereby amended
by deleting  such  Section in its  entirety  and  substituting  in its place the
following:

            (a) Amounts. Subject to the satisfaction of the conditions precedent
      set forth in Article 10, each Lender  severally  agrees,  upon Forstmann's
      request  from time to time on any  Business Day during the period from the
      Interim Order Date to the Stated Termination Date, to make revolving loans
      (the  "Additional  Revolving  Loans") to the Borrowers and participate (as
      provided for in Section 2.4(f)) in the reimbursement obligations under the
      Credit Support and Additional  Letters of Credit, in amounts not to exceed
      at any time  outstanding  (except for BABC with  respect to BABC Loans and
      the Agent with respect to Agent  Advances) such Lender's Pro Rata Share of
      the  Availability  minus such Lender's Pro Rata Share of the  Pre-Petition
      Indebtedness   outstanding  at  such  time.  If  the  Aggregate   Revolver
      Outstandings  exceed  the  Availability  (with the  Availability  for this
      purpose calculated as if the Aggregate  Revolver  Outstandings were zero),
      the  Lenders  may  refuse  to make or  otherwise  restrict  the  making of
      Additional  Revolving Loans as the Lenders determine until such excess has
      been eliminated; and further provided,  however, that at no time shall the
      sum  of  the  aggregate   outstanding  principal  amount  of  Pre-Petition
      Indebtedness  in respect of  pre-petition  Revolving  Loans to FAI and the
      aggregate principal amount of Additional Loans made to FAI exceed $58,000.

            13.  Section  2.2(i)(i)  of the  Existing  Loan  Agreement is hereby
amended by deleting such Section in its entirety and  substituting  in its place
the following:

            (i) Subject to the limitations  set forth in the provisos  contained
      in this Section 2.2(i) and  notwithstanding the provisions of Section 10.2
      to the  contrary,  the Agent is hereby  authorized  by  Borrowers  and the
      Lenders,  from time to time in the Agent's sole discretion,  (1) after the
      occurrence  of a Default or an Event of  Default,  or (2) at any time that
      any of the other applicable  conditions  precedent set forth in Article 10
      have  not  been  satisfied,  to make  Additional  Revolving  Loans  to the
      Borrowers  on behalf of the  Lenders  which the Agent,  in its  reasonable
      business judgment, deems necessary or desirable (A) to preserve or protect
      the Collateral,  or any portion thereof, (B) to enhance the likelihood of,
      or maximize the amount of,  repayment of the Loans and other  Obligations,
      or (C) to pay any other amount chargeable to the Borrowers pursuant to the
      terms of this Agreement,  including,  without limitation,  costs, fees and
      expenses as described  in Section  15.7 (any of the advances  described in
      this Section 2.2(i) being  hereinafter  referred to as "Agent  Advances");
      provided,  that the Agent shall not make any  Additional  Agent Advance if
      the amount thereof would exceed the amount of  Availability on the Funding
      Date applicable thereto; and provided,  further, that the Majority Lenders
      may at any time revoke the Agent's authorization contained in this Section
      2.6(i) to make Agent Advances, any such revocation to be in writing and to
      become effective upon the Agent's receipt thereof.

            14. The  references to "Letters of Credit" set forth in  subsections
(a),  (c) and (d) of  Section  2.4 of the  Existing  Loan  Agreement  are hereby
deleted, and references to "Additional Letters of Credit" are hereby substituted
therefor in each instance. In addition,  subsection (b) of section 2.4 is hereby
amended by deleting such Section in its entirety and  substituting  in its place
the following:

            (b) Amounts;  Outside  Expiration Date. The Agent shall not have any
      obligation  to take steps to cause to be issued any  Additional  Letter of
      Credit or to provide Credit Support for any Additional Letter of Credit at
      any time if: (1) the maximum  undrawn  amount of the requested  Additional
      Letter of Credit is greater than the Unused  Letter of Credit  Subfacility
      at such time; (2) the maximum  undrawn amount of the requested  Additional
      Letter of Credit  and all  commissions,  fees,  and  charges  due from any
      Borrower in connection with the opening thereof exceed the Availability at
      such time; or (3) such Additional  Letter of Credit has an expiration date
      later than the  earlier to occur of (i) the  Stated  Termination  Date and
      (ii) (x) the date which is 365 days from the date of issuance thereof,  in
      the case of  Standby  Letters  of Credit and (y) the date which is 90 days
      from the date of issuance thereof,  in the case of Documentary  Letters of
      Credit.

