EXHIBIT 10.23

                                CREDIT AGREEMENT

                           Dated as of March 29, 2002

                                      Among

                     THE FINANCIAL INSTITUTIONS NAMED HEREIN

                                 as the Lenders

                                       and

                              BANK OF AMERICA, N.A.

                                  as the Agent

                                       and

                                   GFSI, INC.

                                 as the Borrower


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                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

SECTION                                                                                                         PAGE
<S>     <C>      <C>                                                                                             <C>

ARTICLE 1 LOANS AND LETTERS OF CREDIT.............................................................................1

         1.1      Total Facility..................................................................................1
         1.2      Revolving Loans.................................................................................2
         1.3      [Intentionally Deleted].........................................................................4
         1.4      Letters of Credit...............................................................................4
         1.5      Bank Products...................................................................................8

ARTICLE 2 INTEREST AND FEES.......................................................................................8

         2.1      Interest........................................................................................8
         2.2      Continuation and Conversion Elections...........................................................9
         2.3      Maximum Interest Rate..........................................................................10
         2.4      Fees...........................................................................................11
         2.5      Unused Line Fee................................................................................11
         2.6      Letter of Credit Fee...........................................................................11

ARTICLE 3 PAYMENTS AND PREPAYMENTS...............................................................................11

         3.1      Revolving Loans................................................................................11
         3.2      Termination of Facility........................................................................11
         3.3      [Intentionally Deleted]........................................................................12
         3.4      Prepayments....................................................................................12
         3.5      LIBOR Rate Loan Prepayments....................................................................13
         3.6      Payments by the Borrower.......................................................................13
         3.7      Payments as Revolving Loans....................................................................13
         3.8      Apportionment, Application and Reversal of Payments............................................13
         3.9      Indemnity for Returned Payments................................................................14
         3.10     Agent's and Lenders' Books and Records; Monthly Statements.....................................14

ARTICLE 4 TAXES, YIELD PROTECTION AND ILLEGALITY.................................................................15

         4.1      Taxes..........................................................................................15
         4.2      Illegality.....................................................................................16
         4.3      Increased Costs and Reduction of Return........................................................16
         4.4      Funding Losses.................................................................................17
         4.5      Inability to Determine Rates...................................................................17
         4.6      Certificates of Agent..........................................................................18
         4.7      Survival.......................................................................................18

ARTICLE 5 BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES......................................................18

         5.1      Books and Records..............................................................................18
         5.2      Financial Information..........................................................................18
         5.3      Notices to the Lenders.........................................................................21
         5.4      Collateral Reporting...........................................................................23

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ARTICLE 6 GENERAL WARRANTIES AND REPRESENTATIONS.................................................................24

         6.1      Authorization, Validity, and Enforceability of this Agreement and the Loan Documents...........24
         6.2      Validity and Priority of Security Interest.....................................................25
         6.3      Organization and Qualification.................................................................25
         6.4      Corporate Name; Prior Transactions.............................................................25
         6.5      Subsidiaries and Affiliates....................................................................25
         6.6      Financial Statements and Projections...........................................................25
         6.7      Capitalization.................................................................................26
         6.8      Solvency.......................................................................................26
         6.9      Debt...........................................................................................26
         6.10     Distributions..................................................................................26
         6.11     Real Estate; Leases............................................................................26
         6.12     Proprietary Rights.............................................................................27
         6.13     Trade Names....................................................................................27
         6.14     Litigation.....................................................................................27
         6.15     Labor Disputes.................................................................................27
         6.16     Environmental Laws.............................................................................27
         6.17     No Violation of Law............................................................................29
         6.18     No Default.....................................................................................29
         6.19     ERISA Compliance...............................................................................29
         6.20     Taxes..........................................................................................29
         6.21     Regulated Entities.............................................................................30
         6.22     Use of Proceeds; Margin Regulations............................................................30
         6.23     Copyrights, Patents, Trademarks and Licenses, etc..............................................30
         6.24     No Material Adverse Change.....................................................................30
         6.25     Full Disclosure................................................................................30
         6.26     Material Agreements............................................................................30
         6.27     Bank Accounts..................................................................................30
         6.28     Governmental Authorization.....................................................................31
         6.29     CCP Indemnification............................................................................31

ARTICLE 7 AFFIRMATIVE AND NEGATIVE COVENANTS.....................................................................31

         7.1      Taxes and Other Obligations....................................................................31
         7.2      Legal Existence and Good Standing..............................................................31
         7.3      Compliance with Law and Agreements; Maintenance of Licenses....................................31
         7.4      Maintenance of Property; Inspection of Property................................................32
         7.5      Insurance......................................................................................32
         7.6      Insurance and Condemnation Proceeds............................................................33
         7.7      Environmental Laws.............................................................................34
         7.8      Compliance with ERISA..........................................................................35
         7.9      Mergers, Consolidations or Sales...............................................................35
         7.10     Distributions; Capital Change; Restricted Investments..........................................36


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         7.11     Transactions Affecting Collateral or Obligations...............................................36
         7.12     Guaranties.....................................................................................36
         7.13     Debt...........................................................................................37
         7.14     Prepayment.....................................................................................37
         7.15     Transactions with Affiliates...................................................................38
         7.16     Investment Banking and Finder's Fees...........................................................38
         7.17     Business Conducted.............................................................................38
         7.18     Liens..........................................................................................38
         7.19     Sale and Leaseback Transactions................................................................38
         7.20     New Subsidiaries...............................................................................39
         7.21     Acquisitions...................................................................................39
         7.22     Fiscal Year....................................................................................41
         7.23     Fixed Charge Coverage Ratio....................................................................41
         7.24     Minimum Availability...........................................................................41
         7.25     Use of Proceeds................................................................................41
         7.26     Proceeds from Surplus Cash Deposits............................................................41
         7.27     Excess Collections, Investments, etc...........................................................42
         7.28     Further Assurances.............................................................................42

ARTICLE 8 CONDITIONS OF LENDING..................................................................................42

         8.1      Conditions Precedent to Making of Loans on the Closing Date....................................42
         8.2      Conditions Precedent to Each Loan..............................................................44

ARTICLE 9 DEFAULT; REMEDIES......................................................................................45

         9.1      Events of Default..............................................................................45
         9.2      Remedies.......................................................................................48

ARTICLE 10 TERM AND TERMINATION..................................................................................49

         10.1     Term and Termination...........................................................................49

ARTICLE 11 AMENDMENTS; WAIVERs; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS..........................................50

         11.1     Amendments and Waivers.........................................................................50
         11.2     Assignments; Participations....................................................................51

ARTICLE 12 THE AGENT.............................................................................................53

         12.1     Appointment and Authorization..................................................................53
         12.2     Delegation of Duties...........................................................................54
         12.3     Liability of Agent.............................................................................54
         12.4     Reliance by Agent..............................................................................54
         12.5     Notice of Default..............................................................................55
         12.6     Credit Decision................................................................................55
         12.7     Indemnification................................................................................55


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         12.8     Agent in Individual Capacity...................................................................56
         12.9     Successor Agent................................................................................56
         12.10    Withholding Tax................................................................................56
         12.11    Collateral Matters.............................................................................58
         12.12    Restrictions on Actions by Lenders; Sharing of Payments........................................59
         12.13    Agency for Perfection..........................................................................59
         12.14    Payments by Agent to Lenders...................................................................59
         12.15    Settlement.....................................................................................60
         12.16    Letters of Credit; Intra-Lender Issues.........................................................63
         12.17    Concerning the Collateral and the Related Loan Documents.......................................65
         12.18    Field Audit and Examination Reports; Disclaimer by Lenders.....................................66
         12.19    Relation Among Lenders.........................................................................67

ARTICLE 13 MISCELLANEOUS.........................................................................................67

         13.1     No Waivers; Cumulative Remedies................................................................67
         13.2     Severability...................................................................................67
         13.3     Governing Law; Choice of Forum; Service of Process.............................................67
         13.4     WAIVER OF JURY TRIAL...........................................................................68
         13.5     Survival of Representations and Warranties.....................................................68
         13.6     Other Security and Guaranties..................................................................69
         13.7     Fees and Expenses..............................................................................69
         13.8     Notices........................................................................................70
         13.9     Waiver of Notices..............................................................................71
         13.10    Binding Effect.................................................................................71
         13.11    Indemnity of the Agent and the Lenders by the Borrower.........................................71
         13.12    Limitation of Liability........................................................................72
         13.13    Final Agreement................................................................................72
         13.14    Counterparts...................................................................................72
         13.15    Captions ......................................................................................72
         13.16    Right of Setoff................................................................................72
         13.17    Confidentiality................................................................................73
         13.18    Conflicts with Other Loan Documents............................................................73
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                         ANNEXES, EXHIBITS AND SCHEDULES


ANNEX A       -    DEFINED TERMS

EXHIBIT B     -    FORM OF BORROWING BASE CERTIFICATE

EXHIBIT C     -    FINANCIAL STATEMENTS

EXHIBIT D     -    FORM OF NOTICE OF BORROWING

EXHIBIT E     -    FORM OF NOTICE OF CONTINUATION/CONVERSION

EXHIBIT F     -    FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT

EXHIBIT G     -    FORM OF INVENTORY DISPOSITION AGREEMENT



SCHEDULE 1.2 - LENDERS' COMMITMENTS (ANNEX A - DEFINED TERMS)

SCHEDULE 6.3 - ORGANIZATION AND QUALIFICATIONS

SCHEDULE 6.4 -  CORPORATE NAME, PRIOR TRANSACTIONS

SCHEDULE 6.5 - SUBSIDIARIES AND AFFILIATES

SCHEDULE 6.7 - CAPITALIZATION

SCHEDULE 6.9 - DEBT

SCHEDULE 6.11 - REAL ESTATE; LEASES

SCHEDULE 6.12 - PROPRIETARY RIGHTS

SCHEDULE 6.13 - TRADE NAMES

SCHEDULE 6.14 - LITIGATION

SCHEDULE 6.15 - LABOR DISPUTES

SCHEDULE 6.16 - ENVIRONMENTAL LAW

SCHEDULE 6.19 - ERISA COMPLIANCE

SCHEDULE 6.26 - MATERIAL AGREEMENTS

SCHEDULE 6.27 - BANK ACCOUNTS

SCHEDULE 7.18 - LIENS



                                       v
<PAGE>


                                CREDIT AGREEMENT

                  This Credit Agreement, dated as of ______________, 2002, (this
"Agreement")  among the financial  institutions from time to time parties hereto
(such  financial  institutions,  together with their  respective  successors and
assigns,  are  referred  to  hereinafter  each  individually  as a "Lender"  and
collectively  as the  "Lenders"),  Bank of America,  N.A.  with an office at 231
South LaSalle Street, Chicago,  Illinois 60697, as agent for the Lenders (in its
capacity as agent,  the  "Agent"),  GFSI,  Inc.,  a Delaware  corporation,  with
offices at 9700 Commerce Parkway, Lenexa, Kansas 66219 (the "Borrower") and GFSI
Holdings,  Inc., a Delaware  corporation with offices at 9700 Commerce  Parkway,
Lenexa, Kansas 66219 ("Holdings").

                              W I T N E S S E T H:
                              - - - - - - - - - -

                  WHEREAS,  the Borrower  desires to  refinance  and replace its
existing  credit facility with Bank One, N.A. and, in furtherance of such desire
has requested the Lenders to make  available to the Borrower a revolving line of
credit for loans and  letters  of credit in an amount not to exceed  $65,000,000
and which extensions of credit the Borrower will use for the purposes  permitted
hereunder;

                  WHEREAS, Holdings owns all of the outstanding capital stock of
the Borrower  and as such will benefit from the credit  extended to the Borrower
hereunder and has agreed to guarantee the obligations of the Borrower  hereunder
and be bound by the terms hereof;

                  WHEREAS,  capitalized  terms  used in this  Agreement  and not
otherwise  defined  herein shall have the meanings  ascribed  thereto in Annex A
which is attached  hereto and  incorporated  herein;  the rules of  construction
contained  therein shall govern the  interpretation  of this Agreement,  and all
Annexes,  Exhibits and  Schedules  attached  hereto are  incorporated  herein by
reference;

                  WHEREAS,  the  Lenders  have agreed to make  available  to the
Borrower a revolving  credit facility upon the terms and conditions set forth in
this Agreement.

                  NOW, THEREFORE,  in consideration of the mutual conditions and
agreements set forth in this Agreement, and for good and valuable consideration,
the  receipt  of which is hereby  acknowledged,  the  Lenders,  the  Agent,  the
Borrower and Holdings hereby agree as follows.


                                   ARTICLE 1
                           LOANS AND LETTERS OF CREDIT

         1.1  TOTAL FACILITY. Subject to all of the terms and conditions of this
Agreement,  the Lenders agree to make available a total credit facility of up to
$65,000,000 (the "Total  Facility") to the Borrower from time to time during the
term of this Agreement. The Total Facility shall be composed of a revolving line
of credit consisting of Revolving Loans and Letters of Credit described herein.

<PAGE>


         1.2  REVOLVING LOANS.

              (a)  AMOUNTS.  Subject  to  the  satisfaction  of  the  conditions
precedent  set forth in  Article  8, each  Lender  severally,  but not  jointly,
agrees, upon the Borrower's request from time to time on any Business Day during
the period from the Closing  Date to the  Termination  Date,  to make  revolving
loans (the  "Revolving  Loans") to the  Borrower  in amounts  not to exceed such
Lender's Pro Rata Share of Availability,  except for Non-Ratable Loans and Agent
Advances. The Lenders, however, in their unanimous discretion, may elect to make
Revolving  Loans or issue or arrange to have issued  Letters of Credit in excess
of the  Borrowing  Base on one or  more  occasions  not to  exceed  the  Maximum
Revolver  Amount,  but if they do so, neither the Agent nor the Lenders shall be
deemed  thereby  to have  changed  the  limits  of the  Borrowing  Base or to be
obligated to exceed such limits on any other  occasion.  If any Borrowing  would
exceed  Availability,  the Lenders may refuse to make or may otherwise  restrict
the making of  Revolving  Loans as the Lenders  determine  until such excess has
been eliminated,  subject to the Agent's authority,  in its sole discretion,  to
make Agent Advances pursuant to the terms of Section 1.2(i).

              (b) PROCEDURE FOR BORROWING.

                  (1) Each  Borrowing  shall  be   made   upon  the   Borrower's
irrevocable  written  notice  delivered  to the Agent in the form of a notice of
borrowing ("Notice of Borrowing"),  which must be received by the Agent prior to
(i) 12:00 noon (Chicago time) three Business Days prior to the requested Funding
Date, in the case of LIBOR Rate Loans and (ii) 11:00 a.m.  (Chicago time) on the
requested Funding Date, in the case of Base Rate Loans, specifying:

                  (A)  the amount of the Borrowing, which in the case of a LIBOR
Rate Loan must equal or exceed  $1,000,000 (and increments of $100,000 in excess
of such amount);

                  (B)  the requested Funding Date, which must be a Business Day;

                  (C)  whether the Revolving Loans requested are to be Base Rate
Revolving  Loans or LIBOR  Revolving  Loans (and if not  specified,  it shall be
deemed a request for a Base Rate Revolving Loan); and

                  (D)  the duration of the Interest  Period for LIBOR  Revolving
Loans (and if not specified, it shall be deemed a request for an Interest Period
of one month);

provided,  however, that with respect to the Borrowing to be made on the Closing
Date, such Borrowings will consist of Base Rate Revolving Loans only.

                  (2)  In lieu of delivering a Notice of Borrowing, the Borrower
may give the  Agent  telephonic  notice  of such  request  for  advances  to the
Designated  Account on or before the deadline set forth above.  The Agent at all
times  shall be  entitled  to rely on such  telephonic  notice  in  making  such
Revolving Loans, regardless of whether any written confirmation is received.


                                       2
<PAGE>

                  (3)  The Borrower  shall have no right to request a LIBOR Rate
Loan while an Event of Default has occurred and is continuing.

              (c) RELIANCE UPON AUTHORITY.    Prior  to  the  Closing  Date, the
Borrower  shall deliver to the Agent,  a notice setting forth the account of the
Borrower ("Designated Account") to which the Agent is authorized to transfer the
proceeds of the Revolving Loans requested hereunder.  The Borrower may designate
a replacement  account from time to time by written notice.  All such Designated
Accounts must be reasonably  satisfactory to the Agent. The Agent is entitled to
rely  conclusively on any person's  request for Revolving Loans on behalf of the
Borrower,  so  long  as  the  proceeds  thereof  are  to be  transferred  to the
Designated  Account.  The  Agent  has no  duty to  verify  the  identity  of any
individual  representing  himself  or  herself  as a  person  authorized  by the
Borrower to make such requests on its behalf.

              (d) NO LIABILITY.   The Agent shall not incur any liability to the
Borrower  as a result of acting upon any notice  referred to in Sections  1.2(b)
and (c), which the Agent believes in good faith to have been given by an officer
or other person duly  authorized by the Borrower to request  Revolving  Loans on
its  behalf.  The  crediting  of  Revolving  Loans  to  the  Designated  Account
conclusively  establishes the obligation of the Borrower to repay such Revolving
Loans as provided herein.

               (e)  NOTICE IRREVOCABLE.   Any Notice of Borrowing (or telephonic
notice in lieu thereof) made  pursuant to Section  1.2(b) shall be  irrevocable.
The Borrower shall be bound to borrow the funds requested  therein in accordance
therewith.

               (f)  AGENT'S ELECTION.   Promptly  after  receipt  of a Notice of
Borrowing (or telephonic notice in lieu thereof),  the Agent shall elect to have
the  terms of  Section  1.2(g)  or the  terms of  Section  1.2(h)  apply to such
requested  Borrowing.  If the Bank  declines  in its sole  discretion  to make a
Non-Ratable  Loan pursuant to Section 1.2(h),  the terms of Section 1.2(g) shall
apply to the requested Borrowing.

               (g) MAKING OF REVOLVING LOANS.  If Agent elects to have the terms
of this  Section  1.2(g) apply to a requested  Borrowing,  then  promptly  after
receipt of a Notice of Borrowing or telephonic notice in lieu thereof, the Agent
shall  notify the  Lenders by  telecopy,  telephone  or e-mail of the  requested
Borrowing.  Each  Lender  shall  transfer  its Pro Rata  Share of the  requested
Borrowing to the Agent in immediately  available funds, to the account from time
to time  designated by Agent,  not later than 12:00 noon  (Chicago  time) on the
applicable  Funding  Date.  After the  Agent's  receipt of all  proceeds of such
Revolving  Loans,  the Agent  shall make the  proceeds of such  Revolving  Loans
available to the Borrower on the applicable  Funding Date by  transferring  same
day funds to the account designated by the Borrower; provided, however, that the
amount of Revolving Loans so made on any date shall not exceed the  Availability
on such date.

               (h) MAKING OF NON-RATABLE LOANS.

                   (A)  If Agent elects,  with  the consent of the Bank, to have
the terms of this Section 1.2(h) apply to a requested Borrowing,  the Bank shall
make a Revolving Loan in the amount of that Borrowing  available to the Borrower
on the applicable Funding Date

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<PAGE>

by  transferring  same day  funds to the  Borrower's  Designated  Account.  Each
Revolving  Loan  made  solely by the Bank  pursuant  to this  Section  is herein
referred to as a "Non-Ratable  Loan",  and such Revolving Loans are collectively
referred to as the  "Non-Ratable  Loans." Each Non-Ratable Loan shall be subject
to all the terms and conditions  applicable to other Revolving Loans except that
all  payments  thereon  shall be payable to the Bank solely for its own account.
The aggregate  amount of  Non-Ratable  Loans  outstanding  at any time shall not
exceed $6,500,000.  The Agent shall not request the Bank to make any Non-Ratable
Loan if (1) the Agent has  received  written  notice from any Lender that one or
more of the applicable  conditions  precedent set forth in Article 8 will not be
satisfied on the requested Funding Date for the applicable Borrowing, or (2) the
requested Borrowing would exceed Availability on that Funding Date.

                      (B) The  Non-Ratable Loans shall be secured by the Agent's
Liens in and to the Collateral and shall  constitute  Base Rate Revolving  Loans
and Obligations hereunder.

                  (i) Agent Advances.

                      (A)  Subject to the limitations set forth below, the Agent
is authorized by the Borrower and the Lenders,  from time to time in the Agent's
sole  discretion,  (A) after the occurrence of a Default or an Event of Default,
or (B) at any time  that any of the  other  conditions  precedent  set  forth in
Article 8 have not been  satisfied,  to make Base  Rate  Revolving  Loans to the
Borrower on behalf of the Lenders in an aggregate amount outstanding at any time
not to  exceed  10% of the  Borrowing  Base  but not in  excess  of the  Maximum
Revolver  Amount which the Agent,  in its reasonable  business  judgment,  deems
necessary or desirable (1) to preserve or protect the Collateral, or any portion
thereof,  (2) to enhance the likelihood of, or maximize the amount of, repayment
of the Loans and other Obligations, or (3) to pay any other amount chargeable to
the Borrower pursuant to the terms of this Agreement,  including costs, fees and
expenses as described in Section 13.7 (any of such advances are herein  referred
to as "Agent  Advances");  provided,  that the Majority  Lenders may at any time
revoke the Agent's  authorization  to make Agent  Advances.  Any such revocation
must be in writing and shall  become  effective  prospectively  upon the Agent's
receipt thereof.

                      (B)  The Agent Advances  shall be  secured by the  Agent's
Liens in and to the Collateral and shall  constitute  Base Rate Revolving  Loans
and Obligations hereunder.

         1.3   [INTENTIONALLY DELETED].

         1.4   LETTERS OF CREDIT.

               (a)  AGREEMENT  TO ISSUE OR CAUSE TO ISSUE.  Subject to the terms
and  conditions of this  Agreement,  the Agent agrees (i) to cause the Letter of
Credit  Issuer  to issue  for the  account  of the  Borrower  in  support  of an
obligation   of  the  Borrower  or  any   Subsidiary   Guarantor   one  or  more
commercial/documentary and standby letters of credit ("Letter of Credit") and/or
(ii) to provide credit support or other enhancement to a Letter of Credit Issuer
acceptable  to Agent,  which  issues a Letter of Credit  for the  account of the
Borrower in support of an obligation of the Borrower or any Subsidiary Guarantor
(any such credit  support or enhancement


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<PAGE>


being  herein  referred to as a "Credit  Support")  from time to time during the
term of this Agreement.

               (b) AMOUNTS;  OUTSIDE  EXPIRATION  DATE. The Agent shall not have
any obligation to issue or cause to be issued any Letter of Credit or to provide
Credit  Support  for any Letter of Credit at any time if: (i) the  maximum  face
amount of the  requested  Letter of Credit is greater than the Unused  Letter of
Credit  Subfacility  at such  time;  (ii)  the  maximum  undrawn  amount  of the
requested Letter of Credit and all  commissions,  fees, and charges due from the
Borrower in connection  with the opening thereof would (when taken together with
all  Obligations)  exceed  Availability  at such time;  or (iii) such  Letter of
Credit has an expiration date less than 30 days prior to the Stated  Termination
Date or more than 12 months  from the date of issuance  for  standby  letters of
credit and 12 months for  documentary  letters  of credit.  With  respect to any
Letter of Credit which contains any "evergreen" or automatic renewal  provision,
each Lender shall be deemed to have  consented to any such  extension or renewal
unless any such Lender shall have provided to the Agent,  written notice that it
declines to consent to any such  extension  or renewal at least thirty (30) days
prior to the date on which the Letter of Credit Issuer is entitled to decline to
extend or renew the Letter of Credit. If all of the requirements of this Section
1.4 are met and no Event of Default has  occurred and is  continuing,  no Lender
shall decline to consent to any such extension or renewal.

               (c)  OTHER  CONDITIONS.   In  addition  to  conditions  precedent
contained in Article 8, the  obligation  of the Agent to issue or to cause to be
issued  any  Letter of Credit or to  provide  Credit  Support  for any Letter of
Credit is subject to the following conditions precedent having been satisfied in
a manner reasonably satisfactory to the Agent:

                    (1) The  Borrower  shall  have  delivered  to the  Letter of
Credit Issuer,  at such times and in such manner as such Letter of Credit Issuer
may prescribe,  an application in form and substance reasonably  satisfactory to
such Letter of Credit Issuer and  reasonably  satisfactory  to the Agent for the
issuance  of the Letter of Credit and such other  documents  as may be  required
pursuant to the terms thereof,  and the form,  terms and purpose of the proposed
Letter of Credit shall be reasonably satisfactory to the Agent and the Letter of
Credit Issuer; and

                    (2) As of the  date of  issuance,  no  order  of any  court,
arbitrator  or  Governmental  Authority  shall purport by its terms to enjoin or
restrain money center banks generally from issuing letters of credit of the type
and in the  amount  of the  proposed  Letter  of  Credit,  and no  law,  rule or
regulation  applicable  to  money  center  banks  generally  and no  request  or
directive  (whether  or not  having  the  force of law)  from  any  Governmental
Authority with jurisdiction over money center banks generally shall prohibit, or
request that the proposed  Letter of Credit Issuer refrain from, the issuance of
letters of credit generally or the issuance of such Letters of Credit.

               (d)  ISSUANCE OF LETTERS OF CREDIT.

                    (1) Request for Issuance. The Borrower must notify the Agent
of a requested  Letter of Credit at least three (3)  Business  Days prior to the
proposed  issuance date.  Such notice shall be irrevocable  and must specify the
original face amount of the Letter of


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<PAGE>


Credit  requested,  the  Business  Day of issuance of such  requested  Letter of
Credit,  whether  such  Letter of Credit  may be drawn in a single or in partial
draws,  the Business Day on which the  requested  Letter of Credit is to expire,
the purpose for which such Letter of Credit is to be issued, and the beneficiary
of the requested Letter of Credit.  The Borrower shall attach to such notice the
proposed form of the Letter of Credit.

                    (2)  RESPONSIBILITIES  OF  THE  AGENT;  ISSUANCE.  As of the
Business Day immediately  preceding the requested issuance date of the Letter of
Credit,  the Agent shall determine the amount of the applicable Unused Letter of
Credit  Subfacility  and  Availability.  If (i) the face amount of the requested
Letter of Credit is less than the Unused Letter of Credit  Subfacility  and (ii)
the face amount of such requested  Letter of Credit and all  commissions,  fees,
and charges due from the Borrower in connection  with the opening  thereof would
not exceed  Availability,  the Agent shall cause the Letter of Credit  Issuer to
issue the requested  Letter of Credit on the requested  issuance date so long as
the other conditions hereof are met.

                    (3) NO  EXTENSIONS  OR  AMENDMENT.  The  Agent  shall not be
obligated to cause the Letter of Credit  Issuer to extend or amend any Letter of
Credit issued  pursuant  hereto unless the  requirements of this Section 1.4 are
met as though a new Letter of Credit were being requested and issued.

                (e) PAYMENTS PURSUANT TO LETTERS OF CREDIT.  The Borrower agrees
to  reimburse  immediately  the  Letter of Credit  Issuer for any draw under any
Letter of Credit and the Agent for the account of the  Lenders  upon any payment
pursuant  to any  Credit  Support,  and to pay the  Letter of Credit  Issuer the
amount of all other  charges and fees payable to the Letter of Credit  Issuer in
connection with any Letter of Credit  immediately when due,  irrespective of any
claim,  setoff,  defense or other right which the  Borrower may have at any time
against the Letter of Credit Issuer or any other Person.  Each drawing under any
Letter of Credit  shall  constitute a request by the Borrower to the Agent for a
Borrowing of a Base Rate Revolving Loan in the amount of such drawing unless the
Borrower has paid the Letter of Credit Issuer the full amount of such drawing in
immediately  available funds on the date of such drawing.  The Funding Date with
respect to such borrowing shall be the date of such drawing.

                (f) INDEMNIFICATION; EXONERATION; POWER OF ATTORNEY.

                    (1)  Indemnification.  In  addition  to  amounts  payable as
elsewhere  provided  in this  Section  1.4,  the  Borrower  agrees  to  protect,
indemnify,  pay and save the Lenders and the Agent harmless from and against any
and all  claims,  demands,  liabilities,  damages,  losses,  costs,  charges and
expenses  (including  reasonable  attorneys' fees) which any Lender or the Agent
(other than a Lender in its capacity as Letter of Credit Issuer) may incur or be
subject to as a consequence,  direct or indirect,  of the issuance of any Letter
of Credit or the provision of any Credit  Support or  enhancement  in connection
therewith.  The Borrower's  obligations under this Section shall survive payment
of all other Obligations.

                    (2)  Assumption  of  Risk  by the  Borrower.  As  among  the
Borrower,  the  Lenders,  and the Agent  (other than a Lender in its capacity as
Letter  of  Credit  Issuer),  the  Borrower  assumes  all  risks of the acts and
omissions  of, or misuse of any of the  Letters  of Credit  by,  the  respective
beneficiaries of such Letters of Credit. In furtherance and not


                                       6

<PAGE>

in limitation of the  foregoing,  the Lenders and the Agent (other than a Lender
in its capacity as Letter of Credit  Issuer) shall not be  responsible  for: (A)
the form, validity,  sufficiency,  accuracy,  genuineness or legal effect of any
document  submitted by any Person in  connection  with the  application  for and
issuance of and  presentation  of drafts  with  respect to any of the Letters of
Credit,  even  if it  should  prove  to be  in  any  or  all  respects  invalid,
insufficient,  inaccurate, fraudulent or forged; (B) the validity or sufficiency
of any instrument  transferring or assigning or purporting to transfer or assign
any Letter of Credit or the rights or benefits  thereunder or proceeds  thereof,
in whole or in part,  which  may  prove to be  invalid  or  ineffective  for any
reason;  (C) the  failure of the  beneficiary  of any Letter of Credit to comply
duly with conditions  required in order to draw upon such Letter of Credit;  (D)
errors, omissions,  interruptions,  or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise,  whether or not they be
in cipher;  (E) errors in  interpretation  of technical  terms;  (F) any loss or
delay in the transmission or otherwise of any document required in order to make
a drawing  under  any  Letter of  Credit  or of the  proceeds  thereof;  (G) the
misapplication by the beneficiary of any Letter of Credit of the proceeds of any
drawing under such Letter of Credit;  (H) any  consequences  arising from causes
beyond the control of the Lenders or the Agent,  including  any act or omission,
whether  rightful  or  wrongful,  of any  present  or future de jure or de facto
Governmental  Authority or (I) the Letter of Credit Issuer's honor of a draw for
which the draw or any certificate  fails to comply in any respect with the terms
of the Letter of Credit.  None of the foregoing shall affect,  impair or prevent
the  vesting  of any  rights or powers of the  Agent or any  Lender  under  this
Section 1.4(f).

                    (3) Exoneration.  Without limiting the foregoing,  no action
or  omission  whatsoever  by Agent or any  Lender  (excluding  any Lender in its
capacity as a Letter of Credit Issuer) shall result in any liability of Agent or
and Lender to the  Borrower,  or relieve the Borrower of any of its  obligations
hereunder to any such Person.

                    (4)  Rights  Against   Letter  of  Credit  Issuer.   Nothing
contained  in this  Agreement  is  intended  to limit or expand  the  Borrower's
rights,  if any,  with  respect to the Letter of Credit  Issuer  which  arise in
connection with a drawing or attempt to draw, or any payment or nonpayment under
a Letter of Credit. Such rights shall be governed solely by (i) the terms of the
letter of credit application and related agreements between the Borrower and the
Letter Credit Issuer (the "L/C  Agreements") and (ii) applicable law and the UCP
500 or ISP 98, as applicable, (as defined in the L/C Agreements).

                    (5)  Account  Party.  The  Borrower  hereby  authorizes  and
directs any Letter of Credit Issuer to name the Borrower as the "Account  Party"
therein  and to  deliver  to the  Agent  all  instruments,  documents  and other
writings and property  received by the Letter of Credit  Issuer  pursuant to the
Letter of  Credit,  and to accept  and rely upon the  Agent's  instructions  and
agreements  with respect to all matters arising in connection with the Letter of
Credit or the application therefor.

               (g)  SUPPORTING   LETTER  OF  CREDIT;   CASH   COLLATERAL.    If,
notwithstanding the provisions of Section 1.4(b) and Section 10.1, any Letter of
Credit or Credit Support is outstanding  upon the termination of this Agreement,
then upon such  termination  the Borrower shall deposit with the Agent,  for the
ratable  benefit of the Agent and the  Lenders,  with  respect to each Letter of
Credit  or  Credit  Support  then  outstanding,  a  standby  letter of credit (a
"Supporting

                                       7
<PAGE>

Letter of Credit") in form and substance  reasonably  satisfactory to the Agent,
issued by an issuer  reasonably  satisfactory to the Agent in an amount equal to
the greatest  amount for which such Letter of Credit or such Credit  Support may
be drawn plus any fees and  expenses  associated  with such  Letter of Credit or
such  Credit  Support,  under  which  Supporting  Letter of Credit  the Agent is
entitled to draw amounts  necessary  to reimburse  the Agent and the Lenders for
payments to be made by the Agent and the Lenders  under such Letter of Credit or
Credit Support and any fees and expenses  associated  with such Letter of Credit
or Credit Support.  Such Supporting Letter of Credit shall be held by the Agent,
for the ratable  benefit of the Agent and the Lenders,  as security  for, and to
provide for the  payment of, the  aggregate  undrawn  amount of such  Letters of
Credit or such Credit Support remaining outstanding.

         1.5  BANK PRODUCTS.  Each of Holdings, the Borrower and each Subsidiary
Guarantor (except any Canadian  Subsidiary  Guarantor) may request and the Agent
may, in its sole and absolute discretion, arrange for Holdings, the Borrower and
each Subsidiary  Guarantor (except any Canadian Subsidiary  Guarantor) to obtain
from the Bank or the Bank's  Affiliates  Bank Products  although  Holdings,  the
Borrower and  Subsidiary  Guarantors are not required to do so. If Bank Products
are provided by an Affiliate  of the Bank,  Holdings and the Borrower  agree to,
and shall cause each Subsidiary  Guarantor to, indemnify and hold the Agent, the
Bank and the  Lenders  harmless  from any and all costs and  obligations  now or
hereafter incurred by the Agent, the Bank or any of the Lenders which arise from
any  indemnity  given  by the  Agent  to its  Affiliates  related  to such  Bank
Products;  provided, however, that nothing contained herein is intended to limit
the rights of Holdings, the Borrower or Subsidiary  Guarantors,  with respect to
the Bank or its Affiliates,  if any, which arise as a result of the execution of
documents by and between Holdings, the Borrower or Subsidiary Guarantors and the
Bank which  relate to Bank  Products.  The  agreement  contained in this Section
shall survive termination of this Agreement.  Each of Holdings, the Borrower and
Subsidiary  Guarantors  acknowledges  and  agrees  that  the  obtaining  of Bank
Products from the Bank or the Bank's  Affiliates (a) is in the sole and absolute
discretion of the Bank or the Bank's Affiliates, and (b) is subject to all rules
and regulations of the Bank or the Bank's Affiliates.


                                   ARTICLE 2
                                INTEREST AND FEES

         2.1    INTEREST.

                (a)  INTEREST  RATES.  All  outstanding  Obligations  shall bear
interest  on the  unpaid  principal  amount  thereof  (including,  to the extent
permitted  by law,  on  interest  thereon  not paid when due) from the date made
until paid in full in cash at a rate determined by reference to the Base Rate or
the LIBOR Rate plus the Applicable Margins as set forth below, but not to exceed
the Maximum Rate. If at any time Loans are outstanding with respect to which the
Borrower has not  delivered to the Agent a notice  selecting  the interest  rate
applicable thereto in accordance herewith,  those Loans shall bear interest at a
rate  determined  by reference to the Base Rate until notice to the contrary has
been given to the Agent in  accordance  with this  Agreement and such notice has
become  effective.   Except  as  otherwise   provided  herein,  the  outstanding
Obligations shall bear interest as follows:


                                       8

<PAGE>

                    (i)  For all Base Rate Revolving Loans and other Obligations
             (other than LIBOR Rate Loans) at a fluctuating per annum rate equal
             to the Base Rate plus the Applicable Margin; and

                    (ii) For all LIBOR Revolving Loans at a per annum rate equal
             to the LIBOR Rate plus the Applicable Margin.

Each change in the Base Rate shall be reflected in the interest rate  applicable
to Base Rate Loans as of the effective date of such change. All interest charges
shall be  computed  on the basis of a year of 360 days and actual  days  elapsed
(which  results in more  interest  being paid than if computed on the basis of a
365-day year).  The Borrower shall pay to the Agent,  for the ratable benefit of
Lenders,  interest  accrued on all Base Rate Loans  quarterly  in arrears on the
first day of January,  April, July and October of each year, commencing April 1,
2002 and on the Termination  Date. The Borrower shall pay to the Agent,  for the
ratable benefit of Lenders,  interest on all LIBOR Rate Loans in arrears on each
LIBOR Interest Payment Date.

(b) Default  Rate.  If any Default or Event of Default  occurs and is continuing
and the Agent or the Required Lenders in their discretion so elect,  then, while
any such Default or Event of Default is continuing, all of the Obligations shall
bear interest at the Default Rate applicable thereto.

         2.2    CONTINUATION AND CONVERSION ELECTIONS.

                (a) The Borrower may:

                    (i)  elect, as of any Business Day, in the case of Base Rate
         Loans to convert any Base Rate Loans (or any part thereof in an  amount
         not  less  than  $1,000,000, or  that  is  in an  integral  multiple of
         $100,000 in excess thereof) into LIBOR Rate Loans; or

                    (ii)  elect, as  of  the last day of the applicable Interest
         Period, to  continue  any LIBOR  Rate  Loans  having  Interest  Periods
         expiring  on such day (or any part  thereof  in an amount not less than
         $1,000,000,  or that is in  an integral  multiple of $100,000 in excess
         thereof);

provided,  that if at any time the  aggregate  amount  of  LIBOR  Rate  Loans in
respect of any Borrowing is reduced,  by payment,  prepayment,  or conversion of
part  thereof  to  be  less  than  $1,000,000,   such  LIBOR  Rate  Loans  shall
automatically convert into Base Rate Loans.

                (b)  The  Borrower  shall  deliver  a  notice  of  continuation/
conversion ("Notice  of  Continuation/Conversion")  to the  Agent not later than
12:00 noon  (Chicago  time) at least three (3)  Business  Days in advance of the
Continuation/Conversion Date, if the Loans are to be converted into or continued
as LIBOR Rate Loans and specifying:

                    (i)  the proposed Continuation/Conversion Date;

                    (ii) the aggregate amount of Loans to be converted or
         renewed;


                                       9

<PAGE>


                    (iii)     the  type  of  Loans  resulting from the  proposed
            conversion or continuation; and

                    (iv)    the  duration  of  the  requested  Interest  Period,
            provided, however,  the Borrower  may not select an Interest  Period
            that ends after the Stated  Termination  Date; provided further that
            if  the notice shall fail  to specify the  duration of the  Interest
            Period, such Interest Period shall be one month.


               (c)  If upon the expiration of any Interest Period  applicable to
LIBOR Rate Loans, the Borrower has failed to select timely a new Interest Period
to be applicable to LIBOR Rate Loans or if any Event of Default then exists, the
Borrower  shall be deemed to have  elected to convert such LIBOR Rate Loans into
Base Rate Loans effective as of the expiration date of such Interest Period.

               (d)  The Agent will promptly notify each Lender of its receipt of
a Notice of Continuation/Conversion.  All conversions and continuations shall be
made ratably  according to the respective  outstanding  principal amounts of the
Loans with respect to which the notice was given held by each Lender.

               (e)  There may not be more than 8 different  LIBOR  Rate Loans in
effect hereunder at any time.

         2.3 MAXIMUM INTEREST RATE. In no event shall any interest rate provided
for  hereunder  exceed the maximum rate legally  chargeable  by any Lender under
applicable  law for such Lender with  respect to loans of the type  provided for
hereunder (the "Maximum Rate"). If, in any month, any interest rate, absent such
limitation,  would have  exceeded the Maximum  Rate,  then the interest rate for
that month shall be the Maximum Rate,  and, if in future  months,  that interest
rate would  otherwise be less than the Maximum  Rate,  then that  interest  rate
shall remain at the Maximum Rate until such time as the amount of interest  paid
hereunder  equals the amount of interest  which would have been paid if the same
had not been  limited by the Maximum  Rate.  In the event that,  upon payment in
full of the Obligations,  the total amount of interest paid or accrued under the
terms of this  Agreement is less than the total amount of interest  which would,
but for this  Section  2.3,  have  been paid or  accrued  if the  interest  rate
otherwise set forth in this Agreement had at all times been in effect,  then the
Borrower  shall, to the extent  permitted by applicable law, pay the Agent,  for
the account of the  Lenders,  an amount equal to the excess of (a) the lesser of
(i) the amount of  interest  which would have been  charged if the Maximum  Rate
had,  at all times,  been in effect or (ii) the amount of  interest  which would
have accrued had the interest rate otherwise set forth in this Agreement, at all
times,  been in effect over (b) the amount of interest  actually paid or accrued
under this Agreement.  If a court of competent jurisdiction  determines that the
Agent and/or any Lender has received  interest  and other  charges  hereunder in
excess of the Maximum Rate,  such excess shall be deemed received on account of,
and shall  automatically  be  applied  to  reduce,  the  Obligations  other than
interest,  in the inverse  order of  maturity,  and if there are no  Obligations
outstanding,  the Agent and/or such Lender  shall  refund to the  Borrower  such
excess.


                                       10
<PAGE>

         2.4  FEES.  The Borrower  agrees  to pay the Agent (a) for the  ratable
benefit of the Lenders,  a  non-refundable  closing fee (the  "Closing  Fee") of
$243,750 on the Closing Date, (b) for its sole benefit a  non-refundable  agency
fee of $9,000  ("Agency  Fee") paid in advance  on the  Closing  Date and on the
first day of each January, April, July and October, commencing July 1, 2002, and
(c) for its sole benefit a  non-refundable  arrangement  fee pursuant to the fee
letter dated November 16, 2001, between the Agent and the Borrower.

         2.5 UNUSED LINE FEE. On the first day of each January,  April, July and
October,  commencing  April 1, 2002,  and on the  Termination  Date the Borrower
agrees to pay in arrears  to the  Agent,  for the  account  of the  Lenders,  in
accordance  with  their  respective  Pro Rata  Shares,  an unused  line fee (the
"Unused Line Fee") equal to the Applicable  Margin per annum times the amount by
which  the  Maximum  Revolver  Amount  exceeded  the  sum of the  average  daily
outstanding  amount of Revolving Loans and the average daily undrawn face amount
of outstanding  Letters of Credit,  during the  immediately  preceding  month or
shorter  period  if  calculated  for  the  first  quarter  hereafter  or on  the
Termination  Date.  The  Unused  Line Fee  shall be  computed  on the basis of a
360-day  year for the actual  number of days  elapsed.  All  principal  payments
received  by the Agent shall be deemed to be  credited  to the  Borrower's  Loan
Account immediately upon receipt for purposes of calculating the Unused Line Fee
pursuant to this Section 2.5.

         2.6  LETTER OF CREDIT FEE. The Borrower agrees to pay to the Agent, for
the account of the Lenders, in accordance with their respective Pro Rata Shares,
for each  Letter of  Credit,  a fee (the  "Letter of Credit  Fee")  equal to the
Applicable  Margin for standby  Letters of Credit or the  Applicable  Margin for
commercial/documentary  Letters of Credit, as applicable, per annum and to Agent
for the benefit of the Letter of Credit  Issuer a fronting fee of  one-eighth of
one  percent  (0.125%)  per annum of the  undrawn  face amount of each Letter of
Credit,  and to the Letter of Credit Issuer,  all out-of-pocket  costs, fees and
expenses  incurred  by the  Letter  of  Credit  Issuer  in  connection  with the
application  for,  processing  of,  issuance  of, or  amendment to any Letter of
Credit, which costs, fees and expenses shall include a "fronting fee" payable to
the Letter of Credit Issuer. The Letter of Credit Fee shall be payable quarterly
on the first day of each January,  April, July and October,  commencing April 1,
2002, in arrears for each quarter in which a Letter of Credit is outstanding and
on the Termination Date. The Letter of Credit Fee shall be computed on the basis
of a 360-day year for the actual number of days elapsed.


                                   ARTICLE 3
                            PAYMENTS AND PREPAYMENTS

         3.1 REVOLVING LOANS. The Borrower shall repay the outstanding principal
balance of the Revolving Loans, plus all accrued but unpaid interest thereon, on
the  Termination  Date.  The  Borrower may prepay  Revolving  Loans at any time,
without  penalty,  and  reborrow  subject  to the  terms of this  Agreement.  In
addition, and without limiting the generality of the foregoing,  upon demand the
Borrower shall pay to the Agent, for account of the Lenders, the amount, without
duplication, by which the Aggregate Revolver Outstandings exceeds Availability.

         3.2 TERMINATION OF FACILITY.  The Borrower may terminate this Agreement
upon at least ten (10) Business Days' notice to the Agent and the Lenders,  upon
(a) the  payment


                                       11
<PAGE>

in full of all  outstanding  Revolving  Loans,  together  with accrued  interest
thereon, and the cancellation and return or the cash collateralization  pursuant
to Section 1.4(g) of all outstanding  Letters of Credit, (b) the payment in full
in cash of all reimbursable expenses and other Obligations, and (c) with respect
to any LIBOR Rate Loans  prepaid,  payment of the amounts due under Section 4.4,
if any.

         3.3   [INTENTIONALLY DELETED].

         3.4   PREPAYMENTS.


               (a)  One  Business  Day  after  receipt  by the  Borrower  or its
Subsidiaries  of  cash  proceeds  of  any  asset  disposition  or  insurance  or
condemnation  proceeds received  pursuant to Section 7.6 (excluding  proceeds of
asset  dispositions  permitted by Section  7.9(a) or  insurance or  condemnation
proceeds  permitted to be  reinvested  pursuant to Section  7.6)),  the Borrower
shall  prepay  the Loans in an  amount  equal to all such  proceeds,  net of (A)
commissions  and other  reasonable  and customary  transaction  costs,  fees and
expenses  properly  attributable to such transaction and payable by the Borrower
or  its   Subsidiaries   in  connection   therewith  (in  each  case,   paid  to
non-Affiliates),  (B) transfer  taxes,  (C) amounts payable to holders of senior
Liens (to the extent such Liens constitute  Permitted Liens hereunder),  if any,
and (D) an  appropriate  reserve  for income  taxes in  accordance  with GAAP in
connection  therewith ("Net Proceeds").  Any such prepayment shall be applied in
accordance with Section 3.4(b).

               (b) Prepayments from proceeds of asset  dispositions or insurance
or  condemnation  proceeds in accordance  with Section  3.4(a) shall be applied,
first, to pay the principal of the Revolving Loans,  second, to accrued interest
with respect to the Revolving Loans, and third to cash collateralize outstanding
Letters of Credit;  provided,  however,  that if an Event of Default  shall have
occurred and be continuing, such prepayments shall be applied, first, to accrued
interest with respect to the Revolving  Loans,  second,  to pay the principal of
the Revolving  Loans,  and third to cash  collateralize  outstanding  Letters of
Credit.

               (c) No provision contained in this Section 3.4 shall constitute a
consent to an asset  disposition that is otherwise not permitted by the terms of
this Agreement.

               (d) Amounts prepaid may be reborrowed;  provided,  however,  that
upon the sale of, or the  receipt by the  Borrower  or its  Subsidiaries  of any
insurance or  condemnation  proceeds with respect to, any Equipment,  fixture or
Real Estate  reflected  in the  appraisal  by which the Fixed  Asset  Amount was
determined, the Fixed Asset Amount will be permanently reduced (the "Fixed Asset
Amount  Reduction") by 75% of the orderly  liquidation  value (as defined in the
aforementioned  appraisal)  of the  Equipment or fixture sold or disposed of and
70% of the fair market value (as defined in the aforementioned appraisal) of the
Real Estate sold or disposed of; provided,  further,  however, that with respect
to Equipment in which the Borrower or its Subsidiaries are permitted to reinvest
the  proceeds of such sale  pursuant to Section  7.6 or Section  7.9,  the Fixed
Asset  Amount  Reduction  shall  occur  only if (i) the  sale  or  insurance  or
condemnation  proceeds are not reinvested within the time period provided for in
Section  7.6 or  Section  7.9 and (ii) the  Equipment  or fixture  purchased  to
replace such sold or


                                       12

<PAGE>


damaged or  destroyed  Equipment or fixture has a value which is not, in Agent's
reasonable  discretion,  at least  equal to the value of such sold or damaged or
destroyed Equipment.

         3.5   LIBOR RATE LOAN PREPAYMENTS.  In connection  with any prepayment,
if any LIBOR Rate Loans are prepaid prior to the expiration date of the Interest
Period  applicable  thereto,  the Borrower  shall pay to the Lenders the amounts
described in Section 4.4.

         3.6   PAYMENTS BY THE BORROWER.

               (a) All payments to be made by the Borrower shall be made without
set-off,  recoupment or  counterclaim.  Except as otherwise  expressly  provided
herein,  all payments by the Borrower shall be made to the Agent for the account
of the  Lenders,  at the  account  designated  by the Agent and shall be made in
Dollars and in immediately  available  funds,  no later than 12:00 noon (Chicago
time) on the date specified herein. Any payment received by the Agent after such
time shall be deemed (for purposes of  calculating  interest  only) to have been
received  on the  following  Business  Day and  any  applicable  interest  shall
continue to accrue.  After an Activation Event has occurred and Agent has issued
any related notice  required  under any Blocked  Account  Agreement,  solely for
purposes of calculating  interest accrued on the Revolving Loan,  payments shall
be credited to the Loan  Account  after an  additional  one  Business  Day after
receipt of such payments in immediately available funds.

               (b)  Subject to the  provisions  set forth in the  definition  of
"Interest  Period",  whenever  any payment is due on a day other than a Business
Day, such payment shall be due on the following Business Day, and such extension
of time shall in such case be included in the  computation  of interest or fees,
as the case may be.

         3.7 PAYMENTS AS REVOLVING LOANS. At the election of Agent, all payments
of principal, interest,  reimbursement obligations in connection with Letters of
Credit and Credit Support for Letters of Credit,  fees,  premiums,  reimbursable
expenses  and other sums  payable  hereunder,  may be paid from the  proceeds of
Revolving Loans made hereunder.  The Borrower hereby irrevocably  authorizes the
Agent to charge the Loan Account for the purpose of paying all amounts from time
to time due hereunder and agrees that all such amounts charged shall  constitute
Revolving Loans (including Non-Ratable Loans and Agent Advances).

         3.8  APPORTIONMENT, APPLICATION AND REVERSAL OF PAYMENTS. Principal and
interest payments shall be apportioned  ratably among the Lenders  (according to
the unpaid principal  balance of the Loans to which such payments relate held by
each  Lender) and  payments of the fees shall,  as  applicable,  be  apportioned
ratably  among the  Lenders,  except  for fees  payable  solely to Agent and the
Letter of Credit Issuer and except as provided in Section 11.1(b).  All payments
shall be remitted to the Agent and all such  payments  not relating to principal
or interest of specific Loans, or not constituting payment of specific fees, and
all  proceeds of Accounts or other  Collateral  received by the Agent,  shall be
applied, ratably, subject to the provisions of this Agreement, first, to pay any
fees,   indemnities  or  expense   reimbursements,   including  all  such  fees,
indemnities or expense reimbursements relating to Bank Products, then due to the
Agent from Holdings, the Borrower or the Borrower's Subsidiaries; second, to pay
any  expense  reimbursements  then  due to the  Lenders  from  Holdings  and its
Subsidiaries under the Loan Documents;  third, to pay interest due in respect of
all Loans,  including  Non-Ratable


                                       13

<PAGE>

Loans and Agent Advances;  fourth, to pay or prepay principal of the Non-Ratable
Loans and Agent  Advances;  fifth,  to pay or prepay  principal of the Revolving
Loans (other than Non-Ratable Loans and Agent Advances) and unpaid reimbursement
obligations  in respect of Letters of Credit;  sixth,  to pay an amount to Agent
equal  to all  outstanding  Letter  of  Credit  Obligations  to be  held as cash
collateral for such  Obligations if required under Section 1.4(g);  and seventh,
to the  payment of any other  Obligation  to the Agent or any Lender by Holdings
and its  Subsidiaries  under the Loan Documents or documents in connection  with
Bank  Products.  Notwithstanding  anything  to the  contrary  contained  in this
Agreement, unless so directed by the Borrower, or unless an Event of Default has
occurred  and is  continuing,  neither the Agent nor any Lender  shall apply any
payments which it receives to any LIBOR Rate Loan,  except (a) on the expiration
date of the Interest  Period  applicable  to any such LIBOR Rate Loan, or (b) in
the event, and only to the extent, that there are no outstanding Base Rate Loans
and, in any event,  the Borrower shall pay LIBOR  breakage  losses in accordance
with Section 4.4. So long as an Event of Default has occurred and is continuing,
the Agent and the Lenders shall have the continuing and exclusive right to apply
and reverse and reapply any and all such proceeds and payments to any portion of
the Obligations.  If reasonably  requested by the Borrower,  Agent shall provide
the Borrower with an explanation  describing any reversal and  reapplication  of
any such proceeds.

         3.9  INDEMNITY FOR RETURNED  PAYMENTS.  If after receipt of any payment
which is  applied  to the  payment  of all or any part of the  Obligations,  the
Agent,  any  Lender,  the Bank or any  Affiliate  of the Bank is for any  reason
compelled  to  surrender  such  payment or proceeds to any Person  because  such
payment or  application of proceeds is  invalidated,  declared  fraudulent,  set
aside, determined to be void or voidable as a preference,  impermissible setoff,
or a diversion of trust funds, or for any other reason,  then the Obligations or
part thereof  intended to be satisfied  shall be revived and  continued and this
Agreement  shall  continue in full force as if such  payment or proceeds had not
been  received by the Agent or such Lender and the  Borrower  shall be liable to
pay to the Agent and the Lenders,  and hereby does  indemnify  the Agent and the
Lenders  and hold the  Agent and the  Lenders  harmless  for the  amount of such
payment or proceeds surrendered. The provisions of this Section 3.9 shall be and
remain effective  notwithstanding  any contrary action which may have been taken
by the Agent or any  Lender in  reliance  upon such  payment or  application  of
proceeds,  and any such contrary  action so taken shall be without  prejudice to
the Agent's and the Lenders'  rights under this Agreement and shall be deemed to
have been conditioned upon such payment or application of proceeds having become
final and  irrevocable.  The  provisions  of this Section 3.9 shall  survive the
termination of this Agreement.

         3.10  AGENT'S AND LENDERS' BOOKS AND RECORDS;  MONTHLY STATEMENTS.  The
Agent shall record the principal  amount of the Loans owing to each Lender,  the
undrawn  face  amount of all  outstanding  Letters of Credit  and the  aggregate
amount of unpaid  reimbursement  obligations  outstanding  with  respect  to the
Letters of Credit from time to time on its books.  In addition,  each Lender may
note the date and amount of each  payment or  prepayment  of  principal  of such
Lender's Loans in its books and records.  Failure by Agent or any Lender to make
such  notation  shall  not  affect  the  obligations  of the  Borrower  and  its
Subsidiaries  with  respect to the Loans or the Letters of Credit.  Holdings and
the Borrower agree, and the Borrower shall cause its Subsidiaries to agree, that
the Agent's and each Lender's books and records  showing the Obligations and the
transactions  pursuant to this Agreement and the other Loan  Documents  shall be
admissible in any action or proceeding arising  therefrom,  and shall constitute
rebuttably


                                       14
<PAGE>

presumptive  proof  thereof,  irrespective  of whether  any  Obligation  is also
evidenced by a promissory  note or other  instrument.  The Agent will provide to
the Borrower a monthly  statement  of Loans,  payments,  and other  transactions
pursuant  to this  Agreement.  Such  statement  shall be deemed  correct  and an
account  stated  (except for  reversals and  reapplications  of payments made as
provided  in Section 3.8 and  corrections  of errors  discovered  by the Agent),
unless the Borrower  notifies the Agent in writing to the contrary  within sixty
(60) days after such statement is rendered. In the event a timely written notice
of  objections is given by the  Borrower,  only the items to which  exception is
expressly  made (and  interest and fees accrued  with respect  thereto)  will be
considered to be disputed by the Borrower.


                                   ARTICLE 4
                     TAXES, YIELD PROTECTION AND ILLEGALITY

         4.1   TAXES.

               (a) Any and all payments by the Borrower or its  Subsidiaries  to
each Lender or the Agent under this  Agreement and any other Loan Document shall
be made free and clear of, and without deduction or withholding for any Taxes or
Other  Taxes,  unless  required  by law or  administrative  or court  order.  In
addition,  the  Borrower  shall,  or it shall cause its  Subsidiaries  to, where
applicable, pay all Other Taxes.

               (b) The  Borrower  agrees to  indemnify  and hold  harmless  each
Lender and the Agent for the full amount of Taxes or Other Taxes  (including any
Taxes or Other Taxes imposed by any  jurisdiction  on amounts payable under this
Section) paid by any Lender or the Agent and any liability (including penalties,
interest,  additions  to tax and  expenses)  arising  therefrom  or with respect
thereto,  whether or not such Taxes or Other  Taxes  were  correctly  or legally
asserted.  Payment under this indemnification shall be made within 30 days after
the date such Lender or the Agent makes written  demand  therefor.  The Borrower
shall have the right to contest  such Taxes or Other Taxes with the  cooperation
of Agent and Lenders.

               (c) If the Borrower or its Subsidiaries  shall be required by law
to deduct or  withhold  any Taxes or Other  Taxes  from or in respect of any sum
payable hereunder to any Lender or the Agent, then:

                    (i) the sum payable  shall be increased as necessary so that
          after  making all  required  deductions  and  withholdings  (including
          deductions  and  withholdings  applicable to  additional  sums payable
          under this  Section)  such  Lender or the  Agent,  as the case may be,
          receives an amount equal to the sum it would have received had no such
          deductions or withholdings been made;

                    (ii) the Borrower shall, or it shall cause its  Subsidiaries
          to, where applicable, make such deductions and withholdings;

                    (iii) the Borrower shall, or it shall cause its Subsidiaries
          to, where applicable,  pay the full amount deducted or withheld to the
          relevant  taxing  authority  or other  authority  in  accordance  with
          applicable law; and


                                       15

<PAGE>


                    (iv) the Borrower shall, or it shall cause its  Subsidiaries
          to,  where  applicable,  also pay to each  Lender or the Agent for the
          account of such Lender,  at the time interest is paid,  all additional
          amounts which the respective Lender specifies as necessary to preserve
          the  after-tax  yield such Lender would have received if such Taxes or
          Other Taxes had not been imposed.

               (d)  At the Agent's request, within 30 days after the date of any
payment by the Borrower of Taxes or Other Taxes, the Borrower shall, or it shall
cause its Subsidiaries to, where applicable, furnish the Agent the original or a
certified copy of a receipt  evidencing  payment  thereof,  or other evidence of
payment satisfactory to the Agent.

               (e) If the Borrower is required to pay additional  amounts to any
Lender or the Agent pursuant to subsection (b) or (c) of this Section, then such
Lender  shall use  reasonable  efforts  (consistent  with  legal and  regulatory
restrictions)  to  change  the  jurisdiction  of  its  lending  office  so as to
eliminate  any such  additional  payment by the  Borrower  which may  thereafter
accrue,  if  such  change  in the  judgment  of  such  Lender  is not  otherwise
disadvantageous to such Lender.

         4.2   ILLEGALITY.

               (a)  If  any  Lender  determines  that  the  introduction  of any
Requirement  of  Law,  or  any  change  in any  Requirement  of  Law,  or in the
interpretation  or  administration  of any  Requirement  of  Law,  has  made  it
unlawful, or that any central bank or other Governmental  Authority has asserted
that it is unlawful,  for any Lender or its  applicable  lending  office to make
LIBOR Rate Loans, then, on notice thereof by that Lender to the Borrower through
the Agent,  any  obligation  of that  Lender to make  LIBOR Rate Loans  shall be
suspended  until  that  Lender  notifies  the  Agent and the  Borrower  that the
circumstances giving rise to such determination no longer exist.

               (b) If a Lender  determines  that it is unlawful to maintain  any
LIBOR Rate Loan, the Borrower shall, upon its receipt of notice of such fact and
demand  from such Lender  (with a copy to the Agent),  prepay in full such LIBOR
Rate Loans of that Lender  then  outstanding,  together  with  interest  accrued
thereon and amounts  required  under Section 4.4,  either on the last day of the
Interest Period thereof,  if that Lender may lawfully  continue to maintain such
LIBOR Rate Loans to such day, or  immediately,  if that Lender may not  lawfully
continue to maintain  such LIBOR Rate Loans.  If the  Borrower is required to so
prepay  any LIBOR  Rate  Loans,  then  concurrently  with such  prepayment,  the
Borrower shall borrow from the affected Lender, in the amount of such repayment,
a Base Rate Loan.

         4.3   INCREASED COSTS AND REDUCTION OF RETURN.

               (a)  If  any  Lender  determines  that  due  to  either  (i)  the
introduction of or any change in the  interpretation of any law or regulation or
(ii) the  compliance  by that  Lender  with any  guideline  or request  from any
central bank or other Governmental Authority (whether or not having the force of
law), there shall be any increase in the cost to such Lender of agreeing to make
or making,  funding or maintaining any LIBOR Rate Loans, then the Borrower shall
be liable for,  and shall from time to time,  upon  demand  (with a copy of such
demand  to


                                       16

<PAGE>

be  sent  to the  Agent),  pay to the  Agent  for the  account  of such  Lender,
additional  amounts  as are  sufficient  to  compensate  such  Lender  for  such
increased costs.

               (b) If any Lender shall have determined that (i) the introduction
of any Capital  Adequacy  Regulation,  (ii) any change in any  Capital  Adequacy
Regulation,  (iii) any change in the  interpretation  or  administration  of any
Capital Adequacy Regulation by any central bank or other Governmental  Authority
charged with the interpretation or administration thereof, or (iv) compliance by
such Lender or any corporation or other entity  controlling such Lender with any
Capital  Adequacy  Regulation,  affects  or would  affect  the amount of capital
required or expected to be maintained by such Lender or any corporation or other
entity  controlling such Lender and determines  (taking into  consideration such
Lender's  or such  corporation's  or other  entity's  policies  with  respect to
capital adequacy and such Lender's desired return on capital) that the amount of
such capital is increased as a consequence of its Commitments, loans, credits or
obligations  under  this  Agreement,  then,  upon  demand of such  Lender to the
Borrower through the Agent, the Borrower shall pay to such Lender,  from time to
time as specified by such Lender,  additional  amounts  sufficient to compensate
such Lender for such increase.

         4.4   FUNDING LOSSES. The Borrower shall reimburse each Lender and hold
each Lender harmless from any loss  or  expense which such Lender may sustain or
incur as a consequence of:

               (a)    the failure of the  Borrower to make on a timely basis any
         payment of principal of any LIBOR Rate Loan;

               (b)    the failure of the Borrower to borrow, continue or convert
         a Loan  after the  Borrower  has  given (or is deemed to have  given) a
         Notice of Borrowing or a Notice of Continuation/Conversion; or

               (c) the prepayment or other payment (including after acceleration
         thereof) of any  LIBOR  Rate Loans on a day that is not the last day of
         the relevant Interest Period;

including any such loss of  anticipated  profit and any loss or expense  arising
from the  liquidation  or  reemployment  of funds obtained by it to maintain its
LIBOR Rate Loans or from fees payable to terminate  the deposits from which such
funds were obtained.  The Borrower  shall also pay any customary  administrative
fees charged by any Lender in connection with the foregoing.

         4.5  INABILITY TO DETERMINE RATES. If the Agent determines that for any
reason adequate and reasonable means do not exist for determining the LIBOR Rate
for any requested Interest Period with respect to a proposed LIBOR Rate Loan, or
if the Agent or Lenders determine that the LIBOR Rate for any requested Interest
Period with respect to a proposed LIBOR Rate Loan does not adequately and fairly
reflect the cost to the Lenders of funding  such Loan,  in each case,  the Agent
will promptly so notify the Borrower and each Lender. Thereafter, the obligation
of the Lenders to make or maintain LIBOR Rate Loans hereunder shall be suspended
until the Agent revokes such notice in writing. Upon receipt of such notice, the
Borrower may revoke any Notice of Borrowing or Notice of Continuation/Conversion
then  submitted by it. If the Borrower does not revoke such Notice,  the Lenders
shall make,  convert or


                                       17

<PAGE>

continue the Loans, as proposed by the Borrower,  in the amount specified in the
applicable  notice  submitted  by the  Borrower,  but such Loans  shall be made,
converted or continued as Base Rate Loans instead of LIBOR Rate Loans.

         4.6    CERTIFICATES OF AGENT.  If any  Lender claims  reimbursement  or
compensation  under this Article 4, Agent shall determine the amount thereof and
shall deliver to the Borrower (with a copy to the affected Lender) a certificate
setting forth in reasonable  detail the amount  payable to the affected  Lender,
and such certificate  shall be presumed to be correct in the absence of manifest
error.

         4.7    SURVIVAL. The agreements and obligations of the Borrower in this
Article 4 shall survive the payment of all other Obligations.


                                   ARTICLE 5
                BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES

         5.1    BOOKS AND RECORDS. Holdings and the Borrower shall, and Borrower
shall cause its Subsidiaries to,  maintain,  at all times,  correct and complete
books,  records and accounts in which  complete,  correct and timely entries are
made of its transactions in accordance with GAAP applied  consistently  with the
audited  Financial  Statements  required  to be  delivered  pursuant  to Section
5.2(a).   Holdings  and  the  Borrower  shall,  and  Borrower  shall  cause  its
Subsidiaries to, by means of appropriate  entries,  reflect in such accounts and
in all Financial  Statements  proper  liabilities and reserves for all taxes and
proper  provision for  depreciation  and amortization of property and bad debts,
all in accordance with GAAP. Holdings and the Borrower shall, and Borrower shall
cause its Subsidiaries to, maintain at all times books and records pertaining to
the  Collateral in such detail,  form and scope as the Agent or any Lender shall
reasonably require,  including,  but not limited to, records of (a) all payments
received and all credits and  extensions  granted with respect to the  Accounts;
(b) the return, rejection,  repossession,  stoppage in transit, loss, damage, or
destruction  of  any  Inventory;  and  (c)  all  other  dealings  affecting  the
Collateral customarily recorded in such books and records.

         5.2    FINANCIAL INFORMATION.   Holdings  and  its  Subsidiaries  shall
promptly  furnish to each Lender,  all such  financial  information as the Agent
shall  reasonably  request.  Without  limiting the  foregoing,  Holdings and its
Subsidiaries will furnish to the Agent, in sufficient copies for distribution by
the Agent to each  Lender,  in such  detail as the  Agent or the  Lenders  shall
request, the following:

                (a) As  soon as  available,  but in any  event  not  later  than
ninety-five (95) days after the close of each Fiscal Year,  consolidated audited
balance  sheets,  and income  statements,  cash flow  statements  and changes in
stockholders'  equity for Holdings and its Subsidiaries and the Borrower and its
Subsidiaries for such Fiscal Year, and the accompanying  notes thereto,  setting
forth in each case in comparative form figures for the previous Fiscal Year, all
in reasonable  detail,  fairly presenting the financial position and the results
of operations of Holdings and its Subsidiaries the Borrower and its Subsidiaries
as at the date  thereof  and for the Fiscal  Year then  ended,  and  prepared in
accordance  with GAAP.  Such  statements  shall be examined in  accordance  with
generally  accepted  auditing  standards by and, in the case of such  statements
performed on a consolidated  basis,  accompanied by a report thereon unqualified


                                       18

<PAGE>

in any  respect of  independent  certified  public  accountants  selected by the
Borrower and reasonably  satisfactory  to the Agent.  Holdings and the Borrower,
simultaneously  with retaining such  independent  public  accountants to conduct
such annual audit,  shall send a letter to such accountants,  with a copy to the
Agent  and the  Lenders,  notifying  such  accountants  that one of the  primary
purposes for retaining such  accountants'  services and having audited financial
statements  prepared  by them  is for use by the  Agent  and  the  Lenders.  The
Borrower hereby authorizes the Agent to communicate  directly with its certified
public  accountants  and, by this  provision,  authorizes  those  accountants to
disclose to, and discuss  with the Agent any and all  financial  statements  and
other  supporting  financial  documents and schedules  relating to the Borrower;
provided  that the Agent  shall  provide  prior  notice to  Holdings  of Agent's
intention to communicate  with such accountants and such  communication  will be
made with the involvement of a representative  of the Borrower (and the Borrower
hereby  agrees to make such  representative  available  so as to not hinder such
communication).

                (b) As soon as available, but in any event not later than thirty
(30) days after the end of each fiscal  month,  consolidated  unaudited  balance
sheets of Holdings and its  Subsidiaries  and the Borrower and its  consolidated
Subsidiaries  as at the end of such month,  and  consolidated  unaudited  income
statements and cash flow  statements for Holdings and its  Subsidiaries  and the
Borrower  and its  consolidated  Subsidiaries  for such month and for the period
from the  beginning of the Fiscal Year to the end of such fiscal  month,  all in
reasonable  detail,  fairly  presenting  the  financial  position and results of
operations  of  Holdings  and  its   Subsidiaries   and  the  Borrower  and  its
consolidated  Subsidiaries as at the date thereof and for such periods,  and, in
each case,  in  comparable  form  (except  for  Holdings  until such  comparable
information is available but in no event later than April 30, 2003), figures for
the  corresponding  period  in the  prior  Fiscal  Year and in the  budget,  and
prepared in accordance with GAAP applied consistently with the audited Financial
Statements required to be delivered pursuant to Section 5.2(a). Holdings and the
Borrower  will  deliver  to Agent  within  fifty (50) days after the end of each
quarter,  a copy of its 10-Q filed with the SEC. Holdings and the Borrower shall
certify by a certificate  signed by their chief financial  officer that all such
statements  have  been  prepared  in  accordance  with GAAP and  present  fairly
Holdings and the Borrower's  financial  position as at the dates thereof and its
results of operations  for the periods then ended,  subject to normal  recurring
accruals and adjustments considered necessary.

                (c)  With  each  of  the  annual  audited  Financial  Statements
delivered pursuant to Section 5.2(a), a certificate of the independent certified
public  accountants  that examined  such  statement to the effect that they have
reviewed and are  familiar  with this  Agreement  and that,  in  examining  such
Financial  Statements,  they did not become aware of any fact or condition which
then  constituted  a Default or Event of  Default  with  respect to a  financial
covenant,  except for those,  if any,  described  in  reasonable  detail in such
certificate.

                (d)  With  each of the  annual  audited  and  monthly  unaudited
Financial  Statements delivered pursuant to Section 5.2(a) or (b), a certificate
of the chief  financial  officer of the  Borrower  setting  forth in  reasonable
detail the calculations  required to establish that the Borrower and/or Holdings
was in compliance with the covenants set forth in Section 7.23 and Section 7.24,
as applicable,  during the period covered in such Financial Statements and as at
the end  thereof.  Within  thirty  (30)  days  after  the end of each  month,  a
certificate of the chief financial  officer of the Borrower stating that, except
as  explained  in  reasonable  detail  in  such


                                       19

<PAGE>

certificate,  (i) all of the  representations  and  warranties of Holdings,  the
Borrower and its  Subsidiaries  contained in this  Agreement  and the other Loan
Documents  are correct and complete in all  material  respects as at the date of
such  certificate  as if made at such time,  except for those that speak as of a
particular date, (ii) Holdings,  the Borrower and its  Subsidiaries  are, at the
date of such certificate, in compliance in all material respects with all of its
respective  covenants  and  agreements  in this  Agreement  and the  other  Loan
Documents,  (iii) no Default or Event of Default  then exists or existed  during
the period covered by the Financial  Statements for such month,  (iv) describing
and  analyzing  in  reasonable   detail  all  material  trends,   changes,   and
developments  in each  and all  Financial  Statements,  and (v)  explaining  the
variances of the figures in the corresponding quarterly budgets and prior Fiscal
Year financial statements, provided, however, the preceding clauses (iv) and (v)
shall  only  be  required  quarterly.  If  such  certificate  discloses  that  a
representation  or warranty is not correct or  complete,  or that a covenant has
not been complied with, or that a Default or Event of Default existed or exists,
such certificate  shall set forth what action the Borrower has taken or proposes
to take with respect thereto.

                (e)  No sooner  than  sixty  (60) days before  and not more than
thirty (30) days after the beginning of each Fiscal Year,  annual  forecasts (to
include  forecasted  consolidated  balance  sheets and cash flow  statements and
consolidated  and  consolidating   income   statements)  for  Holdings  and  its
Subsidiaries and the Borrower and its Subsidiaries as at the end of and for each
month of such Fiscal Year.

                (f)  Promptly and after filing with the PBGC and the IRS, a copy
of each annual  report or other  filing  filed with  respect to each Plan of the
Borrower and its Subsidiaries.

                (g)  Promptly upon the filing thereof, copies of all reports, if
any,  to or  other  documents  filed by  Holdings,  the  Borrower  or any of the
Borrower's  Subsidiaries  with the Securities and Exchange  Commission under the
Exchange  Act,  and all  reports,  notices,  or  statements  sent or received by
Holdings,  the  Borrower or any of the  Borrower's  Subsidiaries  to or from the
holders of any equity interests of the Borrower (other than routine non-material
correspondence sent by shareholders of the Borrower to the Borrower) or any such
Subsidiary or of any Debt of the Borrower or any of its Subsidiaries  registered
under the  Securities  Act of 1933 or to or from the trustee under any indenture
under which the same is issued.

                (h)  As soon as  available,  but in any  event  not  later  than
fifteen (15) days after the Borrower's or Holdings'  receipt thereof,  a copy of
all final  management  letters  prepared  for the  Borrower  or  Holdings by any
independent certified public accountants of Holdings or the Borrower.

                (i)  Promptly after their preparation  and  distribution  to its
shareholders,  copies of any and all proxy statements, financial statements, and
reports which Holdings and the Borrower makes available to its shareholders.

                (j)  If requested by the Agent,  promptly  after filing with the
IRS, a copy of each tax return filed by Holdings or by any of its Subsidiaries.


                                       20

<PAGE>


                (k)  As soon as  available, but in any event within  twenty (20)
days  after the end of each  fiscal  month  (for such  month) a  Borrowing  Base
Certificate supporting the information in accordance with Section 5.4; provided,
that at any time after an  Activation  Event  occurs and before the Borrower can
demonstrate  that the  Borrower  has  maintained  Availability  of not less than
$12,500,000  for any  period of ninety  (90)  consecutive  days  following  such
Activation Event, Agent may require more frequent collateral reporting.

                (l)  Borrower shall cause each Canadian  Subsidiary Guarantor to
cause its bank to furnish to the Agent,  on the last day of each fiscal quarter,
original statements of all its bank accounts, including, without limitation, all
of its Canadian bank accounts.

                (m)  Such additional  information as the Agent and/or any Lender
may from time to time  reasonably  request  regarding the financial and business
affairs of Holdings or any Subsidiary.

         5.3    NOTICES TO THE LENDERS.  The Borrower shall notify the Agent and
the Lenders in writing of the following matters at the following times:

                (a)  Immediately after becoming aware of any Default or Event of
          Default;

                (b)  Immediately after becoming  aware  of the  assertion by the
          holder  of any  capital  stock of  Holdings,  the  Borrower  or any of
          Borrower's  Subsidiaries  or the holder of any Debt of the Borrower or
          any Subsidiary in a face amount in excess of $1,000,000 that a default
          exists with respect thereto or that the Borrower or such Subsidiary is
          not  in  compliance   with  the  terms  thereof,   or  the  threat  or
          commencement by such holder of any enforcement  action because of such
          asserted default or non-compliance;

                (c)    Immediately  after  becoming  aware  of   any   event  or
          circumstance which  could  reasonably  be  expected to have a Material
          Adverse Effect;

                (d)    Immediately  after  becoming  aware  of  any  pending  or
          threatened action, suit,  or proceeding, by any Person, or any pending
          or threatened  investigation  by a Governmental Authority, which could
          reasonably be expected to have a Material Adverse Effect;

               (e) Immediately after becoming aware of any pending or threatened
          strike,  work stoppage,  unfair labor practice  claim,  or other labor
          dispute  affecting the Borrower or any of its Subsidiaries in a manner
          which could reasonably be expected to have a Material Adverse Effect;

               (f) Immediately after becoming aware of any violation of any law,
          statute,   regulation,   or  ordinance  of  a  Governmental  Authority
          affecting  the Borrower or any  Subsidiary  which could  reasonably be
          expected to have a Material Adverse Effect;


                                       21

<PAGE>


               (g)  Immediately  after receipt of any notice of any violation by
          the Borrower or any of its Subsidiaries of any Environmental Law which
          could reasonably be expected to have a Material Adverse Effect or that
          any  Governmental  Authority has asserted in writing that the Borrower
          or any  Subsidiary is not in  compliance  with any  Environmental  Law
          which could  reasonably be expected to have a Material  Adverse Effect
          or is  investigating  the Borrower's or such  Subsidiary's  compliance
          therewith;

               (h)  Immediately  after  receipt of any  written  notice that the
          Borrower or any of its  Subsidiaries is or may be liable to any Person
          as a result of the Release or threatened Release of any Contaminant or
          that the Borrower or any Subsidiary is subject to investigation by any
          Governmental  Authority  evaluating  whether  any  remedial  action is
          needed  to  respond  to  the  Release  or  threatened  Release  of any
          Contaminant  which, in either case, is reasonably  likely to give rise
          to liability in excess of $1,000,000;

               (i)  Immediately  after  receipt  of any  written  notice  of the
          imposition  of any  Environmental  Lien  against  any  property of the
          Borrower or any of its Subsidiaries;

               (j)  Any change in the Borrower's or its Subsidiaries' name as it
          appears in the state of its incorporation or other organization, state
          of  incorporation  or  organization,  type of  entity,  organizational
          identification   number,   locations   of   Collateral,   or  form  of
          organization, trade names under which the Borrower or its Subsidiaries
          will sell  Inventory or create  Accounts,  or to which  instruments in
          payment of Accounts may be made payable,  in each case at least thirty
          (30) days prior thereto; provided,  however, that when Collateral with
          a book value less than  $200,000 is  relocated in  connection  with an
          Event within the United  States or Canada  (except  Quebec),  for less
          than thirty (30) days the Borrower or its  Subsidiaries  shall provide
          Agent with prior notice of the  relocation of such  Collateral as soon
          as the Borrower can determine the new location if the Borrower has not
          previously notified the Agent of such Event;

               (k)  Within ten (10)  Business  Days  after the  Borrower  or its
          Subsidiaries  or any ERISA  Affiliate knows or has reason to know that
          an ERISA Event or a prohibited transaction (as defined in Sections 406
          of ERISA and 4975 of the Code) has  occurred,  and,  when  known,  any
          action  taken  or  threatened  by the IRS,  the DOL or the  PBGC  with
          respect thereto which could  reasonably be expected to have a Material
          Adverse Effect;

               (l)  Upon request,  or, in the event that such filing  reflects a
          significant change with respect to the matters covered thereby, within
          three (3) Business  Days after the filing  thereof with the PBGC,  the
          DOL or the IRS,  as  applicable,  copies  of the  following:  (i) each
          annual report (form 5500 series),  including Schedule B thereto, filed
          with the PBGC,  the DOL or the IRS with  respect to each Plan,  (ii) a
          copy of each funding  waiver  request filed with the PBGC,  the DOL or
          the IRS with  respect to any Plan and all  communications  received by


                                       22

<PAGE>

          the Borrower or its Subsidiaries or any ERISA Affiliate from the PBGC,
          the DOL or the IRS with respect to such  request,  and (iii) a copy of
          each other filing or notice  filed with the PBGC,  the DOL or the IRS,
          with respect to each Plan by either the  Borrower or its  Subsidiaries
          or any ERISA Affiliate;

               (m) Upon request, copies of each actuarial report for any Plan or
          Multi-employer Plan and annual report for any Multi-employer Plan; and
          within three (3) Business Days after  receipt  thereof by the Borrower
          or its Subsidiaries or any ERISA  Affiliate,  copies of the following:
          (i) any notices of the PBGC's intention to terminate a Plan or to have
          a trustee  appointed to  administer  such Plan;  (ii) any favorable or
          unfavorable   determination   letter  from  the  IRS   regarding   the
          qualification of a Plan under Section 401(a) of the Code; or (iii) any
          notice  from  a  Multi-employer   Plan  regarding  the  imposition  of
          withdrawal liability;

               (n)  Within three (3) Business Days after the occurrence thereof:
          (i)  any  changes  in  the  benefits  of  any  existing  Plan  or  the
          establishment  of any new Plan or the commencement of contributions to
          any  Plan to which  the  Borrower  or its  Subsidiaries  or any  ERISA
          Affiliate was not previously  contributing  which changes in benefits,
          establishment  of a new plan or  commencement  of  contributions  will
          increase the Borrower's or its Subsidiaries' annual costs with respect
          thereto by an amount in excess of $1,000,000  [in the  aggregate];  or
          (ii) any  failure by the  Borrower  or its  Subsidiaries  or any ERISA
          Affiliate to make a required installment or any other required payment
          under  Section  412 of the  Code on or  before  the due  date for such
          installment or payment;

               (o)  Within  three (3) Business  Days after the  Borrower  or its
          Subsidiaries  or any ERISA  Affiliate knows or has reason to know that
          any of the following  events has or will occur:  (i) a  Multi-employer
          Plan has been or will be terminated;  (ii) the  administrator  or plan
          sponsor of a Multi-employer Plan intends to terminate a Multi-employer
          Plan; or (iii) the PBGC has instituted or will  institute  proceedings
          under Section 4042 of ERISA to terminate a Multi-employer Plan; or

               (p)  From time to time as may be reasonably  requested  by Agent,
          the Borrower shall  supplement  Schedule  6.12;  provided that no such
          supplement to Schedule 6.12 shall amend or otherwise  modify  Schedule
          6.12 or be  deemed  a  waiver  of any  Default  or  Event  of  Default
          resulting from the matters disclosed  therein,  except as consented to
          by Agent and Required Lenders in writing.

         Each notice given under this Section  shall describe the subject matter
thereof in reasonable  detail, and shall set forth the action that the Borrower,
its Subsidiary, or any ERISA Affiliate, as applicable,  has taken or proposes to
take with respect thereto.

         5.4  COLLATERAL REPORTING.  The Borrower shall, and shall cause each of
its  Subsidiaries  to,  promptly  furnish  to each  Lender,  all such  financial
information  as  the  Agent  shall  reasonably  request.  Without  limiting  the
foregoing, the Borrower will, and will cause its Subsidiaries to, furnish to the
Agent, in sufficient  copies for  distribution  by the Agent to each


                                       23
<PAGE>

Lender, in such detail as the Agent or the Lenders shall request, the following:
(a) at times  specified in Section 5.2(k),  a schedule of the Accounts  created,
credits given,  cash collected and other  adjustments to Accounts since the last
such schedule and a Borrowing Base  Certificate;  (b) on a monthly basis, by the
20th day of the following  fiscal month,  or more frequently if requested by the
Agent,  an  aging  of  the  Accounts,  together  with  a  reconciliation  to the
corresponding  Borrowing Base and general ledger;  (c) on a monthly basis by the
20th day of the following  fiscal month,  or more frequently if requested by the
Agent, a listing of accounts payable;  (d) on a monthly basis by the 20th day of
the following  fiscal month (or more  frequently  if requested by the Agent),  a
detailed  calculation  of Eligible  Accounts,  Eligible  Inventory  and Eligible
In-Transit  Inventory;  (e) on a monthly  basis by the 20th day of the following
fiscal month (or more frequently if requested by the Agent),  Inventory  reports
by category and location  (including a schedule of upcoming Events in reasonably
sufficient  detail as Agent may request),  together with a reconciliation to the
corresponding  Borrowing Base and general  ledger;  (f) upon request,  copies of
invoices  in  connection  with  Accounts,  customer  statements,  credit  memos,
remittance advices and reports,  deposit slips,  shipping and delivery documents
in connection  with  Accounts and for  Inventory  and Equipment  acquired by the
Borrower or its Subsidiaries,  purchase orders and invoices; (g) upon request, a
statement of the balance of each of the  intercompany  accounts;  (h) such other
reports as to the Collateral as the Agent shall reasonably  request from time to
time; and (i) with the delivery of each of the foregoing, a certificate executed
by an officer  thereof  certifying  as to the accuracy and  completeness  of the
foregoing.  If any  records or  reports of the  Collateral  are  prepared  by an
accounting service or other agent,  Holdings and Borrower hereby authorize,  and
the Borrower shall cause its Subsidiaries to authorize, such service or agent to
deliver  such  records,  reports,  and  related  documents  to  the  Agent,  for
distribution to the Lenders.


                                   ARTICLE 6
                     GENERAL WARRANTIES AND REPRESENTATIONS

         Each of Holdings and Borrower,  as applicable,  warrants and represents
to the Agent and the Lenders that except as hereafter  disclosed to and accepted
by the Agent and the Required Lenders in writing:

         6.1  AUTHORIZATION, VALIDITY,  AND ENFORCEABILITY OF THIS AGREEMENT AND
THE LOAN DOCUMENTS.  Holdings, the Borrower and Borrower's Subsidiaries have the
power and authority to execute, deliver and perform this Agreement and the other
Loan Documents to which they are a party, to incur the Obligations, and to grant
to the Agent  Liens  upon and  security  interests  in the  Collateral.  Each of
Holdings,  the  Borrower and  Borrower's  Subsidiaries  has taken all  necessary
action  (including  obtaining  approval of its  stockholders  if  necessary)  to
authorize its  execution,  delivery,  and  performance of this Agreement and the
other Loan  Documents to which it is a party.  This Agreement and the other Loan
Documents  to which it is a party  have  been duly  executed  and  delivered  by
Holdings, the Borrower and the Borrower's Subsidiaries and constitute the legal,
valid and binding  obligations,  as  applicable,  of Holdings,  the Borrower and
Borrower's  Subsidiaries   enforceable  against  it  in  accordance  with  their
respective  terms.  Holdings,   the  Borrower's  and  Borrower's   Subsidiaries'
execution,  delivery,  and  performance  of this  Agreement  and the other  Loan
Documents  to which  they are a party do not and  will  not  conflict  with,  or
constitute  a violation  or breach of, or result in the  imposition  of any Lien
upon the  property of  Holdings,  the  Borrower or any of its  Subsidiaries,  by
reason of the


                                       24
<PAGE>

terms of (a) any contract, mortgage, lease, agreement,  indenture, or instrument
to  which  Holdings,  the  Borrower  or such  Subsidiary  is a party or which is
binding upon it, (b) any Requirement of Law applicable to Holdings, the Borrower
or any of  Borrower's  Subsidiaries,  or (c)  the  certificate  or  articles  of
incorporation or by-laws or the limited liability company or limited partnership
agreement of Holdings, the Borrower or any of Borrower's Subsidiaries.

         6.2  VALIDITY AND PRIORITY OF SECURITY INTEREST. The provisions of this
Agreement, the Mortgage(s),  and the other Loan Documents create legal and valid
Liens on all the  Collateral in favor of the Agent,  for the ratable  benefit of
the Agent and the Lenders,  and such Liens  constitute  perfected and continuing
Liens  on all the  Collateral,  having  priority  over  all  other  Liens on the
Collateral  (except for those Liens  identified  in clauses (c),  (d), (e), (i),
(j), (k), (l), and (n) of the  definition  of Permitted  Liens  securing all the
Obligations)  and enforceable  against the Borrower and its Subsidiaries and all
third parties.

         6.3    ORGANIZATION AND QUALIFICATION.  Each  of Holdings, the Borrower
and Borrower's  Subsidiaries  (a) is duly organized or incorporated  and validly
existing in good  standing  under the laws of the state of its  organization  or
incorporation,  (b) is qualified  to do business and is in good  standing in the
jurisdictions  set forth on  Schedule  6.3 which are the only  jurisdictions  in
which  qualification  is  necessary in order for it to own or lease its property
and conduct its business other than any jurisdiction in which failure to qualify
does not have a  Material  Adverse  Effect and (c) has all  requisite  power and
authority to conduct its business and to own its property.

         6.4    CORPORATE NAME; PRIOR TRANSACTIONS. Each of the Borrower and its
Subsidiaries has not, during the past five (5) years,  been known by or used any
other  corporate  or  fictitious  name,  or  been  a  party  to  any  merger  or
consolidation, or acquired all or substantially all of the assets of any Person,
or acquired  any of its  property  outside of the  ordinary  course of business,
other than as described  on Schedule  6.4 or with  respect to Champion  Products
prior to its acquisition by CCP.