            15.  Notwithstanding  anything  to the  contrary  set  forth  in the
Existing  Agreement,  from and after the Interim Order Date, the Borrowers shall
not have the  right,  and  agree  not to seek,  to elect to have any  Additional
Revolving Loans be made as LIBOR Revolving Loans, or to convert any pre-petition
Base  Rate  Loan  (or any  part  thereof)  into a LIBOR  Rate  Loan (or any part
thereof)  as a LIBOR  Rate Loan on or after the  expirations  of the  applicable
Interest Period.  Upon the expiration of the Interest Period  applicable to each
pre-petition LIBOR Rate Loan, such LIBOR Rate Loan shall  automatically  convert
into a Base Rate Loan.  Article 3 of the  Existing  Credit  Agreement  is hereby
deemed amended accordingly.

            16.  Section 3.4 of the Existing Loan Agreement is hereby amended by
deleting  such  Section  in its  entirety  and  substituting  in its  place  the
following:

            3.4 DIP Amendment  Closing Fee. The Borrowers  jointly and severally
      agree to pay to the Agent,  for the ratable account of each Lender,  a fee
      (the "DIP Amendment Closing Fee") in the aggregate amount of $650,000. The
      DIP  Amendment  Closing  Fee shall be fully  earned  upon the entry of the
      Interim  Financing  Order on the  Interim  Order Date and shall be due and
      payable on the earlier of October 31, 1999 or the Stated Termination Date.

            17. A new Section 3.7 shall be added to the Existing Loan  Agreement
and shall read as follows:

            3.7. Collateral  Management Fee. The Borrowers jointly and severally
      agree to pay the Agent,  for its own  account,  non-refundable  collateral
      management fees (the  "Collateral  Management  Fee") equal to $150,000 per
      annum,  payable  to the Agent in  monthly  installments  of $12,500 on the
      first Business Day of each month, commencing August 1, 1999.

            18.  From and after the  Additional  Loan  Closing  Date,  the Early
Termination Fee provided for in Section 4.2 of the Existing Loan Agreement shall
no longer be chargeable.

            19.  Section 4.3 of the Existing Loan Agreement is hereby amended by
deleting  such  Section  in its  entirety  and  substituting  in its  place  the
following:

            4.3  Repayment of the Term Loan.  The  Borrowers  agree to repay the
      principal  amount of the Term Loan to the  Agent,  for the  account of the
      Lenders,  in accordance  with the terms of this Agreement and, as modified
      by the next  sentence,  the Term  Loan  Notes.  Notwithstanding  any other
      provision in this  Agreement or the Term Loan Notes to the  contrary,  the
      principal  amount of the Term Loan  outstanding on the Petition Date shall
      be  paid  in  ten  consecutive  installments,  the  first  nine  of  which
      installments  shall  each be in the  amount  of  $500,000  and be  payable
      monthly on the first day of each month,  commencing  November 1, 1999, and
      the last of which  installments  shall be in the entire  then  outstanding
      principal amount of the Term Loan and shall be payable on July 31, 2000 or
      the Stated Termination Date.

The Term Loan Notes are hereby deemed amended to the extent necessary to reflect
the forgoing amendment.

            20. The references to "Revolving  Loans" set forth in Section 4.7 of
the Existing Loan  Agreement are hereby  deleted,  and references to "Additional
Revolving Loans" are hereby substituted therefor in each instance.

            21.  Section 4.8 of the Existing Loan Agreement is hereby amended by
inserting the following two sentences at the end thereof:

      Without  limiting  the  foregoing,  all  payments  received  by the Agent,
      including   proceeds  from  the  sale,   disposition   or  liquidation  of
      Post-Petition  Collateral,  may be  applied  to  either  the  Pre-Petition
      Indebtedness  or the  Post-Petition  Indebtedness  in the  Agent's and the
      Lenders' sole discretion. The Borrowers hereby irrevocably waive any right
      to direct or challenge  the manner of  application  of any payments to the
      Agent or the Lenders or any other  receipts by the Agent or the Lenders or
      proceeds of any of the Collateral.