         6.5    SUBSIDIARIES AND AFFILIATES.    Schedule 6.5  is  a  correct and
complete  list of the name and  relationship  to the Borrower of each and all of
the Borrower's  Subsidiaries and other  Affiliates.  Each Subsidiary is (a) duly
incorporated  or organized and validly  existing in good standing under the laws
of its state of incorporation or organization set forth on Schedule 6.5, and (b)
qualified to do business and in good standing in each  jurisdiction in which the
failure to so qualify or be in good  standing  could  reasonably  be expected to
have a Material Adverse Effect on any such  Subsidiary's  business,  operations,
prospects,  property,  or condition  (financial  or  otherwise)  and (c) has all
requisite power and authority to conduct its business and own its property.

         6.6    FINANCIAL STATEMENTS AND PROJECTIONS.

                (a) The Borrower has  delivered to the Agent and the Lenders the
audited balance sheet and related statements of income,  retained earnings, cash
flows, and changes in stockholders  equity for the Borrower and its consolidated
Subsidiaries  as of  June  29,  2001,  and  for  the  Fiscal  Year  then  ended,
accompanied by the report thereon of the Borrower's independent certified public
accountants,  PricewaterhouseCoopers.  The  Borrower  has also


                                       25
<PAGE>

delivered to the Agent and the Lenders the  unaudited  balance sheet and related
statements  of income  and cash  flows  for the  Borrower  and its  consolidated
Subsidiaries  as of February 22, 2002.  Such  financial  statements are attached
hereto  as  Exhibit  C. All such  financial  statements  have been  prepared  in
accordance with GAAP and present  accurately and fairly in all material respects
the financial  position of the Borrower and its consolidated  Subsidiaries as at
the dates  thereof and their  results of  operations  for the periods then ended
subject to normal recurring accruals and adjustments considered necessary.

                (b) The Latest  Projections  when  submitted  to the  Lenders as
required  herein  represent  the  Borrower's  reasonable  estimate of the future
financial performance of the Borrower and its consolidated  Subsidiaries for the
periods set forth  therein.  The Latest  Projections  have been  prepared on the
basis of the assumptions set forth therein, which the Borrower believes are fair
and  reasonable  in  light  of  current  and  reasonably   foreseeable  business
conditions at the time submitted to the Lenders.

         6.7    CAPITALIZATION

                (a) The Borrower's  authorized capital stock consists  of 10,000
         shares of  common  stock,  par value  $0.01 per share, of which one (1)
         share  is  validly  issued   and   outstanding,  fully  paid  and  non-
         assessable and is owned beneficially and of record by Holdings.

                (b)  Holdings'   authorized  common  capital  stock  consists of
         (i) 1,105 shares of Series A common stock,  par value $.01 per share of
         which  1000  are  validly  issued and  outstanding or held as  treasury
         stock,  fully paid and non-assessable and (ii) 1,000 shares of Series B
         common stock,  par  value  $.01  per share,  of which  1,000 shares are
         validly  issued and  outstanding  or  held  as  treasury  stock,  fully
         paid and  non-assessable  and; in each case, are owned beneficially and
         of record by the parties listed on Schedule 6.7.

         6.8    SOLVENCY.  Each of Holdings,  the  Borrower  and  each  Canadian
Subsidiary is Solvent  prior to and after giving  effect to the Loan  Documents,
the Borrowings to be made on the Closing Date and the issuance of the Letters of
Credit to be issued on the Closing  Date,  and shall remain  Solvent  during the
term of this Agreement.

         6.9    DEBT.   After giving effect to the making of the Revolving Loans
to be made on the Closing Date, the Borrower and its Subsidiaries  have no Debt,
except (a) the  Obligations,  (b) Debt  described  on Schedule  6.9 and (c) Debt
permitted under Section 7.13.

         6.10   DISTRIBUTIONS.  Since June 28, 2001 through the Closing Date, no
Distribution has been declared,  paid, or made upon or in respect of any capital
stock or other securities of the Borrower or any of its Subsidiaries  other than
Permitted Holdings Payments.

         6.11  REAL ESTATE; LEASES.  Schedule 6.11 sets forth, as of the Closing
Date, a correct and  complete  list of all Real Estate owned by the Borrower and
all Real Estate owned by any of its  Subsidiaries,  all leases and  subleases of
real or personal  property held by the Borrower or its Subsidiaries as lessee or
sublessee  (other than leases of personal  property as to which the  Borrower or
its  Subsidiaries  is lessee or sublessee  for which the value of such  personal


                                       26

<PAGE>

property in the aggregate is less than $500,000, and all leases and subleases of
real or personal property held by the Borrower or its Subsidiaries as lessor, or
sublessor.  Each of such  leases  and  subleases  is valid  and  enforceable  in
accordance  with  its  terms  and is in  full  force  and  effect,  and,  to the
Borrower's  knowledge,  no default  by any party to any such  lease or  sublease
exists.  Each of the Borrower and its Subsidiaries has good and marketable title
in fee simple to the Real Estate  identified  on  Schedule  6.11 as owned by the
Borrower or its  Subsidiaries,  or valid leasehold  interests in all Real Estate
designated  therein as "leased"  by the  Borrower  or its  Subsidiaries  and the
Borrower or its Subsidiaries have good, indefeasible,  and merchantable title to
all of  its  other  property  reflected  on  the  February  22,  2002  Financial
Statements delivered to the Agent and the Lenders,  except as disposed of in the
ordinary  course of business  since the date  thereof,  free of all Liens except
Permitted Liens.

         6.12  PROPRIETARY  RIGHTS.  Schedule  6.12  sets  forth a  correct  and
complete list of all of the Borrower's and its Subsidiaries' Proprietary Rights.
None of the Proprietary Rights is subject to any licensing  agreement or similar
arrangement  except as set forth on Schedule 6.12. To the best of the Borrower's
knowledge,  none of the  Proprietary  Rights  infringes on or conflicts with any
other  Person's  property,  and  no  other  Person's  property  infringes  on or
conflicts with the  Proprietary  Rights that would result in an Event of Default
hereunder.  The Proprietary  Rights described on Schedule 6.12 constitute all of
the  property  of such type  necessary  to the current  and  anticipated  future
conduct of the  Borrower's  or its  Subsidiaries'  business the absence of which
would have a Material Adverse Effect.

         6.13  TRADE NAMES.   All trade names or styles under which the Borrower
or any of its Subsidiaries will sell Inventory or create  Accounts,  or to which
instruments  in payment of Accounts may be made payable,  are listed on Schedule
6.13.

         6.14  LITIGATION.  Except as set  forth on  Schedule  6.14, there is no
pending,  or to the  best  of the  Borrower's  or  its  Subsidiaries'  knowledge
threatened,  action, suit, proceeding,  or counterclaim by any Person, or to the
best of the  Borrower's or its  Subsidiaries'  knowledge,  investigation  by any
Governmental  Authority against the Borrower or its  Subsidiaries,  or any basis
for any of the foregoing,  which could reasonably be expected to have a Material
Adverse Effect.

         6.15  LABOR DISPUTES.  Except as set forth on Schedule  6.15, as of the
Closing  Date (a) there is no  collective  bargaining  agreement  or other labor
contract covering  employees of the Borrower or any of its Subsidiaries,  (b) no
such  collective  bargaining  agreement or other labor  contract is scheduled to
expire during the term of this Agreement,  (c) to the Borrower's  knowledge,  no
union or other labor  organization  is seeking to organize,  or to be recognized
as, a  collective  bargaining  unit of  employees  of the Borrower or any of its
Subsidiaries or for any similar purpose,  and (d) there is no pending or (to the
best of the Borrower's knowledge)  threatened,  strike, work stoppage,  material
unfair  labor  practice  claim,  or other  material  labor  dispute  against  or
affecting the Borrower or its Subsidiaries or their employees.

         6.16  ENVIRONMENTAL LAWS.   Except as  otherwise  disclosed on Schedule
6.16:

               (a)  The  Borrower  and its  Subsidiaries  have  complied  in all
material respects with all  Environmental  Laws and neither the Borrower nor any
Subsidiary nor any of its


                                       27

<PAGE>

presently  owned  real  property  or  presently  conducted  operations,  nor its
previously  owned real  property or prior  operations,  or any  property  now or
previously in its charge,  management or control,  is subject to any enforcement
order from or liability  agreement  with any  Governmental  Authority or private
Person  respecting  (i)  compliance  with  any  Environmental  Law or  (ii)  any
potential  liabilities  and costs or remedial action arising from the Release or
threatened Release of a Contaminant.

               (b) The Borrower and its  Subsidiaries  have obtained all permits
necessary for their current  operations under  Environmental  Laws, and all such
permits  are in good  standing  and the  Borrower  and its  Subsidiaries  are in
compliance with all material terms and conditions of such permits.

               (c) Neither the Borrower nor any of its Subsidiaries, nor, to the
best of the Borrower's  knowledge,  any of its predecessors in interest,  has in
violation of applicable law stored, treated or disposed of any hazardous waste.

               (d) Neither the Borrower nor any of its Subsidiaries has received
any summons,  complaint,  order or similar written notice  indicating that it is
not  currently in  compliance  with,  or to the  Borrower's  knowledge  that any
Governmental  Authority is investigating  its compliance with, any Environmental
Laws or that it is or may be liable to any other Person as a result of a Release
or threatened Release of a Contaminant.

               (e) To the best of the Borrower's knowledge,  none of the present
or past operations,  or any property now or previously in its charge, management
or  control,  of  the  Borrower  and  its  Subsidiaries  is the  subject  of any
investigation  by any  Governmental  Authority  evaluating  whether any remedial
action is needed to respond to a Release or threatened Release of a Contaminant.

               (f) There is not now, nor to the best of the Borrower's knowledge
has there ever been on or in the Real Estate:

                              (1)  any  underground  storage  tanks  or  surface
               impoundments,

                              (2) any asbestos-containing material, or

                              (3) any  polychlorinated  biphenyls (PCBs) used in
               hydraulic oils, electrical transformers or other equipment.

               (g) Neither the  Borrower nor any of its  Subsidiaries  has filed
any notice  under any  requirement  of  Environmental  Law  reporting a spill or
accidental  and  unpermitted  Release or  discharge  of a  Contaminant  into the
environment.

               (h) Neither the Borrower nor any of its  Subsidiaries has entered
into any  negotiations or settlement  agreements with any Person  (including the
prior owner of its property) or any  Governmental  Authority  imposing  material
obligations  or  liabilities  on the  Borrower or any of its  Subsidiaries  with
respect to any remedial  action in response to the Release of a  Contaminant  or
environmentally related claim.


                                       28
<PAGE>


                (i)  None of the products manufactured,  distributed  or sold by
the Borrower or any of its Subsidiaries contain asbestos containing material.

                (j) No Environmental Lien has attached to the Real Estate.

          6.17  NO  VIOLATION  OF  LAW.  Neither  the  Borrower  nor  any of its
Subsidiaries  is in  violation  of  any  law,  statute,  regulation,  ordinance,
judgment,  order, or decree applicable to it which violation could reasonably be
expected to have a Material Adverse Effect.

          6.18  NO DEFAULT.  Neither the Borrower nor any of its Subsidiaries is
in default with respect to any note, indenture, loan agreement, mortgage, lease,
deed, or other  agreement to which the Borrower or such Subsidiary is a party or
by which it is bound,  which  default  could  reasonably  be  expected to have a
Material Adverse Effect.

          6.19  ERISA COMPLIANCE.  Except as specifically  disclosed in Schedule
6.19:

                (a) Each Plan is in compliance in all material respects with the
applicable  provisions  of ERISA,  the Code and other federal or state law. Each
Plan which is intended to qualify under Section  401(a) of the Code has received
a favorable  determination  letter from the IRS and to the best knowledge of the
Borrower, nothing has occurred which would cause the loss of such qualification.
The Borrower and its Subsidiaries and each ERISA Affiliate has made all required
contributions to any Plan subject to Section 412 of the Code, and no application
for a funding  waiver or an extension  of any  amortization  period  pursuant to
Section 412 of the Code has been made with respect to any Plan.

                (b)  There  are no  pending  or,  to the best  knowledge  of the
Borrower,  threatened claims, actions or lawsuits, or action by any Governmental
Authority,  with respect to any Plan which has resulted or could  reasonably  be
expected to result in a Material  Adverse  Effect.  There has been no prohibited
transaction or violation of the fiduciary  responsibility  rules with respect to
any Plan which has  resulted  or could  reasonably  be  expected  to result in a
Material Adverse Effect.

                (c) (i) No ERISA Event has occurred or is reasonably expected to
occur;  (ii) no Pension Plan has any Unfunded Pension  Liability;  (iii) neither
the Borrower nor its  Subsidiaries  nor any ERISA  Affiliate  has  incurred,  or
reasonably  expects to incur, any liability under Title IV of ERISA with respect
to any Pension Plan (other than  premiums due and not  delinquent  under Section
4007 of ERISA);  (iv) neither the Borrower  nor its  Subsidiaries  nor any ERISA
Affiliate has incurred,  or reasonably  expects to incur,  any liability (and no
event has occurred which, with the giving of notice under Section 4219 of ERISA,
would result in such liability) under Section 4201 or 4243 of ERISA with respect
to a Multi-employer  Plan; and (v) neither the Borrower nor its Subsidiaries nor
any ERISA  Affiliate  has  engaged  in a  transaction  that  could be subject to
Section 4069 or 4212(c) of ERISA.

         6.20   TAXES.  The Borrower and its Subsidiaries have filed all federal
and  other tax  returns  and  reports  required  to be filed,  and have paid all
federal,  provincial,  state  and  other  taxes,  assessments,  fees  and  other
governmental charges levied or imposed upon them or their properties,  income or
assets otherwise due and payable unless such unpaid taxes and assessments  would
constitute  a Permitted  Lien or do not exceed  $50,000  individually  or in the
aggregate.


                                       29

<PAGE>


         6.21  REGULATED ENTITIES.  None of the Borrower, any Person controlling
the Borrower,  or any Subsidiary,  is an "Investment Company" within the meaning
of the Investment Company Act of 1940. Neither the Borrower nor its Subsidiaries
is subject to regulation  under the Public Utility  Holding Company Act of 1935,
the Federal Power Act, the Interstate  Commerce Act, any state public  utilities
code or law, or any other federal or state  statute or  regulation  limiting its
ability to incur indebtedness.

         6.22  USE OF PROCEEDS; MARGIN REGULATIONS.  The proceeds  of  the Loans
are to be used by the Borrower and its Subsidiaries to refinance  existing debt,
for working capital  purposes,  for Acquisitions and expansion of the businesses
of the Borrower or its Subsidiaries and for general corporate purposes.  Neither
the Borrower nor any  Subsidiary  is engaged in the  business of  purchasing  or
selling  Margin  Stock or  extending  credit for the  purpose of  purchasing  or
carrying Margin Stock.

         6.23  COPYRIGHTS,  PATENTS,  TRADEMARKS AND LICENSES,  ETC. Each of the
Borrower and its Subsidiaries  owns or is licensed or otherwise has the right to
use all of the patents,  trademarks,  service  marks,  trade names,  copyrights,
contractual franchises, licenses, rights of way, authorizations and other rights
that are  reasonably  necessary  for the  operation of its  businesses,  without
conflict  with the  rights of any other  Person.  To the best  knowledge  of the
Borrower,  no slogan or other  advertising  device,  product,  process,  method,
substance,  part or other  material  now  employed,  or now  contemplated  to be
employed,  by the Borrower or any  Subsidiary  infringes upon any rights held by
any other Person and no claim or  litigation  regarding  any of the foregoing is
pending or threatened, and no patent, invention, device, application,  principle
or any statute,  law, rule,  regulation,  standard or code is pending or, to the
knowledge of the Borrower,  proposed, which, in either case, could reasonably be
expected to have a Material Adverse Effect.

         6.24  NO  MATERIAL ADVERSE  CHANGE.  No  Material  Adverse  Effect  has
occurred  since the latest date of the  Financial  Statements  delivered  to the
Lenders.

         6.25  FULL DISCLOSURE.  None of the representations or  warranties made
by the  Borrower or any  Subsidiary  in the Loan  Documents  as of the date such
representations  and  warranties  are  made  or  deemed  made,  and  none of the
statements contained in any exhibit,  report, statement or certificate furnished
by or on behalf of the Borrower or any  Subsidiary in  connection  with the Loan
Documents  (including the offering and disclosure  materials  delivered by or on
behalf of the  Borrower or any  Subsidiary  to the Lenders  prior to the Closing
Date),  contains any untrue  statement of a material  fact or omits any material
fact  required to be stated  therein or  necessary to make the  statements  made
therein, in light of the circumstances under which they are made, not misleading
as of the time when made or delivered.

         6.26  MATERIAL  AGREEMENTS.  Schedule  6.26 hereto sets forth as of the
Closing Date all material  agreements and contracts to which the Borrower or any
of its Subsidiaries is a party or is bound as of the date hereof.

         6.27  BANK ACCOUNTS.  Schedule  6.27  contains as of the Closing Date a
complete and accurate  list of all bank  accounts  maintained by the Borrower or
any of its Subsidiaries with any bank or other financial institution.


                                       30
<PAGE>


         6.28  GOVERNMENTAL  AUTHORIZATION.  No  approval,  consent,  exemption,
authorization,   or  other  action  by,  or  notice  to,  or  filing  with,  any
Governmental  Authority or other  Person is necessary or required in  connection
with the execution,  delivery or performance  by, or  enforcement  against,  the
Borrower  or any  of its  Subsidiaries  of  this  Agreement  or any  other  Loan
Document, except as have been filed by the Borrower and its Subsidiaries.

         6.29  CCP INDEMNIFICATION.  The  representations  and  warranties  made
pursuant  to Article 6 shall be deemed to exclude  from the scope of the matters
covered  thereby any matter that is covered by Section 8.2 of the Champion Stock
Purchase   Agreement,   except  any  such  matter  relating  to  any  claim  for
indemnification  asserted against Sara Lee Corporation under said Section 8.2 as
to which,  to the Borrower's  knowledge,  the Sara Lee Corporation has failed to
assume the defense thereof, or indemnify, the Borrower or CCP therefrom.


                                   ARTICLE 7
                       AFFIRMATIVE AND NEGATIVE COVENANTS

         Each of Holdings  and the  Borrower,  as  applicable,  covenants to the
Agent and each Lender that so long as any of the Obligations  remain outstanding
or this Agreement is in effect:

         7.1  TAXES AND OTHER OBLIGATIONS.  The Borrower shall,  and shall cause
each of its Subsidiaries to, (a) file when due all tax returns and other reports
which it is required to file; (b) pay, or provide for the payment,  when due, of
all taxes, fees,  assessments and other governmental  charges against it or upon
its property, income and franchises, make all required withholding and other tax
deposits, and establish adequate reserves for the payment of all such items, and
provide to the Agent and the  Lenders,  upon  request,  reasonably  satisfactory
evidence of its timely  compliance with the foregoing;  and (c) pay when due all
Debt  owed  by  it  and  all  claims  of   materialmen,   mechanics,   carriers,
warehousemen,  landlords,  processors  and  other  like  Persons,  and all other
indebtedness  owed by it and perform and  discharge in a timely manner all other
obligations  undertaken by it;  provided,  however,  so long as the Borrower has
notified the Agent in writing,  neither the Borrower nor any of its Subsidiaries
need  pay  any  tax,  fee,  assessment,  or  governmental  charge  or  claim  of
materialmen,  mechanics  or  carriers  (i) it is  contesting  in good  faith  by
appropriate proceedings diligently pursued, (ii) as to which the Borrower or its
Subsidiary,  as the case may be, has  established  proper  reserves  as required
under GAAP,  and (iii) the nonpayment of which does not result in the imposition
of a Lien (other than a Permitted Lien).

         7.2  LEGAL EXISTENCE AND GOOD STANDING.  The Borrower shall,  and shall
cause  each  of its  Subsidiaries  to,  maintain  its  legal  existence  and its
qualification  and good  standing in all  jurisdictions  in which the failure to
maintain such existence and  qualification  or good standing could reasonably be
expected to have a Material Adverse Effect.

         7.3  COMPLIANCE WITH LAW AND AGREEMENTS;  MAINTENANCE OF LICENSES.  The
Borrower  shall  comply,  and shall  cause each  Subsidiary  to  comply,  in all
material  respects with all  Requirements of Law of any  Governmental  Authority
having  jurisdiction  over it or its business  (including the Federal Fair Labor
Standards Act and all  Environmental  Laws). The Borrower shall, and shall cause
each  of its  Subsidiaries  to,  obtain  and  maintain  all  licenses,


                                       31

<PAGE>

permits, franchises, and governmental authorizations reasonably necessary to own
its property and to conduct its business as conducted on the Closing  Date.  The
Borrower  shall not,  and shall not permit  any of its  Subsidiaries  to modify,
amend or alter its  certificate  or  articles of  incorporation,  or its limited
liability  company  operating  agreement or limited  partnership  agreement,  as
applicable, other than in a manner which does not adversely affect the rights of
the Lenders or the Agent.

         7.4    MAINTENANCE OF PROPERTY; INSPECTION OF PROPERTY.

                (a) The Borrower shall, and shall cause each of its Subsidiaries
to,  maintain all of its property that is necessary and useful in the conduct of
its business,  in good  operating  condition and repair,  ordinary wear and tear
excepted.

                (b) The Borrower shall permit  representatives  and  independent
contractors  of the Agent (at the expense of the Borrower not to exceed four (4)
times per year unless an Event of Default has  occurred  and is  continuing)  to
visit and inspect any of Borrower's and the Subsidiaries' properties, to examine
their  corporate,  financial and operating  records,  and make copies thereof or
abstracts  therefrom  and to discuss their  affairs,  finances and accounts with
Borrower's and its  Subsidiaries'  directors,  officers and  independent  public
accountants,  at such reasonable  times during normal business hours and as soon
as may be reasonably  desired,  upon reasonable  advance notice to the Borrower;
provided,  however, when an Event of Default exists, the Agent or any Lender may
do any of the foregoing at the expense of the Borrower at any time during normal
business  hours and without  advance  notice.  In addition,  the Borrower  shall
permit  representatives  of any  Lender  (at  such  Lender's  sole  expense)  to
accompany the Agent in connection with any of the foregoing activities.

         7.5    INSURANCE.

                (a) The  Borrower  shall  maintain,  and shall cause each of its
Subsidiaries to maintain, with financially sound and reputable insurers having a
rating of at least A- or better by Best Rating Guide,  insurance against loss or
damage by fire with extended coverage;  theft,  burglary,  pilferage and loss in
transit; public liability and third party property damage; larceny, embezzlement
or other criminal liability;  business interruption;  and public liability;  and
such other hazards or of such other types as is customary for Persons engaged in
the same or similar  business,  as the Agent, in its reasonable  discretion,  or
acting at the direction of the Required Lenders,  shall specify, in amounts, and
under  policies  acceptable  to the  Agent  and the  Required  Lenders.  Without
limiting the  foregoing,  in the event that any improved Real Estate  covered by
the  Mortgages  is  determined  to be  located  within  an area  that  has  been
identified  by the  Director of the  Federal  Emergency  Management  Agency as a
Special Flood Hazard Area  ("SFHA"),  the Borrower  shall  purchase and maintain
flood  insurance on the improved  Real Estate and any  Equipment  and  Inventory
located  on such  Real  Estate.  The  amount  of said  flood  insurance  will be
reasonably  determined  by the Agent,  and  shall,  at a  minimum,  comply  with
applicable federal  regulations as required by the Flood Disaster Protection Act
of 1973, as amended.  The Borrower shall also maintain  flood  insurance for its
Inventory and Equipment which is, at any time, located in a SFHA.



                                       32

<PAGE>

               (b)  The Borrower  shall,  and shall cause its  Subsidiaries  to,
cause the Agent,  for the ratable  benefit of the Agent and the  Lenders,  to be
named as secured party or mortgagee  and sole loss payee or additional  insured,
in a manner  acceptable to the Agent.  Each policy of insurance  shall contain a
clause or  endorsement  requiring  the insurer to give not less than thirty (30)
days'  prior  written  notice to the Agent in the event of  cancellation  of the
policy for any reason  whatsoever and a clause or  endorsement  stating that the
interest of the Agent shall not be impaired or invalidated by any act or neglect
of the Borrower or any of its  Subsidiaries  or the owner of any Real Estate for
purposes more hazardous than are permitted by such policy. All premiums for such
insurance shall be paid by the Borrower when due, and  certificates of insurance
and, if requested by the Agent or any Lender, photocopies of the policies, shall
be delivered to the Agent, in each case in sufficient  quantity for distribution
by the Agent to each of the Lenders. If the Borrower or its Subsidiaries fail to
procure such insurance or to pay the premiums  therefor when due, the Agent may,
and at the direction of the Required  Lenders shall,  do so from the proceeds of
Revolving Loans.


         7.6   INSURANCE AND CONDEMNATION PROCEEDS.  The Borrower shall promptly
notify the Agent and the  Lenders of any loss,  damage,  or  destruction  to the
Collateral,  whether or not covered by insurance. The Agent is hereby authorized
to collect all insurance  and  condemnation  proceeds  (other than proceeds with
respect  to any loss,  damage or  destruction  of the  Collateral  of a Canadian
Subsidiary  Guarantor) in respect of  Collateral  directly and to apply or remit
them as follows:

               (a) With respect to insurance and condemnation  proceeds relating
       to Collateral other than Fixed Assets, after deducting from such proceeds
       the reasonable expenses,  if any, incurred by the Agent in the collection
       or handling thereof, the Borrower shall, and shall cause its Subsidiaries
       to,  deposit  such  proceeds  upon receipt in a cash  collateral  account
       pledged by the Borrower and its  Subsidiaries  for use by the Borrower or
       its  Subsidiaries  to replace  such  Collateral.  If the  Borrower or its
       Subsidiaries  fail to use such proceeds to replace such Collateral within
       120 days of deposit  into the cash  collateral  account or if an Event of
       Default has occurred and is continuing,  Agent shall apply such proceeds,
       ratably, to the reduction of the Obligations in the order provided for in
       Section 3.4.

              (b)  With respect to insurance and condemnation  proceeds relating
       to  Collateral  consisting  of Fixed  Assets,  the Agent shall permit the
       Borrower to use any such  proceeds,  or any part thereof (i) less than or
       equal to $100,000,  in any manner not otherwise  restricted hereunder and
       (ii) in excess of  $100,000,  in order to  replace,  repair,  restore  or
       rebuild the  relevant  Fixed  Assets  within one hundred and eighty (180)
       days  following  receipt of such  proceeds in a diligent and  expeditious
       manner with materials and workmanship of  substantially  the same quality
       as existed before the loss, damage or destruction,  so long as, in either
       case,  (1) no Event of Default has  occurred and is  continuing,  (2) the
       aggregate  proceeds  when  taken  together  with any other  insurance  or
       condemnation  proceeds  received by the  Borrower do not exceed  $500,000
       and,  (3) with  respect to proceeds in excess of  $100,000  only,  if the
       Borrower first (A) provides the Agent and the Required Lenders with plans
       and  specifications  for any such  repair or  restoration


                                       33
<PAGE>


       which  shall  be reasonably  satisfactory  to the Agent and the  Required
       Lenders and (B)  demonstrates to the reasonable satisfaction of the Agent
       and  the  Required  Lenders  that the  funds  available  to  it  will  be
       sufficient  to  complete  such project in the manner provided therein. In
       all  other  circumstances,   the  Agent  shall  apply such  insurance and
       condemnation proceeds,  ratably,  to the reduction of the  Obligations in
       the order provided for in Section 3.4.

Notwithstanding  anything  herein to the  contrary,  to the extent  there is any
loss,  damage,  or  destruction  to  the  Collateral  of a  Canadian  Subsidiary
Guarantor,  the Borrower shall cause such Canadian  Subsidiary  Guarantor to (x)
receive the insurance or condemnation proceeds with respect to such loss, damage
or  destruction  and (y) deposit such  proceeds into a cash  collateral  account
pledged to the  Agent,  to be used for the  purposes  set forth in clause (a) or
(b), above,  as applicable,  as long as such proceeds are not used to reduce the
Obligations.  To the extent such  proceeds  are not used within the time periods
and for the purposes set forth herein,  the pledged cash collateral shall remain
so pledged to the Agent indefinitely.

         7.7   ENVIRONMENTAL LAWS.

               (a) The Borrower shall,  and shall cause each of its Subsidiaries
to,  conduct its business in material  compliance  with all  Environmental  Laws
applicable to it,  including  those relating to the generation,  handling,  use,
storage,  and disposal of any  Contaminant.  The Borrower shall, and shall cause
each of its  Subsidiaries  to, take prompt and appropriate  action to respond to
any material  non-compliance  with Environmental Laws and shall regularly report
to the Agent on such response.

               (b)  Without  limiting  the  generality  of  the  foregoing,  the
Borrower shall submit to the Agent and the Lenders  annually,  commencing on the
first  Anniversary  Date, and on each Anniversary Date thereafter,  an update of
the status of each environmental  non-compliance or liability issue, if any. The
Borrower  shall  provide  to Agent or any  Lender  copies of  technical  reports
prepared by the Borrower or its  Subsidiaries  and its  communications  with any
Governmental  Authority  to  determine  whether  the  Borrower  or  any  of  its
Subsidiaries is proceeding  reasonably to correct, cure or contest in good faith
any alleged  non-compliance or environmental  liability.  The Borrower shall, at
the Agent's or the Required  Lenders'  reasonable  request and at the Borrower's
expense,  (i) retain an  independent  environmental  engineer  acceptable to the
Agent  to  evaluate  the  site,  including  tests  if  appropriate,   where  the
non-compliance or alleged  non-compliance  with  Environmental Laws has occurred
and prepare and deliver to the Agent, in sufficient quantity for distribution by
the Agent to the Lenders, a report setting forth the results of such evaluation,
a proposed plan for responding to any environmental  problems described therein,
and an  estimate  of the costs  thereof,  and (ii)  provide to the Agent and the
Lenders  a  supplemental  report  of such  engineer  whenever  the  scope of the
environmental  problems, or the response thereto or the estimated costs thereof,
shall  increase in any  material  respect.  Agent and the Lenders  agree to keep
confidential  any information  disclosed to them pursuant to this Section 7.7(b)
in accordance with the provisions of Section 13.17.

               (c)  Upon notice that an  environmental  liability  exists at any
location,  the  Agent  and  its  representatives  will  have  the  right  at any
reasonable time to enter and visit the Real Estate and any other place where any
property of the  Borrower  or its  Subsidiaries  is located


                                       34
<PAGE>


for the purposes of  observing  the Real  Estate,  taking and  removing  soil or
groundwater  samples,  and conducting tests on any part of the Real Estate.  The
Agent is under no duty,  however,  to visit or  observe  the Real  Estate  or to
conduct tests, and any such acts by the Agent will be solely for the purposes of
protecting the Agent's Liens and  preserving  the Agent and the Lenders'  rights
under the Loan Documents. No site visit, observation or testing by the Agent and
the  Lenders  will  result in a waiver of any  default  of the  Borrower  or its
Subsidiaries  or impose any  liability on the Agent or the Lenders.  In no event
will any site  visit,  observation  or testing by the Agent be a  representation
that  hazardous  substances  are or are not  present  in,  on or under  the Real
Estate, or that there has been or will be compliance with any Environmental Law.
Neither the  Borrower  nor its  Subsidiaries  nor any other party is entitled to
rely on any site visit,  observation or testing by the Agent.  The Agent and the
Lenders owe no duty of care to protect the Borrower or its  Subsidiaries  or any
other party against,  or to inform the Borrower or its Subsidiaries or any other
party of, any hazardous  substances or any other adverse condition affecting the
Real Estate.  The Agent shall disclose to the Borrower or its Subsidiaries or to
any other party if so  required  by law any report or findings  made as a result
of, or in connection with, any site visit,  observation or testing by the Agent.
The Borrower and its  Subsidiaries  understand and agree that the Agent makes no
warranty or  representation  to the  Borrower or its  Subsidiaries  or any other
party  regarding  the truth,  accuracy  or  completeness  of any such  report or
findings  that  may  be  disclosed.  The  Borrower  and  its  Subsidiaries  also
understand  that  depending  on the  results of any site visit,  observation  or
testing by the Agent and  disclosed  to the  Borrower or its  Subsidiaries,  the
Borrower or its  Subsidiaries  may have a legal obligation to notify one or more
environmental  agencies of the results,  that such  reporting  requirements  are
site-specific,  and are to be  evaluated  by the  Borrower  or its  Subsidiaries
without advice or assistance  from the Agent.  In each instance,  the Agent will
give the Borrower or its Subsidiaries reasonable notice before entering the Real
Estate or any other place the Agent is  permitted  to enter  under this  Section
7.7(c).  The Agent will make reasonable  efforts to avoid  interfering  with the
Borrower's or its  Subsidiaries' use of the Real Estate or any other property in
exercising any rights provided hereunder.

               7.8  COMPLIANCE WITH ERISA.  The Borrower shall,  and shall cause
each of its  Subsidiaries  and ERISA  Affiliates  to: (a) maintain  each Plan in
compliance with the applicable  provisions of ERISA,  the Code and other federal
or state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification;  (c) make all required contributions to any
Plan  subject  to  Section  412 of the  Code;  (d) not  engage  in a  prohibited
transaction or violation of the fiduciary  responsibility  rules with respect to
any Plan;  and (e) not engage in a transaction  that could be subject to Section
4069 or 4212(c) of ERISA,  except [after notice to Agent by the Borrower and its
Subsidiaries of such failure] to the extent that Agent determines that a failure
with  respect to any or all of the  foregoing  clauses (a) through (c) would not
reasonably be expected to have a Material Adverse Effect.

               7.9  MERGERS,  CONSOLIDATIONS  OR  SALES.   Except  as  otherwise
permitted under this Agreement, the Borrower shall not, and shall not permit any
of its Subsidiaries to, enter into any transaction of merger, reorganization, or
consolidation,  except  among  themselves  and so  long as the  Borrower  is the
surviving  entity and  retains a majority  of the  assets,  or  transfer,  sell,
assign,  lease,  or otherwise  dispose of all or any part of its property except
among the Borrower and Subsidiary Guarantors and the Borrower retains a majority
of the assets,  or wind up,  liquidate  or  dissolve,  or agree to do any of the
foregoing,  except  (a) for sales of  Inventory  in the


                                       35

<PAGE>

ordinary  course of its business,  (b) for surrender or waiver of tort claims or
contract  rights in the ordinary course of business that have not otherwise been
pledged  to Agent,  (c) for the grant in the  ordinary  course  of  business  of
non-exclusive  licenses in patents,  trademarks,  and registrations therefor and
other similar intellectual  property, (d) for sales, transfers or termination of
officer's  life  insurance  policies,  (e) for sales of computer  equipment  and
software  in the  ordinary  course of  business  that are  obsolete or no longer
useable by the  Borrower and its  Subsidiaries  in their  business,  and (f) for
sales or other  dispositions  of Equipment  (other than  computer  equipment and
software  sold as  permitted by clause (e) above) that are obsolete or no longer
useable by the  Borrower or its  Subsidiaries  in its  business  with an orderly
liquidation  value not to exceed $500,000 in any Fiscal Year.  Within either (i)
180 days  following  or (ii) 90 days  before,  sales or  dispositions  permitted
pursuant to clause (f) above,  the Borrower or its  Subsidiaries  shall reinvest
the  proceeds of the sale or  disposition  or shall have  purchased  replacement
Equipment in  anticipation  of the receipt of such  proceeds;  provided  that no
Event of Default has  occurred and is  continuing  at the time of the receipt of
such  proceeds or the  reinvestment  of such  proceeds.  If the  Borrower or its
Subsidiaries  fail to comply with  subclauses (i) or (ii) Agent shall apply such
proceeds  (other than proceeds with respect to sale or  disposition of Equipment
of a Canadian Subsidiary Guarantor) to the Loans in accordance with Section 3.4.
All Equipment purchased with such proceeds shall be free and clear of all Liens,
except the Agent's Liens.

Notwithstanding  anything herein to the contrary, to the extent Equipment of any
Canadian Subsidiary Guarantor is sold pursuant to clause (f) above, the Borrower
shall cause such Canadian  Subsidiary  Guarantor to deposit such proceeds into a
cash collateral  account pledged to the Agent, to be used within the time period
set forth in clause  (i) or (ii)  above,  as  applicable,  for  reinvestment  or
purchase of new  Equipment,  as long as such proceeds are not used to reduce the
Obligations.  To the extent such  proceeds  are not used within the time periods
and for the purposes set forth herein,  the pledged cash collateral shall remain
so pledged to the Agent indefinitely.

               7.10  DISTRIBUTIONS; CAPITAL CHANGE; RESTRICTED INVESTMENTS.  The
Borrower  shall  not,  and shall not  permit  any of its  Subsidiaries  to,  (a)
directly or  indirectly  declare or make,  or incur any  liability to make,  any
Distribution,  except  Distributions  to the  Borrower  by its  Subsidiaries  or
Permitted  Holdings  Payments,  provided,  however,  that,  at the  time  of any
Distribution  with respect to  Permitted  Holdings  Payments  other than for any
Distribution  described  in clause (b) of such  definition,  no Event of Default
shall have occurred or be continuing or would result after giving effect to such
Distribution,  (b) make any change in its capital  structure  which could have a
Material Adverse Effect, or (c) make any Restricted Investment.

               7.11  TRANSACTIONS  AFFECTING  COLLATERAL  OR  OBLIGATIONS.   The
Borrower shall not, and shall not permit any of its  Subsidiaries to, enter into
any transaction  which would be reasonably  expected to have a Material  Adverse
Effect.

               7.12  GUARANTIES.  The  Borrower  shall not, and shall not permit
any of its Subsidiaries to,  make,  issue,  or become  liable on  any  Guaranty,
except (a) Guaranties of the

                                       36

<PAGE>


Obligations in favor of the Agent and (b) unsecured guarantees of the Borrower's
or Subsidiary Guarantors' obligations under License Agreements or leases.

               7.13  DEBT.  The Borrower  shall not, and shall not permit any of
its   Subsidiaries  to,  incur  or  maintain  any  Debt,  other  than:  (a)  the
Obligations; (b) Debt described on Schedule 6.9; (c) Capital Leases of Equipment
and purchase money secured Debt incurred to purchase  Equipment,  Real Estate or
fixtures provided that (i) Liens securing the same attach only to the Equipment,
Real Estate or fixtures  acquired by the  incurrence of such Debt,  and (ii) the
aggregate  amount of such Debt  (including  Capital  Leases)  incurred  does not
exceed $1,500,000 in any Fiscal Year; (d) Debt evidencing a refunding,  renewal,
amendment or extension of the Debt described on Schedule 6.9;  provided that (i)
the principal amount thereof is not increased,  (ii) the Liens, if any, securing
such refunded,  renewed, amended or extended Debt do not attach to any assets in
addition to those  assets,  if any,  securing the Debt to be refunded,  renewed,
amended or extended, (iii) no Person that is not an obligor or guarantor of such
Debt as of the Closing Date shall become an obligor or  guarantor  thereof,  and
(iv) the terms of such  refunding,  renewal,  amendment or extension are no less
favorable to the Borrower or its Subsidiaries, the Agent or the Lenders than the
original Debt; (e) Debt evidenced by the Senior Notes in an aggregate  principal
amount not to exceed $125,000,000,  (f) Chillicothe Debt; (g) Debt consisting of
intercompany loans and advances made by the Borrower to any Subsidiary Guarantor
or any such  Subsidiary  Guarantor  to the  Borrower;  provided,  that:  (i) the
Borrower  shall have executed and delivered to each such  Subsidiary  Guarantor,
and each such  Subsidiary  Guarantor  shall have  executed and  delivered to the
Borrower,  on the Closing Date, a demand note  (collectively,  the "Intercompany
Notes") to evidence any such intercompany Debt owing at any time by the Borrower
to such Subsidiary  Guarantor or by such  Subsidiary  Guarantor to the Borrower,
which Intercompany Notes shall be in form and substance reasonably  satisfactory
to Agent and shall be pledged and delivered to Agent  pursuant to the applicable
Pledge Agreement or Security Agreement as additional collateral security for the
Obligations; (ii) the Borrower shall record all intercompany transactions on its
books and  records  in a manner  reasonably  satisfactory  to  Agent;  (iii) the
obligations  of the Borrower and its  Subsidiaries  under any such  Intercompany
Notes shall be subordinated to the Obligations of the Borrower hereunder and the
obligations of the Subsidiary  Guarantors under their respective Guaranties in a
manner reasonably satisfactory to Agent; (iv) for greater certainty,  all Liens,
if  any,  now or  hereafter  held to  secure  any  intercompany  loan  shall  be
subordinated  to the  Liens in favor of the  Agent  and (v) no Event of  Default
shall have  occurred  and be  continuing,  unless  Agent  shall  have  expressly
consented to the making of such intercompany loan regardless of the continuation
of such Event of Default;  (h) Debt incurred in connection  with an  Acquisition
permitted  under  Section 7.21;  provided,  that such Debt shall not exceed more
than  $10,000,000  in the aggregate  outstanding  at any one time;  and (i) Debt
incurred in connection with Hedge Agreements.

               7.14  PREPAYMENT.  The  Borrower shall not,  and shall not permit
any of  its  Subsidiaries  to,  voluntarily  prepay  any  Debt  except  (a)  the
Obligations  in  accordance  with the terms of this  Agreement and (b) any other
Debt (except for Debt  evidenced by the Senior  Notes) as permitted by the Agent
in the Agent's sole  discretion  (except for Senior Notes) and (c)  intercompany
Debt  among the  Borrower  and its  Subsidiaries,  provided,  however,  that the
Borrower or any of its Subsidiaries  may voluntarily  prepay Debt other than the
Obligations  and  intercompany  Debt by means of a refinancing or replacement of
the prepaid Debt, so long as (i) the maturity of the Debt refinanced is extended
beyond the Stated Termination Date, (ii) the


                                       37

<PAGE>

principal amount of the Debt refinanced is not increased (iii) the terms of such
refinancing  debt are not  materially  less  favorable  to the  Borrower  or its
Subsidiaries  than the Debt  that is  refinanced,  and (iv) the  Liens,  if any,
securing such refunded  replaced or extended Debt do not attach to any assets in
addition to those assets, if any, securing the Debt to be refunded, replaced, or
extended.

               7.15 TRANSACTIONS WITH AFFILIATES. Except as set forth below, the
Borrower  shall  not,  and shall not permit any of its  Subsidiaries  to,  sell,
transfer,  distribute, or pay any money or property,  including, but not limited
to, any fees or expenses of any nature (including,  but not limited to, any fees
or expenses  for  management  services),  to any  Affiliate  (except  Subsidiary
Guarantors  or the  Borrower),  or lend or  advance  money  or  property  to any
Affiliate  (except  Subsidiary  Guarantors  or the  Borrower),  or invest in (by
capital  contribution or otherwise) any Affiliate (except Subsidiary  Guarantors
or the Borrower) or purchase or  repurchase  any stock or  indebtedness,  or any
property (including  Inventory),  of any Affiliate (except Subsidiary Guarantors
or the  Borrower),  or  become  liable  on  any  Guaranty  of the  indebtedness,
dividends,  or other obligations of any Affiliate (except Subsidiary  Guarantors
or the Borrower).  Notwithstanding the foregoing, so long as no Event of Default
has occurred and is continuing, (a) the Borrower and its Subsidiaries may engage
in transactions  with  Affiliates in the ordinary course of business  consistent
with past practices,  in amounts and upon terms fully disclosed to the Agent and
the Lenders,  and no less  favorable to the Borrower and its  Subsidiaries  than
would be obtained in a comparable  arm's-length  transaction  with a third party
who is not an  Affiliate  and (b)  the  Borrower  may  make  Permitted  Holdings
Payments;   provided,   however,   that   notwithstanding   the  occurrence  and
continuation of an Event of Default,  the Borrower may make payments  consisting
of Permitted Holdings Payments described in clause (b) of such definition.

               7.16  INVESTMENT BANKING AND FINDER'S FEES.   The  Borrower shall
not,  and shall not permit any of its  Subsidiaries  to, pay or agree to pay, or
reimburse  any other party (except the Agent  pursuant to this  Agreement or the
Fee Letter) with respect to, any  investment  banking or similar or related fee,
underwriter's  fee,  finder's  fee, or broker's fee to any Person in  connection
with this  Agreement.  The Borrower shall defend and indemnify the Agent and the
Lenders  against and hold them  harmless  from all claims of any Person that the
Borrower  is  obligated  to pay for any such  fees,  and all costs and  expenses
(including  attorneys'  fees)  incurred  by  the  Agent  and/or  any  Lender  in
connection therewith.