            22. The first  paragraph of  subsection  6.1(a) of the Existing Loan
Agreement  is hereby  amended by deleting  such  paragraph  in its  entirety and
substituting in its place the following:

      As security for all Pre-Petition Indebtedness,  Post-Petition Indebtedness
      and all other present and future Obligations, each of the Borrowers hereby
      grants to the Agent, for the ratable benefit of the Agent and the Lenders,
      a continuing  security  interest in, and a perfected and enforceable first
      priority  lien on,  assignment  of,  and  right of  set-off  against,  all
      Pre-Petition  Collateral  and  all  of  the  following  property  of  such
      Borrower,  whether now owned or existing or hereafter acquired or arising,
      regardless of where located, including, without limitation:

            23. New  subsections  (d) and (e) are hereby added to Section 6.1 of
the Existing Loan Agreement and shall read as follows:

            (d)  All of the  Obligations  which  may  now or  from  time to time
      hereafter be owing by the Borrowers to the Agent and the Lenders,  and all
      other  liabilities  and  obligations  which  may now or from  time to time
      hereafter  be owing  or  incurred  by the  Borrowers  to the  Agent or any
      Lender,  shall be secured by all of the Collateral  and, to the extent not
      otherwise included therein, a first, general and continuing lien, mortgage
      and security interest, pursuant to Sections 363, 364(c)(2),  364(c)(3) and
      364(d)  of the  Bankruptcy  Code,  upon,  in and to all of the  Borrowers'
      right,  title and interest in and to all of its goods,  property,  assets,
      and  interests  in  property,  of every kind and nature,  whether  real or
      personal,  tangible or intangible,  whether now or hereafter  existing and
      whether owned, acquired,  possessed or controlled by the Borrowers before,
      on or after the Petition Date,  and wherever  located,  including  without
      limitation all inventory,  accounts receivable,  contract rights, purchase
      orders,  documents,  instruments,  chattel paper, fixed assets, machinery,
      equipment,  fixtures,  furniture,  accessories and additions thereto, real
      estate,  general intangibles,  patents,  licenses,  trademarks,  insurance
      proceeds,  tax  refunds,   rights  to  payment,  goods,  property  of  the
      Borrowers' estates (as defined in Section 541 of the Bankruptcy Code), and
      all property acquired by the Borrowers after the Petition Date,  inclusive
      of the  proceeds of any recovery by claim or  litigation  initiated by the
      Borrowers or of any action  brought under  Sections 544 through 550 of the
      Bankruptcy  Code,  as well as Section  506(c)  and/or  Section  724 of the
      Bankruptcy  Code,  now in  existence  or  hereafter  created  and  further
      including without  limitation all property described in any and all of the
      Loan  Documents,  as well as any and all Proceeds  and  products  thereof.
      Without  limiting  the  foregoing,  any equity in the  property  which the
      Lenders hold as Pre-Petition  Collateral,  shall, after payment in full of
      the Pre-Petition Indebtedness, constitute further security for any and all
      Post-Petition  Indebtedness to the Lenders from the Debtor and as adequate
      protection to the Lenders in accordance with Section 361 of the Bankruptcy
      Code, any equity in the  Collateral,  and shall,  after payment in full of
      the Post-Petition  Indebtedness,  constitute  further security for any and
      all  Pre-Petition  Indebtedness  to the  Agent  and the  Lenders  from the
      Debtor.

            (e) In  addition  to the  security  interests,  liens and  mortgages
      granted to the Agent and the Lenders above, pursuant to Section 364 of the
      Bankruptcy  Code,  all  Post-Petition  Indebtedness  shall  constitute  an
      administrative  priority  equivalent in priority to a claim under Sections
      364(c)(1)  of the  Bankruptcy  Code,  and  shall  have  priority  over all
      administrative  expenses of the kind  specified in or ordered  pursuant to
      Sections 105, 326, 330, 331, 503(b), 506(c), 507(a), 507(b), 546(c) or 716
      of the Bankruptcy Code, as well as any other priority claims, and shall at
      all times be  senior  to the  rights  of the  Borrowers  or any  successor
      trustee in the either Second Chapter 11 Case or any subsequent  case under
      the Bankruptcy Code, whether such administrative  expenses are incurred or
      arise  between  or after  the entry of the  Financing  Orders or before or
      after a conversion of such case pursuant to Section 1112 of the Bankruptcy
      Code or otherwise.