               7.17  BUSINESS CONDUCTED.  The Borrower  shall not, and shall not
permit any of its Subsidiaries to, engage directly or indirectly, in any line of
business other than the businesses in which the Borrower or its  Subsidiaries is
engaged on the Closing Date and businesses reasonably related thereto.

               7.18  LIENS.  The Borrower  shall not and shall not permit any of
its Subsidiaries to, create,  incur,  assume, or permit to exist any Lien on any
property now owned or hereafter acquired by any of them, except Permitted Liens,
and Liens,  if any, in effect as of the Closing Date  described in Schedule 7.18
securing Debt  described in Schedule 6.9 and Liens  securing  Capital Leases and
purchase money Debt permitted in Section 7.13.

               7.19 SALE AND LEASEBACK TRANSACTIONS. The Borrower shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly,  enter into
any arrangement with any

                                       38

<PAGE>


Person  providing for the Borrower or such  Subsidiary to lease or rent property
that the Borrower or such Subsidiary has sold or will sell or otherwise transfer
to such Person.

               7.20  NEW SUBSIDIARIES.  The  Borrower  shall not,  and shall not
permit any Subsidiary to, directly or indirectly,  organize,  create, acquire or
permit to exist any Subsidiary other than (a) those listed on Schedule 6.5 as of
the Closing Date and (b) the  Subsidiary of the Borrower  formed as an unlimited
liability  company  under the laws of Nova  Scotia (the  "Canadian  Subsidiary")
which may be formed within 180 days of the Closing Date or at such later time as
the Agent shall  consent to in the Agent's  discretion  and except in connection
with  Acquisitions  permitted under Section 7.21 below.  Any Subsidiary  created
pursuant to this Section shall become a Subsidiary Guarantor and such Subsidiary
Guarantor  shall enter into any  document,  agreement or  arrangement  as may be
required,  by the Agent in its sole discretion,  for the benefit of the Lenders,
including  without  limitation  a security  agreement,  a hypothec  and  Blocked
Account Agreements (springing) in form and substance satisfactory to the Agent.

               7.21  ACQUISITIONS. (a) The Borrower will not consummate and will
not permit any Subsidiary of the Borrower to consummate any  Acquisition  unless
all of the following conditions are satisfied:

                    (i)  both before and after giving effect to such Acquisition
          and the Loans (if any)  requested to be made in connection  therewith,
          the Borrower will be in compliance with Section 7.13(h) and no Default
          or Event of Default exists or would result therefrom;

                    (ii)  as soon as  available,  but not less than fifteen (15)
          Business  Days  prior to such  Acquisition,  the  Borrower  shall have
          provided to Agent a copy of the  information  provided to the board of
          directors  (or a summary  prepared by the chief  financial  officer in
          sufficient  detail,  in Agent's sole discretion,  on Acquisitions less
          than  $1,000,000)  of  Holdings  or  the  Borrower,  together  with  a
          certificate of Holdings' or the  Borrower's  chief  financial  officer
          attaching a forecast dated as of the date of such Acquisition, updated
          on a pro forma basis to give effect to such  Acquisition and otherwise
          complying with Section 5.2(e);

                    (iii)  the aggregate  purchase price paid in connection with
          such  Acquisition  permitted  hereunder shall not exceed  $10,000,000,
          including  Debt and  liabilities  assumed or  incurred  in  connection
          therewith;

                    (iv)  if such  Acquisition is an  Acquisition of the capital
          stock of a Person, the Acquisition is structured so that the surviving
          entity after the Acquisition is organized under the laws of the United
          States or a State therein or Canada or any province of Canada  (except
          for  Quebec  and   Newfoundland)   and  shall  become  a  Wholly-Owned
          Subsidiary of the Borrower (and a Subsidiary Guarantor pursuant to the
          terms of this Agreement) and if such  Acquisition is an acquisition of
          assets,  the  Acquisition  is  structured  so that the  Borrower  or a
          Wholly-Owned Subsidiary of the Borrower that is a Subsidiary Guarantor
          shall acquire such assets;


                                       39

<PAGE>

                    (v)   the Borrower shall not,  and shall not cause or permit
          its  Subsidiaries  to, as a result of or in  connection  with any such
          Acquisition,  assume or incur any  direct  or  contingent  liabilities
          (whether relating to environmental, tax, litigation, or other matters)
          that could reasonably be expected, as of the date of such Acquisition,
          to result in the existence or occurrence of a Material Adverse Effect;

                    (vi)  on a pro  forma  basis  after  giving  effect  to such
          Acquisition (for the twelve month period following such  Acquisition),
          the Fixed Charge  Coverage  Ratio shall be in compliance  with Section
          7.23;

                    (vii) the Borrower shall certify (and provide the Agent with
          a pro forma calculation in form and substance reasonably  satisfactory
          to the Agent) to the Agent and the Lenders  that,  after giving effect
          to the Acquisition, Availability is not less than $10,000,000 on a pro
          forma basis including all consideration  given in connection with such
          Acquisition,  other than  capital  stock of Holdings  delivered to the
          seller(s) in such Acquisition, as having been paid in cash at the time
          of making such Acquisition;

                    (viii)  the Target  shall be in the same or similar  line of
          business as the Borrower or its Subsidiaries; and

                    (ix)  the Target shall not be projected  to contribute  more
          than  $25,000,000 of annual  revenues of the Borrower during the first
          year after its acquisition.

               (b)  Notwithstanding anything in this Agreement to the  contrary,
simultaneously with the closing of any Acquisition financed hereunder (including
any  Acquisition  referred to in the following  clause (c) of this Section 7.21)
and within thirty (30) days following the closing of any other Acquisition,  the
Agent shall have been granted, for the benefit of Agent and the Lenders, a first
priority lien on and security interest in the property of the Target that is the
subject of such  Acquisition,  subject only to Permitted  Liens,  and shall have
received,  without limitation,  (i) the items described in subsection 8.1(g) and
Section 7.26,  and (ii) duly executed UCC financing  statements or amendments to
existing financing statements with respect to such Target, in form and substance
reasonably  satisfactory to the Agent and which, upon filing,  shall perfect the
first priority  security interest of the Agent, for the benefit of Agent and the
Lenders,  in such  property.  In the event  owned Real  Estate was  acquired  in
connection with such Acquisition,  the Agent shall have received,  within thirty
(30) days  following  the closing of any  Acquisition  (except  with  respect to
subclause (z) below such requirement to be delivered prior to the closing day of
any Acquisition),  (x) in the case of owned Real Estate being acquired,  a fully
executed Mortgage,  in form and substance  reasonably  satisfactory to the Agent
together with, in the case of owned Real Estate having a fair market value of at
least  $1,000,000 (if requested by the Agent),  an ALTA lender's title insurance
policy issued by a title insurer  reasonably  satisfactory to the Agent, in form
and substance and in an amount  reasonably  satisfactory  to the Agent  insuring
that  the  Mortgage  is a  valid  and  enforceable  first  priority  lien on the
respective  property,  free and  clear of all  defects,  encumbrances  and Liens
except for Permitted Liens, (y) an environmental  site assessment  prepared by a
qualified


                                       40
<PAGE>


firm  reasonably  acceptable  to the  Agent,  in form and  substance  reasonably
satisfactory to the Agent;  (z) and a flood  certification in form and substance
reasonably  satisfactory  to the  Agent.  Assets of the  entity  subject  to any
Acquisition  permitted  hereunder,  which  would  otherwise  be a  part  of  the
Borrowing  Base,  shall not be considered part of the Borrowing Base until after
the Agent has performed an  acceptable  field  examination  with respect to such
assets, and in any case, only to the extent set forth in this Agreement.

               (c) In connection with any  Acquisition  not otherwise  permitted
hereunder,  the Borrower shall provide the Agent and the Lenders no less than 45
days prior  written  notice and the Agent and the  Lenders  hereby  agree to use
their  best  efforts  to,  within 30 days of  receipt  of  complete  information
relating to such Acquisition as reasonably  determined by the Lenders,  evaluate
such  information and determine  whether to consent to such Acquisition and such
consent shall not be unreasonably  withheld provided that no Default or Event of
Default has occurred and is continuing.

               7.22  FISCAL  YEAR.  Neither  Holdings,   the  Borrower  nor  the
Borrower's Subsidiaries shall change its Fiscal Year.

               7.23 FIXED CHARGE COVERAGE RATIO.  Holdings and its  consolidated
Subsidiaries  will  maintain a Fixed  Charge  Coverage  Ratio for each period of
twelve  consecutive  fiscal months ended on the last day of each fiscal month of
not less than (i) 1:05:1 at all times before an Activation Event and (ii) 1:15:1
at all times after an Activation Event; provided,  however, that if the Borrower
maintains  Availability  of at least  $12,500,000  for any period of ninety (90)
consecutive  days following such  Activation  Event,  the Fixed Charge  Coverage
Ratio  requirement shall be determined going forward as if such Activation Event
had not occurred.

               7.24  MINIMUM AVAILABILITY.

               The Borrower shall maintain, at all times after the Closing Date,
Availability of not less than $2,500,000.

               7.25  USE OF PROCEEDS.  The  Borrower  shall  not,  and shall not
suffer or permit  any  Subsidiary  to,  use any  portion  of the Loan  proceeds,
directly or indirectly,  (i) to purchase or carry Margin Stock, (ii) to repay or
otherwise refinance  indebtedness of the Borrower or others incurred to purchase
or carry Margin  Stock,  (iii) to extend credit for the purpose of purchasing or
carrying any Margin  Stock,  or (iv) to acquire any security in any  transaction
that is subject to Section 13 or 14 of the Exchange Act.

               7.26  PROCEEDS FROM SURPLUS CASH DEPOSITS.   The  Borrower  shall
cause any Canadian Subsidiary  Guarantor that has on deposit in any bank account
any cash not applied for general working capital needs exceeding $1,500,000,  at
any time, to transfer such unapplied cash to the Borrower by loan,  Distribution
or other  intercompany  transfer;  provided,  however,  that after an Activation
Event has occurred the Borrower shall cause such Canadian  Subsidiary  Guarantor
to  transfer  (a) any such  unapplied  cash  exceeding  $800,000 or (2) any such
unapplied cash as Agent shall reasonably,  after consultation with the Borrower,
request.


                                       41
<PAGE>


               7.27  EXCESS COLLECTIONS, INVESTMENTS, ETC.  The  Borrower  shall
not permit any Canadian Subsidiary Guarantor to allow the Canadian Excess Amount
with respect to such Canadian Subsidiary Guarantor to exceed $2,000,000,  in the
aggregate.

               7.28  FURTHER ASSURANCES. The Borrower shall, and shall cause its
Subsidiaries to, execute and deliver, or cause to be executed and delivered,  to
the Agent and/or the Lenders such  documents and  agreements,  and shall take or
cause to be taken such  actions,  as the Agent or any Lender  may,  from time to
time, reasonably request to carry out the terms and conditions of this Agreement
and the other Loan Documents.


                                   ARTICLE 8
                              CONDITIONS OF LENDING

               8.1  CONDITIONS PRECEDENT TO MAKING OF LOANS ON THE CLOSING DATE.
The obligation of the Lenders to make the initial Revolving Loans on the Closing
Date,  and the  obligation  of the Agent to cause the Letter of Credit Issuer to
issue any Letter of Credit on the Closing  Date,  are  subject to the  following
conditions  precedent having been satisfied in a manner reasonably  satisfactory
to the Agent and each Lender:

                    (a) This Agreement and the other Loan  Documents  shall have
been executed by each party thereto and the Borrower and its Subsidiaries  shall
have  performed  and complied  with all  covenants,  agreements  and  conditions
contained herein and the other Loan Documents which are required to be performed
or complied with by the Borrower and its Subsidiaries  before or on such Closing
Date.

                    (b)  Upon  making  the  Revolving   Loans   (including  such
Revolving  Loans made to finance the Closing Fee or otherwise  as  reimbursement
for fees, costs and expenses then payable under this Agreement) and with all its
obligations   current,   the  Borrower  shall  have  Availability  of  at  least
$15,000,000.

                    (c) All representations and warranties made hereunder and in
the other Loan Documents shall be true and correct as if made on such date.

                    (d) No Default or Event of Default  shall have  occurred and
be  continuing  after  giving  effect to the Loans to be made and the Letters of
Credit to be issued on the Closing Date.

                    (e) The Agent  and the  Lenders  shall  have  received  such
opinions of counsel for the  Borrower and its  Subsidiaries  as the Agent or any
Lender shall request,  each such opinion to be in a form,  scope,  and substance
satisfactory to the Agent, the Lenders, and their respective counsel.

                    (f) The Agent shall have  received an ALTA title  policy for
each of the Kansas properties,  in form and substance  acceptable to Agent, with
respect to the Mortgages.

                    (g) The Agent shall have received:


                                       42

<PAGE>


                        (i)   acknowledgment    copies   of   proper   financing
                  statements, duly filed on or before the Closing Date under the
                  UCC, the PPSA, the Personal  Property  Securities  Acts of the
                  provinces  of  Canada  or  the  CCQ,  as  applicable,  in  all
                  jurisdictions  that the Agent may deem  necessary or desirable
                  in order to perfect the Agent's Liens; and

                        (ii) duly executed UCC-3  Termination  Statements,  PPSA
                  Termination  Statements or Termination  Statements relating to
                  the  Personal  Property  Securities  Acts of the  provinces of
                  Canada and all jurisdictions that Agent may deem necessary and
                  such other instruments,  in form and substance satisfactory to
                  the Agent,  as shall be necessary to terminate and satisfy all
                  Liens on the  Property of the  Borrower  and its  Subsidiaries
                  except Permitted Liens.

                    (h) The  Borrower  shall have paid all fees and  expenses of
the Agent and the Attorney  Costs  incurred in  connection  with any of the Loan
Documents and the transactions contemplated thereby to the extent invoiced.

                    (i) The Agent shall have received evidence,  in form, scope,
and substance,  reasonably  satisfactory to the Agent, of all insurance coverage
as required by this Agreement.

                    (j) The Agent and the Lenders shall have had an opportunity,
if they so choose,  to examine the books of account and other  records and files
of the Borrower and its Subsidiaries and to make copies thereof,  and to conduct
a pre-closing  audit which shall include,  without  limitation,  verification of
Inventory, Accounts, and the Borrowing Base, and the results of such examination
and audit  shall  have been  satisfactory  to the Agent and the  Lenders  in all
respects.

                    (k) All  proceedings  taken in connection with the execution
of this  Agreement,  all other  Loan  Documents  and all  documents  and  papers
relating  thereto shall be  satisfactory  in form,  scope,  and substance to the
Agent and the Lenders.

                    (l) Without  limiting the generality of the items  described
above,  the  Borrower  and each Person  guarantying  or securing  payment of the
Obligations shall have delivered or caused to be delivered to the Agent (in form
and substance reasonably  satisfactory to the Agent), the financial  statements,
instruments,  resolutions,  documents,  agreements,  certificates,  opinions and
other items set forth on the "Closing  Checklist"  delivered by the Agent to the
Borrower prior to the Closing Date.

                    (m) The Borrower and its Subsidiaries shall have obtained an
Inventory Disposition Agreement in the form attached hereto as Exhibit G or such
other form otherwise  acceptable to Agent  ("Inventory  Disposition  Agreement")
from each  licensor  for which  Borrower  or its  Subsidiaries  has an  existing
License Agreement to sell Inventory and which is listed on Schedule 6.12. To the
extent such Inventory Disposition  Agreements have not been received,  Inventory
governed  by  the  License  Agreements  for  which  such  Inventory  Disposition
Agreement  is to be executed  shall not be included  in  Eligible  Inventory  or
Eligible In-Transit Inventory except at Agent's discretion.


                                       43
<PAGE>


                    (n) The  Agent  shall  have  received  an  executed  Blocked
Account  Agreement  that  provides  for the  collection  and  remittance  of all
proceeds  of  Accounts  and other  collections  to Agent on a daily basis at all
times after the occurrence of an Activation  Event and notice of the same to the
Clearing  Bank to be applied  against the  outstanding  balance of the Revolving
Loans, in form and substance acceptable to Agent.

               The  acceptance  by the  Borrower of any Loans made or Letters of
Credit  issued on the Closing  Date shall be deemed to be a  representation  and
warranty made by the Borrower and its Subsidiaries to the effect that all of the
conditions precedent to the making of such Loans or the issuance of such Letters
of Credit have been satisfied, with the same effect as delivery to the Agent and
the Lenders of a certificate  signed by a  Responsible  Officer of the Borrower,
dated the Closing Date, to such effect.

               Execution  and delivery to the Agent by a Lender of a counterpart
of this  Agreement  shall be deemed  confirmation  by such  Lender  that (i) all
conditions precedent in this Section 8.1 have been fulfilled to the satisfaction
of such  Lender,  (ii) the decision of such Lender to execute and deliver to the
Agent  an  executed  counterpart  of this  Agreement  was  made  by such  Lender
independently  and without  reliance on the Agent or any other  Lender as to the
satisfaction of any condition precedent set forth in this Section 8.1, and (iii)
all documents sent to such Lender for approval  consent,  or  satisfaction  were
acceptable to such Lender.

               8.2  CONDITIONS PRECEDENT TO EACH LOAN.  The  obligation  of the
Lenders to make each Loan,  including the initial Revolving Loans on the Closing
Date and the  obligation  of the Agent to cause the  Letter of Credit  Issuer to
issue any Letter of Credit shall be subject to the further conditions  precedent
that on and as of the date of any such extension of credit:

                    (a)  The  following   statements  shall  be  true,  and  the
acceptance  by the  Borrower of any  extension of credit shall be deemed to be a
statement to the effect set forth in clauses  (i),  (ii) and (iii) with the same
effect as the delivery to the Agent and the Lenders of a certificate signed by a
Responsible Officer, dated the date of such extension of credit, stating that:

                           (i)  The representations and warranties  contained in
                  this Agreement and the other Loan Documents are correct in all
                  material  respects on and as of the date of such  extension of
                  credit as though  made on and as of such date,  other than any
                  such  representation  or warranty which relates to a specified
                  prior date such as the  Closing  Date and except to the extent
                  the Agent and the Lenders have been notified in writing by the
                  Borrower  that any  representation  or warranty is not correct
                  and the  Required  Lenders have  explicitly  waived in writing
                  compliance with such representation or warranty; and

                           (ii)  No event  has occurred  and is  continuing,  or
                  would result from such extension of credit,  which constitutes
                  a Default or an Event of Default; and


                                       44

<PAGE>


                           (iii)  No event has occurred  and is  continuing,  or
                  would result from such  extension of credit,  which has had or
                  would have a Material Adverse Effect.

               (b)  No  such  Borrowing  shall  exceed  Availability,  provided,
however,  that the foregoing  conditions  precedent  are not  conditions to each
Lender  participating  in or reimbursing the Bank or the Agent for such Lenders'
Pro Rata Share of any Non-Ratable  Loan or Agent Advance made in accordance with
the provisions of Sections 1.2(h) and (i).


                                   ARTICLE 9
                                DEFAULT; REMEDIES

               9.1 Events of Default.  It shall  constitute  an event of default
("Event of  Default")  if any one or more of the  following  shall occur for any
reason:

                  (a) any  failure by the  Borrower to pay the  principal  of or
         interest  or  premium  on any of the  Obligations  or any fee or  other
         amount owing hereunder when due, whether upon demand or otherwise;

                  (b) any  representation  or  warranty  made or deemed  made by
         Holdings,  the  Borrower  or any of  Borrower's  Subsidiaries  in  this
         Agreement   or  by  Holdings,   the  Borrower  or  any  of   Borrower's
         Subsidiaries  in  any  of  the  other  Loan  Documents,  any  Financial
         Statement,  or any certificate  furnished by Holdings,  the Borrower or
         any of Borrower's  Subsidiaries  at any time to the Agent or any Lender
         shall  prove to be untrue  in any  material  respect  as of the date on
         which made, deemed made, or furnished;

                  (c)  (i)  any  default  shall  occur  in  the   observance  or
         performance  of  any of  the  covenants  and  agreements  contained  in
         Sections  5.2(k),  7.2,  7.5,  7.9-7.25,  or Section 11 of the Security
         Agreement,   (ii)  any  default  shall  occur  in  the   observance  or
         performance  of  any of  the  covenants  and  agreements  contained  in
         Sections 5.2 (other than 5.2(k)) or 5.3 and such default shall continue
         for three (3) days or more;  or (iii) any  default  shall  occur in the
         observance or performance  of any of the other  covenants or agreements
         contained  in any other  Article  of this  Agreement  or any other Loan
         Document, any other Loan Documents, or any other agreement entered into
         at any  time to  which  Holdings,  the  Borrower  or any of  Borrower's
         Subsidiaries  and the  Agent or any  Lender  are  party  (including  in
         respect of any Bank  Products)  and such  default  shall  continue  for
         fifteen (15) days or more;

                  (d) any default  shall  occur with  respect to any Debt (other
         than the  Obligations)  of Holdings,  the Borrower or any of Borrower's
         Subsidiaries   in  an  outstanding   principal   amount  which  exceeds
         $1,000,000,  or under any agreement or instrument  under or pursuant to
         which  any  such  Debt may  have  been  issued,  created,  assumed,  or
         guaranteed by Holdings, the Borrower or any of Borrower's Subsidiaries,
         and such default shall  continue for more than the period of grace,  if
         any,  therein  specified,  if the effect  thereof  (with or without the
         giving of notice or


                                       45
<PAGE>


         further  lapse of time or  both) is to  accelerate,  or to  permit  the
         holders of any such Debt to accelerate,  the maturity of any such Debt;
         or any such Debt shall be declared due and payable or be required to be
         prepaid (other than by a regularly scheduled required prepayment) prior
         to the stated maturity thereof;

                  (e) Holdings,  the Borrower or any of Borrower's  Subsidiaries
         shall (i) file a voluntary  petition in  bankruptcy or file a voluntary
         petition or an answer or file any  proposal or notice of intent to file
         a proposal  or  otherwise  commence  any action or  proceeding  seeking
         reorganization, arrangement, consolidation or readjustment of its debts
         or which seek to stay or has the effect of staying any  creditor or for
         any other  relief under the federal  Bankruptcy  Code,  as amended,  or
         under  any  other  bankruptcy,  insolvency,  liquidation,  winding  up,
         corporate  or similar act or law,  state or federal,  now or  hereafter
         existing,  or  consent  to,  approve  of,  or  acquiesce  in,  any such
         petition,  proposal, action or proceeding;  (ii) apply for or acquiesce
         in the appointment of a receiver, assignee,  liquidator,  sequestrator,
         custodian, monitor, administrator, trustee or similar officer for it or
         for all or any part of its property;  (iii) make an assignment  for the
         benefit of creditors;  or (iv) be unable  generally to pay its debts as
         they become due;

                  (f) an  involuntary  petition  shall be filed or an  action or
         proceeding  otherwise  commenced seeking  reorganization,  arrangement,
         consolidation or readjustment of the debts of Holdings, the Borrower or
         any of  Borrower's  Subsidiaries  or for any  other  relief  under  the
         federal  Bankruptcy  Code, as amended,  or under any other  bankruptcy,
         insolvency  liquidation,  winding up,  corporate or similar act or law,
         state,  provincial or federal, now or hereafter existing and either (i)
         such petition or proceeding  shall not be dismissed  within thirty (30)
         days  after the  filing or  commencement  thereof or an order of relief
         shall  be  entered  with  respect  thereto  or (ii)  such  petition  or
         proceeding shall result in a Material Adverse Effect;

                  (g) a receiver, assignee, liquidator, sequestrator, custodian,
         monitor,  administrator,  trustee or similar officer for Holdings,  the
         Borrower or any of  Borrower's  Subsidiaries  or for all or any part of
         their   property  shall  be  appointed  or  a  warrant  of  attachment,
         execution, writ of seizure or seizure and sale or similar process shall
         be issued against any part of the property of Holdings, the Borrower or
         any of Borrower's  Subsidiaries or any distress or analogous process is
         levied upon all or any part of any of Holdings,  the Borrower or any of
         Borrower's Subsidiaries, other than Permitted Liens;

                  (h) Holdings,  the Borrower or any of Borrower's  Subsidiaries
         shall  file  a  certificate   of  dissolution  or  like  process  under
         applicable  state law or shall be liquidated,  dissolved or wound-up or
         shall  commence or have  commenced  against it any action or proceeding
         for dissolution, winding-up or liquidation, or shall take any corporate
         action in furtherance thereof except as permitted hereunder;

                  (i) all or any  material  part of the property of the Borrower
         or any of its  Subsidiaries  shall  be  nationalized,  expropriated  or
         condemned,  seized or


                                       46
<PAGE>


         otherwise  appropriated,  or custody or control of such  property or of
         the Borrower or such  Subsidiary  shall be assumed by any  Governmental
         Authority or any court of competent jurisdiction at the instance of any
         Governmental  Authority or any other person,  except where contested in
         good faith by proper  proceedings  diligently  pursued  where a stay of
         enforcement is in effect;

                  (j) any Loan Document shall be terminated, revoked or declared
         void or  invalid  or  unenforceable  or  challenged  by  Holdings,  the
         Borrower or any of Borrower's Subsidiary or any other obligor;

                  (k)  one or more  judgments, orders,  decrees  or  arbitration
         awards is entered against  Holdings,  the Borrower or any of Borrower's
         Subsidiaries  involving in the  aggregate  liability (to the extent not
         covered by  independent  third-party  insurance as to which the insurer
         does not  dispute  coverage)  as to any single or related or  unrelated
         series of transactions, incidents or conditions, of $1,000,000 or more,
         and the same shall remain  unsatisfied,  unvacated and unstayed pending
         appeal for a period of thirty (30) days after the entry thereof;

                  (l)  any loss,  theft,  damage or  destruction  of any item or
         items of Collateral or other property of Holdings,  the Borrower or any
         of Borrower's Subsidiaries occurs which could reasonably be expected to
         cause a  Material  Adverse  Effect  and is not  adequately  covered  by
         insurance;

                  (m)  there is filed  against Holdings,  the Borrower or any of
         Borrower's  Subsidiaries  any  action,  suit or  proceeding  under  any
         federal  or  state   racketeering   statute  (including  the  Racketeer
         Influenced and Corrupt Organization Act of 1970), which action, suit or
         proceeding  (i) is not dismissed  within one hundred eighty (180) days,
         and (ii) could  reasonably be expected to result in the confiscation or
         forfeiture of any material portion of the Collateral;

                  (n) for any reason other than the failure of the Agent to take
         any action available to it to maintain perfection of the Agent's Liens,
         pursuant to the Loan Documents,  any Loan Document ceases to be in full
         force and effect or any Lien with  respect to any  material  portion of
         the Collateral  intended to be secured thereby ceases to be, or is not,
         valid,  perfected  and prior to all other Liens  (other than  Permitted
         Liens) or is terminated, revoked or declared void;

                  (o)  (i) an ERISA Event  shall occur with respect to a Pension
         Plan or  Multi-employer  Plan which has resulted or could reasonably be
         expected to result in liability of the Borrower under Title IV of ERISA
         to the Pension  Plan,  Multi-employer  Plan or the PBGC in an aggregate
         amount in excess of $1,000,000;  (ii) the aggregate  amount of Unfunded
         Pension   Liability  among  all  Pension  Plans  at  any  time  exceeds
         $1,000,000;  or (iii) the Borrower or any ERISA Affiliate shall fail to
         pay when due, after the expiration of any applicable grace period,  any
         installment  payment with  respect to its  withdrawal  liability  under
         Section  4201 of  ERISA  under a  Multi-employer  Plan in an  aggregate
         amount in excess of $1,000,000;


                                       47
<PAGE>


                    (p) there occurs a Change of Control,  except in  connection
         with any public offering by Holdings or its Subsidiaries; provided that
         (i) the Borrower  gives Agent at least 30 days prior written  notice of
         such public  offering,  (ii)  proceeds of any such public  offering are
         sufficient to  indefeasibly  pay in full in cash all Obligations in the
         manner  provided  in Section 3.8 and (iii) the Agent and the Lenders in
         their discretion declare such payment in full to be a Termination Date;
         or

                    (q) there occurs an event having a Material Adverse Effect.

               9.2  REMEDIES.

                    (a) If a Default  or an Event of Default  exists,  the Agent
may, in its discretion,  and shall, at the direction of the Required Lenders, do
one or more of the  following  at any time or times  and in any  order,  without
notice to or demand on the Borrower:  (i) reduce the Maximum Revolver Amount, or
any of the advance rates used in computing the Borrowing  Base, or reduce one or
more of the other elements used in computing the Borrowing  Base;  (ii) restrict
the amount of or refuse to make Revolving Loans; and (iii) restrict or refuse to
provide Letters of Credit or Credit Support.  If an Event of Default exists, the
Agent shall,  at the  direction of the Required  Lenders,  do one or more of the
following,  in addition to the actions described in the preceding  sentence,  at
any time or times and in any order, without notice to or demand on the Borrower:
(A)  terminate  the  Commitments  and this  Agreement;  (B)  declare  any or all
Obligations to be immediately due and payable; provided,  however, that upon the
occurrence of any Event of Default described in Sections 9.1(e), 9.1(f), 9.1(g),
or 9.1(h),  the Commitments shall  automatically and immediately  expire and all
Obligations  shall  automatically  become  immediately  due and payable  without
notice or demand of any kind; (C) require the Borrower to cash collateralize all
outstanding  Letter of Credit  Obligations;  and (D) pursue its other rights and
remedies under the Loan Documents and applicable law.

                    (b) If an Event of Default has occurred  and is  continuing:
(i) the Agent  shall have for the  benefit of the  Lenders,  in  addition to all
other rights of the Agent and the Lenders,  the rights and remedies of a secured
party under the Loan  Documents and the UCC,  PPSA, CCQ and the Mortgages Act of
Ontario;  (ii) the Agent may, at any time,  and shall,  at the  direction of the
Required  Lenders,  take  possession  of  the  Collateral  and  keep  it on  the
Borrower's  premises,  at no cost to the Agent or any Lender, or remove any part
of it to such other  place or places as the Agent may  desire,  or the  Borrower
shall,  and shall cause its  Subsidiaries  to, upon the Agent's  demand,  at the
Borrower's cost, assemble the Collateral and make it available to the Agent at a
place reasonably  convenient to the Agent; and (iii) the Agent may and shall, at
the direction of the Required Lenders, sell and deliver any Collateral at public
or private sales,  for cash,  upon credit or otherwise,  at such prices and upon
such terms as the Agent deems advisable, in its sole discretion, and may, if the
Agent deems it reasonable,  postpone or adjourn any sale of the Collateral by an
announcement  at the time and place of sale or of such  postponed  or  adjourned
sale without giving a new notice of sale. Without in any way requiring notice to
be given in the  following  manner,  the  Borrower  agrees,  and shall cause its
Subsidiaries  to agree,  that any  notice by the Agent of sale,  disposition  or
other intended action hereunder or in connection  herewith,  whether required by
the UCC, PPSA or the CCQ or otherwise, shall constitute reasonable notice to the
Borrower  and its  Subsidiaries  if such  notice  is


                                       48
<PAGE>


mailed by  registered  or certified  mail,  return  receipt  requested,  postage
prepaid, or is delivered  personally against receipt, at least five (5) Business
Days prior to such action to the Borrower's  address specified in or pursuant to
Section 13.8.  If any  Collateral is sold on terms other than payment in full at
the time of sale,  no credit shall be given  against the  Obligations  until the
Agent or the Lenders receive payment,  and if the buyer defaults in payment, the
Agent may resell the  Collateral  without  further notice to the Borrower or its
Subsidiaries.  In the  event the Agent  seeks to take  possession  of all or any
portion of the Collateral by judicial  process,  the Borrower waives,  and shall
cause its  Subsidiaries  to,  irrevocably  waive:  (A) the  posting of any bond,
surety or security with respect thereto which might  otherwise be required;  (B)
any demand for  possession  prior to the  commencement  of any suit or action to
recover the Collateral; and (C) any requirement that the Agent retain possession
and not  dispose of any  Collateral  until after  trial or final  judgment.  The
Borrower agrees,  and shall cause its Subsidiaries to agree,  that the Agent has
no obligation to preserve rights to the Collateral or marshal any Collateral for
the benefit of any Person.  The Agent is hereby granted a license or other right
to use, without charge,  the Borrower's or its  Subsidiaries'  labels,  patents,
copyrights,  name,  trade  secrets,  trade names,  trademarks,  and  advertising
matter, or any similar  property,  in completing  production of,  advertising or
selling any Collateral,  and the Borrower's and its  Subsidiaries'  rights under
all licenses and all franchise agreements shall inure to the Agent's benefit for
such  purpose if  allowed  by such  agreements.  The  proceeds  of sale shall be
applied first to all expenses of sale,  including  attorneys'  fees, and then to
the  Obligations.  The Agent  will  return any  excess to the  Borrower  and the
Borrower shall remain liable for any deficiency.

                    (c) If an Event of Default occurs,  the Borrower waives, and
shall cause its Subsidiaries to, waive all rights to notice and hearing prior to
the  exercise by the Agent of the Agent's  rights to  repossess  the  Collateral
without judicial process or to reply, attach or levy upon the Collateral without
notice or hearing.


                                   ARTICLE 10
                              TERM AND TERMINATION

                    10.1 TERM AND TERMINATION.  The term of this Agreement shall
end on the Stated  Termination Date unless sooner  terminated in accordance with
the terms  hereof.  The Agent  upon  direction  from the  Required  Lenders  may
terminate  this  Agreement  without  notice upon the  occurrence  of an Event of
Default. Upon the effective date of termination of this Agreement for any reason
whatsoever, all Obligations (including all unpaid principal,  accrued and unpaid
interest and any early termination or prepayment fees or penalties) shall become
immediately due and payable and the Borrower shall  immediately  arrange for the
cancellation and return of Letters of Credit then  outstanding.  Notwithstanding
the termination of this Agreement,  until all Obligations are indefeasibly  paid
and performed in full in cash,  the Borrower  shall remain bound by the terms of
this Agreement and shall not be relieved of any of its Obligations  hereunder or
under any other Loan  Document,  and the Agent and the Lenders  shall retain all
their  rights and remedies  hereunder  (including  the Agent's  Liens in and all
rights  and  remedies  with  respect  to all  then  existing  and  after-arising
Collateral).  At any time,  the  Borrower may request an extension of the Stated
Termination Date for a period of not more than one year. The agreement to extend
the then  Stated  Termination  Date shall be at the Agent's  and  Lenders'  sole
discretion  after giving  consideration,  among other  things,  to the Permitted
Holdings Payments allowed to be made after March 15, 2005 .


                                       49
<PAGE>


                                   ARTICLE 11
          AMENDMENTS; WAIVERs; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS

               11.1  AMENDMENTS AND WAIVERS.

                     (a)   No  amendment or waiver  of  any  provision  of  this
Agreement  or any other  Loan  Document,  and no  consent  with  respect  to any
departure by the Borrower therefrom, shall be effective unless the same shall be
in writing  and signed by the  Required  Lenders (or by the Agent at the written
request of the  Required  Lenders)  and the Borrower and then any such waiver or
consent  shall be effective  only in the specific  instance and for the specific
purpose for which given; provided,  however, that no such waiver,  amendment, or
consent shall,  unless in writing and signed by all the Lenders and the Borrower
and acknowledged by the Agent, do any of the following:

                          (i) increase or extend the Commitment of any Lender;

                          (ii)   postpone  or  delay  any  date  fixed  by  this
             Agreement or any other Loan  Document for any payment of principal,
             interest, fees or other amounts due to the Lenders (or any of them)
             hereunder or under any other Loan Document;

                          (iii) reduce the principal of, or the rate of interest
             specified  herein on any Loan, or any fees or other amounts payable
             hereunder or under any other Loan Document;

                          (iv) change the  percentage of the  Commitments  or of
             the  aggregate  unpaid  principal  amount  of the  Loans  which  is
             required  for  the  Lenders  or any of  them  to  take  any  action
             hereunder;

                          (v) increase any of the  percentages  set forth in the
             definition of the Borrowing Base;

                          (vi)  amend  this  Section  or any  provision  of this
             Agreement providing for consent or other action by all Lenders;

                          (vii)  release any  Guaranties of the  Obligations  or
             release  Collateral  other  than as  permitted  by  Section  12.11;

                          (viii) change the definitions of "Majority Lenders" or
             "Required Lenders"; or

                          (ix) increase the Maximum Revolver Amount, the Maximum
             Inventory Loan Amount, and Letter of Credit Subfacility;

provided, however, the Agent may, in its sole discretion and notwithstanding the
limitations  contained in clauses (v) and (ix) above and any other terms of this
Agreement,  make Agent Advances in accordance with Section 1.2(i) and,  provided
further,  that no  amendment,  waiver or consent  shall,  unless in writing  and
signed by the  Agent,  affect  the  rights or  duties  of the Agent


                                       50
<PAGE>

under this  Agreement  or any other Loan  Document and  provided  further,  that
Schedule  1.2 hereto  (Commitments)  may be  amended  from time to time by Agent
alone to reflect  assignments of  Commitments in accordance  herewith so long as
the total of the  Commitments  is not  modified  except as  otherwise  permitted
hereunder.

               (b)  If any fees are paid to the  Lenders  as  consideration  for
amendments,  waivers or  consents  with  respect to this  Agreement,  at Agent's
election,  such  fees  may be paid  only to  those  Lenders  that  agree to such
amendments,  waivers  or  consents  within  the time  specified  for  submission
thereof.

               (c)  If, in connection  with any  proposed  amendment,  waiver or
consent (a "Proposed Change"):

                          (i) requiring the consent of all Lenders,  the consent
             of Required  Lenders is obtained,  but the consent of other Lenders
             is not obtained  (any such Lender whose  consent is not obtained as
             described  in  this  clause  (i) and in  clause  (ii)  below  being
             referred to as a "Non-Consenting Lender"), or

                          (ii)  requiring the consent of Required  Lenders,  the
             consent of Majority Lenders is obtained,

then, so long as the Agent is not a  Non-Consenting  Lender,  at the  Borrower's
request, an Eligible Assignee shall have the right (but not the obligation) with
the Agent's  approval,  to purchase  from the  Non-Consenting  Lenders,  and the
Non-Consenting  Lenders  agree  that they  shall  sell,  all the  Non-Consenting
Lenders'  Commitments for an amount equal to the principal  balances thereof and
all accrued  interest  and fees with  respect  thereto  through the date of sale
pursuant to Assignment and Acceptance Agreement(s), without premium or discount.

               11.2  ASSIGNMENTS; PARTICIPATIONS.

                    (a) Any Lender may,  with the  written  consent of the Agent
(which  consent  shall not be  unreasonably  withheld)  and the Borrower  (which
consent shall not be unreasonably withheld),  assign and delegate to one or more
Eligible Assignees  (provided that no consent of the Agent or the Borrower shall
be required in connection  with any  assignment and delegation by a Lender to an
Affiliate of such Lender) (each an "Assignee")  all, or any ratable part of all,
of the Loans,  the  Commitments  and the other  rights and  obligations  of such
Lender  hereunder,  in a minimum amount of $5,000,000  (provided that, unless an
assignor Lender has assigned and delegated all of its Loans and Commitments,  no
such assignment and/or delegation shall be permitted unless, after giving effect
thereto,  such  assignor  Lender  retains a  Commitment  in a minimum  amount of
$5,000,000;  provided,  however, that the Borrower and the Agent may continue to
deal solely and  directly  with such Lender in  connection  with the interest so
assigned to an Assignee  until (i) written notice of such  assignment,  together
with payment instructions, addresses and related information with respect to the
Assignee, shall have been given to the Borrower and the Agent by such Lender and
the  Assignee;  (ii) such Lender and its  Assignee  shall have  delivered to the
Borrower and the Agent an  Assignment  and  Acceptance  in the form of Exhibit F
("Assignment  and  Acceptance")  together with any note or notes subject to such
assignment  and (iii) the  assignor  Lender or Assignee  has paid to the Agent a
processing fee in


                                       51
<PAGE>

the amount of  $3,500;  provided,  further,  that the  Borrower's  consent to an
assignment  shall not be required  when an Event of Default has  occurred and is
continuing.  The Borrower agrees to promptly  execute and deliver new promissory
notes and replacement  promissory notes as reasonably  requested by the Agent to
evidence assignments of the Loans and Commitments in accordance herewith.

                    (b)  From and  after the date  that the Agent  notifies  the
assignor  Lender that it has received an executed  Assignment and Acceptance and
payment of the  above-referenced  processing  fee, (i) the  Assignee  thereunder
shall  be a party  hereto  and,  to the  extent  that  rights  and  obligations,
including,  but not  limited to, the  obligation  to  participate  in Letters of
Credit and Credit  Support have been assigned to it pursuant to such  Assignment
and Acceptance, shall have the rights and obligations of a Lender under the Loan
Documents,  and (ii) the assignor  Lender  shall,  to the extent that rights and
obligations  hereunder and under the other Loan  Documents have been assigned by
it pursuant to such  Assignment  and  Acceptance,  relinquish  its rights and be
released  from  its  obligations  under  this  Agreement  (and in the case of an
Assignment and Acceptance  covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto).

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

                    (d) Immediately  upon  satisfaction  of the  requirements of
Section 11.2(a), this Agreement shall be deemed to be amended to the extent, but
only to the extent,  necessary  to reflect the  addition of the Assignee and the
resulting  adjustment  of the


                                       52
<PAGE>

Commitments arising therefrom.  The Commitment  allocated to each Assignee shall
reduce such Commitments of the assigning Lender pro tanto.

                    (e)  Any  Lender  may  at any  time  sell  to  one  or  more
commercial  banks,  financial  institutions,  or other Persons not Affiliates of
Holdings,  the  Borrower  and  the  Borrower's  Subsidiaries  (a  "Participant")
participating  interests  in any Loans,  the  Commitment  of that Lender and the
other interests of that Lender (the  "originating  Lender")  hereunder and under
the other Loan Documents;  provided,  however, that (i) the originating Lender's
obligations  under this Agreement shall remain  unchanged,  (ii) the originating
Lender shall remain solely  responsible for the performance of such obligations,
(iii) the Borrower and the Agent shall continue to deal solely and directly with
the originating  Lender in connection  with the originating  Lender's rights and
obligations  under  this  Agreement  and the other Loan  Documents,  and (iv) no
Lender  shall  transfer  or grant any  participating  interest  under  which the
Participant  has rights to approve  any  amendment  to, or any consent or waiver
with respect to, this  Agreement or any other Loan  Document  except the matters
set forth in Section 11.1(a) (i), (ii) and (iii), and all amounts payable by the
Borrower  hereunder  shall be  determined  as if such  Lender  had not sold such
participation;  except that, if amounts outstanding under this Agreement are due
and unpaid, or shall have become due and payable upon the occurrence of an Event
of  Default,  each  Participant  shall be deemed to have the right of set-off in
respect of its  participating  interest in amounts owing under this Agreement to
the same  extent  and  subject  to the same  limitation  as if the amount of its
participating  interest  were  owing  directly  to it  as a  Lender  under  this
Agreement.

                    (f)  Notwithstanding  any other provision in this Agreement,
any Lender may at any time create a security interest in, or pledge,  all or any
portion of its  rights  under and  interest  in this  Agreement  in favor of any
Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury
Regulation  31 CFR  ss.203.14,  and such  Federal  Reserve Bank may enforce such
pledge or security interest in any manner permitted under applicable law.


                                   ARTICLE 12
                                    THE AGENT

               12.1 Appointment and Authorization. Each Lender hereby designates
and appoints Bank as its Agent under this Agreement and the other Loan Documents
and each Lender hereby  irrevocably  authorizes the Agent to take such action on
its behalf under the  provisions of this  Agreement and each other Loan Document
and to exercise such powers and perform such duties as are  expressly  delegated
to it by the terms of this Agreement or any other Loan  Document,  together with
such powers as are  reasonably  incidental  thereto.  The Agent agrees to act as
such on the express  conditions  contained in this Article 12. The provisions of
this Article 12 are solely for the benefit of the Agent and the Lenders and none
of Holdings, the Borrower or its Subsidiaries shall have rights as a third party
beneficiary  of any of the  provisions  contained  herein.  Notwithstanding  any
provision to the contrary contained  elsewhere in this Agreement or in any other
Loan Document,  the Agent shall not have any duties or responsibilities,  except
those expressly set forth herein,  nor shall the Agent have or be deemed to have
any fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities,  duties,  obligations or  liabilities  shall be read into this
Agreement  or any other


                                       53
<PAGE>

Loan  Document or  otherwise  exist  against  the Agent.  Without  limiting  the
generality  of the  foregoing  sentence,  the use of the  term  "agent"  in this
Agreement  with  reference to the Agent is not intended to connote any fiduciary
or other implied (or express)  obligations  arising under agency doctrine of any
applicable law. Instead,  such term is used merely as a matter of market custom,
and is intended to create or reflect only an administrative relationship between
independent  contracting parties. Except as expressly otherwise provided in this
Agreement,  the Agent shall have and may use its sole discretion with respect to
exercising or refraining from exercising any  discretionary  rights or taking or
refraining from taking any actions which the Agent is expressly entitled to take
or assert under this Agreement and the other Loan  Documents,  including (a) the
determination of the applicability of ineligibility criteria with respect to the
calculation of the Borrowing Base, (b) the making of Agent Advances  pursuant to
Section  1.2(i),  and (c) the exercise of remedies  pursuant to Section 9.2, and
any action so taken or not taken shall be deemed consented to by the Lenders.

               12.2  DELEGATION OF  DUTIES.   The Agent may  execute  any of its
duties  under this  Agreement or any other Loan  Document by or through  agents,
employees  or  attorneys-in-fact  and shall be  entitled  to  advice of  counsel
concerning  all  matters  pertaining  to such  duties.  The  Agent  shall not be
responsible  for the  negligence or misconduct of any agent or  attorney-in-fact
that it selects as long as such  selection was made without gross  negligence or
willful misconduct.

               12.3  LIABILITY OF AGENT. None of the Agent-Related Persons shall
(i) be liable for any  action  taken or omitted to be taken by any of them under
or in  connection  with  this  Agreement  or  any  other  Loan  Document  or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct),  or (ii) be responsible in any manner to any of the Lenders for any
recital,  statement,  representation  or  warranty  made by the  Borrower or any
Subsidiary or Affiliate of the Borrower,  or any officer  thereof,  contained in
this Agreement or in any other Loan  Document,  or in any  certificate,  report,
statement or other  document  referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other Loan Document, or
the validity, effectiveness,  genuineness, enforceability or sufficiency of this
Agreement  or any other  Loan  Document,  or for any  failure of  Holdings,  the
Borrower or the Borrower's  Subsidiaries or any other party to any Loan Document
to perform its  obligations  hereunder or thereunder.  No  Agent-Related  Person
shall be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance  of any of the agreements  contained in, or conditions
of, this  Agreement or any other Loan  Document,  or to inspect the  properties,
books or records of Holdings, the Borrower or any of the Borrower's Subsidiaries
or Affiliates, except as expressly provided herein.

               12.4  RELIANCE BY AGENT. The Agent shall be entitled to rely, and
shall be fully  protected  in relying,  upon any  writing,  resolution,  notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message,  statement  or other  document  or  conversation  believed  by it to be
genuine and correct and to have been signed,  sent or made by the proper  Person
or Persons,  and upon advice and statements of legal counsel  (including counsel
to the Borrower or its Subsidiaries ), independent accountants and other experts
selected by the Agent. The Agent shall be fully justified in failing or refusing
to take any action  under this  Agreement or any other Loan  Document  unless it
shall first  receive such advice or  concurrence  of the Required  Lenders as it
deems  appropriate and, if it so requests,  it shall first be indemnified to its
satisfaction  by the Lenders against any and all liability and expense which may
be incurred by it


                                       54
<PAGE>


by reason of taking or  continuing  to take any such action.  The Agent shall in
all cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance  with a request or consent of
the  Required  Lenders (or all Lenders if so required by Section  11.1) and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all of the Lenders.

          12.5   NOTICE OF DEFAULT.   The Agent  shall  not  be deemed  to  have
knowledge or notice of the occurrence of any Default or Event of Default, unless
the Agent  shall have  received  written  notice  from a Lender or the  Borrower
referring  to this  Agreement,  describing  such Default or Event of Default and
stating  that such  notice is a "notice of  default."  The Agent will notify the
Lenders of its receipt of any such notice. The Agent shall take such action with
respect to such  Default or Event of Default as may be requested by the Required
Lenders in accordance with Section 9; provided,  however,  that unless and until
the Agent  has  received  any such  request,  the  Agent  may (but  shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable.

          12.6   CREDIT DECISION.   Each  Lender  acknowledges  that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereinafter  taken,  including any review of the affairs of the
Borrower and its Affiliates, shall be deemed to constitute any representation or
warranty by any  Agent-Related  Person to any Lender.  Each Lender represents to
the Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made  its own  appraisal  of and  investigation  into the  business,  prospects,
operations,  property, financial and other condition and creditworthiness of the
Borrower and its Affiliates, and all applicable bank regulatory laws relating to
the transactions  contemplated  hereby,  and made its own decision to enter into
this Agreement and to extend credit to the Borrower. Each Lender also represents
that it will,  independently and without reliance upon any Agent-Related  Person
and based on such documents and information as it shall deem  appropriate at the
time,  continue to make its own credit  analysis,  appraisals  and  decisions in
taking or not taking action under this  Agreement and the other Loan  Documents,
and to make such investigations as it deems necessary to inform itself as to the
business,  prospects,  operations,  property,  financial and other condition and
creditworthiness  of  the  Borrower.  Except  for  notices,  reports  and  other
documents expressly herein required to be furnished to the Lenders by the Agent,
the Agent shall not have any duty or  responsibility  to provide any Lender with
any credit or other information concerning the business, prospects,  operations,
property,  financial  and other  condition or  creditworthiness  of the Borrower
which may come into the possession of any of the Agent-Related Persons.

          12.7  INDEMNIFICATION.   Whether or not the transactions  contemplated
hereby  are   consummated,   the  Lenders  shall   indemnify   upon  demand  the
Agent-Related  Persons  (to the  extent  not  reimbursed  by or on behalf of the
Borrower  and without  limiting  the  obligation  of the  Borrower to do so), in
accordance with their Pro Rata Shares,  from and against any and all Indemnified
Liabilities as such term is defined in Section 13.11; provided, however, that no
Lender  shall be liable  for the  payment  to the  Agent-Related  Persons of any
portion of such  Indemnified  Liabilities  resulting  solely from such  Person's
gross  negligence or willful  misconduct.  Without  limitation of the foregoing,
each Lender shall  reimburse the Agent upon demand for its Pro Rata Share of any
reasonable costs or out-of-pocket expenses (including


                                       55
<PAGE>

Attorney  Costs)  incurred  by the  Agent in  connection  with the  preparation,
execution,  delivery,  administration,  modification,  amendment or  enforcement
(whether  through  negotiations,  legal  proceedings  or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, any other
Loan Document,  or any document  contemplated  by or referred to herein,  to the
extent that the Agent is not reimbursed for such expenses by or on behalf of the
Borrower.  The  undertaking  in this  Section  shall  survive the payment of all
Obligations hereunder and the resignation or replacement of the Agent.

         12.8  AGENT IN INDIVIDUAL CAPACITY.   The Bank  and  its Affiliates may
make loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking,  trust,
financial  advisory,  underwriting  or other  business with the Borrower and its
Subsidiaries  and Affiliates as though the Bank were not the Agent hereunder and
without  notice to or consent of the  Lenders.  The Bank or its  Affiliates  may
receive information  regarding the Borrower,  its Affiliates and Account Debtors
(including  information  that may be subject to  confidentiality  obligations in
favor of the Borrower or such Subsidiary) and acknowledge that the Agent and the
Bank shall be under no  obligation  to provide such  information  to them.  With
respect to its Loans,  the Bank shall have the same rights and powers under this
Agreement  as any other  Lender and may  exercise the same as though it were not
the  Agent,  and the  terms  "Lender"  and  "Lenders"  include  the  Bank in its
individual capacity.

        12.9   SUCCESSOR AGENT.  The Agent may resign as Agent  upon at least 30
days' prior  notice to the  Lenders and the  Borrower,  such  resignation  to be
effective upon the acceptance of a successor  agent to its appointment as Agent.
In the event the Bank sells all of its Commitment and Revolving Loans as part of
a sale,  transfer or other  disposition by the Bank of substantially  all of its
loan portfolio,  the Bank shall resign as Agent and such purchaser or transferee
shall become the successor  Agent  hereunder.  Subject to the foregoing,  if the
Agent  resigns  under this  Agreement,  the Required  Lenders shall appoint from
among the Lenders a successor  agent for the Lenders.  If no successor  agent is
appointed prior to the effective date of the resignation of the Agent, the Agent
may appoint,  after  consulting  with the Lenders and the Borrower,  a successor
agent  from  among  the  Lenders.  Upon the  acceptance  of its  appointment  as
successor agent hereunder, such successor agent shall succeed to all the rights,
powers and duties of the  retiring  Agent and the term  "Agent"  shall mean such
successor agent and the retiring Agent's appointment, powers and duties as Agent
shall be terminated.  After any retiring Agent's resignation hereunder as Agent,
the  provisions of this Article 12 shall  continue to inure to its benefit as to
any  actions  taken or omitted  to be taken by it while it was Agent  under this
Agreement.

        12.10  WITHHOLDING TAX.

               (a) If any  Lender  is a  "foreign  corporation,  partnership  or
trust" within the meaning of the Code and such Lender claims  exemption from, or
a reduction of, U.S.  withholding  tax under  Sections 1441 or 1442 of the Code,
such Lender agrees with and in favor of the Agent, to deliver to the Agent:

                           (i) if such Lender  claims an  exemption  from,  or a
                  reduction of, withholding tax under a United States of America
                  tax treaty,  properly  completed



                                       56
<PAGE>


                  IRS Forms W-8BEN and W-8ECI before the payment of any interest
                  in the first  calendar year  and  before the  payment  of  any
                  interest in each third succeeding calendar  year during  which
                  interest may be paid under this Agreement;

                           (ii) if such Lender  claims that  interest paid under
                  this  Agreement  is  exempt  from  United  States  of  America
                  withholding  tax because it is  effectively  connected  with a
                  United States of America trade or business of such Lender, two
                  properly  completed  and  executed  copies of IRS Form  W-8ECI
                  before the payment of any interest is due in the first taxable
                  year of such  Lender and in each  succeeding  taxable  year of
                  such  Lender  during  which  interest  may be paid  under this
                  Agreement, and IRS Form W-9; and

                           (iii)  such  other  form or forms as may be  required
                  under the Code or other laws of the  United  States of America
                  as a condition to exemption  from,  or  reduction  of,  United
                  States of America withholding tax.

Such Lender agrees to promptly  notify the Agent of any change in  circumstances
which would modify or render invalid any claimed exemption or reduction.

                   (b)  If any Lender  claims  exemption  from, or reduction of,
withholding  tax under a United  States of America tax treaty by  providing  IRS
Form  FW-8BEN and such Lender  sells,  assigns,  grants a  participation  in, or
otherwise  transfers all or part of the Obligations  owing to such Lender,  such
Lender  agrees to notify  the Agent of the  percentage  amount in which it is no
longer the beneficial  owner of  Obligations of the Borrower to such Lender.  To
the extent of such  percentage  amount,  the Agent will treat such  Lender's IRS
Form W-8BEN as no longer valid.

                   (c)  If any Lender  claiming  exemption from United States of
America withholding tax by filing IRS Form W-8ECI with the Agent sells, assigns,
grants a participation in, or otherwise transfers all or part of the Obligations
owing to such Lender,  such Lender agrees to undertake sole  responsibility  for
complying with the  withholding  tax  requirements  imposed by Sections 1441 and
1442 of the Code.

                   (d)   If  any  Lender  is  entitled  to a  reduction  in  the
applicable  withholding tax, the Agent may withhold from any interest payment to
such Lender an amount equivalent to the applicable  withholding tax after taking
into account such  reduction.  If the forms or other  documentation  required by
subsection  (a) of this Section are not  delivered to the Agent,  then the Agent
may withhold from any interest  payment to such Lender not providing  such forms
or other documentation an amount equivalent to the applicable withholding tax.

                   (e) If the IRS or any other Governmental  Authority  of the
United  States of America or other  jurisdiction  asserts a claim that the Agent
did not  properly  withhold  tax from  amounts paid to or for the account of any
Lender  (because  the  appropriate  form  was not  delivered,  was not  properly
executed,  or  because  such  Lender  failed to notify  the Agent of a change in
circumstances  which rendered the exemption  from, or reduction of,  withholding
tax ineffective,  or for any other reason) such Lender shall indemnify the Agent
fully for all  amounts  paid,  directly  or  indirectly,  by the Agent as tax or
otherwise,  including penalties and interest, and


                                       57
<PAGE>


including any taxes imposed by any  jurisdiction  on the amounts  payable to the
Agent  under  this  Section,  together  with all costs and  expenses  (including
Attorney  Costs).  The  obligation  of the Lenders under this  subsection  shall
survive the payment of all Obligations and the resignation or replacement of the
Agent.

        12.11  COLLATERAL MATTERS.

               (a) The Lenders hereby  irrevocably  authorize the Agent,  at its
option  and in its sole  discretion,  to  release  any  Agent's  Liens  upon any
Collateral  (i)  upon  the  termination  of  the  Commitments  and  payment  and
satisfaction in full by the Borrower of all Loans and reimbursement  obligations
in respect of Letters of Credit and Credit  Support,  and the termination of all
outstanding  Letters of Credit (whether or not any of such  obligations are due)
and all other Obligations;  (ii) constituting property being sold or disposed of
if the  Borrower  or its  Subsidiaries  certify  to the  Agent  that the sale or
disposition  is made in  compliance  with Section 7.9 and will be  reinvested or
otherwise applied in accordance with Section 7.9 and, if applicable, Section 3.4
(and the Agent may rely conclusively on any such  certificate,  after conducting
reasonable due diligence before relying on such certificate); (iii) constituting
property in which the Borrower or its Subsidiaries owned no interest at the time
the Lien was granted or at any time thereafter;  or (iv)  constituting  property
leased to the  Borrower or its  Subsidiaries  under a lease which has expired or
been  terminated  in a transaction  permitted  under this  Agreement.  Except as
provided above,  the Agent will not release any of the Agent's Liens without the
prior written authorization of the Lenders;  provided that the Agent may, in its
discretion,  release the Agent's Liens on Collateral valued in the aggregate not
in excess of  $1,000,000  during  each Fiscal  Year  without  the prior  written
authorization  of the Lenders  and the Agent may  release  the Agent's  Liens on
Collateral  valued in the  aggregate  not in excess of  $5,000,000  during  each
Fiscal  Year with the prior  written  authorization  of Required  Lenders.  Upon
request by the Agent or the  Borrower at any time,  the Lenders  will confirm in
writing the Agent's authority to release any Agent's Liens upon particular types
or items of Collateral pursuant to this Section 12.11.

               (b)  Upon  receipt  by the  Agent of any  authorization  required
pursuant  to Section  12.11(a)  from the  Lenders of the  Agent's  authority  to
release Agent's Liens upon particular types or items of Collateral,  and upon at
least five (5) Business  Days prior written  request by the Borrower,  the Agent
shall (and is hereby  irrevocably  authorized  by the Lenders  to) execute  such
documents as may be necessary to evidence the release of the Agent's  Liens upon
such Collateral;  provided, however, that (i) the Agent shall not be required to
execute any such document on terms which, in the Agent's  opinion,  would expose
the Agent to liability or create any obligation or entail any consequence  other
than the  release of such Liens  without  recourse  or  warranty,  and (ii) such
release shall not in any manner  discharge,  affect or impair the Obligations or
any Liens (other than those  expressly  being  released) upon (or obligations of
the Borrower in respect of) all interests  retained by the  Borrower,  including
the proceeds of any sale, all of which shall continue to constitute  part of the
Collateral.

               (c) The Agent shall have no  obligation  whatsoever to any of the
Lenders to assure that the Collateral  exists or is owned by the Borrower or its
Subsidiaries or is cared for,  protected or insured or has been  encumbered,  or
that the Agent's Liens have been properly or sufficiently  or lawfully  created,
perfected, protected or enforced or are entitled to any


                                       58
<PAGE>


particular priority,  or to exercise at all or in any particular manner or under
any duty of care, disclosure or fidelity, or to continue exercising,  any of the
rights, authorities and powers granted or available to the Agent pursuant to any
of the Loan  Documents,  it being  understood  and agreed that in respect of the
Collateral,  or any act, omission or event related thereto, the Agent may act in
any manner it may deem appropriate, in its sole discretion given the Agent's own
interest in the  Collateral  in its  capacity as one of the Lenders and that the
Agent shall have no other duty or liability  whatsoever  to any Lender as to any
of the foregoing.

        12.12  RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS.

               (a) Each of the  Lenders  agrees  that it shall not,  without the
express consent of all Lenders,  and that it shall, to the extent it is lawfully
entitled  to do so,  upon  the  request  of all  Lenders,  set off  against  the
Obligations, any amounts owing by such Lender to the Borrower or any accounts of
the Borrower now or hereafter  maintained with such Lender.  Each of the Lenders
further agrees that it shall not, unless specifically  requested to do so by the
Agent,  take or cause to be taken any  action to enforce  its rights  under this
Agreement or against the Borrower,  including the  commencement  of any legal or
equitable  proceedings,  to  foreclose  any Lien on, or  otherwise  enforce  any
security interest in, any of the Collateral.

               (b)  If at any time or  times any  Lender  shall  receive  (i) by
payment,  foreclosure,  setoff or  otherwise,  any proceeds of Collateral or any
payments with respect to the  Obligations of the Borrower to such Lender arising
under,  or relating to, this Agreement or the other Loan  Documents,  except for
any such proceeds or payments received by such Lender from the Agent pursuant to
the terms of this  Agreement,  or (ii) payments from the Agent in excess of such
Lender's  ratable portion of all such  distributions  by the Agent,  such Lender
shall  promptly  (1) turn the same  over to the  Agent,  in kind,  and with such
endorsements  as may be required to negotiate the same to the Agent,  or in same
day  funds,  as  applicable,  for  the  account  of all of the  Lenders  and for
application to the Obligations in accordance  with the applicable  provisions of
this  Agreement,  or (2) purchase,  without  recourse or warranty,  an undivided
interest and  participation in the Obligations owed to the other Lenders so that
such excess payment  received  shall be applied  ratably as among the Lenders in
accordance with their Pro Rata Shares; provided, however, that if all or part of
such excess  payment  received by the purchasing  party is thereafter  recovered
from it,  those  purchases of  participations  shall be rescinded in whole or in
part,  as  applicable,  and the  applicable  portion of the purchase  price paid
therefor shall be returned to such purchasing party, but without interest except
to the  extent  that  such  purchasing  party is  required  to pay  interest  in
connection with the recovery of the excess payment.

        12.13   AGENCY FOR PERFECTION.  Each Lender  hereby appoints each  other
Lender as agent for the purpose of perfecting the Lenders'  security interest in
assets  which,  in  accordance  with  Article  9 of the  UCC  or the  applicable
provisions of the PPSA or CCQ can be perfected  only by  possession.  Should any
Lender (other than the Agent) obtain  possession  of any such  Collateral,  such
Lender shall notify the Agent thereof,  and,  promptly upon the Agent's  request
therefor  shall deliver such  Collateral to the Agent or in accordance  with the
Agent's instructions.

        12.14   PAYMENTS BY AGENT TO LENDERS.   All  payments to be made  by the
Agent to the Lenders shall be made by bank wire transfer or internal transfer of
immediately   available   funds  to  each  Lender   pursuant  to  wire  transfer
instructions  delivered  in writing to the Agent on


                                       59

<PAGE>

or  prior  to the  Closing  Date  (or if  such  Lender  is an  Assignee,  on the
applicable  Assignment and Acceptance),  or pursuant to such other wire transfer
instructions  as each party may  designate  for itself by written  notice to the
Agent.  Concurrently  with each such payment,  the Agent shall identify  whether
such payment (or any portion thereof) represents principal,  premium or interest
on the Revolving  Loans or otherwise.  Unless the Agent receives notice from the
Borrower  prior to the date on which any payment is due to the Lenders  that the
Borrower will not make such payment in full as and when required,  the Agent may
assume that the Borrower has made such payment in full to the Agent on such date
in immediately available funds and the Agent may (but shall not be so required),
in reliance upon such assumption,  distribute to each Lender on such due date an
amount  equal to the  amount  then due such  Lender.  If and to the  extent  the
Borrower has not made such payment in full to the Agent, each Lender shall repay
to the Agent on demand such amount  distributed  to such Lender,  together  with
interest  thereon  at the  Federal  Funds  Rate for each day from the date  such
amount is distributed to such Lender until the date repaid.

           12.15  SETTLEMENT.

                  (a) (i) Each Lender's funded portion of the Revolving Loans is
intended by the Lenders to be equal at all times to such Lender's Pro Rata Share
of the outstanding Revolving Loans.  Notwithstanding such agreement,  the Agent,
the Bank,  and the other  Lenders  agree (which  agreement  shall not be for the
benefit of or  enforceable  by the  Borrower)  that in order to  facilitate  the
administration of this Agreement and the other Loan Documents,  settlement among
them as to the Revolving  Loans,  the  Non-Ratable  Loans and the Agent Advances
shall  take  place  on  a  periodic  basis  in  accordance  with  the  following
provisions:

                      (ii)  The Agent shall  request  settlement  ("Settlement")
with the  Lenders on at least a weekly  basis,  or on a more  frequent  basis at
Agent's  election,  (A) on behalf of the Bank, with respect to each  outstanding
Non-Ratable  Loan, (B) for itself,  with respect to each Agent Advance,  and (C)
with respect to collections  received, in each case, by notifying the Lenders of
such  requested  Settlement  by  telecopy,  telephone  or other  similar form of
transmission,  of such requested  Settlement,  no later than 12:00 noon (Chicago
time) on the date of such requested  Settlement (the  "Settlement  Date").  Each
Lender (other than the Bank, in the case of  Non-Ratable  Loans and the Agent in
the case of Agent  Advances) shall transfer the amount of such Lender's Pro Rata
Share of the outstanding  principal  amount of the  Non-Ratable  Loans and Agent
Advances with respect to each Settlement to the Agent, to Agent's  account,  not
later than 2:00 p.m. (Chicago time), on the Settlement Date applicable  thereto.
Settlements  may occur  during  the  continuation  of a  Default  or an Event of
Default  and whether or not the  applicable  conditions  precedent  set forth in
Article 8 have then been  satisfied.  Such amounts  made  available to the Agent
shall be applied against the amounts of the applicable Non-Ratable Loan or Agent
Advance and, together with the portion of such Non-Ratable Loan or Agent Advance
representing the Bank's Pro Rata Share thereof, shall constitute Revolving Loans
of such  Lenders.  If any such  amount  is not  transferred  to the Agent by any
Lender on the Settlement Date applicable thereto, the Agent shall be entitled to
recover such amount on demand from such Lender together with interest thereon at
the  Federal  Funds  Rate for the  first  three  (3) days  from  and  after  the
Settlement  Date and  thereafter  at the Interest  Rate then  applicable  to the
Revolving  Loans (A) on behalf of the Bank,  with  respect  to each  outstanding
Non-Ratable Loan, and (B) for itself, with respect to each Agent Advance.



                                       60
<PAGE>


                      (iii) Notwithstanding the foregoing, not more than one (1)
Business  Day after  demand is made by the  Agent  (whether  before or after the
occurrence  of a Default or an Event of Default  and  regardless  of whether the
Agent has  requested a Settlement  with respect to a  Non-Ratable  Loan or Agent
Advance),  each other Lender (A) shall irrevocably and unconditionally  purchase
and  receive  from the Bank or the Agent,  as  applicable,  without  recourse or
warranty,  an undivided  interest and  participation in such Non-Ratable Loan or
Agent Advance equal to such Lender's Pro Rata Share of such  Non-Ratable Loan or
Agent Advance and (B) if Settlement has not previously  occurred with respect to
such  Non-Ratable  Loans or Agent  Advances,  upon  demand by Bank or Agent,  as
applicable,  shall pay to Bank or Agent, as applicable, as the purchase price of
such  participation  an  amount  equal to  one-hundred  percent  (100%)  of such
Lender's Pro Rata Share of such  Non-Ratable  Loans or Agent  Advances.  If such
amount is not in fact made available to the Agent by any Lender, the Agent shall
be entitled to recover  such  amount on demand  from such Lender  together  with
interest thereon at the Federal Funds Rate for the first three (3) days from and
after such demand and  thereafter at the Interest  Rate then  applicable to Base
Rate Revolving Loans.

                      (iv)  From and after the date, if any, on which any Lender
purchases an undivided  interest and  participation  in any Non-Ratable  Loan or
Agent  Advance  pursuant  to  clause  (iii)  above,  the  Agent  shall  promptly
distribute  to such  Lender,  such  Lender's  Pro Rata Share of all  payments of
principal and interest and all proceeds of  Collateral  received by the Agent in
respect of such Non-Ratable Loan or Agent Advance.

                      (v)  Between Settlement Dates, the Agent, to the extent no
Agent Advances are outstanding,  may pay over to the Bank any payments  received
by the Agent,  which in  accordance  with the terms of this  Agreement  would be
applied to the reduction of the Revolving  Loans,  for application to the Bank's
Revolving  Loans including  Non-Ratable  Loans.  If, as of any Settlement  Date,
collections  received since the then immediately  preceding Settlement Date have
been applied to the Bank's  Revolving Loans (other than to Non-Ratable  Loans or
Agent  Advances  in which  such  Lender has not yet  funded  its  purchase  of a
participation  pursuant to clause (iii) above),  as provided for in the previous
sentence, the Bank shall pay to the Agent for the accounts of the Lenders, to be
applied to the outstanding  Revolving Loans of such Lenders, an amount such that
each Lender  shall,  upon receipt of such amount,  have,  as of such  Settlement
Date,  its Pro Rata Share of the  Revolving  Loans.  During  the period  between
Settlement  Dates,  the Bank with respect to Non-Ratable  Loans,  the Agent with
respect to Agent  Advances,  and each Lender with respect to the Revolving Loans
other than Non-Ratable  Loans and Agent Advances,  shall be entitled to interest
at the  applicable  rate or rates  payable  under this  Agreement  on the actual
average  daily  amount of funds  employed  by the Bank,  the Agent and the other
Lenders.

                      (vi)  Unless the Agent has received written  notice from a
Lender to the  contrary,  the Agent may assume  that the  applicable  conditions
precedent set forth in Article 8 have been satisfied and the requested Borrowing
will  not  exceed  Availability  on any  Funding  Date for a  Revolving  Loan or
Non-Ratable Loan.

                  (b) Lenders' Failure to Perform.   All Revolving  Loans (other
than  Non-Ratable  Loans  and  Agent  Advances)  shall  be made  by the  Lenders
simultaneously  and in accordance  with their Pro Rata Shares.  It is understood
that (i) no Lender shall be  responsible


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<PAGE>


for any  failure  by any other  Lender to  perform  its  obligation  to make any
Revolving Loans  hereunder,  nor shall any Commitment of any Lender be increased
or  decreased  as a result of any  failure by any other  Lender to  perform  its
obligation to make any Revolving Loans hereunder,  (ii) no failure by any Lender
to perform its obligation to make any Revolving Loans hereunder shall excuse any
other Lender from its  obligation to make any  Revolving  Loans  hereunder,  and
(iii) the obligations of each Lender  hereunder shall be several,  not joint and
several.

                  (c)  Defaulting Lenders.   Unless  the Agent  receives  notice
from a Lender on or prior to the Closing Date or, with respect to any  Borrowing
after the  Closing  Date,  at least one  Business  Day prior to the date of such
Borrowing,  that  such  Lender  will not  make  available  as and when  required
hereunder to the Agent that  Lender's  Pro Rata Share of a Borrowing,  the Agent
may assume  that each  Lender  has made such  amount  available  to the Agent in
immediately available funds on the Funding Date. Furthermore,  the Agent may, in
reliance  upon such  assumption,  make  available to the Borrower on such date a
corresponding  amount. If any Lender has not transferred its full Pro Rata Share
to the Agent in  immediately  available  funds  and the  Agent  has  transferred
corresponding  amount to the Borrower on the Business Day following such Funding
Date that Lender shall make such amount  available to the Agent,  together  with
interest at the Federal Funds Rate for that day. A notice by the Agent submitted
to any Lender with respect to amounts owing shall be conclusive, absent manifest
error.  If each  Lender's  full Pro Rata  Share is  transferred  to the Agent as
required,  the amount  transferred to the Agent shall  constitute  that Lender's
Revolving  Loan  for all  purposes  of this  Agreement.  If that  amount  is not
transferred  to the Agent on the Business Day following  the Funding  Date,  the
Agent will notify the Borrower of such  failure to fund and,  upon demand by the
Agent,  the Borrower shall pay such amount to the Agent for the Agent's account,
together  with  interest  thereon  for each day  elapsed  since the date of such
Borrowing, at a rate per annum equal to the Interest Rate applicable at the time
to the Revolving Loans comprising that particular Borrowing.  The failure of any
Lender to make any Revolving Loan on any Funding Date (any such Lender, prior to
the  cure  of such  failure,  being  hereinafter  referred  to as a  "Defaulting
Lender") shall not relieve any other Lender of its obligation  hereunder to make
a Revolving  Loan on that Funding Date. No Lender shall be  responsible  for any
other  Lender's  failure to advance  such other  Lenders'  Pro Rata Share of any
Borrowing.

                  (d) Retention of Defaulting Lender's Payments. The Agent shall
not be  obligated to transfer to a  Defaulting  Lender any payments  made by the
Borrower  to the  Agent  for  the  Defaulting  Lender's  benefit;  nor  shall  a
Defaulting Lender be entitled to the sharing of any payments hereunder.  Amounts
payable to a  Defaulting  Lender  shall  instead be paid to or  retained  by the
Agent. In its discretion, the Agent may loan the Borrower the amount of all such
payments  received or retained by it for the account of such Defaulting  Lender.
Any amounts so loaned to the Borrower shall bear interest at the rate applicable
to Base Rate Revolving  Loans and for all other purposes of this Agreement shall
be treated as if they were Revolving Loans, provided, however, that for purposes
of voting or  consenting  to  matters  with  respect to the Loan  Documents  and
determining Pro Rata Shares,  such Defaulting Lender shall be deemed not to be a
"Lender". Until a Defaulting Lender cures its failure to fund its Pro Rata Share
of any Borrowing (A) such Defaulting Lender shall not be entitled to any portion
of the Unused Line Fee and (B) the Unused Line Fee shall  accrue in favor of the
Lenders  which have funded their  respective  Pro Rata Shares of such  requested
Borrowing and shall be allocated  among such  performing  Lenders  ratably based
upon their relative Commitments. This Section shall remain



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<PAGE>


effective with respect to such Lender until such time as the  Defaulting  Lender
shall no longer be in default of any of its  obligations  under this  Agreement.
The terms of this Section shall not be construed to increase or otherwise affect
the  Commitment  of any  Lender,  or relieve or excuse  the  performance  by the
Borrower of its duties and obligations hereunder.

               (e) Removal of Defaulting Lender.  At the Borrower's request, the
Agent  or an  Eligible  Assignee  reasonably  acceptable  to the  Agent  and the
Borrower  shall have the right (but not the  obligation)  to  purchase  from any
Defaulting Lender, and each Defaulting Lender shall, upon such request, sell and
assign to the Agent or such Eligible  Assignee,  all of the Defaulting  Lender's
outstanding Commitments hereunder. Such sale shall be consummated promptly after
Agent has arranged for a purchase by Agent or an Eligible  Assignee  pursuant to
an Assignment and Acceptance,  and at a price equal to the outstanding principal
balance of the  Defaulting  Lender's  Loans,  plus  accrued  interest  and fees,
without premium or discount.

        12.16  LETTERS OF CREDIT; INTRA-LENDER ISSUES.

               (a)  Notice of Letter of Credit  Balance.  On each  Settlement
Date the Agent shall notify each Lender of the issuance of all Letters of Credit
since the prior Settlement Date.

               (b)  Participations in Letters of Credit.

                    (i) Purchase of Participations. Immediately upon issuance of
any Letter of Credit in  accordance  with Section  1.4(d),  each Lender shall be
deemed to have  irrevocably and  unconditionally  purchased and received without
recourse or warranty,  an undivided  interest  and  participation  equal to such
Lender's  Pro Rata  Share of the face  amount  of such  Letter  of Credit or the
Credit Support provided through the Agent to the Letter of Credit Issuer, if not
the Bank,  in connection  with the issuance of such Letter of Credit  (including
all obligations of the Borrower with respect thereto,  and any security therefor
or guaranty pertaining thereto).

                    (ii) Sharing of Reimbursement Obligation Payments.  Whenever
the Agent  receives a payment  from the  Borrower  on  account of  reimbursement
obligations  in respect of a Letter of Credit or Credit  Support as to which the
Agent has  previously  received  for the account of the Letter of Credit  Issuer
thereof payment from a Lender,  the Agent shall promptly pay to such Lender such
Lender's  Pro Rata Share of such payment  from the  Borrower.  Each such payment
shall be made by the Agent on the next Settlement Date.

                    (iii)  Documentation.  Upon the request of any  Lender,  the
Agent  shall  furnish to such  Lender  copies of any  Letter of  Credit,  Credit
Support  for  any  Letter  of  Credit,   reimbursement  agreements  executed  in
connection  therewith,  applications  for any Letter of  Credit,  and such other
documentation as may reasonably be requested by such Lender.

                    (iv) Obligations Irrevocable. The obligations of each Lender
to make  payments  to the Agent  with  respect  to any  Letter of Credit or with
respect to their participation therein or with respect to any Credit Support for
any Letter of Credit or with respect to the Revolving  Loans made as a result of
a drawing under a Letter of Credit and the obligations of the Borrower for whose
account the Letter of Credit or Credit  Support  was issued to make


                                       63

<PAGE>


payments to the Agent, for the account of the Lenders,  shall be irrevocable and
shall not be subject to any qualification or exception whatsoever, including any
of the following circumstances:

                    (1) any lack of validity or enforceability of this Agreement
or any of the other Loan Documents;

                    (2) the  existence  of any claim,  setoff,  defense or other
right which the Borrower may have at any time against a  beneficiary  named in a
Letter of Credit or any  transferee  of any  Letter of Credit (or any Person for
whom any such transferee may be acting),  any Lender,  the Agent,  the issuer of
such Letter of Credit,  or any other  Person,  whether in  connection  with this
Agreement,  any Letter of Credit,  the transactions  contemplated  herein or any
unrelated  transactions  (including  any  underlying  transactions  between  the
Borrower or any other Person and the beneficiary named in any Letter of Credit);

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

                    (4) the  surrender  or  impairment  of any  security for the
performance or observance of any of the terms of any of the Loan Documents;

                    (5) the occurrence of any Default or Event of Default; or

                    (6) the failure of the  Borrower  to satisfy the  applicable
conditions precedent set forth in Article 8.

               (c)  Recovery or  Avoidance  of  Payments;  Refund of Payments In
Error. In the event any payment by or on behalf of the Borrower  received by the
Agent with  respect to any Letter of Credit or Credit  Support  provided for any
Letter of Credit and distributed by the Agent to the Lenders on account of their
respective  participations therein is thereafter set aside, avoided or recovered
from the Agent in connection  with any  receivership,  liquidation or bankruptcy
proceeding,  the Lenders shall, upon demand by the Agent, pay to the Agent their
respective  Pro Rata  Shares of such  amount  set aside,  avoided or  recovered,
together  with  interest  at the rate  required to be paid by the Agent upon the
amount  required to be repaid by it. Unless the Agent  receives  notice from the
Borrower  prior to the date on which any payment is due to the Lenders  that the
Borrower will not make such payment in full as and when required,  the Agent may
assume that the Borrower has made such payment in full to the Agent on such date
in immediately available funds and the Agent may (but shall not be so required),
in reliance upon such assumption,  distribute to each Lender on such due date an
amount  equal to the  amount  then due such  Lender.  If and to the  extent  the
Borrower has not made such payment in full to the Agent, each Lender shall repay
to the Agent on demand such amount  distributed  to such Lender,  together  with
interest  thereon  at the  Federal  Funds  Rate for each day from the date  such
amount is distributed to such Lender until the date repaid.

               (d)  Indemnification by Lenders.  To the extent not reimbursed by
the Borrower and without limiting the obligations of the Borrower hereunder, the
Lenders  agree to indemnify  the Letter of Credit  Issuer  ratably in accordance
with their respective Pro Rata Shares,


                                       64

<PAGE>

for any and all liabilities,  obligations,  losses, damages, penalties, actions,
judgments,  suits,  costs,  expenses (including  reasonable  attorneys' fees) or
disbursements of any kind and nature whatsoever that may be imposed on, incurred
by or  asserted  against the Letter of Credit  Issuer in any way  relating to or
arising out of any Letter of Credit or the transactions  contemplated thereby or
any action  taken or omitted by the Letter of Credit  Issuer under any Letter of
Credit or any Loan  Document in  connection  therewith;  provided that no Lender
shall be liable for any of the  foregoing to the extent it arises from the gross
negligence  or  willful  misconduct  of the  Person to be  indemnified.  Without
limitation  of the  foregoing,  each Lender  agrees to  reimburse  the Letter of
Credit  Issuer  promptly  upon  demand  for its Pro Rata  Share of any  costs or
expenses  payable by the Borrower to the Letter of Credit Issuer,  to the extent
that the Letter of Credit Issuer is not promptly  reimbursed  for such costs and
expenses by the Borrower.  The agreement contained in this Section shall survive
payment in full of all other Obligations.

        12.17  CONCERNING THE COLLATERAL AND THE RELATED LOAN DOCUMENTS.


               (a)    Each Lender authorizes and directs the Agent to enter into
         the other Loan Documents, for the ratable benefit and obligation of the
         Agent and the Lenders.  Each Lender agrees that any action taken by the
         Agent,  Majority  Lenders  or  Required  Lenders,  as  applicable,   in
         accordance  with  the  terms  of  this  Agreement  or  the  other  Loan
         Documents,  and the exercise by the Agent, the Majority Lenders, or the
         Required Lenders,  as applicable,  of their respective powers set forth
         therein or herein,  together with such other powers that are reasonably
         incidental  thereto,  shall be  binding  upon all of the  Lenders.  The
         Lenders   acknowledge  that  the  Revolving   Loans,   Agent  Advances,
         Non-Ratable  Loans,  Hedge Agreements,  Bank Products and all interest,
         fees and expenses hereunder  constitute one Debt, secured pari passu by
         all of the Collateral. ---- -----

               (b)  Without limiting the generality  of paragraph (a) above, for
         the purposes of creating a solidarite active in accordance with Article
         1541 of the Civil code of Quebec to the extent applicable, between each
         Lender,  taken  individually,  on the one hand,  and the Agent,  on the
         other hand,  each of the Borrower,  Holdings and each Subsidiary of the
         Borrower party to a Loan Document and each such Lender  acknowledge and
         agree  with the  Agent  that  such  Lender  and the  Agent  are  hereby
         conferred  the  legal  status  of  solidary  creditors  of  each of the
         Borrower,  Holdings and each Subsidiary of the Borrower party to a Loan
         Document in respect of all  Obligations,  present  and future,  owed by
         each of the  Borrower,  Holdings  and each  Subsidiary  of the Borrower
         party  to  a  Loan   document   to  each  such  Lender  and  the  Agent
         (collectively,  the "Solidary Claim").  Each Subsidiary of the Borrower
         party  to a  Loan  Document  shall  be  deemed  to  have  accepted  the
         provisions  contained  herein by its  execution of such Loan  Document.
         Accordingly,  but subject (for the  avoidance of doubt) to Article 1542
         of the Civil Code of Quebec, the Borrower, Holdings and each Subsidiary
         of the Borrower party to a Loan Document are irrevocably  bound towards
         the Agent and each  Lender in respect to the entire  Solidary  Claim of
         the Agent and such Lender.  As a result of the  foregoing,  the parties
         hereto  acknowledge  that the Agent and each Lender  shall at all times
         have a valid and  effective  right of action  for the  entire  Solidary
         Claim  of the  Agent  and  such  Lender  and the  right  to  give  full



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<PAGE>

         acquittance for it. Accordingly, without limiting the generality of the
         foregoing,  the Agent, as solidary creditor with each Lender,  shall at
         all times have a valid and effective  right of action in respect of all
         Obligations, present and future, owed by each of the Borrower, Holdings
         and each  Subsidiary  of the Borrower  party to a Loan  Document to the
         Agent  and to the  Lenders  or any of them and the right to give a full
         acquittance for same. The parties  further agree and  acknowledge  that
         the Agent's Liens on the Collateral  shall be granted to the Agent, for
         its  own  benefit  and  for  the  ratable   benefit  of  the   Lenders.
         Notwithstanding the foregoing,  termination of this Agreement, pursuant
         to Section 3.2 hereof, discharges the Obligations owed to the Agent and
         the Lenders or any of them; provided,  further, that the payment of all
         or any part of the Obligations by Holdings,  the Borrower or Subsidiary
         Guarantors  to Agent or any  Lender  shall  reduce  the  amount  of the
         Obligations  due  the  Agent  and all  Lenders  by the  amount  of such
         payment.

        12.18  FIELD AUDIT AND EXAMINATION REPORTS;  DISCLAIMER  BY LENDERS.  By
signing this Agreement, each Lender:

               (a)    is deemed to have  requested  that the Agent  furnish such
         Lender, promptly after it becomes available, a copy of each field audit
         or  examination  report (each a "Report" and  collectively,  "Reports")
         prepared by or on behalf of the Agent;

               (b)   expressly  agrees and  acknowledges  that  neither the Bank
         nor the  Agent  (i)  makes any  representation  or  warranty  as to the
         accuracy  of any  Report,  or (ii) shall be liable for any  information
         contained in any Report;

               (c)   expressly agrees and  acknowledges that the Reports are not
         comprehensive  audits  or  examinations,  that the Agent or the Bank or
         other party  performing  any audit or  examination  will  inspect  only
         specific information regarding the Borrower and will rely significantly
         upon the Borrower's books and records, as well as on representations of
         the Borrower's personnel;

               (d)  agrees to keep all Reports confidential and strictly for its
         internal use, and not to distribute except to its participants,  or use
         any Report in any other manner; and

               (e)      without   limiting   the   generality   of   any   other
         indemnification  provision contained in this Agreement,  agrees: (i) to
         hold the Agent and any such other  Lender  preparing a Report  harmless
         from any action the  indemnifying  Lender  may take or  conclusion  the
         indemnifying  Lender  may reach or draw from any  Report in  connection
         with any loans or other  credit  accommodations  that the  indemnifying
         Lender  has  made or may  make  to the  Borrower,  or the  indemnifying
         Lender's  participation in, or the indemnifying Lender's purchase of, a
         loan or  loans  of the  Borrower;  and  (ii) to pay  and  protect,  and
         indemnify,  defend  and  hold  the  Agent  and any  such  other  Lender
         preparing a Report  harmless  from and  against,  the claims,  actions,
         proceedings,  damages,  costs,  expenses and other


                                       66
<PAGE>


         amounts  (including  Attorney Costs) incurred by the Agent and any such
         other Lender preparing a Report as the direct or indirect result of any
         third  parties who might  obtain all or part of any Report  through the
         indemnifying Lender.

        12.19  RELATION  AMONG  LENDERS.    The  Lenders  are  not  partners  or
co-venturers,  and no Lender  shall be liable for the acts or  omissions  of, or
(except as otherwise  set forth herein in case of the Agent)  authorized  to act
for, any other Lender.


                                   ARTICLE 13
                                  MISCELLANEOUS

        13.1   NO WAIVERS; CUMULATIVE  REMEDIES.  No failure by the Agent or any
Lender to exercise  any right,  remedy,  or option  under this  Agreement or any
present or future supplement thereto, or in any other agreement between or among
the Borrower and its Subsidiaries  and the Agent and/or any Lender,  or delay by
the  Agent or any  Lender  in  exercising  the same,  will  operate  as a waiver
thereof.  No waiver by the  Borrower,  the Agent or any Lender will be effective
unless it is in writing,  and then only to the extent  specifically  stated.  No
waiver by the Agent or the Lenders on any occasion  shall affect or diminish the
Agent's and each Lender's  rights  thereafter to require  strict  performance by
Holdings, the Borrower and the Borrower's  Subsidiaries of any provision of this
Agreement.  The Agent and the  Lenders  may  proceed  directly  to  collect  the
Obligations  without any prior recourse to the Collateral.  The Agent's and each
Lender's rights under this Agreement will be cumulative and not exclusive of any
other right or remedy which the Agent or any Lender may have.

        13.2   SEVERABILITY. The illegality or unenforceability of any provision
of this Agreement or any Loan Document or any  instrument or agreement  required
hereunder  shall not in any way affect or impair the legality or  enforceability
of the  remaining  provisions of this  Agreement or any  instrument or agreement
required hereunder.

        13.3   GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS.

               (a)   THIS  AGREEMENT SHALL  BE  INTERPRETED  AND  THE RIGHTS AND
LIABILITIES  OF THE PARTIES  HERETO  DETERMINED IN ACCORDANCE  WITH THE INTERNAL
LAWS (AS OPPOSED TO THE CONFLICT OF LAWS  PROVISIONS  PROVIDED  THAT  PERFECTION
ISSUES WITH RESPECT TO ARTICLE 9 OF THE UCC MAY GIVE EFFECT TO APPLICABLE CHOICE
OR  CONFLICT  OF LAW RULES  SET  FORTH IN  ARTICLE 9 OF THE UCC) OF THE STATE OF
ILLINOIS;  PROVIDED  THAT THE AGENT AND THE  LENDERS  SHALL  RETAIN  ALL  RIGHTS
ARISING UNDER FEDERAL LAW.

               (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS
OR OF THE UNITED  STATES OF AMERICA  LOCATED IN COOK  COUNTY,  ILLINOIS,  AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF HOLDINGS AND THE BORROWER, THE
AGENT AND THE LENDERS  CONSENTS,  FOR ITSELF AND IN RESPECT OF ITS PROPERTY,  TO
THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF HOLDINGS



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<PAGE>


AND THE BORROWER,  THE AGENT AND THE LENDERS  IRREVOCABLY  WAIVES ANY OBJECTION,
INCLUDING  ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH  JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED  HERETO.  NOTWITHSTANDING  THE FOREGOING:  (1) THE AGENT AND THE LENDERS
SHALL HAVE THE RIGHT TO BRING ANY ACTION OR  PROCEEDING  AGAINST  HOLDINGS,  THE
BORROWER OR THE BORROWER'S  SUBSIDIARIES  OR THEIR PROPERTY IN THE COURTS OF ANY
OTHER  JURISDICTION  THE AGENT OR THE LENDERS DEEM  NECESSARY OR  APPROPRIATE IN
ORDER TO REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS AND (2)
EACH OF THE  PARTIES  HERETO  ACKNOWLEDGES  THAT ANY  APPEALS  FROM  THE  COURTS
DESCRIBED IN THE IMMEDIATELY  PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE THOSE JURISDICTIONS.

               (c)   EACH OF HOLDINGS  AND  THE BORROWER  HEREBY WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS  UPON IT AND  CONSENTS  THAT ALL SUCH  SERVICE OF
PROCESS MAY BE MADE BY REGISTERED  MAIL (RETURN RECEIPT  REQUESTED)  DIRECTED TO
THE  BORROWER AT ITS ADDRESS SET FORTH IN SECTION 13.8 AND SERVICE SO MADE SHALL
BE DEEMED  TO BE  COMPLETED  FIVE (5) DAYS  AFTER  THE SAME  SHALL  HAVE BEEN SO
DEPOSITED IN THE U.S.  MAILS POSTAGE  PREPAID.  NOTHING  CONTAINED  HEREIN SHALL
AFFECT  THE RIGHT OF AGENT OR THE  LENDERS TO SERVE  LEGAL  PROCESS BY ANY OTHER
MANNER PERMITTED BY LAW.

        13.4  WAIVER OF JURY TRIAL.   HOLDINGS AND THE BORROWER, THE LENDERS AND
THE AGENT EACH IRREVOCABLY  WAIVE THEIR RESPECTIVE  RIGHTS TO A TRIAL BY JURY OF
ANY CLAIM OR CAUSE OF ACTION  BASED  UPON OR  ARISING  OUT OF OR RELATED TO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS  CONTEMPLATED HEREBY OR
THEREBY,  IN ANY ACTION,  PROCEEDING OR OTHER  LITIGATION OF ANY TYPE BROUGHT BY
ANY OF THE  PARTIES  AGAINST  ANY  OTHER  PARTY  OR  ANY  AGENT-RELATED  PERSON,
PARTICIPANT OR ASSIGNEE,  WHETHER WITH RESPECT TO CONTRACT CLAIMS,  TORT CLAIMS,
OR OTHERWISE.  HOLDINGS AND THE  BORROWER,  THE LENDERS AND THE AGENT EACH AGREE
THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A
JURY.  WITHOUT  LIMITING THE  FOREGOING,  THE PARTIES  FURTHER  AGREE THAT THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO
ANY ACTION,  COUNTERCLAIM OR OTHER  PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART,
TO CHALLENGE THE VALIDITY OR  ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS  OR ANY  PROVISION  HEREOF OR THEREOF.  THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS,  RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.

        13.5  SURVIVAL OF REPRESENTATIONS AND WARRANTIES.  All of  Holdings' and
the Borrower's  representations and warranties contained in this Agreement shall
survive the


                                       68

<PAGE>


execution, delivery, and acceptance thereof by the parties,  notwithstanding any
investigation by the Agent or the Lenders or their respective agents.

        13.6  OTHER SECURITY AND GUARANTIES.  The Agent,  may, without notice or
demand and without affecting the Borrower's obligations hereunder,  from time to
time: (a) take from any Person and hold  collateral  (other than the Collateral)
for the payment of all or any part of the Obligations  and exchange,  enforce or
release  such  collateral  or any  part  thereof;  and (b)  accept  and hold any
endorsement  or  guaranty of payment of all or any part of the  Obligations  and
release or  substitute  any such  endorser or  guarantor,  or any Person who has
given any Lien in any other collateral as security for the payment of all or any
part of the Obligations,  or any other Person in any way obligated to pay all or
any part of the Obligations.

         13.7  FEES AND EXPENSES.  The Borrower agrees to pay to the Agent,  for
its benefit,  on demand,  all  reasonable  costs and expenses that Agent pays or
incurs  in   connection   with  the   negotiation,   preparation,   syndication,
consummation, administration,  enforcement, and termination of this Agreement or
any of the other Loan Documents,  including:  (a) Attorney Costs; (b) reasonable
costs and expenses (including attorneys' and paralegals' fees and disbursements)
for any  amendment,  supplement,  waiver,  consent,  or  subsequent  closing  in
connection with the Loan Documents and the  transactions  contemplated  thereby;
(c)  reasonable  costs  and  expenses  of lien  and  title  searches  and  title
insurance; (d) taxes, fees and other charges for recording the Mortgages, filing
financing statements and reasonable continuations, and other actions to perfect,
protect, and continue the Agent's Liens (including reasonable costs and expenses
paid or incurred by the Agent in connection with the consummation of Agreement);
(e)  reasonable  sums paid or  incurred  to pay any  amount  or take any  action
required of Holdings,  the Borrower and Borrower's  Subsidiaries  under the Loan
Documents that Holdings, the Borrower and Borrower's Subsidiaries fail to pay or
take; (f) reasonable costs of appraisals,  inspections, and verifications of the
Collateral,  including the cost of verification of Eligible In-Transit Inventory
in the possession of an Approved Customs  Broker/Shipper  and reasonable travel,
lodging,  and meals for inspections of the Collateral and the Borrower's and its
Subsidiaries' operations by the Agent plus the Agent's then customary charge for
field  examinations  and audits and the  preparation  of reports  thereof  (such
charge is currently $750 per day (or portion  thereof) for each Person  retained
or employed by the Agent with respect to each field  examination or audit);  and
(g) reasonable costs and expenses of forwarding loan proceeds, collecting checks
and other items of payment,  and establishing  and maintaining  Payment Accounts
and lock  boxes,  and  costs and  expenses  of  preserving  and  protecting  the
Collateral.  In  addition,  the  Borrower  agrees  to pay  reasonable  costs and
expenses  incurred by the Agent (including  Attorneys'  Costs) to the Agent, for
its benefit,  on demand, and to the other Lenders for their benefit,  on demand,
and all  reasonable  fees,  expenses  and  disbursements  incurred by such other
Lenders for one law firm retained by such other Lenders,  in each case,  paid or
incurred to obtain payment of the Obligations,  enforce the Agent's Liens,  sell
or otherwise  realize upon the Collateral,  and otherwise enforce the provisions
of the Loan  Documents,  or to defend any claims made or threatened  against the
Agent  or  any  Lender  arising  out  of the  transactions  contemplated  hereby
(including preparations for and consultations  concerning any such matters). The
foregoing  shall not be  construed  to limit any  other  provisions  of the Loan
Documents  regarding  costs and expenses to be paid by the Borrower.  All of the
foregoing  costs and expenses shall be charged to the Borrower's Loan Account as
Revolving Loans as described in Section 3.7.



                                       69

<PAGE>


        13.8  NOTICES. Except as otherwise provided herein, all notices, demands
and requests  that any party is required or elects to give to any other shall be
in  writing,  or by a  telecommunications  device  capable of creating a written
record,  and any such notice shall become  effective (a) upon personal  delivery
thereof,  including,  but not limited to, delivery by overnight mail and courier
service,  (b) four (4) days  after it shall  have been  mailed by United  States
mail, first class, certified or registered,  with postage prepaid, or (c) in the
case of notice by such a telecommunications  device, when properly  transmitted,
in each case addressed to the party to be notified as follows:

                  If to the Agent or to the Bank:

                           Bank of America, N.A.
                           231 South LaSalle Street, 16th Floor
                           Chicago, IL  60697
                           Attention: Business Credit
                           Account Executive
                           Telecopy No.: (312) 974-8760


                           with copies to:

                           Latham & Watkins
                           233 South Wacker Drive
                           Sears Tower, Suite 5800
                           Chicago, IL  60606
                           Attention:  Thomas M. Quirk
                           Telecopy No.:  (312) 993-9767


                  If to the Borrower:

                           GFSI, Inc.
                           9700 Commerce Parkway
                           Lenexa, Kansas  66219
                           Attn: President or Chief Financial Officer
                           Telecopy No.: (913) 693-3907

                  with copies to:

                           Lathrop & Gage, L.C.
                           2345 Grand Blvd.
                           Suite 2300
                           Kansas City, Missouri  64108
                           Attn: H. Steven Graham
                           Telecopy No.:  (816) 292-2001

or to such other  address as each party may designate for itself by like notice.
Failure or delay in delivering copies of any notice, demand,  request,  consent,
approval,  declaration or other



                                       70

<PAGE>


communication  to the  persons  designated  above to  receive  copies  shall not
adversely affect the  effectiveness of such notice,  demand,  request,  consent,
approval, declaration or other communication.

        13.9  WAIVER OF NOTICES. Unless otherwise expressly provided herein, the
Borrower waives presentment,  and notice of demand or dishonor and protest as to
any  instrument,  notice of intent to accelerate the  Obligations  and notice of
acceleration of the  Obligations,  as well as any and all other notices to which
it might otherwise be entitled. No notice to or demand on the Borrower which the
Agent or any Lender  may elect to give  shall  entitle  the  Borrower  to any or
further notice or demand in the same, similar or other circumstances.

        13.10  BINDING EFFECT. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective representatives, successors, and
assigns of the parties hereto; provided, however, that no interest herein may be
assigned by the Borrower  without  prior  written  consent of the Agent and each
Lender. The rights and benefits of the Agent and the Lenders hereunder shall, if
such  Persons  so  agree,  inure to any  party  acquiring  any  interest  in the
Obligations or any part thereof.

        13.11  INDEMNITY OF THE AGENT AND THE LENDERS BY THE BORROWER.

               (a) Holdings and the Borrower agree to defend, indemnify and hold
the Agent-Related  Persons, and each Lender and each of its respective officers,
directors,  employees,  counsel,  representatives,  agents and attorneys-in-fact
(each,  an  "Indemnified   Person")  harmless  from  and  against  any  and  all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  charges,  expenses and disbursements  (including  Attorney Costs) of any
kind or nature whatsoever which may at any time (including at any time following
repayment of the Loans and the  termination,  resignation  or replacement of the
Agent or  replacement  of any  Lender) be imposed  on,  incurred  by or asserted
against any such Person in any way relating to or arising out of this  Agreement
or any  document  contemplated  by or  referred to herein,  or the  transactions
contemplated  hereby, or any action taken or omitted by any such Person under or
in  connection  with  any  of  the  foregoing,  including  with  respect  to any
investigation,  litigation or proceeding (including any Insolvency Proceeding or
appellate  proceeding)  related to or arising out of this  Agreement,  any other
Loan Document,  or the Loans or the use of the proceeds thereof,  whether or not
any Indemnified Person is a party thereto (all the foregoing,  collectively, the
"Indemnified Liabilities"); provided, that the Borrower shall have no obligation
hereunder  to any  Indemnified  Person with respect to  Indemnified  Liabilities
resulting  solely  from the  gross  negligence  or  willful  misconduct  of such
Indemnified  Person. The agreements in this Section shall survive payment of all
other Obligations.

               (b) The Borrower  agrees to  indemnify,  defend and hold harmless
the Agent and the Lenders  from any loss or  liability  directly  or  indirectly
arising out of the use, generation,  manufacture,  production, storage, release,
threatened  release,  discharge,  disposal or presence of a hazardous  substance
relating  to  the  Borrower's  or  its  Subsidiaries'  operations,  business  or
property. This indemnity will apply whether the hazardous substance is on, under
or about the Borrower's or its Subsidiaries'  property or operations or property
leased to the Borrower or its  Subsidiaries.  The indemnity  includes but is not
limited to Attorneys Costs. The


                                       71


<PAGE>


indemnity  extends  to the Agent and the  Lenders,  their  parents,  affiliates,
subsidiaries  and  all  of  their  directors,   officers,   employees,   agents,
successors,  attorneys and assigns.  "Hazardous substances" means any substance,
material  or waste  that is or  becomes  designated  or  regulated  as  "toxic,"
"hazardous,"   "pollutant,"  or  "contaminant"  or  a  similar   designation  or
regulation  under any  federal,  state or local law  (whether  under common law,
statute,  regulation or otherwise) or judicial or administrative  interpretation
of such,  including  petroleum  or natural  gas.  This  indemnity  will  survive
repayment of all other Obligations.

         13.12  LIMITATION OF LIABILITY.  NO CLAIM MAY BE MADE BY HOLDINGS,  THE
BORROWER,  ANY LENDER OR OTHER  PERSON  AGAINST THE AGENT,  ANY  LENDER,  OR THE
AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, COUNSEL, REPRESENTATIVES,  AGENTS OR
ATTORNEYS-IN-FACT  OF ANY OF THEM FOR ANY SPECIAL,  INDIRECT,  CONSEQUENTIAL  OR
PUNITIVE  DAMAGES IN RESPECT  OF ANY CLAIM FOR BREACH OF  CONTRACT  OR ANY OTHER
THEORY OF LIABILITY  ARISING OUT OF OR RELATED TO THE TRANSACTIONS  CONTEMPLATED
BY THIS  AGREEMENT  OR ANY OTHER LOAN  DOCUMENT,  OR ANY ACT,  OMISSION OR EVENT
OCCURRING IN CONNECTION  THEREWITH,  AND HOLDINGS,  THE BORROWER AND EACH LENDER
HEREBY  WAIVE,  RELEASE  AND AGREE  NOT TO SUE UPON ANY CLAIM FOR SUCH  DAMAGES,
WHETHER OR NOT  ACCRUED AND  WHETHER OR NOT KNOWN OR  SUSPECTED  TO EXIST IN ITS
FAVOR.

         13.13  FINAL AGREEMENT. This Agreement and the other Loan Documents are
intended by the Borrower,  the Agent and the Lenders to be the final,  complete,
and  exclusive   expression  of  the  agreement  between  them.  This  Agreement
supersedes any and all prior oral or written agreements  relating to the subject
matter  hereof  except for that certain  "fee  letter"  dated as of November 16,
2001,  2002,  between the Borrower and the Agent. No  modification,  rescission,
waiver,  release,  or amendment of any provision of this  Agreement or any other
Loan  Document  shall be made,  except  by a  written  agreement  signed  by the
Borrower and a duly  authorized  officer of each of the Agent and the  requisite
Lenders.

         13.14  COUNTERPARTS.  This  Agreement  may be executed in any number of
counterparts,  and by the  Agent,  each  Lender  and the  Borrower  in  separate
counterparts,  each of  which  shall  be an  original,  but all of  which  shall
together constitute one and the same agreement;  signature pages may be detached
from multiple separate counterparts and attached to a single counterpart so that
all signature pages are physically attached to the same document.

         13.15  CAPTIONS.  The  captions  contained  in this  Agreement  are for
convenience of reference only, are without substantive meaning and should not be
construed to modify, enlarge, or restrict any provision.

         13.16  RIGHT OF SETOFF.  In  addition to any rights and remedies of the
Lenders  provided  by law,  if the Loans have been  accelerated,  each Lender is
authorized  at any time  and from  time to time,  without  prior  notice  to the
Borrower,  any such notice being  waived by the  Borrower to the fullest  extent
permitted by law, to set off and apply any and all deposits (general or special,
time  or  demand,  provisional  or  final)  at  any  time  held  by,  and  other
indebtedness  at any time owing by, such Lender or any  Affiliate of such Lender
to or for  the  credit  or the  account  of the  Borrower  against  any  and all
Obligations  owing to such Lender,  now or hereafter  existing,


                                       72

<PAGE>


irrespective  of whether or not the Agent or such Lender  shall have made demand
under this Agreement or any Loan Document and although such  Obligations  may be
contingent or unmatured.  Each Lender agrees promptly to notify the Borrower and
the Agent after any such set-off and application made by such Lender;  provided,
however,  that the failure to give such notice  shall not affect the validity of
such set-off and  application.  NOTWITHSTANDING  THE FOREGOING,  NO LENDER SHALL
EXERCISE ANY RIGHT OF SET-OFF,  BANKER'S  LIEN,  OR THE LIKE AGAINST ANY DEPOSIT
ACCOUNT OR PROPERTY OF THE BORROWER HELD OR  MAINTAINED  BY SUCH LENDER  WITHOUT
THE PRIOR WRITTEN UNANIMOUS CONSENT OF THE LENDERS.

         13.17  CONFIDENTIALITY.

                (a)  The Borrower hereby consents that the Agent and each Lender
may issue and  disseminate  to the public  general  information  describing  the
credit accommodation entered into pursuant to this Agreement, including the name
and address of the Borrower and a general description of the Borrower's business
and may use the Borrower's name in advertising and other promotional material.

                (b)  Each Lender severally agrees to take normal and  reasonable
precautions  and  exercise  due  care to  maintain  the  confidentiality  of all
information  provided  to the  Agent  or  such  Lender  by or on  behalf  of the
Borrower, under this Agreement or any other Loan Document,  except to the extent
that such information (i) was or becomes generally available to the public other
than as a result  of  disclosure  by the  Agent or such  Lender,  or (ii) was or
becomes  available  on a  nonconfidential  basis  from a source  other  than the
Borrower,  provided that such source is not bound by a confidentiality agreement
with the Borrower known to the Agent or such Lender; provided, however, that the
Agent and any  Lender  may  disclose  such  information  (1) at the  request  or
pursuant to any requirement of any Governmental  Authority to which the Agent or
such Lender is subject or in connection with an examination of the Agent or such
Lender by any such  Governmental  Authority;  (2)  pursuant to subpoena or other
court process;  (3) when required to do so in accordance  with the provisions of
any  applicable  Requirement  of Law; (4) to the extent  reasonably  required in
connection with any litigation or proceeding (including, but not limited to, any
bankruptcy  proceeding)  to which the  Agent,  any  Lender  or their  respective
Affiliates  may be party;  (5) to the extent  reasonably  required in connection
with the exercise of any remedy hereunder or under any other Loan Document;  (6)
to the Agent's or such Lender's independent auditors, accountants, attorneys and
other  professional  advisors;  (7) to any  prospective  Participant or Assignee
under any Assignment  and  Acceptance,  actual or potential,  provided that such
prospective Participant or Assignee agrees to keep such information confidential
to the same  extent  required  of the Agent and the  Lenders  hereunder;  (8) as
expressly permitted under the terms of any other document or agreement regarding
confidentiality to which the Borrower is party or is deemed party with the Agent
or such Lender, and (9) to its Affiliates.

         13.18  CONFLICTS WITH OTHER LOAN DOCUMENTS.  Unless otherwise expressly
provided in this Agreement (or in another Loan Document by specific reference to
the  applicable  provision  contained  in  this  Agreement),  if  any  provision
contained  in this  Agreement  conflicts  with any  provision  of any other Loan
Document, the provision contained in this Agreement shall govern and control.



                                       73
<PAGE>


         IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.

                                        "BORROWER"


                                        GFSI, INC.


                                        By:   /s/  Larry Graveel
                                           -------------------------------------
                                        Name:  Larry Graveel
                                        Title: President



                                        "HOLDINGS"

                                        GFSI HOLDINGS, INC.


                                        By:   /s/  Larry Graveel
                                           -------------------------------------
                                        Name:  Larry Graveel
                                        Title: President



                                        "AGENT"

                                        Bank of America, N.A., as the Agent


                                        By:   /s/  Debra A. Rathberger
                                           -------------------------------------
                                           Debra A. Rathberger, Vice President



                                        "LENDERS"

                                        Bank of America, N.A., as a Lender


                                        By:  /s/  Debra A. Rathberger
                                           ------------------------------------
                                           Debra A. Rathberger, Vice President



                                        THE CIT GROUP/COMMERCIAL
                                        SERVICES, INC., as a Lender

                                        By:  /s/  Gary Paul Vessecchia
                                          --------------------------------------
                                          Gary Paul Vessecchia, Vice President




                    [Signature Page to GFSI Credit Agreement]
<PAGE>




                                        U. S. BANK NATIONAL ASSOCIATION,
                                        as a Lender


                                        By:  /s/  Tim Kyndesen
                                           -------------------------------------
                                           Tim Kyndesen, Vice President






                                       2

<PAGE>


                                     ANNEX A
                                       TO
                                CREDIT AGREEMENT


                                   DEFINITIONS

         Capitalized  terms used in the Loan Documents  shall have the following
respective  meanings  (unless  otherwise  defined  therein),   and  all  section
references  in  the  following  definitions  shall  refer  to  sections  of  the
Agreement:

         "Accounts"  means all of the Borrower's  and each of its  Subsidiaries'
now owned or hereafter  acquired or arising  accounts,  as defined in the UCC or
PPSA,  as  applicable,  including any rights to payment for the sale or lease of
goods or  rendition  of  services,  whether  or not they  have  been  earned  by
performance.

         "Account  Debtor"  means  each  Person  obligated  in any  way on or in
connection with an Account,  Chattel Paper or General  Intangibles  (including a
payment intangible).

         "ACH  Transactions"  means  any cash  management  or  related  services
including the  automatic  clearing  house  transfer of funds by the Bank for the
account of the Borrower pursuant to agreement or overdrafts.

         "Acquisition"  means any transaction or series of related  transactions
for the purpose of or resulting,  directly or indirectly, in (a) the acquisition
by the Borrower and/or any of its  Subsidiaries of all or  substantially  all of
the assets of a Person,  or of any  business or division of a Person,  or of any
patents,  trademarks,  service  marks,  trade names  and/or  copyrights  (or any
license  to use any of the  foregoing)  of any  Person,  which  transaction  may
include the purchase of Inventory  and/or other assets from such Person or other
parties  related to such Person,  (b) the acquisition by the Borrower and/or any
of its Subsidiaries of all of the capital stock, partnership interests or equity
of any  Person  or  otherwise  causing  any  Person  to  become  a  Wholly-Owned
Subsidiary,  or (c) a merger  or  consolidation  or any other  combination  with
another  Person  (other  than a Person  that is a  Subsidiary)  provided  that a
Wholly-Owned Subsidiary is the surviving entity.

         "Activation  Event"  means (i) an Event of Default has occurred or (ii)
Availability is less than $10,000,000.

         "Adjusted  Net Earnings  from  Operations"  means,  with respect to any
fiscal period of Holdings and its  Subsidiaries,  Holdings and its Subsidiaries'
net  income  after  provision  for  income  taxes  for such  fiscal  period,  as
determined in accordance with GAAP and reported on the Financial  Statements for
such period, excluding any and all of the following included in such net income:

         (a)  gain or loss arising from the sale of any capital asset;

         (b)  gain arising from  the  write-up in the book value  of any
              asset,  or  loss arising from the  write-down  in the book
              value of any fixed or intangible asset (except any Account);



                                      A-1

<PAGE>


         (c)  earnings  or losses of any Person,  substantially  all the
              assets of which  have been  acquired  by  Holdings  or any
              Subsidiary,  including the Borrower, in any manner, to the
              extent  realized by such other Person prior to the date of
              acquisition;

         (d)  earnings   or  losses  of  any  Person   (other  than  any
              Subsidiary  of Holdings,  including the Borrower) in which
              Holdings or any Subsidiary, including the Borrower, has an
              ownership  interest  unless (and only to the extent)  such
              earnings or loss shall actually have been received or paid
              by Holdings or any Subsidiary,  including the Borrower, in
              the form of cash distributions or capital contributions;

         (e)  earnings   or  losses  of  any  Person   (other  than  any
              Subsidiary  of Holdings,  including the Borrower) to which
              assets  of  Holdings  or  any  Subsidiary,  including  the
              Borrower,  shall have been sold,  transferred  or disposed
              of, or into which  Holdings or any  Subsidiary,  including
              the Borrower,  shall have been merged, or which has been a
              party  with  Holdings  or any  Subsidiary,  including  the
              Borrower,   to  any   consolidation   or  other   form  of
              reorganization, prior to the date of such transaction;

         (f)  gain  arising  from  the  acquisition  of  debt or  equity
              securities of Holdings or any  Subsidiary,  including  the
              Borrower, or from cancellation or forgiveness of Debt;

         (g)  the  cost   associated  with  the  write-off  of  deferred
              financing  costs related to that certain Credit  Agreement
              dated  February  27, 1997 among the Borrower and The First
              National  Bank of  Chicago,  as Agent,  (now Bank One) and
              other costs associated with the 1997 recapitalization;

         (h)  gain  arising  from  extraordinary items, as determined in
              accordance with GAAP;

         (i)  at Agent's sole discretion, any expense resulting from any
              non-recurring    transactions,    defined   and   reported
              externally in accordance  with GAAP and any applicable SEC
              reporting guidelines;

         (j)  the non-recurring charges from Holdings', the Borrower and
              its  Subsidiaries  fourth quarter of its Fiscal Year ended
              June 28, 2001,  of (1) the $836,291  charge for  severance
              and employee termination benefits related to the execution
              of a restructuring  plan that eliminated  approximately 50
              positions;  and (2) the $1,110,331  charge for preparatory
              integration  costs related to the  acquisition of Champion
              Products by CCP; and

         (k)  the non-recurring  gain of $629,787 related to the sale by
              the  Borrower of its Tandem  Marketing  business  realized
              during  the  Holdings',   the  Borrower's  and  Borrower's
              Subsidiaries  fourth quarter of the Fiscal Year ended June
              28, 2001.


                                      A-2

<PAGE>

         "Affiliate" means, as to any Person,  any other Person which,  directly
or  indirectly,  is in control of, is controlled  by, or is under common control
with,  such Person or which owns,  directly or indirectly,  ten percent (10%) or
more of the outstanding equity interest of such Person. A Person shall be deemed
to control  another  Person if the  controlling  Person  possesses,  directly or
indirectly,  the power to direct or cause the  direction of the  management  and
policies  of  the  other  Person,   whether  through  the  ownership  of  voting
securities,  by  contract,  or  otherwise;  provided,  however,  that  the  term
"Affiliate" shall specifically exclude JZ Equity Partners PLC.

         "Agency Fee" has the meaning specified in Section 2.4.

         "Agent"  means  the  Bank,  solely  in its  capacity  as agent  for the
Lenders, and any successor agent.

         "Agent Advances" has the meaning specified in Section 1.2(i).

         "Agent's Liens" means the Liens in the Collateral granted to the Agent,
for the benefit of the Lenders,  Bank,  and Agent pursuant to this Agreement and
the other Loan Documents.

         "Agent-Related  Persons" means the Agent, together with its Affiliates,
and the officers,  directors,  employees, counsel,  representatives,  agents and
attorneys-in-fact of the Agent and such Affiliates.

         "Aggregate Revolver  Outstandings" means, at any date of determination:
the sum of (a) the unpaid balance of Revolving  Loans,  (b) the aggregate amount
of Pending  Revolving  Loans,  (c) one hundred  percent  (100%) of the aggregate
undrawn face amount of all outstanding  Letters of Credit, and (d) the aggregate
amount of any unpaid reimbursement obligations in respect of Letters of Credit.

         "Agreement"  means  the  Credit  Agreement  to  which  this  Annex A is
attached, as from time to time amended, modified or restated.

         "Anniversary Date" means each anniversary of the Closing Date.

         "Applicable Margin" means

         (i)      with respect to Base Rate Revolving Loans and all other
                  Obligations (other than LIBOR Rate Loans), .250%;

         (ii)     with respect to LIBOR Revolving Loans, 2.50%;

         (iii)    with respect to commercial/documentary Letters of Credit,
                  1.250%;

         (iv)     with respect to the Unused Line Fee, .250%; and

         (v)      with respect to standby Letters of Credit, 2.50%



                                      A-3
<PAGE>

         The Applicable Margins shall be adjusted (up or down)  prospectively on
a quarterly  basis as  determined  by  Holdings'  Fixed Charge  Coverage  Ratio,
commencing  with the first day of the first  calendar  month that  occurs  after
delivery of Holdings' quarterly  Financial  Statements to Lenders for the fiscal
quarter  ending  June 27,  2002.  Adjustments  in  Applicable  Margins  shall be
determined by reference to the following grids:

--------------------------------------------------------------------------------
If Fixed Charge Coverage Ratio Is:                 Level of Applicable Margins:
---------------------------------                  ---------------------------

>1.45:1                                             Level I
-

>1.35:1, but <1.45:1                                Level II
-

>1.25:1, but <1.35:1                                Level III
-

>1.15:1, but <1.25:1                                Level IV
-

<1.15:1                                             Level V
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------
                                                                    APPLICABLE MARGINS
                                        ---------------------------------------------------------------------
                                        Level I        Level II        Level III      Level IV       Level V
                                        -------        --------        ---------      --------       -------
<S>                                    <C>            <C>             <C>            <C>            <C>
Base Rate Revolving Loans               0%             .250%           .250%          .375%          .500%

LIBOR Revolving Loans and Standby       2.00%          2.25%           2.50%          2.75%          3.00%
Letters of Credit

Unused Line Fee                         .250%          .250%           .250%          .375%          .375%

Commercial/Documentary L/C              1.00%          1.125%          1.250%         1.375          1.500%
------------------------------------------------------------------------------------------------------------
</TABLE>


         All adjustments in the Applicable  Margins after June 27, 2002 shall be
implemented  quarterly on a prospective basis, for each calendar month after the
date of delivery  to the Lenders of  quarterly  unaudited  Financial  Statements
evidencing the need for an adjustment.  Concurrently  with the delivery of those
Financial Statements,  the Borrower shall deliver to the Agent and the Lenders a
certificate,  signed by its chief financial officer, setting forth in reasonable
detail  the basis for the  continuance  of, or any  change  in,  the  Applicable
Margins.  Failure to timely deliver such Financial Statements shall, in addition
to any other remedy provided for in this Agreement, result in an increase in the
Applicable  Margins to the highest level set forth in the foregoing grid,  until
the  first day of the first  calendar  month  following  the  delivery  of those
Financial Statements  demonstrating that such an increase is not required.  If a
Default or Event of  Default  has  occurred  and is  continuing  at the time any
reduction in the Applicable Margins is to be implemented, no reduction may occur
until the first day of the first calendar month following the date on which such
Default or Event of Default is waived or cured.


                                      A-4


<PAGE>

         "Approved Customs Broker/Shipper" means any reputable and credit worthy
customs broker  receiving,  or shipper or freight  forwarder,  transporting  raw
materials or finished goods from  locations  outside the United States or Canada
to locations within the United States or Canada  designated by the Borrower that
has  entered  into a bailee  letter  with  Agent on  terms  acceptable  to Agent
regarding in-transit Inventory.

         "Assignee" has the meaning specified in Section 11.2(a).

         "Assignment  and  Acceptance"  has the  meaning  specified  in  Section
11.2(a).

         "Attorney Costs" means and includes all reasonable  fees,  expenses and
disbursements  of any law firm or other  counsel  engaged  by the  Agent and the
reasonably allocated costs and expenses of internal legal services of the Agent.

         "Availability"  means,  at any  time,  the  lesser  of (a) the  Maximum
Revolver  Amount minus the sum of (i) Reserves  against  Availability,  (ii) the
unpaid  balance  of  Revolving  Loans,  (iii) the  aggregate  amount of  Pending
Revolving  Loans,  (iv)  100%  of  the  aggregate  undrawn  face  amount  of all
outstanding  Letters  of Credit  (both  standby  and  documentary),  and (v) the
aggregate amount of any unpaid  reimbursement  obligations in respect of Letters
of Credit or (b) the  Borrowing  Base  minus  the sum of (i)  Reserves  (without
duplication of Reserves  deducted in calculating the Borrowing  Base),  (ii) the
unpaid  balance  of  Revolving  Loans,  (iii) the  aggregate  amount of  Pending
Revolving Loans,  (iv) 100% of the aggregate  undrawn face amount of outstanding
standby  Letters  of  Credit  and  (v)  the  aggregate   amount  of  any  unpaid
reimbursement obligations in respect of Letters of Credit.

         "Bank" means Bank of America, N.A., a national banking association,  or
any successor entity thereto.

         "Bank  Products"  means  any  one or  more of the  following  types  of
services  or  facilities  extended  to  Holdings,  the  Borrower  or  Borrower's
Subsidiaries  by the Bank or any affiliate of the Bank in reliance on the Bank's
agreement to indemnify such affiliate:  (i) credit cards; (ii) ACH Transactions;
(iii) cash management,  including  controlled  disbursement  services;  and (iv)
Hedge Agreements.

         "Bank Product Reserves" means all reserves which the Agent from time to
time  establishes  in its  reasonable  discretion  for the  Bank  Products  then
provided or outstanding.

         "Bankruptcy  Code"  means  Title  11 of  the  United  States  Code  (11
U.S.C.ss. 101 et seq.).


         "Base Rate" means, for any day, the rate of interest in effect for such
day as  publicly  announced  from time to time by the Bank in  Charlotte,  North
Carolina  as its "prime  rate" (the  "prime  rate"  being a rate set by the Bank
based upon  various  factors  including  the Bank's  costs and  desired  return,
general economic conditions and other factors,  and is used as a reference point
for pricing some loans,  which may be priced at, above,  or below such announced
rate).  Any change in the prime rate  announced by the Bank shall take effect at
the opening of business on the day specified in the public  announcement of such
change.  Each  Interest  Rate  based  upon  the  Base  Rate  shall  be  adjusted
simultaneously with any change in the Base Rate.


                                      A-5
<PAGE>


         "Base Rate Loans" means the Base Rate Revolving Loans.

         "Base Rate Revolving  Loan" means a Revolving Loan during any period in
which it bears interest based on the Base Rate.

         "BIA"  means  the  Bankruptcy  and  Insolvency  Act  (Canada)  and  all
regulations thereunder.

         "Blocked  Account  Agreement"  means an  agreement  including,  without
limitation,  a blocked  account  agreement  (springing)  among the  Borrower  or
Subsidiary Guarantors, as applicable, or Borrower's Subsidiaries,  the Agent and
a Clearing  Bank, in form and substance  reasonably  satisfactory  to the Agent,
concerning the  collection of payments which  represent the proceeds of Accounts
or of any other Collateral.

         "Borrower  Indenture" means that certain Indenture dated as of February
27, 1997  between  the  Borrower  and Fleet  National  Bank,  as Trustee and all
Supplemental Indentures.

         "Borrowing" means a borrowing  hereunder  consisting of Revolving Loans
made on the same day by the Lenders to the  Borrower or by Bank in the case of a
Borrowing funded by Non-Ratable Loans or by the Agent in the case of a Borrowing
consisting of an Agent Advance, or the issuance of Letters of Credit hereunder.

         "Borrowing  Base" means, at any time, an amount equal to (a) the sum of
(A) eighty-five percent (85%) of the value of Eligible Accounts;  plus (B) fifty
percent (50%) of the value of Eligible  Inventory;  plus (C) fifty percent (50%)
of the value of Eligible In-Transit Inventory;  plus (D) the Fixed Asset Amount;
plus (E) fifty percent (50%) of the undrawn face amount of  outstanding  Letters
of Credit  for  Inventory  that  will  become  Eligible  Inventory  or  Eligible
In-Transit  Inventory  and not already  included in either of these  categories;
minus (b) Reserves from time to time  established by the Agent in its reasonable
judgment;  provided  that the aggregate  Revolving  Loans  advanced  against (i)
Eligible  Inventory  and  Eligible  In-Transit  Inventory  shall not  exceed the
Maximum Inventory Loan Amount and (ii) Eligible  Inventory,  Eligible In-Transit
Inventory  and  Eligible  Accounts of the Canadian  Subsidiary  shall not exceed
$5,000,000 at any time, and, in any case, at any time  Availability is less than
$12,500,000,  in Agent's sole discretion,  Agent can adjust the advance rate for
Eligible Inventory and Eligible  In-Transit  Inventory to an amount equal to 85%
of the  net  orderly  liquidation  value  of  Eligible  Inventory  and  Eligible
In-Transit Inventory as determined by appraisals.

         "Borrowing  Base  Certificate"  means a  certificate  by a  Responsible
Officer of the Borrower, substantially in the form of Exhibit B (or another form
acceptable to the Agent) setting forth the  calculation  of the Borrowing  Base,
including a calculation of each component  thereof,  all in such detail as shall
be reasonably  satisfactory to the Agent. All calculations of the Borrowing Base
in connection  with the  preparation  of any Borrowing  Base  Certificate  shall
originally  be made by the Borrower and certified to the Agent;  provided,  that
the Agent  shall have the right to review and  adjust,  in the  exercise  of its
reasonable judgment, any such calculation (1) to reflect its reasonable estimate
of declines in value of any of the Collateral  described therein, and (2) to the
extent that such calculation is not in accordance with this Agreement.


                                      A-6
<PAGE>

         "Business Day" means (a) any day that is not a Saturday,  Sunday,  or a
day on which banks in Kansas City,  Missouri,  Chicago,  Illinois or  Charlotte,
North  Carolina are required or permitted to be closed,  and (b) with respect to
all notices, determinations,  fundings and payments in connection with the LIBOR
Rate or LIBOR Rate Loans,  any day that is a Business Day pursuant to clause (a)
above and that is also a day on which  trading  in  Dollars is carried on by and
between banks in the London interbank market.

         "Canadian Excess Amount" means with respect to any Canadian  Subsidiary
Guarantor an amount equal to the sum of (a) the amounts of cash deposited in any
bank account by such Canadian Subsidiary  Guarantor,  (b) marketable  securities
owned by such Canadian Subsidiary Guarantor, (c) the value of direct obligations
of the United States of America or Canada, or any agency thereof, or obligations
guaranteed by the United States of America or Canada, in each case, owned by the
Canadian Subsidiary Guarantor,  provided that such obligations mature within one
year from the date of acquisition  thereof, (d) the value of acquisitions by any
Canadian  Subsidiary  Guarantor of certificates  of deposit  maturing within one
year  from  the  date of  acquisition,  bankers'  acceptances,  Eurodollar  bank
deposits,  or overnight  bank  deposits,  in each case issued by, created by, or
with a bank or trust  company  organized  under the laws of the United States of
America or Canada or any state thereof having capital and surplus aggregating at
least $100,000,000 and (e) the value of acquisitions by any Canadian  Subsidiary
Guarantor  of  commercial  paper  given a rating of "A2" or better by Standard &
Poor's  Corporation  or "P2" or better by Moody's  Investors  Service,  Inc. and
maturing not more than 90 days from the date of creation thereof

         "Canadian Subsidiary" has the meaning specified in Section 7.20.

         "Canadian  Subsidiary  Guarantors" means any Subsidiary of the Borrower
organized  under the laws of Canada that has entered into a Subsidiary  Guaranty
in favor of Agent for the benefit of the Lenders and granted to Agent  perfected
Liens on all or  substantially  all of its  assets  to  secure  that  Subsidiary
Guaranty, subject only to Permitted Liens.

         "Capital Adequacy Regulation" means any guideline, request or directive
of any central bank or other Governmental  Authority,  or any other law, rule or
regulation,  whether  or not having  the force of law,  in each case,  regarding
capital adequacy of any bank or of any corporation controlling a bank.

         "Capital  Expenditures"  means all  payments  due  (whether or not paid
during  any  fiscal  period)  in  respect  of the  cost of any  fixed  asset  or
improvement,  or replacement,  substitution,  or addition  thereto,  which has a
useful life of more than one year,  including,  without limitation,  those costs
arising in connection  with the direct or indirect  acquisition of such asset by
way of  increased  product or service  charges or in  connection  with a Capital
Lease.


                                      A-7
<PAGE>

         "Capital  Lease" means any lease of property by Holdings,  the Borrower
or Borrower's  Subsidiaries  which, in accordance with GAAP, should be reflected
as a capital lease on the balance sheet of the Borrower.

         "CCP" means CC Products, Inc. a Delaware corporation.

         "CCQ" means the Civil code of Quebec, and all regulations thereunder.

         "Champion  Inventory  Limit"  means (a) for the period from the Closing
Date until March 31,  2003,  $12,000,000,  (b) for the period from April 1, 2003
until  March 31,  2004,  $13,500,000,  and (c) for the period from April 1, 2004
until the Termination Date, $15,000,000.

         "Champion   Products"  means  Champion  Products,   Inc.,  a  New  York
corporation, which through a series of transactions was acquired by CCP.

         "Champion Stock Purchase  Agreement"  means that certain Stock Purchase
Agreement  dated  April 20,  2001 by and among  Sara Lee  Corporation,  Champion
Products and the Borrower.

         "Change of Control"  means any event,  transaction  or  occurrence as a
result of which (a) the Management  Stockholders cease to own and control all of
the  economic  and voting  rights  associated  with  ownership of at least forty
percent (40%) of the outstanding  Series A common stock of Holdings,  (b) Jordan
Stockholders  cease to own and control  all of the  economic  and voting  rights
associated  with  ownership of at least forty percent  (40%) of the  outstanding
Series B common stock of Holdings,  (c) the Management  Stockholders  and Jordan
Stockholders,  collectively,  cease to own and control all of the  economic  and
voting rights  associated  with the ownership of at least 51% of the outstanding
Series A and B common stock of Holdings,  (d) Holdings ceases to own and control
all of the economic and voting  rights  associated  with all of the  outstanding
capital stock of the Borrower or (e) the Borrower  ceases to own and control all
of the economic and voting rights associated with all of the outstanding capital
stock of any of its Subsidiaries.

         "Chattel   Paper"  means  all  of  the   Borrower's  and  each  of  its
Subsidiary's  now owned or hereafter  acquired  chattel paper, as defined in the
UCC, including electronic chattel paper.

         "Chillicothe Debt" means loans,  obligations,  and debt of the Borrower
(excluding  Obligations  under this  Agreement)  incurred or  assumed,  or to be
incurred  or  assumed,   in  connection  with  the  acquisition,   construction,
expansion,  equipping and  improving a  manufacturing  facility in  Chillicothe,
Missouri.  The Chillicothe Debt shall not exceed the aggregate  principal amount
of $1,000,000.

         "Clearing  Bank" means the Bank or any other banking  institution  with
whom a Payment  Account  has been  established  pursuant  to a  Blocked  Account
Agreement.

         "Closing Date" means the date of this Agreement.

         "Closing Fee" has the meaning specified in Section 2.4.



                                      A-8

<PAGE>


         "Code" means the Internal Revenue Code of 1986.

         "Collateral"  means  all  of  Holdings,  the  Borrower's  and  each  of
Borrower's  Subsidiary's  real and personal property and all other assets of any
Person  from  time  to  time  subject  to  Agent's  Liens  securing  payment  or
performance of the Obligations.

         "Commitment" means, at any time with respect to a Lender, the principal
amount set forth beside such  Lender's  name under the heading  "Commitment"  on
Schedule  1.2  attached  to  the  Agreement  or on  the  signature  page  of the
Assignment  and  Acceptance  pursuant  to  which  such  Lender  became  a Lender
hereunder in accordance  with the provisions of Section 11.2, as such Commitment
may be adjusted from time to time in accordance  with the  provisions of Section
11.2,  and  "Commitments"  means,  collectively,  the  aggregate  amount  of the
commitments of all of the Lenders.

         "Contaminant" means any waste,  pollutant,  hazardous substance,  toxic
substance,  hazardous  waste,  special  waste,  petroleum  or  petroleum-derived
substance or waste, asbestos in any form or condition, polychlorinated biphenyls
("PCBs"), or any constituent of any such substance or waste.

         "Continuation/Conversion  Date"  means  the  date  on  which  a Loan is
converted into or continued as a LIBOR Rate Loan.

         "Credit Support" has the meaning specified in Section 1.4(a).

         "Debt" means,  without  duplication,  all liabilities,  obligations and
indebtedness  of the  Borrower  or any of its  Subsidiaries  (or  Holdings  with
respect to the  determination of the Fixed Charge Coverage Ratio) to any Person,
of any  kind  or  nature,  now or  hereafter  owing,  arising,  due or  payable,
howsoever  evidenced,  created,  incurred,  acquired or owing,  whether primary,
secondary,  direct, contingent,  fixed or otherwise,  consisting of indebtedness
for borrowed money or the deferred  purchase price of property,  excluding trade
payables  and  amounts  due under  License  Agreements,  but  including  (a) all
Obligations;  (b) all  obligations  and liabilities of any Person secured by any
Lien on the Borrower's or its Subsidiaries'  property,  even though the Borrower
or such  Subsidiary  shall not have  assumed or become  liable  for the  payment
thereof; provided,  however, that all such obligations and liabilities which are
limited in  recourse  to such  property  shall be  included  in Debt only to the
extent of the book value of such  property as would be shown on a balance  sheet
of the Borrower or any such Subsidiary prepared in accordance with GAAP; (c) all
obligations  or  liabilities  created  or  arising  under any  Capital  Lease or
conditional  sale or other title  retention  agreement  with respect to property
used or acquired by the Borrower or any such Subsidiary,  even if the rights and
remedies of the lessor,  seller or lender thereunder are limited to repossession
of such property;  provided,  however, that all such obligations and liabilities
which are limited in recourse to such property shall be included in Debt only to
the  extent of the book  value of such  property  as would be shown on a balance
sheet of the Borrower or any such  Subsidiary  prepared in accordance with GAAP;
(d) all obligations and liabilities  under  Guaranties and (e) the present value
(discounted at the Base Rate) of lease payments due under synthetic leases. Debt
does not  include  any  indemnities  or  contingent  liabilities  arising in the
ordinary course of business including performance,  surety, statutory, appeal or
similar bonds or any liabilities,  obligations or indebtedness not classified as
debt pursuant to GAAP except as otherwise stated above.



                                      A-9

<PAGE>

         "Default"  means any event or  circumstance  which,  with the giving of
notice,  the lapse of time, or both, would (if not cured,  waived,  or otherwise
remedied during such time) constitute an Event of Default.

         "Default Rate" means a fluctuating per annum interest rate at all times
equal to the sum of (a) the  otherwise  applicable  Interest  Rate  plus (b) two
percent (2%) per annum. Each Default Rate shall be adjusted  simultaneously with
any change in the applicable Interest Rate. In addition,  the Default Rate shall
result in an  increase  in the Letter of Credit Fee by 2  percentage  points per
annum.

         "Defaulting Lender" has the meaning specified in Section 12.15(c).

         "Deposit Accounts" means all "deposit accounts" as such term is defined
in the UCC,  now or  hereafter  held in the name of the  Borrower  or one of its
Subsidiaries.

         "Designated Account" has the meaning specified in Section 1.2(c).

         "Distribution" means, in respect of any corporation: (a) the payment or
making of any dividend or other  distribution  of property in respect of capital
stock (or any options or warrants  for,  or other  rights with  respect to, such
stock) of such  corporation,  other than  distributions in capital stock (or any
options or warrants for such stock) of the same class;  or (b) the redemption or
other  acquisition  by such  corporation of any capital stock (or any options or
warrants for such stock) of such corporation.

         "Documents"  means all  documents  as such term is  defined in the UCC,
including bills of lading,  warehouse  receipts or other documents of title, now
owned or hereafter acquired by the Borrower or one of its Subsidiaries.

         "DOL"  means the United  States  Department  of Labor or any  successor
department or agency.

         "Dollar"  and "$" means  dollars in the lawful  currency  of the United
States.  Unless otherwise specified,  all payments under the Agreements shall be
made in Dollars.

         "EBITDA"  means,  with respect to any fiscal period of Holdings and its
Subsidiaries,  Adjusted  Net  Earnings  from  Operations,  plus,  to the  extent
deducted in the  determination of Adjusted Net Earnings from Operations for that
fiscal  period,  interest  expenses,  Federal,  state,  local and foreign income
taxes,  depreciation and amortization;  provided,  however,  EBITDA shall not be
reduced as a result of any  election by the  Borrower  and its  Subsidiaries  to
change its method of valuing its Inventory to the last-in, first-out basis.

         "Eligible  Accounts"  means the Accounts of the Borrower or  Subsidiary
Guarantors  which  the  Agent  in  the  exercise  of its  reasonable  discretion
determines to be Eligible Accounts. Without limiting the discretion of the Agent
to establish  other  criteria of  ineligibility,  Eligible  Accounts  shall not,
unless the Agent in its sole discretion elects, include any Account:


                                      A-10


<PAGE>


         (a)  with respect  to which more than 120 days have  elapsed  since the
date of the original invoice therefor or which is more than 60 days past due;

         (b)  with respect  to  which  any of the  representations,  warranties,
covenants,  and agreements  contained in the Security Agreement are incorrect or
have been breached;

         (c)  with respect to which Account (or any other  Account due from such
Account Debtor),  in whole or in part, a check,  promissory note,  draft,  trade
acceptance  or other  instrument  for the  payment  of money has been  received,
presented for payment and returned uncollected for any reason;

         (d)  which represents a progress billing (as hereinafter defined) or as
to which the Borrower or Subsidiary Guarantors has extended the time for payment
without the consent of the Agent;  for the purposes hereof,  "progress  billing"
means any invoice for goods sold or leased or services rendered under a contract
or  agreement  pursuant to which the  Account  Debtor's  obligation  to pay such
invoice is conditioned upon the Borrower's or Subsidiary  Guarantors' completion
of any further performance under the contract or agreement;

         (e) with respect to which any one or more of the  following  events has
occurred to the Account Debtor on such Account: death or judicial declaration of
incompetency of an Account Debtor who is an individual; the filing by or against
the Account  Debtor of a request or petition  for  liquidation,  reorganization,
arrangement,  adjustment of debts,  adjudication as a bankrupt,  winding-up,  or
other relief  under the  bankruptcy,  insolvency,  or similar laws of the United
States,  any state or territory  thereof,  or any foreign  jurisdiction,  now or
hereafter in effect;  the making of any general assignment by the Account Debtor
for the benefit of creditors;  the  appointment of a receiver or trustee for the
Account  Debtor  or for any of the  assets  of the  Account  Debtor,  including,
without limitation, the appointment of or taking possession by a "custodian," as
defined in the  Federal  Bankruptcy  Code;  the  institution  by or against  the
Account Debtor of any other type of insolvency  proceeding (under the bankruptcy
laws of the United  States,  the BIA or  otherwise) or of any formal or informal
proceeding for the dissolution or liquidation of,  settlement of claims against,
or winding up of affairs of, the Account Debtor; the nonpayment generally by the
Account Debtor of its debts as they become due; or the cessation of the business
of the Account Debtor as a going concern;

         (f)  if fifty percent (50%) or more of the  aggregate  Dollar amount of
outstanding  Accounts  owed  at such  time  by the  Account  Debtor  thereon  is
classified as ineligible under clause (a) above;

         (g)  owed by an Account Debtor  which:  (i) does not maintain its chief
executive  office in the United  States of  America  or  Canada;  or (ii) is not
organized  under the laws of the United States of America or Canada or any state
or  province  thereof;  or (iii) is the  government  of any  foreign  country or
sovereign  state, or of any state,  province,  municipality,  or other political
subdivision  of such  foreign  country,  or of any  department,  agency,  public
corporation,  or other instrumentality  thereof;  except to the extent that such
Account is secured or payable by a letter of credit satisfactory to the Agent in
its reasonable  discretion and except that Eligible Accounts shall include up to
$500,000 of Accounts in the aggregate owing by non-US and  non-Canadian  Account
Debtors;


                                      A-11

<PAGE>

         (h) owed by an Account  Debtor  which is an  Affiliate  or  employee of
Holdings, the Borrower or Borrower's Subsidiaries;

         (i)  except as  provided  in clause (k)  below,  with  respect to which
either the perfection,  enforceability, or validity of the Agent's Liens in such
Account,  or the Agent's right or ability to obtain direct  payment to the Agent
of the proceeds of such  Account,  is governed by any federal,  state,  or local
statutory requirements other than those of the UCC;

         (j) owed by an  Account  Debtor to which  the  Borrower  or  Subsidiary
Guarantors  or any of its  Subsidiaries,  is  indebted  in any way,  or which is
subject to any right of setoff or  recoupment  (including,  without  limitation,
accrued  rebates,  discounts,  claims,  credits and  allowances)  by the Account
Debtor,  unless the Account  Debtor has entered into an agreement  acceptable to
the Agent to waive setoff rights;  or if the Account Debtor thereon has disputed
liability  or made any claim  with  respect to any other  Account  due from such
Account Debtor;  but in each such case only to the extent of such  indebtedness,
setoff, recoupment, dispute, or claim;

         (k) owed by the  government  of the United States of America or Canada,
or any department, agency, public corporation, or other instrumentality thereof,
unless, in the case of the United States of America,  the Federal  Assignment of
Claims Act of 1940, as amended (31 U.S.C. ss. 3727 et seq.), and any other steps
necessary to perfect the Agent's Liens  therein,  have been complied with to the
Agent's satisfaction with respect to such Account;

         (l) owed by any  state,  province,  municipality,  or  other  political
subdivision  of the  United  States of America  or  Canada,  or any  department,
agency, public corporation, or other instrumentality thereof and as to which the
Agent determines that its Lien therein is not or cannot be perfected;

         (m) which represents a sale on a  bill-and-hold,  guaranteed sale, sale
and return, sale on approval, consignment, or other repurchase or return basis;

         (n) which is evidenced by a promissory  note or other  instrument or by
chattel paper;

         (o) if the Agent believes,  in the exercise of its reasonable judgment,
that the prospect of  collection of such Account is impaired or that the Account
may not be paid by reason of the Account Debtor's financial inability to pay;

         (p) with  respect to which the  Account  Debtor is located in any state
requiring the filing of a Notice of Business Activities Report or similar report
in order to permit the Borrower or its Subsidiaries to seek judicial enforcement
in  such  State  of  payment  of  such  Account,  unless  such  Borrower  or its
Subsidiaries  have  qualified to do business in such state or has filed a Notice
of Business Activities Report or equivalent report for the then current year;

         (q) which arises out of a sale not made in the  ordinary  course of the
Borrower's or its Subsidiary business;


                                      A-12
<PAGE>


         (r) with  respect to which the goods  giving rise to such  Account have
not been  shipped and  delivered  to and  accepted by the Account  Debtor or the
services  giving rise to such Account have not been performed by the Borrower or
its  Subsidiaries,  and, if applicable,  accepted by the Account Debtor,  or the
Account Debtor revokes its acceptance of such goods or services;

         (s) owed by an Account  Debtor  which is  obligated  to the Borrower or
Subsidiary  Guarantors respecting Accounts the aggregate unpaid balance of which
exceeds  twenty  percent (20%) of the aggregate  unpaid  balance of all Accounts
owed  to the  Borrower  or  Subsidiary  Guarantors  at  such  time by all of the
Borrower's or Subsidiary  Guarantors' Account Debtors, but only to the extent of
such excess; provided, that with respect to Accounts owed by Barnes and Noble to
the Borrower or Subsidiary Guarantors, to the extent such Accounts the aggregate
unpaid  balance  of which  exceeds  twenty  five (25%) of the  aggregate  unpaid
balance of all Accounts  owed to the Borrower or  Subsidiary  Guarantors at such
time by all of the Borrower's or Subsidiary  Guarantors'  Account  Debtors,  but
only to the extent of such excess;

         (t) which is not subject to a first  priority  and  perfected  security
interest in favor of the Agent for the benefit of the Lenders; and

         (u) to the extent (but only to the extent)  such  Account is subject to
any unpaid sales, excise or similar taxes.

         If any Account at any time ceases to be an Eligible Account,  then such
Account shall promptly be excluded from the calculation of Eligible Accounts.

         "Eligible  Assignee" means (a) a commercial  bank,  commercial  finance
company  or  other  asset  based  lender,  having  total  assets  in  excess  of
$1,000,000,000;  (b) any Lender listed on the signature page of this  Agreement;
(c) any Affiliate of any Lender; and (d) if an Event of Default has occurred and
is continuing, any Person reasonably acceptable to the Agent.

         "Eligible In-Transit Inventory" shall mean Inventory which is otherwise
Eligible  Inventory  (except with respect to the  eligibility  requirements  set
forth in clauses (h), (i) and (k) of the  definition of Eligible  Inventory) and
is in-transit from foreign suppliers to the Borrower or Subsidiary  Guarantor or
Borrower's or Subsidiary  Guarantors'  designated  location and reflected on the
Borrower's  or  such  Subsidiary  Guarantor's  internal  accounting  records  as
in-transit  Inventory.  In  furtherance  of and without  limiting the foregoing:
Eligible  In-Transit  Inventory  shall be limited to raw  materials and finished
goods (i) in the  possession  or control of an Approved  Customs  Broker/Shipper
under  contract  with the  Borrower or  Subsidiary  Guarantors  and in which the
Borrower or Subsidiary  Guarantor has good title; (ii) as to which Agent for the
benefit of Lenders has a first priority security  interest through  constructive
possession  by means of a  customs  broker  bailee  agreement  with an  Approved
Customs  Broker/Shipper;  (iii)  which have been  accepted  by the  Borrower  or
Subsidiary  Guarantor or their agent (F.O.B.  shipping  point or  equivalent) as
conforming  goods;  (iv) which are fully  insured  against loss under  insurance
naming  Agent as loss payee for the benefit of  Lenders;  (vi) as to which Agent
has been  designated  as  consignee  on the  applicable  bill of lading or other
Document; provided, however, that at no time shall Eligible In-Transit Inventory
exceed $7,500,000 in aggregate.



                                      A-13

<PAGE>


         "Eligible Inventory" means Inventory, valued at the lower of cost (on a
first-in,  first-out  basis) or  market,  which  the  Agent,  in its  reasonable
discretion, determines to be Eligible Inventory. Without limiting the discretion
of the Agent to establish other criteria of  ineligibility,  Eligible  Inventory
shall  not,  unless  the  Agent  in its  sole  discretion  elects,  include  any
Inventory:

         (a) that is not owned by the Borrower or any Subsidiary Guarantor;

         (b) that is not subject to the Agent's Liens, which are perfected as to
such Inventory, or that are subject to any other Lien whatsoever (other than the
Liens  described  in clause (d) and (h) of the  definition  of  Permitted  Liens
provided  that such  Permitted  Liens (i) are junior in  priority to the Agent's
Liens or subject to Reserves and (ii) do not impair  directly or indirectly  the
ability  of  the  Agent  to  realize  on or  obtain  the  full  benefit  of  the
Collateral);

         (c) that does not consist of finished goods or raw materials;

         (d) that consists of work-in-process,  chemicals,  embroidery, artwork,
samples, prototypes, supplies, or packing and shipping materials;

         (e) that is not in good condition, is unmerchantable,  or does not meet
all standards imposed by any Governmental  Authority having regulatory authority
over such goods, their use or sale;

         (f) that is obsolete or is not currently  either usable or salable,  at
prices  approximating  at least cost, in the normal course of the  Borrower's or
Subsidiary  Guarantors'  business,  or that  is slow  moving  or  stale  without
duplication for Inventory reduced in value to market per GAAP ;

         (g) that is returned or repossessed or used goods taken in trade;

         (h) that is located outside the United States of America or Canada;

         (i) that is located in a public  warehouse or in possession of a bailee
or in a  facility  leased  by the  Borrower  or  Subsidiary  Guarantors,  if the
warehouseman,  or the bailee,  or the lessor has not delivered to the Agent,  if
requested  by the  Agent,  a  subordination  agreement  in  form  and  substance
satisfactory to the Agent unless a Reserve for rents or storage charges has been
established for Inventory at that location;

         (j) that  contains  or bears any  Proprietary  Rights  licensed  to the
Borrower or a Subsidiary  Guarantor by any Person,  as to which the Borrower has
not delivered to the Agent an Inventory  Disposition Agreement acceptable to the
Agent if requested;

         (k) that is Inventory,  placed on  consignment  or not reflected in the
details  of a  current  perpetual  inventory  report,  provided  however  up  to
$1,000,000 of such Inventory shall be considered Eligible Inventory;

         (l) that is  Inventory  consisting  of product that is  categorized  as
"Irregular"; or



                                      A-14

<PAGE>

         (m) that consists of raw materials  carrying the Champion trademark and
is  subject  to the  License  Agreement  with  Sara Lee  Corporation,  provided,
however, an amount equal to the Champion Inventory Limit of such Inventory shall
be  considered  Eligible  Inventory;  provided,  further,  upon  receipt  of  an
Inventory  Disposition  Agreement  relating  to such  Inventory,  on  terms  and
conditions  acceptable to the Agent in its sole discretion,  all such Inventory,
regardless  of amount  shall be  considered  Eligible  Inventory  to the  extent
otherwise eligible hereunder.

         If any  Inventory  at any time  ceases to be Eligible  Inventory,  such
Inventory shall promptly be excluded from the calculation of Eligible Inventory.

         "Environmental  Claims"  means all  claims,  however  asserted,  by any
Governmental   Authority  or  other  Person  alleging  potential   liability  or
responsibility  for  violation  of any  Environmental  Law,  or for a Release or
injury to the environment.

         "Environmental  Compliance  Reserve"  means any reserve which the Agent
establishes  in its  reasonable  discretion  after prior  written  notice to the
Borrower from time to time for amounts that are reasonably likely to be expended
by the Borrower or its Subsidiaries in order for the Borrower,  its Subsidiaries
and  their  operations  and  property  (a) to  comply  with  any  notice  from a
Governmental  Authority  asserting  material  non-compliance  with Environmental
Laws, or (b) to correct any such material non-compliance  identified in a report
delivered to the Agent and the Lenders pursuant to Section 7.7.

         "Environmental  Laws" means all  federal,  state,  provincial  or local
laws, statutes,  common law duties,  rules,  regulations,  ordinances and codes,
together   with  all   administrative   orders,   directed   duties,   licenses,
authorizations and permits of, and agreements with, any Governmental  Authority,
in each case relating to environmental, health, safety and land use matters.

         "Environmental  Lien"  means  a  Lien  in  favor  of  any  Governmental
Authority or other Person for (a) any liability under Environmental Laws, or (b)
damages  arising  from,  or costs  incurred by such  Governmental  Authority  in
response  to,  a  Release  or  threatened  Release  of a  Contaminant  into  the
environment.

         "Equipment"  means all of the Borrower's and each of its  Subsidiaries'
now owned and hereafter acquired machinery, equipment,  furniture,  furnishings,
fixtures,  and other tangible  personal property (except  Inventory),  including
embedded  software,  motor vehicles with respect to which a certificate of title
has been issued,  aircraft,  dies, tools,  jigs, molds and office equipment,  as
well as all of such types of  property  leased by the  Borrower  and each of its
Subsidiaries and all of the Borrower's and each of its Subsidiaries'  rights and
interests with respect thereto under such leases (including, without limitation,
options  to  purchase);  together  with all  present  and future  additions  and
accessions  thereto,  replacements  therefor,  component and auxiliary parts and
supplies used or to be used in connection therewith, and all substitutes for any
of the foregoing, and all manuals, drawings, instructions, warranties and rights
with respect thereto; wherever any of the foregoing is located.

         "ERISA" means the Employee  Retirement Income Security Act of 1974, and
regulations promulgated thereunder.


                                      A-15
<PAGE>


         "ERISA   Affiliate"  means  any  trade  or  business  (whether  or  not
incorporated)  under  common  control  with the  Borrower  within the meaning of
Section  414(b) or (c) of the Code (and Sections  414(m) and (o) of the Code for
purposes of provisions relating to Section 412 of the Code).

         "ERISA  Event" means (a) a  Reportable  Event with respect to a Pension
Plan,  (b) a withdrawal  by the Borrower or any ERISA  Affiliate  from a Pension
Plan  subject  to  Section  4063 of ERISA  during a plan  year in which it was a
substantial  employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations  which is treated as such a withdrawal  under  Section  4062(e) of
ERISA,  (c) a  complete  or  partial  withdrawal  by the  Borrower  or any ERISA
Affiliate from a Multi-employer  Plan or notification that a Multi-employer Plan
is in  reorganization,  (d) the filing of a notice of intent to  terminate,  the
treatment of a Plan  amendment as a  termination  under Section 4041 or 4041A of
ERISA,  or the  commencement  of  proceedings by the PBGC to terminate a Pension
Plan or  Multi-employer  Plan, (e) the occurrence of an event or condition which
might  reasonably be expected to constitute  grounds under Section 4042 of ERISA
for the  termination  of, or the  appointment  of a trustee to  administer,  any
Pension Plan or  Multi-employer  Plan,  or (f) the  imposition  of any liability
under Title IV of ERISA,  other than for PBGC  premiums  due but not  delinquent
under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.

         "Event"  means (a) an athletic  competition  or other private or public
event at which the  Borrower or any of its  Subsidiaries'  Inventory  is sold at
retail (i) by the Borrower or its  Subsidiary  or by their  regular or temporary
employees  at such event with a payment by  Borrower  or its  Subsidiary  to the
owner of the  facility  at which  the  event is held  and/or  to the  sponsoring
organization of commissions,  site fees and/or royalties, or (ii) by a vendor at
such event to which Borrower or its Subsidiaries  ships Inventory on consignment
and for which the vendor  remits the proceeds to the Borrower or its  Subsidiary
minus  commissions or site fees;  and/or (b) a warehouse sale at which Inventory
is sold by the  Borrower  or its  Subsidiary  or by their  regular or  temporary
employees at such warehouse  sale. In connection  with such an Event,  Inventory
may be sold at the  Event,  temporary  locations  at hotels in the area,  and at
activities held in connection with such Event.

         "Event of Default" has the meaning specified in Section 9.1.

         "Event 1" means Event 1, Inc., a Kansas corporation.

         "Exchange  Act"  means  the  Securities   Exchange  Act  of  1934,  and
regulations promulgated thereunder.

         "FDIC"  means  the  Federal  Deposit  Insurance  Corporation,  and  any
Governmental Authority succeeding to any of its principal functions.

         "Federal  Funds Rate" means,  for any day, the rate per annum  (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve  System  arranged by Federal  funds brokers on such day, as published by
the Federal  Reserve Bank of New York on the Business Day next  succeeding  such
day; provided that (a) if such day is not a Business Day, the Federal Funds Rate
for  such day  shall be such  rate on such  transactions  on the next  preceding
Business Day as so published on the next succeeding  Business Day, and (b) if no
such rate is so  published  on such next  succeeding  Business  Day, the Federal
Funds Rate for such day shall be the  average  rate  charged to the Bank on such
day on such transactions as determined by the Agent.


                                      A-16
<PAGE>

         "Federal  Reserve  Board"  means the Board of  Governors of the Federal
Reserve System or any successor thereto.

         "Financial  Statements" means,  according to the context in which it is
used, the financial  statements referred to in Sections 5.2 and 6.6 or any other
financial  statements  required  to be given  to the  Lenders  pursuant  to this
Agreement.

         "Fiscal   Year"  means   Holdings',   the   Borrower's   or  Borrowers'
Subsidiaries' fiscal year for financial accounting purposes.  The current Fiscal
Year of the Borrower will end on June 27, 2002.

         "Fixed Assets" means the Equipment and Real Estate of the Borrower.

         "Fixed Asset  Amount" means an amount equal to  $13,381,025;  provided,
however,  that such amount  shall  decrease by $500,000 on the first day of each
calendar  quarter,  commencing  on the  calendar  quarter  beginning on or about
October 1, 2002.  The Fixed Asset  Amount shall  increase  (a) by an  additional
amount equal to 70% of the appraised value of the  Chillicothe  property at such
time as the Agent has received a (i) first priority Mortgage, (ii) title policy,
(iii) flood certificates , (iv) environmental questionnaires with respect to the
Chillicothe  property and (v) any other documents  derived therefrom in form and
substance  reasonably  satisfactory  to Agent  and the  Lenders  in  their  sole
discretion  and (b) by an  additional  amount  equal  to 70% of the  incremental
revised appraised value of the (i) 9700 Commerce Parkway property and (ii) 16002
W. 110th Street property.  The appraised value referenced in clauses (a) and (b)
shall be mutually satisfactory to Agent, Lenders and the Borrower.

         "Fixed Asset  Amount  Reduction"  has the meaning  specified in Section
3.4(d).

         "Fixed Charge Coverage Ratio" means,  with respect to any fiscal period
of  Holdings  and its  Subsidiaries,  the  ratio  of (a)  EBITDA  minus  Capital
Expenditures not funded with third party Debt to (b) Fixed Charges.

         "Fixed Charges" means, with respect to any fiscal period of Holdings on
a  consolidated  basis,  without  duplication,  interest  expense  paid in cash,
scheduled principal payments of Debt, scheduled  amortization of the Fixed Asset
Amount,  Federal, state, local and foreign income taxes (net of any tax benefits
with respect to such taxes),  excluding  deferred taxes,  but including all such
taxes paid by or refunded to,  Holdings and its  Subsidiaries  on a consolidated
basis and  without  duplication  of amounts  deductible  in the  calculation  of
EBITDA,  all Distributions  paid in cash by Holdings and the Borrower,  plus the
difference  between  (i) any  Distribution  paid in cash  permitted  pursuant to
clause (c) or (f) of the definition of Permitted Holdings Payments minus (ii) an
amount equal to the cash  proceeds  received by Holdings  from stock  issuances,
stock  reissuances  or the exercise of stock options to the extent such proceeds
are distributed or contributed to the Borrower.


                                      A-17

<PAGE>

         "Funding Date" means the date on which a Borrowing occurs.

         "GAAP" means generally accepted accounting principles and practices set
forth from time to time in the opinions  and  pronouncements  of the  Accounting
Principles Board and the American  Institute of Certified Public Accountants and
statements and  pronouncements of the Financial  Accounting  Standards Board (or
agencies with similar  functions of comparable  stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the
Closing Date.

         "General  Intangibles"  means  all of the  Borrower's  and  each of its
Subsidiaries'  now owned or hereafter  acquired general  intangibles,  choses in
action and causes of action and all other  intangible  personal  property of the
Borrower and each  Subsidiary  of the  Borrower of every kind and nature  (other
than Accounts),  including,  without  limitation,  all contract rights,  payment
intangibles,   Proprietary   Rights,   corporate  or  other  business   records,
inventions,   designs,  blueprints,   plans,  specifications,   patents,  patent
applications,  trademarks,  service marks, trade names, trade secrets, goodwill,
copyrights,   computer  software,  customer  lists,   registrations,   licenses,
franchises, tax refund claims, any funds which may become due to the Borrower or
one of its  Subsidiaries in connection with the termination of any Plan or other
employee benefit plan or any rights thereto and any other amounts payable to the
Borrower  or one of its  Subsidiaries  from any Plan or other  employee  benefit
plan,   rights  and   claims   against   carriers   and   shippers,   rights  to
indemnification, business interruption insurance and proceeds thereof, property,
casualty or any similar type of insurance and any proceeds thereof,  proceeds of
insurance  covering  the lives of key  employees on which the Borrower or one of
its  Subsidiaries is beneficiary,  rights to receive  dividends,  distributions,
cash,  Instruments  and other  property in respect of or in exchange for pledged
equity  interests or  Investment  Property and any letter of credit,  guarantee,
claim, security interest or other security held by or granted to the Borrower or
one of its Subsidiaries.

         "Goods" means all "goods" as defined in the UCC or PPSA, as applicable,
now owned or  hereafter  acquired by the  Borrower  or one of its  Subsidiaries,
wherever located,  including embedded software to the extent included in "goods"
as defined  in the UCC,  manufactured  homes,  standing  timber  that is cut and
removed for sale and unborn young of animals.

         "Governmental Authority" means any nation or government, any state, any
province,  municipality,  region or other  political  subdivision  thereof,  any
central bank (or similar monetary or regulatory  authority) thereof,  any entity
exercising  executive,  legislative,   judicial,  regulatory  or  administrative
functions of or pertaining to government,  any corporation or other entity owned
or controlled,  through stock or capital  ownership or otherwise,  by any of the
foregoing and any department, agency, board, commission,  tribunal, committee or
instrumentality of any of the foregoing.

         "Guaranty" means,  with respect to any Person,  all obligations of such
Person which in any manner  directly or  indirectly  guarantee or assure,  or in
effect  guarantee or assure,  the payment or  performance  of any  indebtedness,
dividend  or  other   obligations   of  any  other   Person   (the   "guaranteed
obligations"),  or assure  or in  effect  assure  the  holder of the  guaranteed
obligations  against loss in respect  thereof,  including  any such  obligations
incurred  through an agreement,  contingent  or  otherwise:  (a) to purchase the
guaranteed  obligations or any property constituting  security therefor;  (b) to
advance  or  supply  funds  for  the  purchase  or  payment  of  the  guaranteed
obligations or to maintain a working  capital or other balance sheet  condition;
or (c) to lease  property or to purchase any debt or equity  securities or other
property or services.


                                      A-18
<PAGE>


         "Hedge  Agreement"  means  any  and  all  transactions,  agreements  or
documents now existing or hereafter entered into, which provides for an interest
rate,  credit,  commodity or equity swap,  cap, floor,  collar,  forward foreign
exchange transaction,  currency swap, cross currency rate swap, currency option,
or any combination of, or option with respect to, these or similar transactions,
for the purpose of hedging  Holdings'  or any of its  Subsidiaries'  exposure to
fluctuations in interest or exchange rates,  loan, credit exchange,  security or
currency valuations or commodity prices.

         "Holdings" means GFSI Holdings, Inc. a Delaware corporation.

         "Holdings  Guaranty"  means the  Guaranty  dated as of the date  hereof
executed by Holdings in favor of Agent for the benefit of Lenders.

         "Holdings Pledge  Agreement" means the Pledge Agreement dated as of the
date hereof executed by Holdings in favor of Agent for the benefit of Lenders.

         "Instruments"  means all instruments as such term is defined in the UCC
or PPSA, as applicable,  now owned or hereafter  acquired by the Borrower or one
of its Subsidiaries.

         "Interest  Period"  means,  as to  any  LIBOR  Rate  Loan,  the  period
commencing  on the Funding  Date of such Loan or on the  Continuation/Conversion
Date on which the Loan is converted  into or continued as a LIBOR Rate Loan, and
ending on the date one, two,  three or six months  thereafter as selected by the
Borrower in its Notice of Borrowing,  in the form attached  hereto as Exhibit D,
or Notice of Continuation/Conversion,  in the form attached hereto as Exhibit E,
provided that:

                  (a)   if any Interest Period would otherwise end on a day that
         is not a Business Day,  that  Interest  Period shall be extended to the
         following  Business Day unless the result of such extension would be to
         carry such Interest Period into another  calendar month, in which event
         such Interest Period shall end on the preceding Business Day;

                  (b)   any Interest Period pertaining to a LIBOR Rate Loan that
         begins on the last  Business  Day of a calendar  month (or on a day for
         which there is no numerically  corresponding  day in the calendar month
         at the end of such Interest  Period) shall end on the last Business Day
         of the calendar month at the end of such Interest Period; and

                  (c)    no  Interest Period  shall  extend  beyond  the  Stated
         Termination Date.

         "Interest Rate" means each or any of the interest rates,  including the
Default Rate, set forth in Section 2.1.

         "Inventory"  means all of the Borrower's and each of its  Subsidiaries'
now owned and hereafter  acquired  inventory,  goods and  merchandise,  wherever
located,  to be  furnished  under any  contract  of  service or held for sale or


                                      A-19

<PAGE>


lease,  all returned  goods,  raw  materials,  work-in-process,  finished  goods
(including embedded software),  other materials and supplies of any kind, nature
or  description  which  are used or  consumed  in the  Borrower's  or one of the
Borrower's  Subsidiaries'  business  or used in  connection  with  the  packing,
shipping, advertising,  selling or finishing of such goods, merchandise, and all
documents of title or other Documents representing them.

         "Investment  Property"  means  all  of the  Borrower's  right  and  its
Subsidiaries'  title and interest in and to any and all: (a) securities  whether
certificated  or  uncertificated;  (b) securities  entitlements;  (c) securities
accounts; (d) commodity contracts; or (e) commodity accounts.

         "IRS" means the Internal Revenue Service and any Governmental Authority
succeeding to any of its principal functions under the Code.

         "Jordan  Stockholders"  means (a) The Jordan  Company,  LLC, a New York
general  partnership,  Jordan/Zalznick  Capital Company, a New York corporation,
Jordan  Industries,   Inc.,  an  Illinois  corporation,   and  their  respective
affiliates (including Leucadia Investors,  Inc.), (b) current, former and future
partners, members, principals,  directors, officers, employees and agents of the
Persons  referred to in clause (a) hereof,  (c) The John W. Jordan II  Revocable
Trust,  The Jordan Family Trust and/or any other trusts  established  by John W.
Jordan II, (d) any other trust  established,  now or  hereafter,  by the persons
referred to in clause (b) hereof, and (e) any corporation,  partnership or other
entity controlled by, or which is an affiliate of, now or hereafter, the Persons
referred to in clauses (a), (b), (c) and (d) hereof,  and (f) JZ Equity Partners
PLC, a public  limited  liability  company  formed under the laws of England and
Wales, and any corporation,  partnership or other entity controlled by, or which
is an affiliate of, now or hereafter, JZ Equity Partners PLC.

         "Latest  Projections"  means:  (a) on the Closing  Date and  thereafter
until the Agent  receives  new  projections  pursuant  to  Section  5.2(e),  the
projections of Holdings and its  Subsidiaries  financial  condition,  results of
operations,  and cash  flows,  for the period  commencing  on June 29,  2001 and
ending on June 27, 2002 and  delivered  to the Agent prior to the Closing  Date;
and (b) thereafter, the projections most recently received by the Agent pursuant
to Section 5.2(e).

         "Lender" and "Lenders" have the meanings  specified in the introductory
paragraph  hereof and shall include the Agent to the extent of any Agent Advance
outstanding  and the Bank to the  extent of any  Non-Ratable  Loan  outstanding;
provided  that no such  Agent  Advance or  Non-Ratable  Loan shall be taken into
account in determining any Lender's Pro Rata Share.

         "Letter of Credit" has the meaning specified in Section 1.4(a).

         "Letter of Credit Fee" has the meaning specified in Section 2.6.

         "Letter of Credit Issuer"  means the Bank, any affiliate of the Bank or
any other  financial  institution  that issues any Letter of Credit  pursuant to
this Agreement.


                                      A-20
<PAGE>


         "Letter-of-Credit Rights"  means "letter-of-credit rights" as such term
is defined in the UCC, now owned or hereafter acquired by the Borrower or one of
its  Subsidiaries,  including rights to payment or performance under a letter of
credit, whether or not Borrower or one of its Subsidiaries,  as beneficiary, has
demanded or is entitled to demand payment or performance.

         "Letter of Credit Subfacility" means $25,000,000.

         "LIBOR Interest Payment Date" means, with respect to a LIBOR Rate Loan,
the Termination Date and the last day of each Interest Period applicable to such
Loan or, with  respect to each  Interest  Period of greater than three months in
duration,  the last day of the third month of such Interest  Period and the last
day of such Interest Period.

         "LIBOR Rate" means, for any Interest Period, with respect to LIBOR Rate
Loans,  the rate of interest  per annum  determined  pursuant  to the  following
formula:

                  LIBOR Rate  =         Offshore Base Rate
                                 -------------------------------------------
                                      1.00 - Eurodollar Reserve Percentage
                  Where,

                  "Offshore Base Rate"  means  the rate per annum  appearing  on
         Telerate  Page 3750 (or any  successor  page) as the  London  interbank
         offered  rate for  deposits  in  Dollars  at  approximately  11:00 a.m.
         (London time) two Business Days prior to the first day of such Interest
         Period for a term comparable to such Interest Period. If for any reason
         such rate is not  available,  the Offshore  Base Rate shall be, for any
         Interest  Period,  the rate per annum  appearing on Reuters Screen LIBO
         Page as the London  interbank  offered  rate for deposits in Dollars at
         approximately  11:00 a.m.  (London time) two Business Days prior to the
         first  day of  such  Interest  Period  for a term  comparable  to  such
         Interest Period; provided,  however, if more than one rate is specified
         on  Reuters  Screen  LIBO  Page,  the  applicable  rate  shall  be  the
         arithmetic  mean  of all  such  rates.  If for any  reason  none of the
         foregoing rates is available,  the Offshore Base Rate shall be, for any
         Interest Period,  the rate per annum determined by Agent as the rate of
         interest  at which  dollar  deposits in the  approximate  amount of the
         LIBOR Rate Loan  comprising  part of such Borrowing would be offered by
         the Bank's London  Branch to major banks in the offshore  dollar market
         at their request at or about 11:00 a.m. (London time) two Business Days
         prior to the first day of such Interest Period for a term comparable to
         such Interest Period.

                  "Eurodollar Reserve Percentage" means, for any day  during any
         Interest  Period,  the  reserve  percentage  (expressed  as a  decimal,
         rounded  upward  to the  next  1/100th  of 1%) in  effect  on such  day
         applicable to member banks under  regulations  issued from time to time
         by the  Federal  Reserve  Board for  determining  the  maximum  reserve
         requirement  (including any emergency,  supplemental  or other marginal
         reserve  requirement) with respect to Eurocurrency  funding  (currently
         referred to as "Eurocurrency liabilities").  The Offshore Rate for each
         outstanding  LIBOR Rate Loan shall be adjusted  automatically as of the
         effective date of any change in the Eurodollar Reserve Percentage.


                                      A-21

<PAGE>


         "LIBOR Rate Loans" means the LIBOR Revolving Loans.

         "LIBOR  Revolving  Loan"  means a  Revolving  Loan during any period in
which it bears interest based on the LIBOR Rate.

         "License Agreement" means license or royalty agreements entered into by
Borrower and/or its  Subsidiaries  as the licensee  entered into in the ordinary
course of business or in connection  with an Acquisition,  including  agreements
with guaranteed or minimum payments. Existing agreements of this type are listed
or described on Schedule 6.12.

         "Lien" means: (a) any interest in property  securing an obligation owed
to, or a claim by, a Person other than the owner of the  property,  whether such
interest is based on the common  law,  statute,  or  contract,  and  including a
security  interest,  hypothec,  charge,  claim, or lien arising from a mortgage,
deed  of  trust,  encumbrance,   pledge,  hypothecation,   assignment,   deposit
arrangement, agreement, security agreement, conditional sale or trust receipt or
a lease,  consignment or bailment for security  purposes;  (b) to the extent not
included  under  clause  (a),  (i)  any  reservation,  exception,  encroachment,
easement, right-of-way,  covenant, condition,  restriction, lease or other title
exception or  encumbrance  affecting  property and (ii) with respect to property
located in Canada,  any other lien,  charge,  privilege,  secured  claim,  title
retention,  garnishment,  right,  deemed trust,  encumbrance  or any other right
affecting  property,  choate or inchoate,  whether or not crystallized or fixed,
whether or not for amounts due or accruing due,  arising by any statute,  act of
law of any jurisdiction,  at common law, in equity or any agreement; and (c) any
contingent or other agreement to provide any of the foregoing.

         "Loan Account"  means  the loan account of the Borrower,  which account
shall be maintained by the Agent.

         "Loan Documents"   means  this   Agreement,   the  Trademark   Security
Agreements,  the Security Agreement,  the Mortgages,  the Pledge Agreement,  the
Holdings Guaranty,  the Subsidiary  Guaranty,  the Holdings Pledge Agreement and
any other agreements,  instruments,  and documents heretofore,  now or hereafter
evidencing, securing, guaranteeing or otherwise relating to the Obligations, the
Collateral,  or any  other  aspect  of the  transactions  contemplated  by  this
Agreement, including, without limitation, the documents to be delivered pursuant
to Section 7.20 hereof.

         "Loans"  means,  collectively,  all loans and advances  provided for in
Article 1.

         "Majority Lenders" means at any date of determination Lenders whose Pro
Rata Shares aggregate more than 50%.

         "Management Stockholders" means Robert Wolff, Larry Graveel, Mike Gary,
J. Craig  Peterson,  Jason Krakow,  Mark Schimpf,  Carl Allard,  Jim Malseed and
their family members and trusts for the benefit of any of the foregoing.

         "Margin  Stock"  means  "margin  stock"  as  such  term is  defined  in
Regulation T, U or X of the Federal Reserve Board.


                                      A-22
<PAGE>


         "Material  Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations,  business,  properties,  condition
(financial or otherwise)  or prospects of the  Borrower,  the  Collateral or any
guarantor of the  Obligations;  (b) a material  impairment of the ability of the
Borrower or any Affiliate of the Borrower,  including  Subsidiaries,  to perform
under any Loan Document to which it is a party; or (c) a material adverse effect
upon the legality,  validity, binding effect or enforceability against Holdings,
the Borrower or  Borrower's  Subsidiaries  of any Loan Document to which it is a
party.

         "Maximum Inventory Loan Amount" means $30,000,000.

         "Maximum Rate" has the meaning specified in Section 2.3.

         "Maximum Revolver Amount" means $65,000,000.

         "Mortgages"   means  and  includes  any  and  all  of  the   mortgages,
charges/mortgages of land, deeds of trust, deeds to secure debt, assignments and
other  instruments  executed and delivered by the Borrower to or for the benefit
of the Agent by which the Agent,  on behalf of the  Lenders,  acquires a Lien on
the Real Estate or a collateral  assignment  of the  Borrower's  interest  under
leases  of  Real  Estate,  and all  amendments,  modifications  and  supplements
thereto.

         "Multi-employer Plan"  means a  "multi-employer  plan"  as  defined  in
Section  4001(a)(3) of ERISA which is or was at any time during the current year
or the immediately preceding six (6) years contributed to by the Borrower or its
Subsidiaries or any ERISA Affiliate.

         "Net Proceeds" has the meaning specified in Section 3.4(b).

         "Non-Ratable Loan" and "Non-Ratable  Loans" have the meanings specified
in Section 1.2(h).

         "Notice of Borrowing" has the meaning specified in Section 1.2(b).

         "Notice  of  Continuation/Conversion"  has  the  meaning  specified  in
Section 2.2(b).

         "Obligations"   means  all   present   and  future   loans,   advances,
liabilities, obligations, covenants, duties, and debts owing by Holdings and any
of its Subsidiaries to the Agent and/or any Lender, arising under or pursuant to
this 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,   absolute  or
contingent,  due or to  become  due,  primary  or  secondary,  as  principal  or
guarantor,  and including all  principal,  interest,  charges,  expenses,  fees,
attorneys'  fees,  filing fees and any other sums chargeable to Holdings and its
Subsidiaries or under any of the other Loan Documents.  "Obligations"  includes,
without limitation, (a) all debts, liabilities, and obligations now or hereafter
arising  from or in  connection  with the  Letters  of Credit and (b) all debts,
liabilities and obligations now or hereafter  arising from or in connection with
Bank Products.

         "Other Taxes" means any present or future stamp or documentary taxes or
any other excise or property  taxes,  charges or similar levies which arise from
any payment made hereunder or from the execution,  delivery or registration  of,
or otherwise with respect to, this Agreement or any other Loan Documents.



                                      A-23
<PAGE>

         "Participant" means any Person who shall have been granted the right by
any Lender to  participate  in the financing  provided by such Lender under this
Agreement, and who shall have entered into a participation agreement in form and
substance satisfactory to such Lender.

         "Payment Account" means each bank account  established  pursuant to the
Security  Agreement,  to which the proceeds of Accounts and other Collateral are
deposited or credited,  and which is  maintained in the name of the Agent or the
Borrower, as the Agent may determine, on terms acceptable to the Agent.

         "PBGC"  means  the  Pension   Benefit   Guaranty   Corporation  or  any
Governmental Authority succeeding to the functions thereof.

         "Pending  Revolving Loans" means, at any time, the aggregate  principal
amount of all Revolving Loans  requested in any Notice of Borrowing  received by
the Agent which have not yet been advanced.

         "Pension  Plan"  means a pension  plan (as  defined in Section  3(2) of
ERISA) subject to Title IV of ERISA which the Borrower sponsors,  maintains,  or
to which it makes, is making, or is obligated to make  contributions,  or in the
case of a  Multi-employer  Plan has made  contributions  at any time  during the
immediately preceding five (5) plan years.

         "Permitted Holdings Payments" means any Distribution by the Borrower or
its  Subsidiaries  to  Holdings  at any time  other  than  after and  during the
occurrence  of an Event of Default  (except  for  purposes  of any  Distribution
described  in clause (b) of this  definition)  for the  purpose of (a)  enabling
Holdings to pay the fees pursuant to that certain TJC Management Agreement dated
February 27, 1997 in an amount not to exceed  $1,000,000  per annum in quarterly
installments,  (b) meeting obligations with respect to tax obligations under the
Tax Sharing  Agreement  dated as of February 27, 1997  between  Holdings and the
Borrower,  (c) making  payments and stock  repurchases  under the  Stockholders'
Agreement or any related  agreements  (including  payments on any debt  relating
thereto) in an aggregate  amount not to exceed  $1,000,000 per annum, (d) paying
the  costs of  accounting,  legal,  administrative,  directors,  franchise  tax,
governmental  and other  ordinary  course fees  (including  payments on any debt
relating thereto), expenses and indemnities in an aggregate amount not to exceed
$500,000 per annum,  (e) enabling  Holdings to pay scheduled  payments due on or
after  March 15, 2005 under the  Indenture  dated  February  27,  1997,  between
Holdings and Fleet  National  Bank, as Trustee as in effect on the Closing Date,
(f) enabling  Holdings to purchase Holdings capital stock from current or former
executives,  management and employees of the Borrower or its  Subsidiaries of up
to a maximum of $500,000 in the  aggregate  per year.  Notwithstanding  anything
herein to the contrary, if Holdings sells any capital stock repurchased pursuant
to clause (c) or (f),  an amount  equal to the  proceeds  of such sales shall be
deemed to reduce the amounts  previously  applied against the respective maximum
amounts set forth in such  clause(s);  provided  that the proceeds of such sales
are distributed to the Borrower,  and (g) enabling Holdings to make any payments
required in connection  with that certain  Noncompetition  Agreement dated as of
February  27, 1997 by and between  Holdings and Robert M. Wolff in an amount not
to exceed $250,000 per annum.


                                      A-24
<PAGE>

         "Permitted Liens" means:

         (a) Liens for taxes not  delinquent or statutory  Liens for taxes in an
amount not to exceed $500,000  provided that the payment of such taxes which are
due and payable is being contested in good faith and by appropriate  proceedings
diligently  pursued  and as to  which  adequate  financial  reserves  have  been
established on the Borrower's or its Subsidiaries'  books and records and a stay
of enforcement of any such Lien is in effect;

         (b)  the Agent's Liens;

         (c)  Liens  consisting  of  deposits  made in the  ordinary  course  of
business in connection with, or to secure payment of, obligations under worker's
compensation, unemployment insurance, social security and other similar laws, or
to secure the  performance  of bids,  tenders or  contracts  (other than for the
repayment of Debt) or to secure  indemnity,  performance  or other similar bonds
for the performance of bids,  tenders or contracts (other than for the repayment
of Debt) or to secure  statutory  obligations  (other than liens  arising  under
ERISA or Environmental Liens) or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds;

         (d)  Liens securing  the claims or demands of  materialmen,  mechanics,
carriers,  warehousemen,  landlords,  customs  brokers,  and other like Persons,
provided  that if any such Lien  arises  from the  nonpayment  of such claims or
demand when due, such claims or demands do not exceed $500,000 in the aggregate;

         (e)  Liens constituting  encumbrances  in the  nature of  reservations,
exceptions, encroachments,  easements, rights of way, covenants running with the
land,  and other similar title  exceptions  or  encumbrances  affecting any Real
Estate;  provided that they do not in the aggregate  materially detract from the
value of the Real Estate or  materially  interfere  with its use in the ordinary
conduct of the Borrower's or its Subsidiaries' business;

         (f)  Liens arising from judgments and  attachments  in connection  with
court  proceedings  provided that the  attachment or  enforcement  of such Liens
would  not  result in an Event of  Default  hereunder  and such  Liens are being
contested in good faith by appropriate proceedings,  adequate reserves have been
set aside and no  material  Property  is subject  to a material  risk of loss or
forfeiture  and the  claims  in  respect  of such  Liens are  fully  covered  by
insurance  (subject  to  ordinary  and  customary  deductibles)  and a  stay  of
execution pending appeal or proceeding for review is in effect;

         (g)  Liens arising in connection  with (i) operating  leases  permitted
hereunder  and (ii) any leases or subleases but only to the extent the Agent has
set appropriate Reserves in its reasonable discretion;

         (h)  Liens  in favor of  customs  and  revenue  authorities  to  secure
payments of customs duties in connection with importation of goods;


                                      A-25

<PAGE>


         (i)  Liens on assets  (other  than  Accounts  and  Inventory)  acquired
pursuant to  Acquisitions  allowed under Section 7.21 whether such Liens existed
prior to or arose in connection with such Acquisition;

         (j)  existing Liens as set forth on Schedule 7.18;

         (k)  Liens  otherwise   permitted  hereunder  in  connection  with  any
extension,  refinancing,  replacement, renewal, substitution or refunding of any
Debt permitted hereunder;

         (l)  Liens incurred in connection with the Chillicothe Debt;

         (m)  Liens of any trustee  incurred in connection  with and pursuant to
the fifth paragraph of Section 7.07 of the Borrower Indenture;

         (n) Liens allowed to secure Debt permitted pursuant to Section 7.13(c);
and

         (o)  Liens incurred in connection  with workers' compensation,  Canada
Pension Plan,  employment insurance and similar legislation not to exceed in the
aggregate $250,000.

         "Person"  means  any  individual,  sole  proprietorship,   partnership,
limited liability company, joint venture,  trust,  unincorporated  organization,
association, corporation, Governmental Authority, or any other entity.

         "Plan"  means an employee  benefit  plan (as defined in Section 3(3) of
ERISA)  which the Borrower or its  Subsidiaries  sponsor or maintain or to which
the Borrower or its  Subsidiaries  make,  are making,  or are  obligated to make
contributions and includes any Pension Plan.

         "Pledge  Agreement" means the Pledge Agreement executed by the Borrower
dated  as of the  date  hereof  in favor or the  Agent  for the  benefit  of the
Lenders.

         "PPSA" means the Personal  Property  Security  Act  (Ontario),  and all
regulations thereunder.

         "Proprietary  Rights"  means  all of the  Borrower's  and  each  of its
Subsidiaries' now owned and hereafter arising or acquired: licenses, franchises,
permits, patents, patent rights, copyrights,  works which are the subject matter
of copyrights,  trademarks,  service marks, trade names,  trade styles,  patent,
trademark and service mark applications,  and all licenses and rights related to
any of the foregoing,  including those patents, trademarks, service marks, trade
names and  copyrights  set forth on Schedule  6.12 hereto,  and all other rights
under any of the  foregoing,  all  extensions,  renewals,  reissues,  divisions,
continuations, and continuations-in-part of any of the foregoing, and all rights
to sue for past, present and future infringement of any of the foregoing.

         "Pro Rata Share" means, with respect to a Lender, a fraction (expressed
as a  percentage),  the  numerator  of  which  is the  amount  of such  Lender's
Commitment and the  denominator of which is the sum of the amounts of all of the
Lenders'  Commitments,   or  if  no  Commitments  are  outstanding,  a  fraction


                                      A-26

<PAGE>


(expressed as a percentage), the numerator of which is the amount of Obligations
owed to such Lender and the denominator of which is the aggregate  amount of the
Obligations  owed to the  Lenders,  in each case  giving  effect  to a  Lender's
participation in Non-Ratable Loans and Agent Advances. Following the termination
of the Lenders'  Commitments,  the  Obligations  shall exclude Bank Products for
purposes of the definition of Pro Rata Share.

         "Real Estate" means all of the Borrower's and each of its Subsidiaries'
now or hereafter  owned or leased estates in real property,  including,  without
limitation, all fees, leaseholds and future interests,  together with all of the
Borrower's  and each of its  Subsidiaries'  now or  hereafter  owned  or  leased
interests in the  improvements  thereon,  the fixtures  attached thereto and the
easements appurtenant thereto.

         "Release"  means  a  release,   spill,  emission,   leaking,   pumping,
injection, deposit, disposal,  discharge,  dispersal, leaching or migration of a
Contaminant  into the indoor or outdoor  environment  or into or out of any Real
Estate or other property,  including the movement of Contaminants  through or in
the air, soil, surface water, groundwater or Real Estate or other property.

         "Reportable  Event"  means,  any of the  events  set  forth in  Section
4043(b) of ERISA or the  regulations  thereunder,  other than any such event for
which the 30-day notice  requirement  under ERISA has been waived in regulations
issued by the PBGC.

         "Required  Lenders"  means at any time  Lenders  whose Pro Rata  Shares
aggregate more than 66-2/3% of all Commitments.

         "Requirement  of Law" means,  as to any Person,  any law  (statutory or
common),  treaty,  rule or regulation or  determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.

         "Reserves"  means  reserves  that  limit  the  availability  of  credit
hereunder,  consisting  of reserves  against  Availability,  Eligible  Accounts,
Eligible Inventory, or Eligible In-Transit Inventory,  established by Agent from
time  to  time  in  Agent's  sole  reasonable  judgment.  Without  limiting  the
generality  of the  foregoing,  the following  reserves  shall be deemed to be a
reasonable exercise of Agent's credit judgment: (a) Bank Product Reserves, (b) a
reserve for accrued,  unpaid interest on the Obligations,  (c) reserves for rent
at leased locations  subject to statutory or contractual  landlord liens, (d) to
the extent not reflected in the calculation of Eligible Inventory,  reserves for
Inventory  shrinkage,  (e)  reserves  for  customs  charges,  (f)  reserves  for
dilution,  (g) a reserve for accrued and unpaid licensing fees, and (h) reserves
for warehousemen's or bailees' charges.  At the Borrower's  reasonable  request,
Agent shall provide an explanation of the reasons for any Reserves.

         "Responsible   Officer"  means  the  chief  executive  officer  or  the
president of the Borrower,  or any other officer having  substantially  the same
authority  and  responsibility;  or, with respect to compliance  with  financial
covenants and the  preparation  of the  Borrowing  Base  Certificate,  the chief
financial officer or the treasurer of the Borrower,  or any other officer having
substantially the same authority and responsibility.


                                      A-27

<PAGE>

         "Restricted Investment" means, as to the Borrower and its Subsidiaries,
any acquisition of property by the Borrower or its  Subsidiaries in exchange for
cash or other property, whether in the form of an acquisition of stock, debt, or
other  indebtedness  or obligation,  or the purchase or acquisition of any other
property, or a loan, advance, capital contribution, or subscription,  except the
following:  (a)  acquisitions of Equipment or Real Estate and improvements to be
used in the business of the Borrower or its Subsidiaries,  provided with respect
to  acquisitions  of Real  Estate,  the  Borrower  shall,  and  shall  cause its
Subsidiaries to provide, an environmental  assessment acceptable to Agent in its
sole  discretion  prior to such  acquisition  so long as the  acquisition  costs
thereof  constitute Capital  Expenditures;  (b) acquisitions of Inventory in the
ordinary  course  of  business  of  the  Borrower  or  its   Subsidiaries;   (c)
acquisitions  of current assets  acquired in the ordinary  course of business of
the Borrower or its Subsidiaries; (d) direct obligations of the United States of
America, or any agency thereof,  or obligations  guaranteed by the United States
of America,  provided that such obligations mature within one year from the date
of acquisition  thereof;  (e)  acquisitions of certificates of deposit  maturing
within one year from the date of acquisition,  bankers' acceptances,  Eurodollar
bank deposits,  or overnight bank deposits,  in each case issued by, created by,
or with a bank or trust company organized under the laws of the United States of
America or any state thereof  having  capital and surplus  aggregating  at least
$100,000,000;  (f)  acquisitions  of commercial  paper given a rating of "A2" or
better by Standard & Poor's  Corporation or "P2" or better by Moody's  Investors
Service,  Inc.  and  maturing  not more than 90 days  from the date of  creation
thereof;  (g) Hedge Agreements;  (h) Acquisitions  permitted pursuant to Section
7.21;  (i)  investments  of the  Borrower  in any  Subsidiary  now  existing  or
hereafter  created or acquired as permitted  under Section  7.20,  including any
payments  made to capitalize a new  Subsidiary,  provided,  that the  Borrower's
investment in the Canadian Subsidiary, when taken together with any intercompany
Debt  owing  by  the  Canadian  Subsidiary  to the  Borrower  shall  not  exceed
$5,000,000  in the  aggregate;  (j) any other  investments  expressly  permitted
hereunder,  (k) investments of the Borrower or its  Subsidiaries in Holdings but
only to the extent that such investments are Permitted Holdings Payments and (l)
intercompany loans permitted under Section 7.13(g).

         "Revolving Loans" has the meaning specified in Section 1.2 and includes
each Agent Advance and Non-Ratable Loan.

         "Security Agreement" means the Security Agreement of even date herewith
among the  Borrower,  CCP,  Event 1 and Agent for the benefit of Agent and other
Lenders.

         "Senior   Notes"   means  the  Series  A  and  Series  B  95/8%  Senior
Subordinated Notes Due 2007, issued pursuant to the Borrower Indenture.

         "Settlement"  and  "Settlement  Date" have the  meanings  specified  in
Section 12.15(a)(ii).

         "Software" means all "software" as such term is defined in the UCC, now
owned or hereafter  acquired by the Borrower or one of its  Subsidiaries,  other
than software embedded in any category of Goods, including all computer programs
and all supporting information provided in connection with a transaction related
to any program.


                                      A-28

<PAGE>


         "Solvent" when used with respect to any Person,  means that at the time
of determination:

                  (a)  the  fair   market   value   (i.e.,   the  value  of  the
         consideration  obtainable  in a sale of assets on a going concern basis
         in the open  market,  assuming a sale by a willing  seller to a willing
         buyer dealing at arm's length and arranged in an orderly  manner over a
         reasonable  period of time,  each having  reasonable  knowledge  of the
         nature and  characteristics  of such  assets,  neither  being under any
         compulsion to act, determined in good faith) of its assets is in excess
         of the total amount of its liabilities (including,  without limitation,
         contingent liabilities); and

                  (b)  the  present  fair  saleable  value  of  its  assets  (as
         determined  on a  going-concern  basis) is  greater  than its  probable
         liability  on its  existing  debts as such debts  become  absolute  and
         matured; and

                  (c)  it is then able and  expects  to be able to pay its debts
         (including, without limitation, contingent debts and other commitments)
         as they mature; and

                  (d) it has  capital  sufficient  to carry on its  business  as
         conducted and as proposed to be conducted.

         For purposes of determining whether a Person is Solvent,  the amount of
any contingent  liability  shall be computed as the amount that, in light of all
the facts and  circumstances  existing at such time,  represents the amount that
can reasonably be expected to become an actual or matured liability.

         "Stated  Termination  Date" means January 15, 2005 or the date to which
this Agreement is extended pursuant to Section 10.1.

         "Stockholders  Agreement"  means the Amended and Restated  Subscription
and  Stockholders  Agreement,  dated as of December 19, 2000, among Holdings and
its shareholders, as it may be amended from time to time.

         "Subsidiary"   of  a  Person   means  any   corporation,   association,
partnership,  limited liability company,  joint venture or other business entity
of which  more than fifty  percent  (50%) of the  voting  stock or other  equity
interests  (in the  case of  Persons  other  than  corporations),  is  owned  or
controlled  directly  or  indirectly  by  the  Person,  or one  or  more  of the
Subsidiaries  of the  Person,  or a  combination  thereof.  Unless  the  context
otherwise  clearly  requires,  references  herein to a  "Subsidiary"  refer to a
Subsidiary  of the Borrower and includes,  without  limitation,  the  Subsidiary
Guarantors.

         "Subsidiary  Guarantors"  means the US  Subsidiary  Guarantors  and the
Canadian Subsidiary Guarantors.


                                      A-29


<PAGE>

         "Subsidiary  Guaranty"  means the Guaranty  dated as of the date hereof
executed by each of CCP and Event 1 in favor of the Agent for the benefit of the
Lenders,  plus any  additional  guarantees in favor of Agent or the Lenders by a
Subsidiary required under Section 7.20 or otherwise.

         "Supporting  Obligations" means all supporting obligations as such term
is defined in the UCC,  including  letters  of credit and  guaranties  issued in
support of Accounts, Chattel Paper, Documents, General Intangibles, Instruments,
or Investment Property.

         "Target"  means any other Person or business unit or asset group of any
other Person acquired or proposed to be acquired in an Acquisition.

         "Taxes"  means any and all present or future  taxes,  levies,  imposts,
deductions,  charges or withholdings,  and all liabilities with respect thereto,
excluding,  in the case of each  Lender  and the Agent,  such  taxes  (including
income taxes or franchise taxes) as are imposed on or measured by the Agent's or
each  Lender's net income in any the  jurisdiction  (whether  federal,  state or
local and including any political  subdivision  thereof) under the laws of which
such  Lender or the  Agent,  as the case may be, is  organized  or  maintains  a
lending office.

         "Termination  Date"  means  the  earliest  to occur  of (i) the  Stated
Termination  Date, (ii) the date the Total Facility is terminated  either by the
Borrower  pursuant to Section 3.2 or by the Required Lenders pursuant to Section
9.2, and (iii) the date this  Agreement is otherwise  terminated  for any reason
whatsoever pursuant to the terms of this Agreement.

         "Total Facility" has the meaning specified in Section 1.1.

         "Trademark  Security Agreement" means the Trademark Security Agreement,
dated as of the date hereof, executed and delivered by the Borrower to the Agent
to evidence and perfect the Agent's  security  interest in the Borrower's or its
Subsidiaries' present and future trademarks and related licenses and rights, for
the benefit of the Agent and the Lenders.

         "UCC"  means the  Uniform  Commercial  Code,  as in effect from time to
time,  of the  State of  Illinois  or of any  other  state the laws of which are
required  as a result  thereof  to be applied  in  connection  with the issue of
perfection of security interests;  provided,  that to the extent that the UCC is
used to  define  any term  herein  or in any  other  documents  and such term is
defined  differently  in  different  Articles  or  Divisions  of  the  UCC,  the
definition of such term contained in Article or Division 9 shall govern.

         "Unfunded  Pension  Liability"  means the  excess  of a Plan's  benefit
liabilities  under Section  4001(a)(16) of ERISA, over the current value of that
Plan's assets,  determined in accordance with the  assumptions  used for funding
the Pension  Plan  pursuant to Section 412 of the Code for the  applicable  plan
year.

         "Unused Letter of Credit  Subfacility"  means an amount equal to Letter
of Credit  Subfacility  minus the sum of (a) the aggregate undrawn amount of all
outstanding  Letters of Credit  plus,  without  duplication,  (b) the  aggregate
unpaid reimbursement obligations with respect to all Letters of Credit.


                                      A-30
<PAGE>


         "Unused Line Fee" has the meaning specified in Section 2.5.

         "U.S.  Subsidiary  Guarantors"  means any  Subsidiary  of the  Borrower
organized under the laws of the United States that has entered into a Subsidiary
Guaranty in favor of Agent for the benefit of the Lenders and granted  perfected
Liens to Agent to secure that Subsidiary Guaranty on all or substantially all of
its assets, subject to Permitted Liens.

         "Wholly-Owned  Subsidiary"  means any  business  entity in which (other
than  directors'  qualifying  shares  required  by law)  100%  of the  ownership
interest or 100% of the voting  interest,  in each case, at the time as of which
any  determination is being made, is owned,  beneficially and of record,  by the
Borrower,  or by one or  more  of the  other  Wholly-Owned  Subsidiaries  of the
Borrower, or both.

         Accounting Terms. Any accounting term used in the Agreement shall have,
unless otherwise  specifically provided herein, the meaning customarily given in
accordance  with GAAP, and all financial  computations in the Agreement shall be
computed,  unless otherwise  specifically  provided therein,  in accordance with
GAAP as consistently  applied and using the same method for inventory  valuation
as used in the preparation of the Financial Statements.

         Interpretive Provisions.  (a) The meanings of defined terms are equally
applicable to the singular and plural forms of the defined terms.

         (b) The words "hereof,"  "herein,"  "hereunder" and similar words refer
to  the  Agreement  as a  whole  and  not  to any  particular  provision  of the
Agreement; and Subsection,  Section,  Schedule and Exhibit references are to the
Agreement unless otherwise specified.

         (c)  (i)      The term  "documents" includes any and  all  instruments,
documents,  agreements,  certificates,  indentures,  notices and other writings,
however evidenced.

              (ii)     The term "including" is not limiting and means "including
         without limitation."

              (iii)    In the computation  of  periods of time from a  specified
         date  to a  later  specified  date,  the word "from"  means  "from  and
         including," the words "to" and "until" each mean "to but excluding" and
         the word "through" means "to and including."

              (iv)     The word "or" is not exclusive.

         (d) Unless  otherwise  expressly  provided  herein,  (i)  references to
agreements (including the Agreement) and other contractual  instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
are to be  construed  as  including  all  statutory  and  regulatory  provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.

         (e) The captions and headings of the Agreement and other Loan Documents
are for convenience of reference only and shall not affect the interpretation of
the Agreement.


                                      A-31

<PAGE>


         (f) The  Agreement and other Loan  Documents may use several  different
limitations,  tests or measurements to regulate the same or similar matters. All
such  limitations,  tests and  measurements  are  cumulative  and shall  each be
performed in accordance with their terms.

         (g) For  purposes  of  Section  9.1, a breach of a  financial  covenant
contained in Sections  7.23-7.24 shall be deemed to have occurred as of any date
of  determination  thereof  by the Agent or as of the last day of any  specified
measuring period,  regardless of when the Financial  Statements  reflecting such
breach are delivered to the Agent.

         (h) The  Agreement  and the  other  Loan  Documents  are the  result of
negotiations  among and have been reviewed by counsel to the Agent, the Borrower
and its  Subsidiaries,  and the  other  parties,  and  are the  products  of all
parties.  Accordingly,  they shall not be  construed  against the Lenders or the
Agent  merely   because  of  the  Agent's  or  Lenders'   involvement  in  their
preparation.






                                      A-32
<PAGE>



                                    EXHIBIT B

                       FORM OF BORROWING BASE CERTIFICATE



<PAGE>




                                    EXHIBIT C

                              FINANCIAL STATEMENTS



<PAGE>


                                    EXHIBIT D

                               NOTICE OF BORROWING


                                                     Date:  ______________, 200_


To:      Bank of  America,  N.A. as Agent for the Lenders who are parties to the
         Credit Agreement dated as of ___________,  2002 (as extended,  renewed,
         amended  or  restated  from  time  to  time,  the  "Credit  Agreement")
         among GFSI, Inc.,  certain  Lenders  which  are signatories thereto and
         Bank of America, N.A., as Agent

Ladies and Gentlemen:

         The undersigned,  ___________________________  (the "Borrower"), refers
to the Credit Agreement,  the terms defined therein being used herein as therein
defined,  and hereby gives you notice  irrevocably  of the  Borrowing  specified
below:

         1.  The Business Day of the proposed Borrowing is ______, 200_.


         2.  The aggregate amount of the proposed Borrowing is $_________.


         3.  The Borrowing is to be comprised of $_______ of Base Rate
             and $__________ of LIBOR Rate Loans.

         4.  The duration of the Interest  Period for the LIBOR Rate Loans,
             if any,  included in the Borrowing shall be _____ months.

         The undersigned hereby certifies that the following statements are true
on the date  hereof,  and will be true on the  date of the  proposed  Borrowing,
before and after giving effect  thereto and to the  application  of the proceeds
therefrom:

         (a) The representations and warranties of the Borrower contained in the
Credit Agreement are true and correct as though made on and as of such date;

         (b) No Default or Event of Default has occurred and is  continuing,  or
would result from such proposed Borrowing; and


                                       1

<PAGE>


         (c) The  proposed  Borrowing  will not  cause the  aggregate  principal
amount of all outstanding  Revolving Loans plus the aggregate  amount  available
for drawing  under all  outstanding  Letters of Credit,  to exceed the Borrowing
Base or the combined Commitments of the Lenders.

                                         GFSI, INC.



                                         By:
                                            ------------------------------------

                                         Title:
                                               ---------------------------------





                                       2
<PAGE>


                                    EXHIBIT E

                        NOTICE OF CONTINUATION/CONVERSION


                                                   Date: ________________, 200_



To:   Bank of America,  N.A. as Agent for the Lenders to the Credit Agreement
      dated as of __________, 2002 (as extended, renewed, amended or restated
      from time to time, the "Credit  Agreement")  among GFSI, Inc.,  certain
      Lenders  which are  signatories  thereto and Bank of America,  N.A., as
       Agent

Ladies and Gentlemen:

         The undersigned,  ___________________________  (the "Borrower"), refers
to the Credit Agreement,  the terms defined therein being used herein as therein
defined,   and  hereby  gives  you  notice   irrevocably  of  the   [conversion]
[continuation] of the Loans specified herein, that:

         1.   The Continuation/Conversion Date is ________, 200_.

         2.   The aggregate amount of the Loans to be [converted] [continued]
              is $____________.

         3.   The Loans are to be [converted into] [continued as] [LIBOR Rate]
              [Base Rate] Loans.

         4.   The duration of the Interest Period for the LIBOR Rate Loans
              included in the [conversion] [continuation] shall be ____ months.


         The undersigned hereby certifies that the following statements are true
on the date  hereof,  and will be true on the  proposed  Continuation/Conversion
Date,  before and after  giving  effect  thereto and to the  application  of the
proceeds therefrom:

                  (a)  The   representations  and  warranties  of  the  Borrower
         contained in the Credit  Agreement  are true and correct as though made
         on and as of such date;

                  (b)  Default  or  Event  of  Default  has   occurred   and  is
         continuing,   or  would   result   from  such   proposed   [conversion]
         [continuation]; and




                                       1
<PAGE>


                  (c) The  proposed  conversion-continuation  will not cause the
         aggregate principal amount of all outstanding  Revolving Loans plus the
         aggregate amount available for drawing under all outstanding Letters of
         Credit to exceed the Borrowing Base or the combined  Commitments of the
         Lenders.

                                         GFSI, INC.



                                         By:
                                            ------------------------------------

                                         Title:
                                               ---------------------------------





                                       2
<PAGE>


                                    EXHIBIT F

                  [FORM OF] ASSIGNMENT AND ACCEPTANCE AGREEMENT


         This  ASSIGNMENT  AND  ACCEPTANCE   AGREEMENT  (this   "Assignment  and
Acceptance")   dated   as  of   ____________________,   2002  is  made   between
______________________________  (the "Assignor") and  __________________________
(the "Assignee").

                                    RECITALS

         WHEREAS,  the Assignor is party to that certain Credit  Agreement dated
as  of  _____________,   2002  (as  amended,  amended  and  restated,  modified,
supplemented or renewed,  the "Credit  Agreement")  among GFSI, Inc., a Delaware
corporation (the "Borrower"),  GFSI Holdings, Inc., a Delaware corporation,  the
several financial  institutions  from time to time party thereto  (including the
Assignor,  the "Lenders"),  and Bank of America, N. A., as agent for the Lenders
(the "Agent"). Any terms defined in the Credit Agreement and not defined in this
Assignment and Acceptance are used herein as defined in the Credit Agreement;

         WHEREAS,  as provided  under the Credit  Agreement,  the  Assignor  has
committed  to  making  Loans  (the  "Committed  Loans")  to the  Borrower  in an
aggregate amount not to exceed $__________ (the "Commitment");

         WHEREAS,  the  Assignor  has  made  Committed  Loans  in the  aggregate
principal amount of $__________ to the Borrower

         WHEREAS,  [the  Assignor has acquired a  participation  in its pro rata
share of the  Lenders'  liabilities  under  Letters  of Credit  in an  aggregate
principal amount of $____________ (the "L/C Obligations")] [no Letters of Credit
are outstanding under the Credit Agreement]; and

         WHEREAS,  the Assignor  wishes to assign to the Assignee  [part of the]
[all]  rights and  obligations  of the  Assignor  under the Credit  Agreement in
respect of its Commitment,  together with a corresponding portion of each of its
outstanding  Committed  Loans  and  L/C  Obligations,  in  an  amount  equal  to
$__________  (the "Assigned  Amount") on the terms and subject to the conditions
set forth herein and the Assignee wishes to accept assignment of such rights and
to assume such  obligations  from the Assignor on such terms and subject to such
conditions;

         NOW,  THEREFORE,  in  consideration  of the  foregoing  and the  mutual
agreements contained herein, the parties hereto agree as follows:

         1.   Assignment and Acceptance.

              (a)   Subject  to the terms and  conditions of this Assignment and
Acceptance,  (i)  the  Assignor  hereby  sells,  transfers  and  assigns  to the
Assignee,  and (ii) the Assignee hereby  purchases,  assumes and undertakes from
the Assignor, without recourse and without representation or warranty (except as
provided in this  Assignment and  Acceptance)  __% (the  "Assignee's  Percentage
Share") of (A) the  Commitment,  the Committed  Loans and the L/C Obligations of
the Assignor and (B) all related rights, benefits, obligations,  liabilities and
indemnities  of the Assignor under and in connection  with the Credit  Agreement
and the Loan Documents.


                                       1
<PAGE>


              (b)     With effect on and after the Effective Date (as defined in
Section 5 hereof),  the Assignee  shall be a party to the Credit  Agreement  and
succeed to all of the rights and be obligated to perform all of the  obligations
of a Lender under the Credit  Agreement,  including the requirements  concerning
confidentiality  and the payment of  indemnification,  with a  Commitment  in an
amount equal to the Assigned Amount. The Assignee agrees that it will perform in
accordance  with their  terms all of the  obligations  which by the terms of the
Credit  Agreement  are  required to be  performed  by it as a Lender.  It is the
intent of the parties  hereto that the Commitment of the Assignor  shall,  as of
the Effective Date, be reduced by an amount equal to the Assigned Amount and the
Assignor shall relinquish its rights and be released from its obligations  under
the Credit  Agreement  to the extent such  obligations  have been assumed by the
Assignee;  provided, however, the Assignor shall not relinquish its rights under
Sections __ and __ of the Credit  Agreement to the extent such rights  relate to
the time prior to the Effective Date.

              (c) After giving effect to the assignment and assumption set forth
herein, on the Effective Date the Assignee's Commitment will be $__________.

              (d) After giving effect to the assignment and assumption set forth
herein, on the Effective Date the Assignor's Commitment will be $__________.

         2.   Payments.

              (a)     As  consideration  for the sale,  assignment  and transfer
contemplated in Section 1 hereof,  the Assignee shall pay to the Assignor on the
Effective Date in immediately  available  funds an amount equal to  $__________,
representing  the  Assignee's  Pro Rata  Share of the  principal  amount  of all
Committed Loans.

              (b)   The Assignee further agrees to pay to the Agent a processing
fee in the  amount specified in Section 11.2(a) of the Credit Agreement.

         3.   Reallocation of Payments.

              Any interest,  fees and other  payments  accrued  to the Effective
Date with respect to the  Commitment,  and Committed  Loans and L/C  Obligations
shall be for the account of the Assignor. Any interest,  fees and other payments
accrued on and after the  Effective  Date with  respect to the  Assigned  Amount
shall be for the account of the Assignee.  Each of the Assignor and the Assignee
agrees  that it will hold in trust for the other  party any  interest,  fees and
other amounts which it may receive to which the other party is entitled pursuant
to the  preceding  sentence and pay to the other party any such amounts which it
may receive promptly upon receipt.


                                       2
<PAGE>


         4.   Independent Credit Decision.

              The Assignee (a) acknowledges  that it has received a  copy of the
Credit Agreement and the Schedules and Exhibits thereto, together with copies of
the most recent financial  statements of the Borrower,  and such other documents
and  information  as it has deemed  appropriate to make its own credit and legal
analysis  and decision to enter into this  Assignment  and  Acceptance;  and (b)
agrees that it will,  independently and without reliance upon the Assignor,  the
Agent or any other  Lender and based on such  documents  and  information  as it
shall deem  appropriate  at the time,  continue to make its own credit and legal
decisions in taking or not taking action under the Credit Agreement.

         5.   Effective Date; Notices.

              (a)   As between  the Assignor and  the  Assignee,  the  effective
date  for  this  Assignment  and  Acceptance  shall  be  __________,  200_  (the
"Effective Date");  provided that the following  conditions  precedent have been
satisfied on or before the Effective Date:

                    (i)   this Assignment and  Acceptance  shall be executed and
         delivered by the Assignor  and the Assignee;

                   [(ii)  the  consent of  the  Agent  required for an effective
         assignment of the Assigned Amount by the Assignor to the Assignee shall
         have been duly obtained and shall be in full force and effect as of the
         Effective Date;]

                    (iii)    the Assignee shall pay to the  Assignor all amounts
         due to the Assignor under this Assignment and Acceptance;

                   [(iv)   the Assignee shall have complied with Section 11.2 of
         the Credit  Agreement (if applicable);]

                    (v)   the processing fee referred to in  Section 2(b) hereof
         and in Section  11.2(a) of the Credit Agreement shall have been paid to
         the Agent; and

              (b)   Promptly  following the  execution  of  this  Assignment and
Acceptance,  the  Assignor  shall  deliver  to the  Borrower  and the  Agent for
acknowledgment  by the Agent, a Notice of Assignment in the form attached hereto
as Schedule 1.

         6.   [Agent.  [INCLUDE ONLY IF ASSIGNOR IS AGENT]

              (a)  The Assignee  hereby  appoints and authorizes the Assignor to
take such  action as agent on its behalf and to exercise  such powers  under the
Credit  Agreement as are  delegated to the Agent by the Lenders  pursuant to the
terms of the Credit Agreement. Without limiting the generality of the foregoing,
the parties  acknowledge  and agree that the Assignee and the Agent are solidary
creditors of each of Holdings,  the  Borrower  and each  Subsidiary  of Borrower
party to a Loan Document in respect of all  Obligations  owed by each of them to
the Agent and the Assignee,  as contemplated  by Section  12.17(b) of the Credit
Agreement and in accordance with Article 1541 of the Civil Code of Quebec.


                                       3

<PAGE>


                  (b) The Assignee shall assume no duties or obligations held by
the Assignor in its capacity as Agent under the Credit Agreement.]

         7.   Withholding Tax.

              The Assignee (a) represents and warrants to the Lender,  the Agent
and the Borrower that under  applicable law and treaties no tax will be required
to be  withheld  by the Lender  with  respect to any  payments to be made to the
Assignee hereunder,  (b) agrees to furnish (if it is organized under the laws of
any jurisdiction other than the United States or any State thereof) to the Agent
and the  Borrower  prior to the time that the Agent or  Borrower  is required to
make any payment of principal,  interest or fees hereunder,  duplicate  executed
originals of either U.S.  Internal Revenue Service Form W-8ECI or U.S.  Internal
Revenue  Service Form W-8BEN  (wherein the Assignee  claims  entitlement  to the
benefits  of a tax  treaty  that  provides  for a complete  exemption  from U.S.
federal income withholding tax on all payments  hereunder) and agrees to provide
new Forms W-8ECI or W-8BEN upon the expiration of any previously  delivered form
or comparable  statements in accordance with applicable U.S. law and regulations
and  amendments  thereto,  duly executed and completed by the Assignee,  and (c)
agrees to comply with all applicable  U.S. laws and  regulations  with regard to
such withholding tax exemption.

         8.   Representations and Warranties.

              (a)  The Assignor represents and warrants that (i) it is the legal
and  beneficial  owner of the interest  being  assigned by it hereunder and that
such interest is free and clear of any Lien or other adverse  claim;  (ii) it is
duly organized and existing and it has the full power and authority to take, and
has taken,  all action  necessary  to execute and deliver  this  Assignment  and
Acceptance  and any other  documents  required  or  permitted  to be executed or
delivered by it in connection with this Assignment and Acceptance and to fulfill
its obligations hereunder;  (iii) no notices to, or consents,  authorizations or
approvals of, any Person are required (other than any already given or obtained)
for  its  due  execution,  delivery  and  performance  of  this  Assignment  and
Acceptance, and apart from any agreements or undertakings or filings required by
the Credit  Agreement,  no further  action by, or notice to, or filing with, any
Person is required of it for such execution,  delivery or performance;  and (iv)
this  Assignment  and  Acceptance has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignor, enforceable
against  the  Assignor  in  accordance  with the terms  hereof,  subject,  as to
enforcement,  to bankruptcy,  insolvency,  moratorium,  reorganization and other
laws of general  application  relating to or affecting  creditors' rights and to
general equitable principles.

              (b)  The Assignor makes no representation  or warranty and assumes
no responsibility with respect to any statements,  warranties or representations
made in or in connection with the Credit  Agreement or the execution,  legality,
validity,  enforceability,  genuineness,  sufficiency  or  value  of the  Credit
Agreement or any other instrument or document  furnished  pursuant thereto.  The
Assignor makes no  representation or warranty in connection with, and assumes no
responsibility with respect to, the solvency,  financial condition or statements
of the Borrower, or the performance or observance by the Borrower, of any of its
respective  obligations  under the Credit  Agreement or any other  instrument or
document furnished in connection therewith.


                                       4


<PAGE>


              (c)  The Assignee  represents  and  warrants  that  (i) it is duly
organized  and  existing and it has full power and  authority  to take,  and has
taken,  all  action  necessary  to  execute  and  deliver  this  Assignment  and
Acceptance  and any other  documents  required  or  permitted  to be executed or
delivered  by it in  connection  with this  Assignment  and  Acceptance,  and to
fulfill  its   obligations   hereunder;   (ii)  no  notices  to,  or   consents,
authorizations  or approvals of, any Person are required (other than any already
given or  obtained)  for its due  execution,  delivery and  performance  of this
Assignment  and  Acceptance;  and apart from any agreements or  undertakings  or
filings required by the Credit Agreement, no further action by, or notice to, or
filing  with,  any Person is  required  of it for such  execution,  delivery  or
performance;  (iii) this  Assignment  and  Acceptance has been duly executed and
delivered by it and constitutes the legal,  valid and binding  obligation of the
Assignee,  enforceable against the Assignee in accordance with the terms hereof,
subject,   as   to   enforcement,   to   bankruptcy,   insolvency,   moratorium,
reorganization  and other laws of general  application  relating to or affecting
creditors'  rights  and to  general  equitable  principles;  [and  (iv) it is an
Eligible Assignee.]

         9.   Further Assurances.

              The  Assignor  and the  Assignee  each hereby agree to execute and
deliver such other instruments,  and take such other action, as either party may
reasonably  request in connection  with the  transactions  contemplated  by this
Assignment  and  Acceptance,  including  the  delivery  of any  notices or other
documents or instruments to the Borrower or the Agent,  which may be required in
connection with the assignment and assumption contemplated hereby.

         10.  Miscellaneous.

              (a)  Any amendment or waiver of any  provision of this  Assignment
and Acceptance shall be in writing and signed by the parties hereto.  No failure
or delay by either  party  hereto in  exercising  any right,  power or privilege
hereunder  shall operate as a waiver thereof and any waiver of any breach of the
provisions of this Assignment and Acceptance  shall be without  prejudice to any
rights with respect to any other or further breach thereof.

              (b)  All payments made hereunder shall be made without any set-off
or counterclaim.

              (c) The Assignor and the Assignee shall each pay its own costs and
expenses incurred in connection with the negotiation, preparation, execution and
performance of this Assignment and Acceptance.

              (d)  This Assignment  and Acceptance may be executed in any number
of counterparts and all of such  counterparts  taken together shall be deemed to
constitute one and the same instrument.

              (e)   THIS ASSIGNMENT  AND  ACCEPTANCE  SHALL BE  GOVERNED  BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF ILLINOIS.  The Assignor and
the Assignee each irrevocably  submits to the non-exclusive  jurisdiction of any
State or Federal court  sitting in Illinois over any suit,  action or proceeding
arising out of or relating to this  Assignment and  Acceptance  and  irrevocably
agrees that all claims in respect of such action or proceeding  may be heard and
determined  in  such  Illinois  State  or  Federal  court.  Each  party  to this
Assignment and Acceptance  hereby  irrevocably  waives, to the fullest extent it
may effectively do so, the defense of an  inconvenient  forum to the maintenance
of such action or proceeding.


                                       5

<PAGE>


              (f)  THE  ASSIGNOR  AND  THE  ASSIGNEE   EACH  HEREBY   KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY  WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY  LITIGATION  BASED  HEREON,  OR ARISING OUT OF,  UNDER,  OR IN
CONNECTION  WITH THIS  ASSIGNMENT  AND  ACCEPTANCE,  THE CREDIT  AGREEMENT,  ANY
RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR
STATEMENTS (WHETHER ORAL OR WRITTEN).

              IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly  authorized
officers as of the date first above written.

                                                         [ASSIGNOR]


                                       By:______________________________________
                                       Title:___________________________________
                                       Address:_________________________________


                                                         [ASSIGNEE]


                                       By:______________________________________
                                       Title:___________________________________
                                       Address:_________________________________




                                       6
<PAGE>

                                   SCHEDULE 1
                                       to
                            ASSIGNMENT AND ACCEPTANCE


                       NOTICE OF ASSIGNMENT AND ACCEPTANCE




                                                          _______________, 200_



Bank of America, N.A
231 South LaSalle Street
Chicago, IL  60697
Attn:_______________


Re:  [Name and Address of the Borrower]

Ladies and Gentlemen:

              We refer to the Credit  Agreement dated as of _________,  2002 (as
amended,  amended and restated,  modified,  supplemented or renewed from time to
time   the   "Credit    Agreement")   among   GFSI,   Inc.   (the   "Borrower"),
-----------------  -------- the Lenders referred to therein and Bank of America,
N. A., as agent for the Lenders (the "Agent"). Terms ----- defined in the Credit
Agreement are used herein as therein defined.

              1.  We hereby give you notice of, and request your consent to, the
assignment  by  __________________  (the  "Assignor")  to  _______________  (the
"Assignee") of _____% of the right, title and interest of the Assignor in and to
the Credit Agreement (including the right, title and interest of the Assignor in
and to the  Commitments  of the  Assignor,  all  outstanding  Loans  made by the
Assignor and the Assignor's  participation  in the Letters of Credit pursuant to
the Assignment and Acceptance  Agreement  attached  hereto (the  "Assignment and
Acceptance").  We understand and agree that the Assignor's  Commitment,  as of ,
200 , is $  ___________,  the  aggregate  amount  of its  outstanding  Loans  is
$_____________, and its participation in L/C Obligations is $_____________.

              2.  The Assignee agrees that,  upon  receiving  the consent of the
Agent and, if applicable,  the Borrower to such assignment, the Assignee will be
bound by the terms of the Credit Agreement as fully and to the same extent as if
the Assignee  were the Lender  originally  holding  such  interest in the Credit
Agreement.


<PAGE>


              3.  The following administrative details apply to the Assignee:

                  (A)     Notice Address:

                          Assignee name:______________________
                          Address:      ______________________
                          Attention:    ______________________
                                        ______________________
                                        ______________________
                          Telephone:    (___)_________________
                          Telecopier:   (___)_________________


                  (B)     Payment Instructions:

                          Account No.:  ______________________
                                  At:   ______________________
                                        ______________________
                                        ______________________
                          Reference:    ______________________
                          Attention:    ______________________

              4.  You are entitled to rely upon the representations,  warranties
and covenants of each of the Assignor and Assignee  contained in the  Assignment
and Acceptance.

              IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Notice of  Assignment  and  Acceptance to be executed by their  respective  duly
authorized officials, officers or agents as of the date first above mentioned.

                                              Very truly yours,

                                              [NAME OF ASSIGNOR]

                                              By:_______________________________
                                              Title:____________________________


                                              [NAME OF ASSIGNEE]


                                              By:_______________________________
                                              Title:____________________________

<PAGE>




ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:


BANK OF AMERICA, N. A.
as Agent


By:_______________________________
Title:____________________________



[GFSI, INC.] [If Required]




By:_______________________________
Title:____________________________

<PAGE>


                                  SCHEDULE 1.2


                                   COMMITMENTS




                                  Revolving Loan            Pro Rata Share
         Lender                     Commitment                (3 decimals)
         ------                   --------------            --------------

Bank of America, N.A.               $30,000,000                 46.154%

The CIT
Group/Commercial                    $20,000,000                 30.769%
Services, Inc.

U.S. Bank National
Association                         $15,000,000                 23.077%


                                                                100%
                                                                ----