            24. A new  subsection  (f) is  hereby  added to  Section  6.8 of the
Existing Loan Agreement and shall read as follows:

            (f) The Borrowers  shall  obtain,  within 10 days after the creation
      thereof, a written confirmation, in form and substance satisfactory to the
      Agent, from the Account Debtor of each Bill and Hold Account created after
      the Petition  Date and shall  deliver a copy of such  confirmation  to the
      Agent promptly after receipt thereof.

            25.  New  subsection  (m) is  hereby  added  to  Section  7.2 of the
Existing Loan Agreement and shall read as follows:

            (m) Budget Reconciliations. No later than the fourth Business Day of
      each week, a report,  in form and substance  satisfactory to the Agent, of
      all amounts  collected and expended by the  Borrowers  during the previous
      week,  which report shall reconcile such  collections and  expenditures to
      the  respective  Budget in effect  for such week and  contain  such  other
      information as the Agent shall reasonably require.

            26.  Sections 8.24 of the Existing Loan  Agreement is hereby amended
by deleting  such  Sections in its  entirety and  substituting  in its place the
following:

            8.24 Use of Proceeds of Additional  Loans and Additional  Letters of
      Credit;  Margin  Regulations.  The  proceeds of the  Additional  Loans and
      Additional  Letters of Credit will be used by such Borrower solely for the
      purposes detailed in the Budget and the Financing Orders. Such Borrower is
      not  engaged in the  business of  purchasing  or selling  Margin  Stock or
      extending credit for the purpose of purchasing or carrying Margin Stock.

            27.  Sections 8.8, 8.9, 8.15,  8.26,  9.14,  9.25,  9.28 11.1(g) and
11.1(h) of the Existing Loan Agreement are hereby deleted in their entirety.

            28. Section 9.24 of the Existing Loan Agreement is hereby amended by
deleting  such  section  in its  entirety  and  substituting  in its  place  the
following:

            (a) The Borrowers  shall not make or incur any Capital  Expenditures
      without the prior  written  consent of the Majority  Lenders (i) if, after
      giving effect thereto, the aggregate amount of all Capital Expenditures by
      the  Borrower  would  exceed  $100,000  during any  fiscal  quarter of the
      Borrowers, commencing with the fiscal quarter beginning August 2, 1999; or
      (ii) that would  exceed  $25,000  for any single  Capital  Expenditure  or
      series of related Capital Expenditure.

            (b) During the 60 days following the entry of the Interim  Financing
      Order,  the Borrower  shall develop a plan and budget to achieve Year 2000
      compliance ("Y2K") for its MIS equipment.  After such final 60-day period,
      such plan and budget will be submitted  for approval to Agent and Lenders.
      Borrower may undertake such MIS Y2K related expenditures as set forth in a
      plan and budget approved in writing by Agent and Majority Lenders.

            29. Section 9.24 of the Existing Loan Agreement is hereby amended by
deleting  such  Sections  in its  entirety  and  substituting  in its  place the
following:
            9.24 Minimum EBITDA.  The Borrower's  EBITDA for (a) the Fiscal Year
      ending October 1999 shall not be less than  -$2,750,000,  and (b) for each
      fiscal month thereafter shall not be less than $0.

            30.  A new  Section  9.31  is  hereby  added  to the  Existing  Loan
Agreement and shall read as follows:

            9.31  Budgets.  The  Borrowers  have  submitted to the Agent and the
      Lenders weekly budgets (the "Budgets") in the form of Exhibit 9.31 annexed
      hereto. The Borrowers will, from time to time promptly upon request of the
      Agent,  submit to the Agent updated weekly budgets,  which updated budgets
      will,  if  acceptable  in form  and  substance  to the  Agent  in its sole
      discretion,  be substituted for the Budgets then in effect and thenceforth
      constitute the Budgets;  provided,  however,  that the Agent shall have no
      duty to accept any such updated weekly budget.  The Borrowers agree not to
      request  Additional Loans or Additional Letters of Credit in amounts which
      are in excess of the  budgeted  amounts set forth in the  Budgets  then in
      effect.  In their sole  discretion,  however,  the Agent and the  Majority
      Lenders may, at any time and from time to time,  waive  and/or  exceed any
      time, dollar or other limitations(s) contained in such Budgets, so long as
      such amount would not cause the aggregate  principal amount of Obligations
      outstanding under this Loan Agreement to exceed the Total Facility.

            31.  A new  Section  9.32  is  hereby  added  to the  Existing  Loan
Agreement and shall read as follows:

            9.32 Second  Chapter 11 Cases.  The Borrowers (a) shall not file any
      motion,  application,  objection,  plan, response,  adversary complaint or
      similar  pleading in the Second  Chapter 11 Cases that seeks,  directly or
      indirectly,  the  use of any  cash  collateral  or  that  might  otherwise
      adversely  affect  the  ability  of the Agent or the  Lenders  to  receive
      indefeasible  payment in full in cash of all of the  Obligations;  and (b)
      shall notify the Agent of all motions,  applications,  objections,  plans,
      responses,  adversary  complaints or similar pleadings filed in the Second
      Chapter 11 Cases.

            32. Section 11.1 of the Existing Loan Agreement is hereby amended by
deleting  the word "or" at the end of  subsection  (s)  thereof,  replacing  the
period at the end of  subsection  (t) of such  section  with a  semi-colon,  and
adding new subsections (u) through (gg) thereto, to read as follows:

            (u) the  Bankruptcy  Court  shall enter an order  dismissing  either
      Second Chapter 11 Case, or converting  either Second Chapter 11 Cases to a
      case under Chapter 7 of the Bankruptcy  Code, or appointing a trustee or a
      responsible  officer or an examiner with expanded  powers in either Second
      Chapter 11 Case, or  transferring  venue in either Second Chapter 11 Cases
      to another judicial district;

            (v) the Bankruptcy  Court shall enter an order granting  relief from
      the automatic stay applicable  under Section 362 of the Bankruptcy Code to
      the holder of any  security  interest  other than in favor of the Agent in
      any  assets  of the  Borrowers  having  an  aggregate  value in  excess of
      $100,000;

            (w) the Bankruptcy  Court shall enter an order  confirming a Plan of
      Reorganization in either Second Chapter 11 Case;

            (x) an order  shall be entered in either  Second  Chapter 11 Case by
      the  Bankruptcy  Court  or  any  other  court  of  competent  jurisdiction
      amending,  supplementing,  staying  for a  period  in  excess  of 10 days,
      vacating  or  otherwise  modifying  any of the  Financing  Orders,  or the
      Borrowers  shall apply for  authority to do so;  provided that no Event of
      Default  shall  occur  under  this  clause  (x) to the  extent  that  such
      amendment,  supplement or other  modification  is made in compliance  with
      this  Agreement and is not adverse,  in the sole judgment of the Agent and
      the  Majority  Lenders,  to the rights and  interests of the Agent and the
      Lenders under this Agreement and the Loan Documents;

            (y) The Interim  Financing Order shall cease to be in full force and
      effect  and;  or the  Interim  Order  shall  cease to be in full force and
      effect and the Final  Financing Order shall not have been entered prior to
      such  cessation;  or the Final  Financing  Order shall cease to be in full
      force and effect;

            (z) the Borrowers  shall  oppose,  or encourage or support any other
      Person's  opposition  to, any motion made in the  Bankruptcy  Court by the
      Agent or any Lender seeking  confirmation  of the amount of the Agent's or
      such  Lender's  claim or the validity and  enforceability  of the Liens in
      favor of the Agent or such Lender;

            (aa) the Borrowers  shall seek to, or shall encourage or support any
      other Person's  motion to,  disallow,  subordinate or  recharacterize,  in
      whole  or in part  any  Lender's  claim  in  respect  of the  Pre-Petition
      Indebtedness,  Post-Petition  Indebtedness or the other  Obligations or to
      challenge  the  validity and  enforceability  of the Liens in favor of the
      Agent or any Lender;

            (bb) the Borrowers  shall make any payments on any  Indebtedness  of
      the  Borrowers  (other than in respect of the  Pre-Petition  Indebtedness)
      arising before the Petition Date without the prior written approval of the
      Agent and the Majority  Lenders or  authorization  by the Bankruptcy Court
      after notice and service of any such application upon the Agent;

            (cc) an application shall be filed by the Borrowers for the approval
      of,  or  there  shall  exist,   be  established  or  allowed,   any  other
      Superpriority  Claim  pari  passu with or senior to the claim of the Agent
      and the Lenders under this  Agreement and the other Loan  Documents or any
      other Lien on the Borrowers' Property other than Permitted Liens;

            (dd)  the Borrowers shall fail to comply with the terms of the
      Financing Orders in all material respects;

            (ee) the Borrowers  shall seek to, or shall encourage or support any
      Person's  motion to,  surcharge  pursuant to Section 506 of the Bankruptcy
      Code any of the Collateral; or

            (ff)  the   Borrowers'   exclusive   periods   to  file  a  plan  of
      reorganization  or seek acceptance  thereof pursuant to Section 1121(c) of
      the Bankruptcy Code shall expire or be terminated; or

            (gg)  either  Rod  Peckham or  Richard  Reddon  ceases to be, or act
      perform the  functions  of Chairman of the Board and  President  and Chief
      Operating Officer, respectively, of Forstmann for any reason whatsoever.

            33. A new  Section  11.2(d)  is hereby  added to the  Existing  Loan
Agreement and shall read as follows:

            (d) Upon the  occurrence  of an Event of Default,  provided that the
      Borrowers  have  failed to cure or remedy  such Event of  Default  after 5
      Business  Days  written  notice  the  automatic  stay  provisions  of  the
      Bankruptcy  Code  shall be lifted and  terminated  as to the Agent and the
      Lenders to the fullest  extent  necessary to implement  the  provisions of
      this Section 11.2, including without limitation in order for the Agent and
      the Lenders  immediately to proceed without delay,  hindrance or motion to
      enforce  their  rights and  remedies  upon the  occurrence  of an Event of
      Default  and  to  realize  upon,  apply  and to  retain  the  proceeds  of
      Collateral  for all purposes set forth herein.  Upon the  occurrence of an
      Event of Default: (i) the Agent and the Lenders may, but are not required,
      to take  possession  of any and/or  all of the  Collateral  and,  upon the
      Agent's or the Majority  Lenders' request,  the Borrowers,  as well as any
      superseding trustee in bankruptcy, shall immediately surrender and deliver
      peaceful  possession to the Agent,  or its authorized  agent,  of all such
      Collateral, and the Agent and the Lenders shall be authorized to liquidate
      all or any portion of the Collateral in accordance  with the provisions of
      this  Loan  Agreement,  the  other  Loan  Documents  and  applicable  law,
      including,  without limitation,  Article 9 of the Uniform Commercial Code,
      or to retain such Collateral in satisfaction of the Obligations;  (ii) the
      Agent and the Lenders  shall have no further or other  obligation  to make
      any Additional  Loan or issue any Additional  Letter of Credit;  and (iii)
      the  Agent  and the  Lenders  may also  exercise  any and all  rights  and
      remedies  available  under the Loan  Documents  or under  applicable  law,
      without  any duty of the Agent or the  Lenders to marshal  assets or to be
      bound by any other  doctrine  which could prohibit or restrict the ability
      of the Agent or the Lenders in choosing to foreclose  on or enforce  their
      rights  as to any  portion  of the  Collateral.  In  connection  with  the
      enforcement of each and all of the above remedies, the Borrowers agrees to
      cooperate  fully  with the Agent and the  Lenders,  consents  thereto  and
      hereby  agrees not to take any steps or  actions  to contest or  otherwise
      challenge  the  exercise  thereof.  The Agent  shall  give the  Borrowers'
      counsel such notice, if any, of a claimed Event of Default, as is provided
      for herein, prior to the exercise of the Agent's rights and remedies as to
      the Collateral, and the Borrowers and any other interested parties at that
      time  shall only have the right to contest  the  existence  of an Event of
      Default and any applicable  rights to cure such Event of Default and shall
      not have any entitlement  to, and shall not directly or indirectly  raise,
      any other claims of any kind.

            D.  REPRESENTATIONS  AND  WARRANTIES.  To  induce  the Agent and the
Lenders to enter into this DIP Amendment and to make the Additional Loans and to
issue the  Additional  Letters of Credit,  the  Borrowers  hereby  restates  and
reaffirms each of the representations  and warranties  contained in the Existing
Loan  Agreement (as amended  hereby),  except with respect to Sections 8.1, 8.2,
and 8.20 which are deemed  amended to include a reference to the Second  Chapter
11 Cases  and the  Bankruptcy  Court and  except  that  each  reference  in such
representations  and  warranties  to "this  Agreement"  shall be  deemed to be a
reference to the Loan Agreement as amended by this DIP Amendment.

            E.  CONDITIONS TO  EFFECTIVENESS.  This DIP  Amendment  shall become
effective as of the Interim  Order Date upon  receipt by the Agent,  in form and
substance  satisfactory to the Agent, of (a) counterpart  originals  hereof duly
executed by the  Borrowers,  the Lenders and the Agent,  (b)  resolutions of the
board of directors of the Borrowers and such other authority  and/or evidence of
authority  with  respect to any and all matters set forth in this DIP  Amendment
and the Loan Documents as the Agent shall  reasonably  require,  authorizing the
execution,  delivery and performance of this DIP Amendment and the Existing Loan
Agreement as amended hereby;  and (c) a certified copy of the Interim  Financing
Order.

      F.    MISCELLANEOUS.

            1. Limited Effect. This DIP Amendment shall be limited solely to the
matters  expressly  set forth  herein and shall not (a)  constitute  a waiver or
amendment of any other term or condition  of the Existing  Loan  Agreement or of
any  instrument  or  agreement  referred  to  therein  or any  Event of  Default
thereunder  or (b)  prejudice any right or rights which the Lenders may now have
or may have in the future under or in connection  with the Loan Agreement or any
instrument  or  agreement  referred  to therein or with  respect to any Event of
Default thereunder. Except as expressly amended hereby, all of the covenants and
provisions of the Existing Loan  Agreement are and shall  continue to be in full
force and effect.

            2.  GOVERNING  LAW.  THIS DIP  AMENDMENT  SHALL BE GOVERNED  BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE  WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK.

            3.  Counterparts.  This  Amendment  may be  executed  by the parties
hereto  in any  number  of  separate  counterparts,  each of  which  shall be an
original,  and all of which taken together shall be deemed to constitute one and
the same instrument.

            IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered as of the date set forth above.

                                          FORSTMANN & COMPANY, INC., as
                                          Debtor and Debtor-in-Possession


                                          By:________________________________
                                             Name:
                                             Title:


                                          FORSTMANN APPAREL, INC., as Debtor
                                          and Debtor-in-Possession


                                          By:________________________________
                                             Name:
                                             Title:


                                          BANK OF AMERICA NT & SA,
                                             as Agent and Lender


                                          By:________________________________
                                             Name:
                                             Title:


                                          THE CIT GROUP/COMMERCIAL SERVICES,
                                          INC.


                                          By:________________________________
                                             Name:
                                             Title:


                                          IBJ WHITEHALL BUSINESS CREDIT CORP.
                                          f/k/a IBJ SCHROEDER BUSINESS CREDIT
                                          CORPORATION


                                          By:________________________________
                                             Name:
                                             Title:


                                          JACKSON NATIONAL LIFE INSURANCE
                                          COMPANY

                                          By:   PPM FINANCE, INC.

                                          By:________________________________
                                             Name:
                                             Title:


                                          LA SALLE BUSINESS CREDIT, INC.


                                          By:________________________________
                                             Name:
                                             Title:


                                          PNC BANK, NATIONAL ASSOCIATION


                                          By:________________________________
                                             Name:
                                             Title: