Exhibit 10.13


                                  $8,700,000.00

                                CREDIT AGREEMENT

                                   DATED AS OF

                                NOVEMBER 14, 1996

                                     BETWEEN

                               THE SOURCE COMPANY

                                       AND

                      WACHOVIA BANK OF NORTH CAROLINA, N.A.


<PAGE>
                                TABLE OF CONTENTS

                          [Not a part of the Agreement]



ARTICLE I.  DEFINITIONS......................................................1
       
SECTION 1.01.  Definitions...................................................1
SECTION 1.02.  Accounting Terms and Determinations..........................14
SECTION 1.03.  Use of Defined Terms.........................................14
SECTION 1.04.  Terminology..................................................14
SECTION 1.05.  References...................................................14
  
ARTICLE II. THE CREDITS.....................................................14

SECTION 2.01.  Commitment to Lend...........................................14
SECTION 2.02.  Method of Borrowing..........................................15
SECTION 2.03.  Note.........................................................15
SECTION 2.04.  Payment of Advances..........................................15
SECTION 2.05.  Interest Rates...............................................15
SECTION 2.06.  Fees.........................................................16
SECTION 2.07.  Optional Termination or Reduction of Commitment..............16
SECTION 2.08.  Termination of Commitment....................................17
SECTION 2.09.  Optional Prepayments.........................................17
SECTION 2.10.  Mandatory Prepayments........................................17
SECTION 2.11.  General Provisions Concerning Payments.......................17
SECTION 2.12.  Computation of Interest......................................18

ARTICLE III.  CHANGE IN CIRCUMSTANCES; COMPENSATION.........................18

SECTION 3.01.  Basis for Determining Interest Rate Inadequate or Unfair.....18
SECTION 3.02.  Illegality...................................................19
SECTION 3.03.  Increased Cost and Reduced Return............................19
SECTION 3.04.  Base Rate Loans Substituted for Affected Euro-Dollar Loans...21
SECTION 3.05.  Compensation.................................................21

ARTICLE IV.  CONDITIONS TO BORROWINGS.......................................21
 
SECTION 4.01.  Conditions to First Borrowing................................21
SECTION 4.02.  Conditions to All Borrowings.................................23

ARTICLE V.  REPRESENTATIONS AND WARRANTIES..................................24

SECTION 5.01.  Corporate Existence and Power................................24
SECTION 5.02.  Corporate and Governmental Authorization; Contravention......24
<PAGE>

SECTION 5.03.  Binding Effect...............................................24
SECTION 5.04.  Financial Information........................................24
SECTION 5.05.  Litigation...................................................25
SECTION 5.06.  Compliance with ERISA........................................25
SECTION 5.07.  Taxes........................................................25
SECTION 5.08.  Subsidiaries.................................................25
SECTION 5.09.  Not an Investment Company....................................25
SECTION 5.10.  Ownership of Property; Liens.................................25
SECTION 5.11.  No Default...................................................25
SECTION 5.12.  Full Disclosure..............................................26
SECTION 5.13.  Environmental  Matters.......................................26
SECTION 5.14.  Compliance with Laws.........................................26
SECTION 5.15.  Capital Stock................................................26
SECTION 5.16.  Margin Stock.................................................26
SECTION 5.17.  Insolvency...................................................27
SECTION 5.18.  Insurance....................................................27

ARTICLE VI.  COVENANTS......................................................27
  
SECTION 6.01.  Information..................................................27
SECTION 6.02.  Inspection of Property, Books and Records....................29
SECTION 6.03.  Ratio of EBILT to Interest Expense and Lease Obligations.....29
SECTION 6.04.  Ratio of Funded Debt to EBITDA...............................29
SECTION 6.05.  Ratio of Funded Debt to Total Capitalization.................29
SECTION 6.06.  Minimum Tangible Net Worth...................................29
SECTION 6.07.  Accounts Receivable..........................................29
SECTION 6.08.  Restricted Payments..........................................30
SECTION 6.09.  Loans or Advances............................................30
SECTION 6.10.  Investments..................................................30
SECTION 6.11.  Negative Pledge..............................................30
SECTION 6.12.  Maintenance of Existence.....................................30
SECTION 6.13.  Dissolution..................................................30
SECTION 6.14.  Consolidations, Mergers and Sales of Assets..................30
SECTION 6.15.  Use of Proceeds..............................................31
SECTION 6.16.  Compliance with Laws; Payment of Taxes.......................31
SECTION 6.17.  Insurance....................................................31
SECTION 6.18.  Change in Fiscal Year........................................32
SECTION 6.19.  Maintenance of Property......................................32
SECTION 6.20.  Environmental Notices........................................32
SECTION 6.21.  Environmental Matters........................................32
SECTION 6.22.  Environmental Release........................................32
SECTION 6.23.  Transactions with Affiliates.................................33
SECTION 6.24.  Collateral...................................................33
<PAGE>

SECTION 6.25.  Interest Rate Protection.....................................33

ARTICLE VII.  DEFAULTS......................................................34

SECTION 7.01.  Events of Default............................................34
SECTION 7.02.  Remedies on Default..........................................36
SECTION 7.03.  Security Interest; Offset....................................37

ARTICLE VIII.  MISCELLANEOUS................................................37

SECTION 8.01.  Notices......................................................37
SECTION 8.02.  No Waivers...................................................38
SECTION 8.03.  Expenses; Documentary Taxes; Indemnification.................38
SECTION 8.04.  Amendments and Waivers.......................................39
SECTION 8.05.  Successors and Assigns.......................................39
SECTION 8.06.  Confidentiality..............................................40
SECTION 8.07.  Interest Limitation..........................................41
SECTION 8.08.  Survival of Certain Obligations..............................41
SECTION 8.09.  Governing Law................................................41
SECTION 8.10.  Counterparts.................................................41
SECTION 8.11.  Consent to Jurisdiction......................................41
SECTION 8.12.  Severability.................................................41
SECTION 8.13.  Captions.....................................................42

EXHIBIT A           Form of Note

EXHIBIT B           Form of Opinion of Counsel for the Borrower

EXHIBIT C           Form of Assignment and Acceptance

EXHIBIT D           Form of Closing Certificate

EXHIBIT E           Form of Officer's Certificate

EXHIBIT F           Form of Receivables Certification

EXHIBIT G           Location of Collateral

EXHIBIT H           Form of Compliance Certificate

Schedule 1.01       Canadian Companies

Schedule 5.05       Litigation Disclosure

Schedule 5.10       List of Patents, Tradenames, Trademarks and Applications

<PAGE>
                                CREDIT AGREEMENT


         THIS CREDIT AGREEMENT, made as of the 14th day of November 1996, by and
between  THE  SOURCE  COMPANY,  a  Missouri   corporation   (together  with  its
successors,  the  "Borrower"),  and  WACHOVIA  BANK OF NORTH  CAROLINA,  N.A., a
national banking association  (together with endorsees,  successors and assigns,
the "Bank").

                                   BACKGROUND

         The  Borrower  desires  to  establish  with the Bank a credit  facility
providing for revolving loans of up to  $8,700,000.00  in the aggregate  maximum
principal amount at any time  outstanding,  and the Bank is willing to establish
such a credit facility on the terms and conditions hereinafter set forth.

         NOW,  THEREFORE,  in  consideration  of the  premises  and the promises
herein  contained,  and each  intending to be legally bound hereby,  the parties
agree as follows:

                             ARTICLE I. DEFINITIONS

         SECTION  1.01.  Definitions.  The terms as defined in this Section 1.01
shall,  for all purposes of this  Agreement and any amendment  hereto (except as
herein otherwise  expressly provided or unless the context otherwise  requires),
have the meanings set forth herein:

         "Accounts,"  "Chattel Paper,"  "Contracts,"  "Documents,"  "Equipment,"
"General Intangibles," "Goods," "Instruments," "Fixtures," and "Inventory" shall
have the same  respective  meanings  as are given to those  terms in the Uniform
Commercial Code of North Carolina.

         "Adjusted  Monthly  Libor Index  Rate" means a rate per annum  (rounded
upward,  if necessary,  to the next higher  1/10,000th of 1%)  determined by the
Bank pursuant to the following formula:

Adjusted Monthly Libor   =   Monthly Libor Index Rate   +   Applicable Margin
                           -----------------------------
      Index Rate      1.0 - Euro-Dollar Reserve Percentage  for Euro-Dollar Loan

         "Advance" means any advance by the Bank under the Commitment.

         "Affiliate" of any Person means (i) any other Person which directly, or
indirectly through one or more  intermediaries,  controls such Person,  (ii) any
other Person which directly,  or indirectly through one or more  intermediaries,
is controlled by or is under common control with such Person, or (iii) any other
Person of which such Person  owns,  directly or  indirectly,  20% or more of the
common stock or equivalent equity interests.  As used herein, the term "control"
means  possession,  directly or indirectly,  of the power to direct or cause the
direction  of the  management  or  policies  of a Person,  whether  through  the
ownership of voting securities, by contract or otherwise.

         "Agreement" means this Credit  Agreement,  together with all amendments
and supplements hereto.
<PAGE>

         "Applicable  Margin" means,  for any Base Rate Loan for any day and for
any Euro-Dollar Loan, a positive number equal to the percentages set forth below
during the  Borrower's  fiscal  periods that the ratio of Funded Debt to EBITDA,
based upon the financial  information  submitted to the Bank pursuant to Section
6.01, is as follows:

Ratio of Funded                 Applicable Margin          Applicable Margin
Debt to EBITDA                  for Base Rate Loan        for Euro-Dollar Loan
--------------                  ------------------        --------------------

greater than 3.00 to 1.00             1.00%                       3.50%
greater than 2.25 to 1.00             0.50%                       3.00%
greater than 1.50 to 1.00             0.25%                       2.75%
less than or equal to
  1.50 to 1.00                        0.00%                       2.50%


         "Assignee" has the meaning set forth in Section 8.05(c).

         "Assignment and Acceptance" means an Assignment and Acceptance executed
in accordance with Section 8.05(c) in the form attached hereto as Exhibit C.

         "Authority" has the meaning set forth in Section 3.02.

         "Base  Rate"  means for any Base  Rate  Loan for any day,  the rate per
annum  equal  to the  higher  as of such  day of (i) the  Prime  Rate,  and (ii)
one-half of one  percent  above the  Federal  Funds Rate for such day,  plus the
Applicable  Margin for Base Rate Loan. For purposes of determining the Base Rate
for any day,  changes in the Prime Rate shall be  effective  on the date of each
such change.

         "Base  Rate Loan"  means an  Advance  made or to be made as a Base Rate
Loan pursuant to Article III.

         "Borrowing"  shall mean a borrowing under the Commitment  consisting of
an Advance by the Bank. A Borrowing is a "Euro-Dollar  Borrowing" if the Advance
is made as a  Euro-Dollar  Loan,  and a "Base Rate  Borrowing" if the Advance is
made as a Base Rate Loan.

         "Borrowing Base" means, based on the most recent Quarterly  Receivables
Certification, which as of the date of a determination of the Borrowing Base has
been received by the Bank, the aggregate of: (a) 85% of the aggregate net amount
of Tier I Eligible Receivables;  and (b) 70% of the aggregate net amount of Tier
II Eligible Receivables.

         "Capital  Leases" means all leases  reflected on a balance sheet of the
Borrower or a lease that should be so reflected  in  accordance  with  generally
accepted accounting principles consistently applied.
<PAGE>

         "Capital Stock" means any  nonredeemable  capital stock of the Borrower
(to the extent issued to a Person other than the  Borrower),  whether  common or
preferred.

         "CERCLA" means the Comprehensive  Environmental  Response  Compensation
and Liability Act.

         "CERCLIS" means the Comprehensive  Environmental  Response Compensation
and Liability Inventory System established pursuant to CERCLA.

         "Change of Law" shall have the meaning set forth in Section 3.02.

         "Closing Certificate" has the meaning set forth in Section 4.01(d).

         "Closing Date" means ____________________________.

         "Code" means the  Internal  Revenue  Code of 1986,  as amended,  or any
successor  Federal tax code.  Any  reference to any  provision of the Code shall
also be  deemed to be a  reference  to any  successor  provision  or  provisions
thereof.

         "Collateral" has the meaning set forth in the Security Agreement.

         "Collateral  Documents"  shall  mean,  collectively,  (i) the  Security
Agreement;  (ii) the FMA Agreement;  and (iii) the Guaranty Agreement; as any of
the foregoing may be amended, modified, or supplemented.

         "Commitment" shall have the meaning assigned to it in Section 2.01.

         "Compliance Certificate" has the meaning set forth in Section 6.01(c).

         "Controlled   Group"  means  all  members  of  a  controlled  group  of
corporations and all trades or businesses  (whether or not  incorporated)  under
common  control  which,  together  with the  Borrower,  are  treated as a single
employer under Section 414 of the Code.

         "Convertible  Preferred  Stock" of any Person  means any  nonredeemable
preferred  stock  issued  by such  Person  which  is at any  time  prior  to the
Termination  Date  convertible  to  Capital  Stock at the  option of the  holder
thereof.

         "Debt"  of the  Borrower  or of any  other  Person  means at any  date,
without  duplication,  (i) all  obligations  of the  Borrower or such Person for
borrowed money, (ii) all obligations of the Borrower or such Person evidenced by
bonds, debentures, notes or other similar instruments,  (iii) all obligations of
the  Borrower or such Person to pay the deferred  purchase  price of property or
services,  except  trade  accounts  payable  arising in the  ordinary  course of
business,  (iv) all  obligations  of the Borrower or such Person as lessee under
Capital Leases,  (v) all obligations of the Borrower or such Person to reimburse
<PAGE>

any  bank or other  Person  in  respect  of  amounts  payable  under a  banker's
acceptance,  (vi) all Redeemable  Preferred Stock of the Borrower or such Person
(in the event  such  Person is a  corporation),  (vii)  all  obligations  of the
Borrower  or such  Person to  reimburse  any bank or other  Person in respect of
amounts paid under a letter of credit or similar instrument,  (viii) all Debt of
others secured by a Lien on any asset of the Borrower or such Person, whether or
not such Debt is assumed by the  Borrower or such  Person,  and (ix) all Debt of
others Guaranteed by the Borrower or such Person.

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

         "Default Rate" means, with respect to any Advance,  on any day, the sum
of 2% plus the higher of (x) the  Adjusted  Monthly  Libor Index Rate or (y) the
Base Rate.

         "Depreciation"  means  for  any  period  the  sum of  all  depreciation
expenses of the Borrower for such  period,  as  determined  in  accordance  with
generally accepted accounting principles consistently applied.

         "Dollars" or "$" means dollars in lawful  currency of the United States
of America.

         "Domestic  Business Day" means any day on which the Bank is open to the
public  for  the  conduct  of  banking  business  at  its  principal  office  in
Winston-Salem, North Carolina.

         "EBILT" means, without  duplication,  for any fiscal period, as applied
to the  Borrower,  the sum of the  amounts  for such  fiscal  period of: (i) Net
Income (Loss) of the Borrower,  (ii) Interest  Expense,  (iii) Lease Obligations
actually  paid or incurred by the Borrower  during such  period,  and (iv) taxes
based on income of the Borrower and  actually  paid by the Borrower  during such
period,  all as determined and computed in accordance  with  generally  accepted
accounting principles consistently applied.

         "EBITDA" means, without duplication,  for any fiscal period, as applied
to the  Borrower,  the sum of the  amounts  for such  fiscal  period of: (i) Net
Income  (Loss) of the  Borrower,  (ii)  Interest  Expense,  (iii) taxes based on
income of the  Borrower and  actually  paid by the Borrower  during such period,
(iv) Depreciation,  and (v) amortization expense, all as determined and computed
in  accordance  with  generally  accepted  accounting  principles   consistently
applied.

         "Eligible Receivables" means those Receivables of the Borrower, each of
which  meets  the  following  requirements:  (i)  such  Receivable  arose in the
ordinary course of the Borrower's  business;  (ii) the right to payment has been
fully earned by completed performance and, if Goods are involved, the Goods have
been shipped by the Borrower (or if not shipped by the Borrower, are held by the
Borrower  under a "bill and hold"  arrangement  satisfactory  to the Bank in its
sole  discretion);  (iii) the Receivable  includes only that portion thereof not
subject to any offset, defense,  counterclaim,  credit, allowance or adjustment;
(iv) the  Borrower's  title to such  Receivable is absolute and is subject to no
prior  assignment,  claim,  lien  or  security  interest;  (v) the  full  amount
reflected on the Borrower's  books and on any invoice or statement  delivered to
the Bank  related to such  Receivable  is owing to the  Borrower  and no partial
payment has been made thereon; (vi) such Receivable is currently due and payable
and is not past due beyond the  requirements  set forth in the  definitions  for
<PAGE>
Tier I and Tier II Eligible Receivables; (vii) such Receivable did not arise out
of a contract or purchase order  containing  provisions  prohibiting  assignment
thereof or the  creation of a security  interest  therein,  and the Borrower has
received no note,  trade  acceptance,  draft or other instrument with respect to
such  Receivable  or in payment  thereof;  (viii) the  Borrower  has received no
notice of the death of the account debtor or of the dissolution,  termination of
existence, insolvency,  bankruptcy,  appointment of receiver for any part of the
property of, or  assignment  for the benefit of  creditors  made by, the account
debtor;  (ix) such  Receivable  is not payable by any Affiliate of the Borrower;
(x) such  Receivable  is not payable by any foreign  Person except those foreign
persons located in Canada and identified on Schedule 1.01 attached hereto, which
Schedule  1.01  may be  supplemented  from  time  to time  at  their  discretion
(provided  that Persons  present in  possessions of the United States of America
shall not be considered  foreign Persons),  unless such Receivable is payable in
the full amount of the face value of such  Receivable in United  States  dollars
and is  supported  by an  irrevocable  letter of  credit  in form and  substance
acceptable  to  the  Bank,  in  its  sole  discretion,  and  issued  by  a  bank
satisfactory to the Bank, in its sole discretion (and, if requested by the Bank,
such  letter  of  credit  or the  proceeds  thereof,  as the  Bank,  in its sole
discretion, shall require, have been assigned to the Bank); (xi) such Receivable
is not payable by the United States of America or any political  subdivision  or
agency  thereof,  unless  the  Bank  and the  Borrower  have  complied  with the
Assignment  of Claims Act with  respect to such  Receivable;  (xii) the  account
debtor for such  Receivable is not located in the State of New Jersey unless the
Borrower  has filed a Notice of Business  Activities  Report with the New Jersey
Division of Taxation for the then current  year;  and (xiii) such  Receivable is
not payable by any Person who is the account debtor for other Receivable and who
is past due (as  provided in (vi) above) with regard to fifty  percent  (50%) or
more of the aggregate amount of such other Receivables.

         "Environmental  Authorizations"  means all licenses,  permits,  orders,
approvals,  notices,  registrations or other legal  prerequisites for conducting
the business of the Borrower required by any Environmental Requirement.

         "Environmental  Authority" means any foreign,  federal, state, local or
regional  government  that exercises any form of jurisdiction or authority under
any Environmental Requirement.

         "Environmental  Judgments and Orders" means all  judgments,  decrees or
orders   arising  from  or  in  any  way  associated   with  any   Environmental
Requirements,  whether or not entered upon consent or written agreements with an
Environmental  Authority or other entity  arising from or in any way  associated
with any Environmental  Requirement,  whether or not incorporated in a judgment,
decree or order.

         "Environmental  Liabilities"  means any  liabilities,  whether accrued,
contingent  or  otherwise,  arising  from  and in any way  associated  with  any
Environmental Requirements.

         "Environmental  Notices" means notice from any Environmental  Authority
or by any other person or entity, of possible or alleged  noncompliance with any
Environmental   Requirement,   including  without   limitation  any  complaints,
citations,  demands or requests  from any  Environmental  Authority  or from any
other person or entity for  correction  of any  violation  of any  Environmental
Requirement or any investigations  concerning any violation of any Environmental
Requirement.
<PAGE>

         "Environmental   Proceedings"  means  any  judicial  or  administrative
proceedings  arising  from  or in any  way  associated  with  any  Environmental
Requirement.

         "Environmental  Releases"  means releases as defined in CERCLA or under
any applicable state or local environmental law or regulation.

         "Environmental  Requirements"  means any legal requirement  relating to
health,  safety  or  the  environment  and  applicable  to the  Borrower  or the
Properties,  including but not limited to any such  requirement  under CERCLA or
similar state legislation.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended  from  time to  time,  or any  successor  law,  including  any  rules or
regulations  promulgated  thereunder.  Any  reference to any  provision of ERISA
shall also be deemed to be a reference to any successor  provision or provisions
thereof.

         "Euro-Dollar  Business  Day" means any  Domestic  Business Day on which
dealings in Dollar deposits are carried out in the London interbank market.

         "Euro-Dollar  Loan" means an Advance  made or to be made  (pursuant  to
this  Agreement  and the FMA  Agreement)  as a  Euro-Dollar  Loan  based  on the
Adjusted Monthly Libor Index Rate.

         "Euro-Dollar  Reserve  Percentage"  means  for any day that  percentage
(expressed  as a decimal)  which is in effect on such day, as  prescribed by the
Board  of  Governors  of the  Federal  Reserve  System  (or any  successor)  for
determining  the maximum  reserve  requirement  for a member bank of the Federal
Reserve System in respect of  "Eurocurrency  liabilities"  (or in respect of any
other category of liabilities  which includes deposits by reference to which the
interest rate on  Euro-Dollar  Loans is determined or any category of extensions
of credit or other assets which includes loans by a non-United  States office of
the Bank to United  States  residents).  The Adjusted  Monthly  Libor Index Rate
shall be adjusted automatically on and as of the effective date of any change in
the Euro-Dollar Reserve Percentage.

         "Event of  Default"  shall have the  meaning  assigned  to such term in
Section 7.01.

         "Facility Fee" shall have the meaning assigned to it in Section 2.06.

         "Facility Fee Payment Date" means the first day of each February,  May,
August, and November, commencing February 1, 1997; provided that if any such day
is not a Domestic  Business  Day,  the Facility Fee Payment Date shall be on the
next succeeding Domestic Business Day.

         "Federal  Funds Rate" means,  for any day, the rate per annum  (rounded
upward,  if necessary,  to the next higher  1/100th 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 Domestic  Business Day
next succeeding such day, provided that (i) if the day for which such rate is to
be  determined  is not a Domestic  Business Day, the Federal Funds Rate for such
day  shall be such  rate on such  transactions  on the next  preceding  Domestic
<PAGE>
Business Day as so published on the next succeeding  Domestic  Business Day, and
(ii) if such rate is not so published  for any day,  the Federal  Funds Rate for
such day shall be the  average  rate  charged  to  Wachovia  on such day on such
transactions.

         "Fiscal Quarter" means any fiscal quarter of the Borrower.

         "Fiscal Year" means any fiscal year of the Borrower.

         "FMA Agreement" means that certain Financial  Management Account Master
Agreement dated November 14, 1996,  between the Borrower and the Bank,  together
with   and  as   amended   by  that   certain   Financial   Management   Account
Investment/Commercial Loan Access Agreement dated November 14, 1996, between the
Borrower and the Bank, together with all supplements, amendments, additions, and
schedules thereto from time to time.

         "Funded Debt" means, at any date, any Debt of the Borrower.

         "Guarantee"  by  any  Person  means  any   obligation,   contingent  or
otherwise,  of such Person directly or indirectly guaranteeing any Debt or other
obligation  of any other  Person and,  without  limiting the  generality  of the
foregoing, any obligation,  direct or indirect, contingent or otherwise, of such
Person  (i) to  secure,  purchase  or pay (or  advance  or supply  funds for the
purchase or payment of) such Debt or other obligation (whether arising by virtue
of  partnership  arrangements,  by agreement to keep-well,  to purchase  assets,
goods,  securities or services,  to provide collateral security, to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered into
for the  purpose of  assuring  in any other  manner the  obligee of such Debt or
other  obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part), provided that the term Guarantee shall
not include  endorsements  for  collection or deposit in the ordinary  course of
business. The term "Guarantee" used as a verb has a corresponding meaning.

         "Guarantors" shall have the meaning set forth in Section 4.01(h).

         "Guaranty  Agreement"  shall have the meaning set forth in Section 4.01
(h).

         "Hazardous  Materials"  includes,  without  limitation,  (a)  solid  or
hazardous  waste,  as defined in the Resource  Conservation  and Recovery Act of
1980,  or in any  applicable  state or local law or  regulation,  (b)  hazardous
substances,  as defined in CERCLA,  or in any  applicable  state or local law or
regulation,  (c) gasoline,  or any other  petroleum  product or by-product,  (d)
toxic substances,  as defined in the Toxic Substances Control Act of 1976, or in
any applicable state or local law or regulation or (e) insecticides, fungicides,
or  rodenticides,  as  defined  in  the  Federal  Insecticide,   Fungicide,  and
Rodenticide Act of 1975, or in any applicable  state or local law or regulation,
as each such Act, statute or regulation may be amended from time to time.

         "Interest  Expense" for any period means interest,  whether expensed or
capitalized, in respect of Debt of the Borrower outstanding during such period.
<PAGE>

         "Investment"  means any  investment in any Person,  whether by means of
purchase or acquisition  of  obligations  or securities of such Person,  capital
contribution  to such Person,  loan or advance to such Person,  making of a time
deposit with such Person,  Guarantee or  assumption  of any  obligation  of such
Person or otherwise.

         "Lease  Obligations" means, for any period, as applied to the Borrower,
all Debt and payment obligations of the Borrower for such period under operating
leases and rental agreements.

         "Lending  Office"  means the Bank's  office  located at its address set
forth on the signature pages hereof (or identified on the signature pages hereof
as its Lending Office) or such other office as the Bank may hereafter  designate
as its Lending Office by notice to the Borrower.

         "Lien" means,  with respect to any asset, any mortgage,  lien,  pledge,
charge,  security  interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement,  the Borrower shall be deemed to own subject
to a Lien any asset which it has acquired or holds  subject to the interest of a
vendor or lessor under any conditional  sale  agreement,  Capital Lease or other
title retention agreement relating to such asset.

         "Loan  Documents"  means  this  Agreement,  the  Note,  the  Collateral
Documents,  and any other  document  evidencing,  relating  to or  securing  the
Advances,  and any other  document or instrument  delivered from time to time in
connection  with this  Agreement,  the Note,  the Collateral  Documents,  or the
Advances,  as such documents and instruments may be amended or supplemented from
time to time.

         "Long-Term  Debt" means,  at any date,  any Debt which  matures (or the
maturity of which may at the option of the  Borrower  be  extended  such that it
matures) more than one year after such date.

         "Margin  Stock" means "margin  stock" as defined in Regulations G, T, U
or X of the Board of Governors of the Federal Reserve System,  as in effect from
time to time,  together  with all official  rulings and  interpretations  issued
thereunder.

         "Material  Adverse  Effect"  means,  with  respect to any  event,  act,
condition or occurrence of whatever nature (including any adverse  determination
in any litigation,  arbitration,  or governmental  investigation or proceeding),
whether  singly or in conjunction  with any other event or events,  act or acts,
condition or conditions,  occurrence or occurrences,  whether or not related,  a
material  adverse  change in, or a material  adverse effect upon, any of (a) the
financial  condition,  business,  investments,  assets,  or  properties  of  the
Borrower,  (b) the rights and remedies of the Bank under the Loan Documents,  or
the ability of the Borrower to perform its obligations under the Loan Documents,
or (c) the  legality,  validity  or  enforceability  of any Loan  Document.  

         The "Monthly Libor Index Rate" applicable to any Euro-Dollar Loan means
the rate per annum  designated  by the Bank in its sole  discretion on each Rate
Determination  Date as the Bank's Monthly Libor Index Rate,  taking into account
the offered rate for deposits in Dollars for a term of one month,  which appears
on the display  designated as Page "3750" of the Telerate Service (or such other
<PAGE>

page as may replace page 3750 of that service or such other  service or services
as may be  nominated  by the  British  Bankers'  Association  for the purpose of
displaying London interbank offered rates for U.S. dollar deposits),  determined
as of 11:00 a.m. (London time), on each such Rate  Determination  Date, and such
other factors as the Bank shall deem relevant.

         "Multiemployer  Plan"  shall  have the  meaning  set  forth in  Section
4001(a)(3) or ERISA.

         "Net  Income  (Loss)"  means,  as applied to the  Borrower or any other
Person,  for any period,  gross revenues and other proper income of the Borrower
or such other Person during such period less the aggregate during such period of
(i) cost of merchandise sold, (ii) selling, administrative and general expenses,
(iii) taxes, (iv)  Depreciation,  depletion and amortization of assets,  and (v)
any other items that are treated as expenses under generally accepted accounting
principles  consistently  applied,  all as computed in accordance with generally
accepted accounting principles consistently applied.

         "Net Income of the  Borrower"  means,  for any  period,  the Net Income
(Loss) of the Borrower,  but  excluding any equity  interests of the Borrower in
the unremitted earnings of any Person.

         "Note"  shall mean a  promissory  note of the  Borrower  payable to the
order of the Bank, in substantially the form of Exhibit A hereto, evidencing the
maximum principal indebtedness of the Borrower to the Bank under the Commitment,
either as  originally  executed or as it may be from time to time  supplemented,
modified, amended, renewed or extended.

         "Obligations"  means all  indebtedness,  obligations and liabilities to
the Bank existing on the date of this Agreement or arising thereafter, direct or
indirect,  joint or  several,  absolute  or  contingent,  matured or  unmatured,
liquidated or unliquidated, secured or unsecured, arising by contract, operation
of law or  otherwise,  of the  Borrower  under this  Agreement or any other Loan
Document.

         "Officer's Certificate" has the meaning set forth in Section 4.01(e).

         "Operating  Profits"  means,  as applied to any Person  (including  the
Borrower) for any period,  the operating  income of such Person for such period,
as  determined in  accordance  with  generally  accepted  accounting  principles
consistently applied.

         "Participant" has the meaning set forth in Section 8.05(b).

         "PBGC" means the Pension  Benefit  Guaranty  Corporation  or any entity
succeeding to any or all of its functions under ERISA.

         "Permitted Encumbrances" means:

         (a) Liens for taxes,  assessments,  or similar charges, incurred in the
ordinary course of business that are not yet due and payable;

         (b)  Pledges or  deposits  made in the  ordinary  course of business to
secure  payment  of  workers'  compensation,  or to  participate  in any fund in
connection with workers' compensation,  unemployment insurance, old-age pensions
or other social security programs;
<PAGE>

         (c) Liens of mechanics, materialmen,  warehousemen,  carriers, or other
like liens,  securing  obligations  incurred in the ordinary  course of business
that are not yet due and payable;

         (d) Good  faith  pledges or  deposits  made in the  ordinary  course of
business to secure performance of bids,  tenders,  contracts (other than for the
repayment of borrowed money) or leases, not in excess of twenty percent (20%) of
the aggregate  amount due thereunder,  or to secure  statutory  obligations,  or
surety,  appeal,  indemnity,  performance or other similar bonds required in the
ordinary course of business;

         (e) Liens in favor of the Bank pursuant to the Loan Documents; and

         (f) Any Lien on any  equipment  of the  Borrower  securing  Debt of the
Borrower incurred for the purpose of financing all of the cost of acquiring such
equipment,  provided that (i) such Lien attaches to such equipment  concurrently
with the  acquisition  thereof,  and (ii) such Liens  shall not  exceed,  in the
aggregate, $100,000.00 in any Fiscal Year.

         "Person" means any  individual,  joint venture,  corporation,  company,
voluntary association,  partnership,  trust, joint stock company, unincorporated
organization,  association,  government,  or  any  agency,  instrumentality,  or
political subdivision thereof, or any other form of entity or organization.

         "Plan"  means at any time an  employee  pension  benefit  plan which is
covered by Title IV of ERISA or subject to the minimum  funding  standards under
Section  412 of the  Code  and is  either  (i)  maintained  by a  member  of the
Controlled  Group for  employees of any member of the  Controlled  Group or (ii)
maintained  pursuant  to  a  collective   bargaining   agreement  or  any  other
arrangement under which more than one employer makes  contributions and to which
a member of the  Controlled  Group is then making or accruing an  obligation  to
make   contributions   or  has  within  the  preceding   five  plan  years  made
contributions.

         "Prime Rate" refers to that  interest  rate so  denominated  and set by
Wachovia from time to time as an interest rate basis for  borrowings.  The Prime
Rate is but one of several interest rate bases used by Wachovia.  Wachovia lends
at interest  rates  above and below the Prime  Rate.  A change in the Prime Rate
shall be effective on the date of such change.

         "Properties" means all real property owned, leased or otherwise used or
occupied by the Borrower, wherever located.

         "Quarterly Receivables Certification" means a certification in the form
attached hereto as Exhibit F and otherwise  satisfactory to the Bank,  certified
by the chief financial officer or other authorized officer of Borrower regarding
the Receivables of the Borrower.

         "Rate  Determination  Date"  means  each  day  that is two  Euro-Dollar
Business Days prior to the first day of each calendar month,  and if such day is
not a Domestic Business Day, then on the immediately preceding Domestic Business
Day which is also a Euro-Dollar Business Day.
<PAGE>

         "Receivables"  means all obligations of every kind at any time owing to
Borrower  (whether  now existing or hereafter  arising,  and whether  classified
under the Uniform  Commercial Code as Accounts,  Instruments,  Contract  Rights,
Chattel Paper,  Contracts,  General  Intangibles,  or  otherwise),  all proceeds
thereof,  all  security  therefor and all of the  Borrower's  rights to Goods or
other property sold or leased which may be represented thereby.

         "Redeemable  Preferred  Stock" of any Person means any preferred  stock
issued by such Person which is at any time prior to the Termination  Date either
(i) mandatorily redeemable (by sinking fund or similar payments or otherwise) or
(ii) redeemable at the option of the holder thereof.

         "Reportable  Event" has the meaning given such term in Section  4043(b)
of Title V of ERISA.

         "Reported Net Income" means,  for any period,  the Net Income (Loss) of
the Borrower.

         "Restricted  Payment" means (i) any dividend or other  distribution  on
any shares of the Borrower's  capital stock (except  dividends payable solely in
shares of its  capital  stock) or (ii) any  payment on account of the  purchase,
redemption,  retirement  or  acquisition  of (a) any  shares  of the  Borrower's
capital stock (except  shares  acquired upon the  conversion  thereof into other
shares  of its  capital  stock) or (b) any  option,  warrant  or other  right to
acquire shares of the Borrower's capital stock.

         "Security  Agreement"  shall have the meaning set forth in Section 4.01
(g).

         "Stockholders'  Equity" means, at any time, the shareholders' equity of
the Borrower,  as set forth or reflected on the most recent balance sheet of the
Borrower prepared in accordance with generally  accepted  accounting  principles
consistently applied,  excluding any Redeemable Preferred Stock of the Borrower,
and  including  any  Convertible  Preferred  Stock.  Shareholders'  Equity would
generally  include,  but not be  limited  to (i) the par or stated  value of all
outstanding  Capital Stock, (ii) capital surplus,  (iii) retained earnings,  and
(iv) various  deductions such as (A) purchases of treasury stock,  (B) valuation
allowances,  (C)  receivables  due from an employee  stock  ownership  plan, (D)
employee stock ownership plan debt guarantees,  and (E) translation  adjustments
for foreign currency transactions.

         "Subsidiary"  any  corporation  or other entity of which  securities or
other  ownership  interests  having ordinary voting power to elect a majority of
the board of directors or other persons  performing similar functions are at the
time directly or indirectly owned by the Borrower.

         "Tangible Net Worth" means, at any time, Stockholders' Equity, less the
sum of the value,  as set forth or reflected on the most recent balance sheet of
the  Borrower,   prepared  in  accordance  with  generally  accepted  accounting
principles consistently applied, of

         (A) Any surplus  resulting  from any write-up of assets  subsequent  to
July 31, 1996;
<PAGE>

         (B) All assets which would be treated as  intangibles  under  generally
accepted accounting  principles,  including without limitation goodwill (whether
representing  the  excess  of cost  over  book  value  of  assets  acquired,  or
otherwise),  trademarks,  tradenames,  copyrights, patents and technologies, and
unamortized debt discount and expense;

         (C) To the extent not included in (B) of this definition, any amount at
which shares of capital stock of the Borrower  appear as an asset on the balance
sheet of the Borrower;

         (D)  Loans  or  advances  to  stockholders,   directors,   officers  or
employees; and

         (E) To the  extent not  included  in (B) of this  definition,  deferred
expenses.

         "Taxes" has the meaning set forth in Section 2.11.

         "Termination Date" has the meaning set forth in Section 2.07.

         "Third Parties" means all lessees, sublessees, licenses and other users
of the  Properties,  excluding  those users of the  Properties  in the  ordinary
course of the Borrower's business and on a temporary basis.

         "Tier I Eligible  Receivables" means those Receivables of the Borrower,
each of which meets the following requirements: (i) such Receivable meets all of
the requirements set forth in the definition of the term "Eligible Receivables",
and (ii) such  Receivable  is currently due and payable and no more than 90 days
have elapsed from the date the claim  evidencing  such Receivable was filed with
the publisher for payment, or alternatively,  as may be applicable, from invoice
date, and (iii) such Receivable is not a Tier II Eligible Receivable.

         "Tier II Eligible Receivables" means those Receivables of the Borrower,
each of which meets the following requirements: (i) such Receivable meets all of
the requirements set forth in the definition of the term "Eligible Receivables",
(ii)  such  Receivable  is not a Tier I  Eligible  Receivable,  and  (iii)  such
Receivable  is currently due and payable and more than 90 days have elapsed from
the date the claim  evidencing  such Receivable was filed with the publisher for
payment, or alternatively,  as may be applicable, from invoice date, but no more
than 365 days have elapsed from the date the claim  evidencing  such  Receivable
was  filed  with  the  publisher  for  payment,  or  alternatively,  as  may  be
applicable, from invoice date.

         "Total Assets" means,  at any time, the total assets of the Borrower as
set  forth  or  reflected  on the most  recent  balance  sheet of the  Borrower,
prepared  in  accordance   with   generally   accepted   accounting   principles
consistently applied.

         "Total Capitalization" means, at any time, the sum of (i) Stockholders'
Equity, and (ii) Funded Debt.

         "Transferee" has the meaning set forth in Section 8.05(d).
<PAGE>

         "Unused Commitment" means at any date an amount equal to the Commitment
less the aggregate outstanding principal amount of the Advances.

         "Wachovia"  means  Wachovia  Bank of North  Carolina,  N.A., a national
banking association, together with its successors.

         SECTION 1.02.  Accounting  Terms and  Determinations.  Unless otherwise
specified  herein,  all terms of an  accounting  character  used herein shall be
interpreted,  all  accounting  determinations  hereunder  shall be made, and all
financial  statements  required to be delivered  hereunder  shall be prepared in
accordance with generally accepted accounting  principles as in effect from time
to time,  applied on a basis consistent  (except for changes concurred in by the
Borrower's   independent  public  accountants)  with  the  most  recent  audited
financial statements of the Borrower delivered to the Bank.

         SECTION 1.03. Use of Defined Terms. All terms defined in this Agreement
shall  have the same  meanings  when  used in any of the other  Loan  Documents,
unless otherwise defined therein or unless the context shall otherwise require.

         SECTION  1.04.   Terminology.   All  personal  pronouns  used  in  this
Agreement,  whether  used in the  masculine,  feminine or neuter  gender,  shall
include all other genders;  the singular shall include the plural and the plural
shall  include the singular.  Titles of Articles and Sections in this  Agreement
are for  convenience  only, and neither limit nor amplify the provisions of this
Agreement.

         SECTION 1.05.  References.  Except as otherwise  expressly  provided in
this  Agreement:  the words "herein,"  "hereof,"  "hereunder" and other words of
similar import refer to this Agreement as a whole, including any Schedule hereto
which is a part hereof, and not to any particular Section, Article, paragraph or
other subdivision;  the singular includes the plural and the plural includes the
singular; "or" is not exclusive; the words "include," "includes" and "including"
are not limiting;  a reference to any agreement or other contract  includes past
and future permitted  supplements,  amendments,  modifications  and restatements
thereto or thereof;  a  reference  to an Article,  Section,  paragraph  or other
subdivision  is  a  reference  to  an  Article,  Section,   paragraph  or  other
subdivision of this Agreement;  a reference to any law includes any amendment or
modification to such law and any rules and regulations promulgated thereunder; a
reference to a Person includes its permitted  successors and assigns;  any right
may be  exercised  at any time and from time to time;  and,  except as otherwise
expressly  provided  therein,  all  obligations  under  any  agreement  or other
contract are  continuing  obligations  throughout  the term of such agreement or
contract.

                             ARTICLE II. THE CREDITS

         SECTION  2.01.  Commitment to Lend.  The Bank agrees,  on the terms and
conditions  set forth herein and in the FMA  Agreement,  to make Advances to the
Borrower  from  time  to  time  before  the  Termination  Date;  provided  that,
immediately  after each such Advance is made, the aggregate  principal amount of
outstanding  Advances shall not exceed the lesser of (i) the Borrowing  Base, or
<PAGE>

(ii)  $8,700,000.00 (as such figure may be reduced from time to time as provided
in this Agreement, the "Commitment").  Within the foregoing limits, the Borrower
may borrow  under this  Section,  repay or, to the extent  permitted  by Section
2.09,  prepay  Advances and  reborrow  under this Section at any time before the
Termination  Date.  The Bank shall have no obligation to advance funds in excess
of the lesser of (i) the Borrowing Base, or (ii) the amount of the Commitment.

         SECTION 2.02.  Method of Borrowing.  (a) Advances to the Borrower shall
be made in accordance with the Bank's  Financial  Management  Account service as
set  forth  in the  FMA  Agreement,  the  terms  and  provisions  of  which  are
incorporated herein by reference; provided that all Advances shall be subject to
the terms, covenants, conditions, restrictions and provisions of this Agreement.

         (b)  Notwithstanding   anything  to  the  contrary  contained  in  this
Agreement or the FMA  Agreement,  the Bank shall have no  obligation  to make an
Advance if there  shall have  occurred a Default or an Event of  Default,  which
Default or Event of Default shall not have been cured or waived.

         SECTION 2.03.  Note.  The Advances  shall be evidenced by a single Note
payable to the order of the Bank in an amount  equal to the  original  principal
amount of the Bank's  Commitment.  The Bank may,  at its  option,  record on any
schedule forming a part of the Note appropriate notations to evidence, the date,
amount and maturity of, and  effective  interest  rate for, each Advance made by
it, the date and amount of each payment of principal  made by the Borrower  with
respect  thereto,  and  such  recordations  and  endorsements  shall  constitute
rebuttable  presumptive evidence of the principal amount owing and unpaid on the
Note;  provided that the failure of the Bank to make any such recordation  shall
not affect the obligation of the Borrower hereunder, under the Loan Documents or
under the Note.  The Note shall bear interest and be repaid in  accordance  with
the terms and provisions of the FMA Agreement and Sections 2.04 and 2.05 of this
Agreement.

         SECTION  2.04.  Payment  of  Advances.  The  principal  amount  of  all
outstanding  Advances  together  with all accrued and unpaid  interest  thereon,
shall be due and payable in full, on the Termination  Date;  provided,  however,
that the aggregate  outstanding principal amount of all Advances at any one time
outstanding  shall not exceed the  lesser  of: (i) the  Commitment;  or (ii) the
Borrowing  Base. In addition,  the Borrower has authorized and directed the Bank
to effect periodic  payments of principal and interest on Advances under the FMA
Agreement.

         SECTION 2.05.  Interest Rates. (a) Subject to the provisions of Article
III,  each  Advance  shall bear  interest on the  outstanding  principal  amount
thereof at a rate per annum equal to the current  Adjusted  Monthly  Libor Index
Rate.  The Adjusted  Monthly  Libor Index Rate will change as of the first (1st)
day of each calendar month following a change in the Monthly Libor Index Rate as
of the  immediately  preceding Rate  Determination  Date. Such interest shall be
payable on the first  (1st)  Domestic  Business  Day of each  calendar  month in
accordance with the FMA Agreement.  Any overdue  principal of and, to the extent
permitted by law,  overdue interest on any Euro-Dollar Loan shall bear interest,
payable  on  demand,  for each day until  paid at a rate per annum  equal to the
higher  of (i)  the  sum of 2%  plus  the  Adjusted  Monthly  Libor  Index  Rate
applicable to such Euro-Dollar Loan or (ii) the Default Rate.
<PAGE>

         (b) The Bank shall  determine  the  interest  rate  applicable  to each
Advance  hereunder and under the FMA Agreement,  and shall,  if requested by the
Borrower,  give prompt  notice to the  Borrower by  telephone or telecopy of the
rate  of  interest  so  determined,  and  its  determination  thereof  shall  be
conclusive in the absence of manifest error.

         (c) After the occurrence and during the  continuance of a Default,  the
principal  amount of Advances (and, to the extent  permitted by applicable  law,
all accrued interest thereon) may, at the election of the Bank, bear interest at
the Default Rate.  The Advances shall bear interest at a rate per annum equal to
the Default Rate following any judgment in favor of the Bank on the Note.

         SECTION  2.06.  Fees.  (a) From and  after  the date  hereof  up to and
including the  Termination  Date,  the Borrower shall pay to the Bank a facility
fee at the rate of three-eighths  of one percent (0.375%) per annum  (calculated
from the date  hereof on the basis of a year of 360 days and paid for the actual
number of days elapsed) on the average  daily  balance of the Unused  Commitment
(the  "Facility  Fee").  The  Facility  Fee  shall be  payable  by the  Borrower
quarterly in arrears on each  Facility  Fee Payment Date and on the  Termination
Date, provided that should the Commitment be terminated at any time prior to the
Termination  Date  (whether  by  termination  of the  Commitment  as provided in
Section 2.07 or Section 2.08,  refinancing  of the Advances or  otherwise),  the
entire  accrued  and  unpaid  Facility  Fee  shall  be paid on the  date of such
termination.

         (b) The Borrower  shall pay to the Bank on or prior to the Closing Date
a Commitment Fee in the amount of $8,700.00 (the "Commitment Fee").

         SECTION 2.07. Optional Termination or Reduction of Commitment.  (a) The
Borrower may, upon at least three  Domestic  Business  Days' notice to the Bank,
terminate the Commitment at any time, or reduce the Commitment from time to time
by an aggregate minimum amount of at least $1,000,000 or an integral multiple of
$100,000 in excess  thereof.  If the  Commitment is so reduced,  such  reduction
shall be accounted for in determining  the Facility Fees due under Section 2.06.
If the  Commitment is so  terminated  in its entirety,  (i) all accrued fees (as
provided  under  Section  2.06) shall be payable on the  effective  date of such
termination,  and (ii) the Borrower  shall pay to the Bank on the effective date
of such  termination a termination fee equal to one tenth of one percent (0.10%)
of the  Commitment.  A notice of  reduction  or  termination  of the  Commitment
hereunder, once given, shall not thereafter be revocable by the Borrower.

         (b)  NOTWITHSTANDING  ANYTHING  HEREIN OR IN THE FMA  AGREEMENT  TO THE
CONTRARY, the Bank shall have the right, in its sole and absolute discretion, to
terminate the Commitment  and the Bank's  obligation to extend the Commitment to
the Borrower  hereunder,  upon not less than  thirteen (13) months prior written
notice.  Such  termination  shall become  effective on the date specified in the
written  notice which the Bank  delivers to the Borrower  exercising  the Bank's
option under this Section 2.07 to terminate the Commitment (the termination date
specified in said written  notice being  referred to herein as the  "Termination
Date").

         SECTION 2.08. Termination of Commitment. The Commitment shall terminate
and the unpaid principal balance and all accrued and unpaid interest on the Note
<PAGE>
will be due and  payable  upon the  first of the  following  dates or  events to
occur:  (i)  acceleration  of the  maturity of the Note in  accordance  with the
remedies  contained in Section  7.02;  (ii) the  Borrower's  termination  of the
Commitment  pursuant  to  Section  2.07(a);  or  (iii)  upon  expiration  of the
Commitment on the Termination Date as provided for in Section 2.07(b).  From and
after the date of such termination, no Advances shall be made.

         SECTION 2.09. Optional  Prepayments.  Optional  prepayments of Advances
shall be permitted only as provided for in the FMA Agreement.

         SECTION  2.10.  Mandatory  Prepayments.  (a) On each  date on which the
Commitment  is reduced  pursuant to Section  2.07,  the Borrower  shall repay or
prepay such principal amount of the outstanding  Advances, if any (together with
interest  accrued  thereon),  as may be necessary so that after such payment the
aggregate unpaid  principal  amount of the outstanding  Advances does not exceed
the aggregate  amount of the  Commitment  as then reduced.  Each such payment or
prepayment shall be applied to Advances  outstanding on the date of such payment
(in direct order of maturity).

         (b) In the event that the aggregate principal amount of all Advances at
any one time  outstanding  shall at any  time  exceed  the  lesser  of:  (i) the
Borrowing  Base; or (ii) the aggregate  amount of the  Commitment,  the Borrower
shall  immediately  repay  (in the  inverse  order of  maturity)  so much of the
Advances as is necessary  in order that the  aggregate  principal  amount of the
Advances  thereafter  outstanding  shall  not  exceed  the  lesser  of:  (i) the
Borrowing Base; or (ii) the Commitment.

         SECTION 2.11. General Provisions Concerning Payments.  (a) All payments
of principal of, or interest on, the Note,  and of the Facility Fee or any other
fees  due  hereunder,  shall  be made in  Federal  or  other  funds  immediately
available to the Bank at its office in Greensboro, North Carolina not later than
1:00 p.m., Greensboro, North Carolina time. Funds received after 1:00 p.m. shall
be deemed to have been paid on the next following Domestic Business Day.

         (b) Whenever any payment of  principal,  or interest or fees,  shall be
due on a day which is not a Domestic  Business Day, the date for payment thereof
shall be extended to the next succeeding  Domestic Business Day. If the date for
any payment of principal is extended by operation of law or otherwise,  interest
thereon shall be payable for such extended time.

         (c) All payments of principal,  interest and fees and all other amounts
to be made by the  Borrower  pursuant to this  Agreement  shall be paid  without
deduction for, and free from, any tax, imposts, levies, duties,  deductions,  or
withholdings  of  any  nature  now  or  at  anytime  hereafter  imposed  by  any
governmental  authority or by any taxing authority  thereof or therein excluding
in the case of the Bank,  taxes  imposed on or measured  by its net income,  and
franchise taxes imposed on it, by the  jurisdiction  under the laws of which the
Bank is organized or any political  subdivision  thereof (all such  non-excluded
taxes, imposts,  levies, duties,  deductions or withholdings of any nature being
"Taxes").  In the event that the Borrower is required by applicable  law to make
any such  withholding  or  deduction of Taxes with respect to Advances or fee or
other  amount,  the  Borrower  shall pay such  deduction or  withholding  to the
applicable taxing authority, shall promptly furnish to the Bank all receipts and
other  documents  evidencing  such payment and shall pay to the Bank  additional
amounts as may be necessary in order that the amount  received by the Bank after
the required  withholding or other payment shall equal the amount the Bank would
<PAGE>

have  received  had no such  withholding  or  other  payment  been  made.  If no
withholding  or  deduction of Taxes are payable in respect of any Advance or fee
relating  thereto,  the  Borrower  shall  furnish,  at  the  Bank's  request,  a
certificate  from each  applicable  taxing  authority  or an  opinion of counsel
acceptable  to the Bank,  in either case stating  that such  payments are exempt
from or not subject to withholding or deduction of Taxes.  If the Borrower fails
to provide such original or certified  copy of a receipt  evidencing  payment of
Taxes or certificate(s) or opinion of counsel of exemption,  the Borrower hereby
agrees to  compensate  the Bank for, and indemnify the Bank with respect to, the
tax  consequences of the Borrower's  failure to provide evidence of tax payments
or tax exemption.

         In the  event  the Bank  receives  a refund  of any  Taxes  paid by the
Borrower  pursuant to this Section  2.11, it will pay to the Borrower the amount
of such refund promptly upon receipt thereof; provided,  however, if at any time
thereafter  the Bank is required  to return  such  refund,  the  Borrower  shall
promptly repay to the Bank the amount of such refund.

         Without  prejudice  to the  survival  of  any  other  agreement  of the
Borrower hereunder,  the agreements and obligations of the Borrower contained in
this Section 2.11 shall be applicable with respect to any Participant,  Assignee
or other Transferee,  and any calculations required by such provisions (i) shall
be made based upon the  circumstances  of such  Participant,  Assignee  or other
Transferee,  and (ii)  constitute a continuing  agreement  and shall survive the
termination  of this  Agreement and the payment in full or  cancellation  of the
Note.

         SECTION 2.12. Computation of Interest.  Interest shall be calculated on
the   basis   of  a  year  of  360   days  for  the   actual   number   of  days
for the actual number of days in each interest period.

               ARTICLE III. CHANGE IN CIRCUMSTANCES; COMPENSATION

         SECTION 3.01. Basis for Determining Interest Rate Inadequate or Unfair.
If at any time:

         (i) the Bank  determines  that  deposits in Dollars (in the  applicable
amounts) are not being offered in the relevant  market for such one month period
or otherwise  determines in its  reasonable  judgment that it is not possible to
determine the Monthly Libor Index Rate, or

         (ii) the Bank  determines  that the  Monthly  Libor Index Rate will not
adequately and fairly reflect the cost to the Bank of funding Euro-Dollar Loans,

the Bank shall give notice  thereof to the  Borrower,  whereupon  until the Bank
notifies the Borrower that the  circumstances  giving rise to such suspension no
longer exist, the obligations of the Bank to make or maintain  Euro-Dollar Loans
shall be suspended.

         SECTION 3.02.  Illegality.  If, after the date hereof,  the adoption of
any applicable law, rule or regulation,  or any change therein, or any change in
the  interpretation  or  administration  thereof by any governmental  authority,
central  bank  or  comparable   agency  charged  with  the   interpretation   or
administration thereof (any such authority,  bank or agency being referred to as
<PAGE>
an "Authority"  and any such event being  referred to as a "Change of Law"),  or
compliance  by the Bank (or its Lending  Office)  with any request or  directive
(whether or not having the force of law) of any Authority shall make it unlawful
or impossible for the Bank (or its Lending Office) to make, maintain or fund its
Euro-Dollar Loans and the Bank shall so notify the Borrower, whereupon until the
Bank notifies the Borrower that the circumstances giving rise to such suspension
no longer exist, the obligation of the Bank to make  Euro-Dollar  Loans shall be
suspended.  If the Bank shall  determine  that it may not  lawfully  continue to
maintain and fund any of its outstanding Euro-Dollar Loans to maturity and shall
so specify in such notice,  the Borrower  shall  immediately  prepay in full the
then  outstanding  principal  amount of each  Euro-Dollar  Loan,  together  with
accrued interest  thereon.  Concurrently  with prepaying each such Advance,  the
Borrower  shall  borrow an  Advance  as a Base  Rate Loan in an equal  principal
amount from the Bank and the Bank shall make such an Advance.

         SECTION 3.03.  Increased Cost and Reduced Return. (a) If after the date
hereof,  a Change of Law or compliance by the Bank (or its Lending  Office) with
any  request  or  directive  (whether  or not  having  the  force of law) of any
Authority:

         (i) shall subject the Bank (or its Lending  Office) to any tax, duty or
other charge with respect to its Euro-Dollar  Loans,  the Note or its obligation
to make or maintain  Euro-Dollar Loans, or shall change the basis of taxation of
payments to the Bank (or its Lending  Office) of the principal of or interest on
its  Euro-Dollar  Loans or any other amounts due under this Agreement in respect
of its Euro-Dollar Loans or its obligation to make or maintain Euro-Dollar Loans
(except  for changes in the rate of tax on the overall net income of the Bank or
its Lending Office  imposed by the  jurisdiction  in which the Bank's  principal
executive office or Lending Office is located); or

         (ii) shall  impose,  modify or deem  applicable  any  reserve,  special
deposit  or  similar  requirement  (including,   without  limitation,  any  such
requirement imposed by the Board of Governors of the Federal Reserve System, but
excluding any such  requirement  included in an applicable  Euro-Dollar  Reserve
Percentage)  against  assets of,  deposits with or for the account of, or credit
extended by, the Bank (or its Lending Office); or

         (iii) shall  impose on the Bank (or its  Lending  Office) or the London
interbank market any other condition  affecting its Euro-Dollar  Loans, its Note
or its obligation to make or maintain Euro-Dollar Loans;

and the result of any of the  foregoing  is to increase the cost to the Bank (or
its Lending Office) of making or maintaining any Euro-Dollar  Loan, or to reduce
the amount of any sum received or receivable by the Bank (or its Lending Office)
under this Agreement or under the Note with respect thereto, by an amount deemed
by the Bank to be material,  then,  within 15 days after demand by the Bank, the
Borrower  shall  pay to the Bank  such  additional  amount  or  amounts  as will
compensate the Bank for such increased cost or reduction.

         (b) If the Bank shall have  determined  that after the date  hereof the
adoption of any applicable law, rule or regulation  regarding  capital adequacy,
or any change therein,  or any change in the  interpretation  or  administration
thereof,  or compliance by the Bank (or its Lending  Office) with any request or
<PAGE>

directive regarding capital adequacy (whether or not having the force of law) of
any  Authority,  has or would have the effect of reducing  the rate of return on
the Bank's capital as a consequence of its obligations under this Agreement with
respect to any Advance to a level below that which the Bank could have  achieved
but for such  adoption,  change or  compliance  (taking into  consideration  the
Bank's  policies  with respect to capital  adequacy) by an amount  deemed by the
Bank to be material,  then from time to time, within 15 days after demand by the
Bank,  the Borrower shall pay to the Bank such  additional  amount or amounts as
will compensate the Bank for such reduction.

         (c) The Bank will promptly notify the Borrower of any event of which it
has knowledge,  occurring after the date hereof,  which will entitle the Bank to
compensation  pursuant to this  Section and will  designate a different  Lending
Office if such  designation  will  avoid the need for,  or reduce the amount of,
such  compensation  and will not,  in the  judgment  of the Bank,  be  otherwise
disadvantageous  to the Bank. A certificate  of the Bank  claiming  compensation
under this Section and setting forth the additional amount or amounts to be paid
to it  hereunder  shall be  conclusive  in the  absence of  manifest  error.  In
determining  such  amount,  the  Bank  may  use  any  reasonable  averaging  and
attribution methods.

         (d) The provisions of this Section shall be applicable  with respect to
any Participant  in, or Assignee or other  Transferee of, the obligations of the
Borrower hereunder to the Bank, and any calculations required by such provisions
shall be made based upon the  circumstances  of such  Participant,  Assignee  or
other Transferee.

         SECTION  3.04.  Base Rate Loans  Substituted  for Affected  Euro-Dollar
Loans. If (i) the obligation of the Bank to make or maintain  Euro-Dollar  Loans
has been  suspended  pursuant to Section 3.01 or Section  3.02, or (ii) the Bank
has demanded  compensation under Section 3.03 and the Borrower,  by at least one
Domestic  Business  Day's prior notice to the Bank,  shall have elected that the
provisions of this Section shall apply, then, unless and until the Bank notifies
the Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer apply:

         (a)  all  Advances  which  would  otherwise  be  made  by the  Bank  as
Euro-Dollar Loans shall be made instead as Base Rate Loans, and

         (b) after each of its Euro-Dollar  Loans has been repaid,  all payments
of principal  which would otherwise be applied to repay such  Euro-Dollar  Loans
shall be applied to repay its Base Rate Loans instead.

         SECTION 3.05. Compensation.  Upon the request of the Bank, delivered to
the Borrower, the Borrower shall pay to the Bank such amount or amounts as shall
compensate  the Bank for any loss,  cost or  expense  incurred  by the Bank as a
result of:

         (a) any  optional  or  mandatory  payment or  prepayment  (pursuant  to
Section 3.02,  the FMA  Agreement or otherwise) of a Euro-Dollar  Loan on a date
other than (i) the first day of a calendar  month,  or (ii) an approved date for
payment or prepayment as provided for in or pursuant to the FMA Agreement; or
<PAGE>

         (b) any  failure by the  Borrower to prepay a  Euro-Dollar  Loan on the
date for such  prepayment  specified in the relevant  notice of prepayment of or
notice of reduction of the Commitment hereunder, as the case may be.


                      ARTICLE IV. CONDITIONS TO BORROWINGS

         SECTION 4.01. Conditions to First Borrowing. The obligation of the Bank
to make an  Advance on the  occasion  of the first  Borrowing  is subject to the
satisfaction  of the  conditions  set forth in  Section  4.02 and the  following
additional conditions:

         (a)  receipt  by  the  Bank  from  the  Borrower  of  a  duly  executed
counterpart of this Agreement signed by the Borrower;

         (b) receipt by the Bank of the duly  executed Note  complying  with the
provisions of Section 2.03;

         (c)  receipt by the Bank of an opinion of counsel of Gallop,  Johnson &
Neuman, L.C., counsel for the Borrower and Guarantors, substantially in the form
of Exhibit B hereto,  and  covering  such  additional  matters  relating  to the
transactions contemplated hereby as the Bank may reasonably request;

         (d) receipt by the Bank of a  certificate,  dated the Closing  Date and
substantially   in  the  form  attached   hereto  at  Exhibit  D  (the  "Closing
Certificate"),  signed by a principal  financial  officer of the Borrower to the
effect that (i) no Default  hereunder  has  occurred  and is  continuing  on the
Closing  Date  and (ii)  the  representations  and  warranties  of the  Borrower
contained in Article V are true on and as of the Closing Date;  and if the first
Advance is made by the Bank  after the  Closing  Date,  receipt by the Bank of a
certificate,  dated  the  date  of the  first  Advance,  signed  by a  principal
financial  officer of the  Borrower to the effect that (i) no Default  hereunder
has occurred  and is  continuing  on the date of the first  Advance and (ii) the
representations  and warranties of the Borrower  contained in Article V are true
on and as of the date of the first Advance hereunder;

         (e) receipt by the Bank of all documents  which the Bank may reasonably
request relating to the existence of the Borrower,  the corporate  authority for
and the  validity of this  Agreement,  the Note and the other Loan  Documents to
which the Borrower is a party,  and any other matters  relevant  hereto,  all in
form and substance  satisfactory  to the Bank,  including  without  limitation a
certificate  of  incumbency  of the  Borrower,  signed  by the  Secretary  or an
Assistant  Secretary of the Borrower and  substantially in the form of Exhibit E
hereto  (the  "Officer's  Certificate"),   certifying  as  to  the  names,  true
signatures and incumbency of the officer or officers of the Borrower  authorized
to execute and deliver the Loan Documents, and certified copies of the following
items:  (i) the  Borrower's  Certificate of  Incorporation,  (ii) the Borrower's
Bylaws,  (iii) a  certificate  of the  Secretary of State (or other  appropriate
office)  of the  jurisdiction  of the  Borrower's  incorporation  as to the good
<PAGE>

standing  of  the  Borrower  as a  corporation  of  such  jurisdiction,  (iv)  a
certificate  of the Secretary of State of North Carolina as to the good standing
of the  Borrower as a foreign  corporation  under the laws of the State of North
Carolina,  and (v) the action  taken by the Board of  Directors  of the Borrower
authorizing  the  Borrower's   execution,   delivery  and  performance  of  this
Agreement,  the Note and the other Loan  Documents  to which the  Borrower  is a
party;

         (f) receipt by the Bank of the duly  executed FMA  Agreement,  together
with all Schedules and supplements thereto;

         (g) duly executed UCC financing statements and a duly executed Security
Agreement (the "Security  Agreement")  from the Borrower  granting to or for the
benefit  of the  Bank a first  priority  lien on and  security  interest  in the
Collateral;

         (h) receipt by the Bank of a Guaranty  Agreement  satisfactory  in form
and substance to the Bank (the  "Guaranty  Agreement"),  and duly executed by S.
Leslie Flegel,  Elynor  Flegel,  William H. Lee, Jr., and Theresa O. Lee (herein
collectively referred to as the "Guarantors") to and in favor of the Bank;

         (i) policies of  insurance or  certificates  evidencing  such  policies
(with loss payable clauses satisfactory to the Bank) as required pursuant to the
Security Agreement;

         (j) a Quarterly Receivables Certification dated as of July 31, 1996 and
the financial  information  required in Sections 6.01(b) and (c) with respect to
the Fiscal Quarter ending July 31,1996;

         (k) Uniform Commercial Codes searches  confirming the Bank's first lien
position with respect to the Collateral;

         (l) receipt by the Bank of payment of the Commitment Fee; and

         (m) such  other  documents  or items  as the  Bank or its  counsel  may
reasonably request.

         SECTION 4.02. Conditions to All Borrowings.  The obligation of the Bank
to make  an  Advance  on the  occasion  of  each  Borrowing  is  subject  to the
satisfaction of the following conditions:

         (a) the fact that,  immediately after such Borrowing,  no Default shall
have occurred and be continuing;

         (b) the fact that the  representations  and  warranties of the Borrower
contained  in  Article V shall be true on and as of the date of such  Borrowing;
and
<PAGE>

         (c) the fact that,  immediately  after such  Borrowing,  the  aggregate
outstanding  principal  amount of the Advances will not exceed the lesser of (i)
the amount of the Commitment, or (ii) the Borrowing Base.

Each  Advance  hereunder  and  under the FMA  Agreement  shall be deemed to be a
representation  and  warranty by the  Borrower on the date of such Advance as to
the facts  specified in clauses (a), (b) and (c) of this Section;  provided that
such Advance shall not be deemed to be such a representation and warranty to the
effect set forth in Section 5.04(b) as to any event,  act or condition  having a
Material  Adverse Effect which has theretofore  been disclosed in writing by the
Borrower  to the  Bank if the  aggregate  outstanding  principal  amount  of the
Advances  immediately  after  such  Borrowing  will  not  exceed  the  aggregate
outstanding principal amount of Advances immediately before such Borrowing.

                    ARTICLE V. REPRESENTATIONS AND WARRANTIES

         The Borrower represents and warrants that:

         SECTION  5.01.  Corporate  Existence  and  Power.  The  Borrower  is  a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, is duly qualified to transact business
in every jurisdiction  where, by the nature of its business,  such qualification
is  necessary,  and has all  corporate  powers  and all  governmental  licenses,
authorizations,  consents and approvals required to carry on its business as now
conducted.

         SECTION 5.02. Corporate and Governmental Authorization;  Contravention.
The execution,  delivery and performance by the Borrower of this Agreement,  the
Note and the other  Loan  Documents  (i) are  within  the  Borrower's  corporate
powers, (ii) have been duly authorized by all necessary corporate action,  (iii)
require no action by or in respect of, or filing with,  any  governmental  body,
agency or official,  (iv) do not contravene,  or constitute a default under, any
provision of applicable law or regulation or of the certificate of incorporation
or by-laws of the Borrower or of any  agreement,  judgment,  injunction,  order,
decree or other instrument  binding upon the Borrower,  and (v) do not result in
the creation or imposition of any Lien on any asset of the Borrower.

         SECTION 5.03.  Binding Effect.  This Agreement  constitutes a valid and
binding agreement of the Borrower  enforceable in accordance with its terms, and
the Note and the other Loan Documents, when executed and delivered in accordance
with this  Agreement,  will  constitute  valid and  binding  obligations  of the
Borrower  enforceable in accordance with their respective  terms,  provided that
the  enforceability  hereof  and  thereof  is  subject  in each case to  general
principles of equity and to  bankruptcy,  insolvency  and similar laws affecting
the enforcement of creditors' rights generally.

         SECTION  5.04.  Financial  Information.  (a) The  balance  sheet of the
Borrower  as of January  31, 1996 and the  related  consolidated  statements  of
income,  shareholders'  equity and cash flows for the  Fiscal  Year then  ended,
reported on by BDO Seidman LLP, copies of which have been delivered to the Bank,
and the unaudited  financial  statements of the Borrower for the interim  period
<PAGE>
ended July 31, 1996,  copies of which have been  delivered  to the Bank,  fairly
present,  in conformity  with  generally  accepted  accounting  principles,  the
financial  position  of the  Borrower  as of  such  dates  and  its  results  of
operations and cash flows for such periods stated.

         (b) Since July 31,  1996  there has been no event,  act,  condition  or
occurrence having a Material Adverse Effect.

         (c)  The  Borrower's   federal   taxpayer   identification   number  is
43-1710906.

         SECTION 5.05.  Litigation.  Except as disclosed in Schedule 5.05, there
is no action,  suit or proceeding  pending,  or to the knowledge of the Borrower
threatened,  against or affecting the Borrower before any court or arbitrator or
any governmental  body,  agency or official which could have or cause a Material
Adverse  Effect,  or which in any manner draws into question the validity of, or
could impair the ability of the Borrower to perform its obligations  under, this
Agreement, the Note or any of the other Loan Documents.

         SECTION 5.06. Compliance with ERISA. (a) The Borrower does not have any
employee  pension  benefit plan which is covered by Title IV of ERISA or that is
subject to the minimum funding standards under Section 412 of the Code.

         (b) The Borrower and each member of the Controlled Group have fulfilled
their obligations under the minimum funding standards of ERISA and the Code with
respect to any Plan and are in  compliance  in all  material  respects  with the
presently applicable provisions of ERISA and the Code, and have not incurred any
liability to the PBGC or any Plan under Title IV of ERISA.

         (c) Neither the Borrower nor any member of the  Controlled  Group is or
ever has been obligated to contribute to any Multiemployer Plan.

         SECTION  5.07.  Taxes.  There have been filed on behalf of the Borrower
all  Federal,  state and local  income,  excise,  property and other tax returns
which are  required to be filed by it and all taxes due pursuant to such returns
or pursuant to any assessment received by or on behalf of the Borrower have been
paid. The charges, accruals and reserves on the books of the Borrower in respect
of taxes or other  governmental  charges  are, in the  opinion of the  Borrower,
adequate.  United  States  income tax returns of the Borrower have been examined
and closed through the Fiscal Year ended January 31, 1996.

         SECTION 5.08. Subsidiaries. The Borrower has no Subsidiaries.

         SECTION  5.09.  Not  an  Investment  Company.  The  Borrower  is not an
"investment  company" within the meaning of the Investment  Company Act of 1940,
as amended.

         SECTION 5.10.  Ownership of Property;  Liens. The Borrower has title to
its Properties and assets  sufficient for the conduct of its business,  and none
of such  Properties  or assets  is  subject  to any Lien  except  for  Permitted
Encumbrances. All patents, trademarks, tradenames, copyrights,  technologies and
applications  for such owned by or  requested  in the name of the  Borrower  are
shown on Schedule 5.10 hereto.
<PAGE>

         SECTION 5.11. No Default.  The Borrower is not in default under or with
respect to any agreement, instrument or undertaking to which it is a party or by
which it or any of its  property  is bound which could have or cause of Material
Adverse Effect. No Default has occurred and is continuing.

         SECTION 5.12. Full Disclosure.  All information heretofore furnished by
the Borrower to the Bank for purposes of or in connection with this Agreement or
any  transaction  contemplated  hereby  is, and all such  information  hereafter
furnished by the  Borrower to the Bank will be,  true,  accurate and complete in
every material respect or based on reasonable  estimates on the date as of which
such information is stated or certified.  The Borrower has disclosed to the Bank
in  writing  any and all facts  which  could  have or cause a  Material  Adverse
Effect.

         SECTION 5.13. Environmental Matters. (a) The Borrower is not subject to
any Environmental  Liability which could have or cause a Material Adverse Effect
and the Borrower has not been  designated  as a  potentially  responsible  party
under  CERCLA  or  under  any  state  statute  similar  to  CERCLA.  None of the
Properties  have  been  identified  on any  current  or  proposed  (i)  National
Priorities  List under 40 C.F.R.  ss. 300,  (ii)  CERCLIS list or (iii) any list
arising from a state statute similar to CERCLA.

         (b) No  Hazardous  Materials  have  been or are being  used,  produced,
manufactured,  processed, generated, stored, disposed of, managed at, or shipped
or transported to or from the Properties or are otherwise  present at, on, in or
under the  Properties,  or, to the best of the knowledge of the Borrower,  at or
from any adjacent  site or facility,  except for  Hazardous  Materials,  such as
cleaning solvents, pesticides and other materials used, produced,  manufactured,
processed, generated, stored, disposed of, and managed in the ordinary course of
business in compliance with all applicable Environmental Requirements.

         (c)  The  Borrower,  and  each  of its  Affiliates,  has  procured  all
Environmental  Authorizations  necessary for the conduct of its business, and is
in  compliance  with  all  Environmental  Requirements  in  connection  with the
operation of the Properties  and the  Borrower's,  and each of its  Affiliate's,
respective businesses.

         SECTION 5.14.  Compliance with Laws. The Borrower is in compliance with
all applicable laws,  including,  without  limitation,  all Environmental  Laws,
except where any failure to comply with any such laws would not, alone or in the
aggregate, have a Material Adverse Effect.

         SECTION 5.15.  Capital  Stock.  All Capital Stock,  debentures,  bonds,
notes and all other securities of the Borrower  presently issued and outstanding
are  validly  and  properly  issued  in  accordance  with all  applicable  laws,
including,  but not limited to, the "Blue Sky" laws of all applicable states and
the federal securities laws.

         SECTION 5.16. Margin Stock. The Borrower is not engaged principally, or
as one of its  important  activities,  in the business of purchasing or carrying
any Margin  Stock,  and no part of the  proceeds of any Advance  will be used to
<PAGE>

purchase or carry any Margin Stock or to extend credit to others for the purpose
of  purchasing  or carrying any Margin  Stock,  or be used for any purpose which
violates, or which is inconsistent with, the provisions of Regulation X.

         SECTION  5.17.  Insolvency.  After giving  effect to the  execution and
delivery  of the Loan  Documents  and the  making  of the  Advances  under  this
Agreement and under the FMA  Agreement,  the Borrower  will not be  "insolvent,"
within the  meaning of that term as defined in ss. 101 of Title 11 of the United
States  Code  or  Section  2 of  the  Uniform  Fraudulent  Transfer  Act,  or as
contemplated in N.C.G.S.  ss. 39-15,  et. seq. or any other applicable state law
pertaining to fraudulent transfers, as each may be amended from time to time, or
be  unable to pay its debts  generally  as such  debts  become  due,  or have an
unreasonably  small  capital to engage in any business or  transaction,  whether
current or contemplated.

         SECTION 5.18. Insurance. The Borrower maintains (in its own name), with
financially  sound and reputable  insurance  companies,  insurance on all of its
Properties,  Equipment,  Fixtures,  and Inventory,  in at least such amounts and
against at least such risks as are usually  insured  against in the same general
area by companies of established repute engaged in the same or similar business.


                              ARTICLE VI. COVENANTS

         The  Borrower  agrees  that,  so long as the  Commitment  is in  effect
hereunder  or any  amount  payable  under the Note,  this  Agreement  or the FMA
Agreement remains unpaid:

         SECTION 6.01. Information. The Borrower will deliver to the Bank:

         (a) as soon as available  and in any event within 90 days after the end
of each  Fiscal  Year,  a balance  sheet of the  Borrower  as of the end of such
Fiscal Year and the related statements of income,  shareholders' equity and cash
flows for such Fiscal Year,  setting forth in each case in comparative  form the
figures for the previous  fiscal year, all certified by BDO Seidman LLP or other
independent  public  accountants of nationally  recognized  standing,  with such
certification  to be free of exceptions  and  qualifications  not  acceptable to
Bank;

         (b) as soon as available  and in any event within 60 days after the end
of each of the first three  quarters of each Fiscal Year, a balance sheet of the
Borrower as of the end of such  quarter and the related  statement of income and
statement  of cash flows for such quarter and for the portion of the Fiscal Year
ended at the end of such quarter, setting forth in each case in comparative form
the figures for the corresponding  quarter and the corresponding  portion of the
previous Fiscal Year, all certified (subject to normal year-end  adjustments) as
to  fairness of  presentation,  generally  accepted  accounting  principles  and
consistency by the chief financial  officer or the chief  accounting  officer of
the Borrower;

         (c)  simultaneously   with  the  delivery  of  each  set  of  financial
statements referred to in clauses (a) and (b) above, a certificate substantially
in the form of Exhibit H attached hereto (the "Compliance Certificate"),  of the
<PAGE>
chief  financial  officer or the chief  accounting  officer of the  Borrower (i)
setting  forth in  reasonable  detail the  calculations  required  to  establish
whether the Borrower was in compliance  with the  requirements  of Sections 6.03
through  6.07,  inclusive  on the  date of such  financial  statements  and (ii)
stating whether any Default exists on the date of such  certificate  and, if any
Default then exists,  setting forth the details thereof and the action which the
Borrower is taking or proposes to take with respect thereto;

         (d)  simultaneously  with the delivery of each set of annual  financial
statements  referred  to in  clause  (a)  above,  a  statement  of the  firm  of
independent  public  accountants which reported on such statements to the effect
that  nothing  has come to their  attention  to cause them to  believe  that any
Default existed on the date of such financial statements;

         (e) within five Domestic Business Days after the Borrower becomes aware
of the occurrence of any Default,  a certificate of the chief financial  officer
or the chief  accounting  officer  of the  Borrower  setting  forth the  details
thereof  and the action  which the  Borrower  is taking or proposes to take with
respect thereto;

         (f)  promptly  upon the  mailing  thereof  to the  shareholders  of the
Borrower  generally,  copies  of all  financial  statements,  reports  and proxy
statements so mailed;

         (g)  promptly  upon the  filing  thereof,  copies  of all  registration
statements  (other than the exhibits thereto and any registration  statements on
Form S-8 or its equivalent)  and annual,  quarterly or monthly reports which the
Borrower shall have filed with the Securities and Exchange Commission;

         (h) if and when any  member  of the  Controlled  Group  (i) gives or is
required to give notice to the PBGC of any Reportable  Event with respect to any
Plan which might  constitute  grounds for a termination of such Plan under Title
IV of ERISA,  or knows that the plan  administrator  of any Plan has given or is
required to give notice of any such  Reportable  Event,  a copy of the notice of
such  Reportable  Event given or required to be given to the PBGC; (ii) receives
notice of complete or partial  withdrawal  liability  under Title IV of ERISA, a
copy of such notice;  or (iii)  receives  notice from the PBGC under Title IV of
ERISA of an intent to terminate or appoint a trustee to  administer  any Plan, a
copy of such notice;

         (i) as soon as available and in any event within  forty-five  (45) days
after  the  end of  each  Fiscal  Quarter  of  each  Fiscal  Year,  a  Quarterly
Receivables  Certification,  dated as of the last day of the  applicable  Fiscal
Quarter; and

         (j)  from  time to  time  such  additional  information  regarding  the
financial  position  or  business  of the  Borrower  as the Bank may  reasonably
request.

         SECTION 6.02.  Inspection of Property,  Books and Records. The Borrower
will keep proper books of record and account  which  fairly state the  financial
position of the Borrower in all material  respects in conformity  with generally
<PAGE>
accepted accounting  principles with respect to all dealings and transactions in
relation to its business and activities;  and will permit representatives of the
Bank at the Bank's expense prior to the occurrence of an Event of Default and at
the Borrower's  expense after the occurrence of an Event of Default to visit and
inspect any of their respective  properties,  to examine and make abstracts from
any of their  respective  books and  records  and to  discuss  their  respective
affairs,  finances and accounts with their  respective  officers,  employees and
independent public  accountants.  The Borrower agrees to cooperate and assist in
such visits and inspections,  in each case at such reasonable times and as often
as may reasonably be desired.

         SECTION 6.03. Ratio of EBILT to Interest Expense and Lease Obligations.
As of January 31,  1997,  the ratio of EBILT for the Fiscal  Quarter then ending
and the  immediately  preceding three Fiscal Quarters to the sum of (i) Interest
Expense and (ii) Lease  Obligations,  actually paid during such Fiscal Quarters,
will not be less than  2.00 to 1.00;  and as of the end of each  Fiscal  Quarter
thereafter,  the ratio of EBILT  for the  Fiscal  Quarter  then  ending  and the
immediately  preceding three Fiscal Quarters to the sum of (i) Interest  Expense
and (ii) Lease Obligations,  actually paid during such Fiscal Quarters, will not
be less than 2.50 to 1.00.

         SECTION 6.04.  Ratio of Funded Debt to EBITDA.  As of July 31, 1997 and
as of the end of each Fiscal  Quarter  thereafter,  the ratio of Funded Debt for
the Fiscal  Quarter  then ending to EBITDA for such  Fiscal  Quarter and for the
immediately preceding three Fiscal Quarters, will not be less than 4.00 to 1.00.

         SECTION 6.05.  Ratio of Funded Debt to Total  Capitalization.  From the
Closing  Date  through the Fiscal  Quarter  ending July 31,  1997,  the ratio of
Funded Debt to Total  Capitalization shall not exceed 65.0%; from August 1, 1997
through January 31, 1998, the ratio of Funded Debt to Total Capitalization shall
not exceed  60.0%;  from  February 1, 1998 through  July 31, 1998,  the ratio of
Funded Debt to Total  Capitalization  shall not exceed 55.0%; and from and after
August  1,  1998,  the ratio of Funded  Debt to Total  Capitalization  shall not
exceed 50.0%.

         SECTION 6.06. Minimum Tangible Net Worth. Tangible Net Worth will at no
time be less than $3,600,000.00 plus the sum of 50.0% of the cumulative Reported
Net Income of the  Borrower  during any period after July 31, 1996 (taken as one
accounting  period),  calculated  quarterly but excluding from such calculations
any quarter in which the Net Income of the Borrower is negative.

         SECTION 6.07. Accounts Receivable. Tier I Eligible Receivables shall at
all times comprise more than fifty percent (50%) of the Borrower's  Receivables.
At no time shall total  Receivables  to the  Canadian  companies  identified  on
Schedule  1.01  attached  hereto  exceed in the  aggregate  ten percent (10%) of
Eligible Receivables.

         SECTION  6.08.  Restricted  Payments.  The Borrower will not declare or
make any  Restricted  Payment  during any Fiscal Year except from Net Income and
then only after  providing  for  payment of all  current  principal  payments on
Long-Term  Debt;  provided  that after giving  effect to the payment of any such
Restricted  Payments,  the Borrower will be in full  compliance  with all of the
provisions of this Agreement.
<PAGE>

         SECTION 6.09.  Loans or Advances.  The Borrower shall not make loans or
advances  to any  Person  except:  (i) the  existing  loans to  officers  of the
Borrower as reflected on the financial  information submitted by the Borrower to
the Bank under Section  6.01(b) and (c) of this Agreement for the Fiscal Quarter
ending July 31,  1996;  and (ii)  deposits  required by  government  agencies or
public utilities;  provided that after giving effect to the making of any loans,
advances  or  deposits  permitted  by clause  (i) or (ii) of this  Section,  the
Borrower will be in full compliance with all the provisions of this Agreement.

         SECTION 6.10.  Investments.  The Borrower shall not make Investments in
any Person except  investments  in (i) direct  obligations  of the United States
Government  maturing within one year,  (ii)  certificates of deposit issued by a
commercial bank whose credit is satisfactory to the Bank, (iii) commercial paper
rated A-1 or the equivalent  thereof by Standard & Poor's  Corporation or P-1 or
the equivalent  thereof by Moody's  Investors  Service,  Inc. and in either case
maturing within 6 months after the date of acquisition, and/or (iv) tender bonds
the payment of the  principal of and  interest on which is fully  supported by a
letter of credit issued by a United States bank whose long-term  certificates of
deposit  are rated at least AA or the  equivalent  thereof by  Standard & Poor's
Corporation and Aa or the equivalent thereof by Moody's Investors Service, Inc.

         SECTION 6.11. Negative Pledge. The Borrower shall not create, assume or
suffer to exist any Lien on any asset  now owned or  hereafter  acquired  by it,
except for Permitted Encumbrances.

         SECTION 6.12. Maintenance of Existence. The Borrower shall maintain its
corporate  existence and carry on its business in substantially  the same manner
and in  substantially  the same  fields as such  business  is now carried on and
maintained.

         SECTION  6.13.  Dissolution.  The  Borrower  shall not suffer or permit
dissolution  or  liquidation  either in whole or in part or redeem or retire any
shares of its own stock.

         SECTION 6.14. Consolidations, Mergers and Sales of Assets. The Borrower
will not consolidate or merge with or into, or sell, lease or otherwise transfer
all or any  substantial  part of its assets to, any other  Person,  or create or
acquire any  Subsidiary,  or  discontinue  or  eliminate  any  business  line or
segment, provided that

         (a) the Borrower  may merge with another  Person if (i) such Person was
organized  under the laws of the United  States of America or one of its states,
(ii) the Borrower is the corporation surviving such merger and (iii) immediately
after  giving  effect to such  merger,  no Default  shall have  occurred  and be
continuing,

         (b) the foregoing  limitation on the sale,  lease or other  transfer of
assets and on the  discontinuation  or elimination of a business line or segment
shall not  prohibit,  during any  Fiscal  Quarter,  a transfer  of assets or the
discontinuance  or  elimination  of a  business  line or  segment  (in a  single
transaction or in a series of related  transactions) unless the aggregate assets
to be so  transferred  or  utilized  in a  business  line  or  segment  to be so
discontinued,  when  combined with all other assets  transferred,  and all other
assets  utilized in all other  business lines or segments  discontinued,  during
<PAGE>
such Fiscal Quarter and the immediately preceding seven Fiscal Quarters,  either
(x)  constituted  more than 10% of Total Assets at the end of the eighth  Fiscal
Quarter immediately  preceding such Fiscal Quarter, or (y) contributed more than
10% of Operating Profits during the eight Fiscal Quarters immediately  preceding
such Fiscal Quarter.

         SECTION  6.15.  Use of  Proceeds.  No  portion of the  proceeds  of the
Advances  will be used by the Borrower (i) in  connection  with any tender offer
for, or other  acquisition  of,  stock of any  corporation  with a view  towards
obtaining control of such other  corporation,  (ii) directly or indirectly,  for
the purpose,  whether  immediate,  incidental  or  ultimate,  of  purchasing  or
carrying  any  Margin  Stock,  or (iii)  for any  purpose  in  violation  of any
applicable law or regulation.

         SECTION  6.16.  Compliance  with Laws;  Payment of Taxes.  The Borrower
will,  and will  cause  each  member of the  Controlled  Group to,  comply  with
applicable  laws  (including but not limited to ERISA),  regulations and similar
requirements  of governmental  authorities  (including but not limited to PBGC),
except where the necessity of such  compliance is being  contested in good faith
through  appropriate  proceedings  diligently  pursued.  The  Borrower  will pay
promptly  when due all  taxes,  assessments,  governmental  charges,  claims for
labor,  supplies,  rent and other obligations  which, if unpaid,  might become a
lien against the property of the Borrower, except liabilities being contested in
good faith by appropriate  proceedings  diligently pursued and against which, if
requested by the Bank,  the Borrower  will set up reserves  satisfactory  to the
Bank.

         SECTION 6.17.  Insurance.  The Borrower will  maintain,  or cause to be
maintained,  public liability insurance and fire and extended coverage insurance
on all assets owned by it, all in such form and amounts as are  consistent  with
industry practices and satisfactory to the Bank and with such insurers as may be
satisfactory to the Bank. The Borrower will maintain, or cause to be maintained,
business interruption  insurance in such form and amounts as are satisfactory to
the Bank and with insurers as may be  satisfactory to the Bank. Such policies of
insurance or  certificates  evidencing such policies shall be deposited with the
Bank, or the Borrower will furnish to the Bank such evidence of insurance as the
Bank may require.  All such policies  insuring  Collateral  shall contain a loss
payable  clause,  in a form  satisfactory  to the Bank, in its sole  discretion,
naming the Bank as loss payee as its interests  may appear.  Each such policy of
insurance or  endorsement  shall contain a clause  requiring the insurer to give
the Bank not less than thirty (30) days  written  notice  before any such policy
shall be altered or cancelled or the coverage  thereunder reduced or restricted.
Unless  written  consent to the contrary is first  obtained  from the Bank,  all
proceeds payable under any such policy shall be payable in any event to the Bank
(regardless  of whether an Event of Default  has  occurred  hereunder),  and the
insurer named therein is hereby  authorized and directed by the Borrower to make
payment  for any loss  under  any such  policy of  insurance  to the Bank as its
interests may appear, rather than to the Borrower and the Bank jointly. The Bank
may act as the Borrower's  agent in adjusting or compromising any loss under any
such insurance policy and in collecting and receiving the proceeds from any such
policy,  and the  Bank  is  hereby  appointed  the  Borrower's  attorney-in-fact
(without  requiring  the Bank to act as such) to endorse  any check which may be
payable to the Borrower and to collect such returned or unearned premiums or the
proceeds of such  insurance,  and any amount so collected may be applied  toward
satisfaction  of any of the  liabilities,  indebtedness  or  obligations  of the
Borrower  evidenced  by the Note or  arising  from or in  connection  with  this
Agreement. The Borrower hereby agrees that, if the Borrower shall default in its
<PAGE>

obligation  hereunder to insure the Collateral in a manner  satisfactory  to the
Bank, or in the event the Borrower  fails to pay or cause to be paid the premium
on any insurance required hereunder, then the Bank shall have the right (but not
the obligation),  in its sole  discretion,  to procure such insurance and/or pay
any premium on such insurance,  and to charge the costs of same to the Borrower,
and the Bank may, at its option,  demand  reimbursement by the Borrower for such
amounts so paid with  interest  thereon at the Default Rate, or the Bank may, at
its option,  add all such costs and expenses  incurred by the Bank to the unpaid
principal  amount  of  the  liabilities,  indebtedness  and  obligations  of the
Borrower  evidenced  by the Note and  arising  from or in  connection  with this
Agreement  (which costs and expenses  shall become a part thereof and shall bear
interest  at the  Default  Rate  or  the  highest  contract  rate  permitted  by
applicable law whichever is less);  and all of the foregoing shall be secured by
the Collateral.

         SECTION 6.18.  Change in Fiscal Year.  The Borrower will not change its
Fiscal Year without the consent of the Bank.

         SECTION 6.19.  Maintenance of Property. The Borrower shall maintain all
of its  Properties  and  assets in good  condition,  repair and  working  order,
ordinary wear and tear excepted,  and will pay and discharge or cause to be paid
and discharged  when due, the cost of repairs to or maintenance of the same, and
will pay or cause to be paid all rental or  mortgage  payments  due on such real
estate.  The Borrower  hereby  agrees  that,  in the event it fails to pay or to
cause to be paid any such  payment  which  failure  continues  for five (5) days
(unless the validity or amount of such payment is being contested in good faith,
by  appropriate  proceedings  diligently  pursued  and  the  amount  thereof  is
adequately  reserved),  the Bank may (but shall have no obligation to) do so and
shall be reimbursed by the Borrower  therefor on demand with interest thereon at
the Default Rate. The Borrower will comply with all obligations under the leases
to which the Borrower is a party with regard to the Properties.

         SECTION 6.20.  Environmental Notices. The Borrower shall furnish to the
Bank prompt written notice of all Environmental Liabilities, pending, threatened
or anticipated Environmental Proceedings,  Environmental Notices,  Environmental
Judgments and Orders, and Environmental Releases at, on, in, under or in any way
affecting the Properties or any adjacent  property,  and all facts,  events,  or
conditions that could lead to any of the foregoing.

         SECTION 6.21.  Environmental  Matters.  The Borrower will not, and will
not permit any Third Party to, use,  produce,  manufacture,  process,  generate,
store, dispose of, manage at, or ship or transport to or from the Properties any
Hazardous  Materials except for Hazardous  Materials such as cleaning  solvents,
pesticides and other similar materials used, produced, manufactured,  processed,
generated,  stored,  disposed or managed in the  ordinary  course of business in
compliance with all applicable Environmental Requirements.

         SECTION 6.22.  Environmental Release. The Borrower agrees that upon the
occurrence of an  Environmental  Release it will act  immediately to investigate
the  extent of,  and to take  appropriate  remedial  action to  eliminate,  such
Environmental Release,  whether or not ordered or otherwise directed to do so by
any Environmental Authority.
<PAGE>

         SECTION 6.23. Transactions with Affiliates.  The only transactions with
Affiliates  of Borrower to which the Borrower is a party are those  transactions
with  Affiliates  disclosed in the  Borrower's  Form 10-K annual  report for the
Fiscal Year  ending  January 31,  1996 and the  Borrower's  Form 10-Q  quarterly
report for July 31, 1996,  copies of which have been  provided to the Bank;  and
otherwise,  the Borrower shall not enter into, or be a party to, any transaction
with any Affiliate of the Borrower (which Affiliate is not the Borrower), except
as  permitted  by law and in the  ordinary  course of business  and  pursuant to
reasonable terms which are disclosed to the Bank, consented to in writing by the
Bank,  and are no less  favorable  to  Borrower  than  would  be  obtained  in a
comparable arm's length transaction with a Person which is not an Affiliate.

         SECTION  6.24.  Collateral.  (a) The Borrower will collect its Accounts
and sell its Inventory only in the ordinary course of its business.

         (b) The  Borrower  will  keep  accurate  and  complete  records  of its
Accounts, Inventory and Equipment, consistent with sound business practices.

         (c) The  Borrower  will notify the Bank ten (10) days in advance of any
change in the location of any of its places of business or of the  establishment
of any new, or the  discontinuance of any existing,  place of business or of the
locations  at which any of the  Collateral  is kept;  and all  locations  of the
Borrower's  places of business and all locations at which any of the  Collateral
is kept are listed on Exhibit G attached hereto.

         (d) If requested by the Bank in writing,  the Borrower  will furnish to
the Bank  written  reports,  in addition to the other  reports and  certificates
required  of  Borrower  under  this  Agreement,   detailing  the  aging  of  the
Receivables  and  collections  thereof,  and containing  such  information  with
respect thereto as the Bank may specify.  Such reports shall be furnished by the
Borrower daily, if required by the Bank.

         (e) If  requested  by the  Bank in  writing  from  time to time  and at
intervals  designated  by  the  Bank,  Borrower  shall  provide  the  Bank  with
schedules,  in  addition  to the other  reports  and  certificates  required  of
Borrower under this  Agreement,  of all of Borrower's  Inventory,  itemizing and
describing the kind,  type,  quality and quantity of such Inventory,  Borrower's
cost therefor and selling price thereof, together with such support documents as
the Bank may  request,  including,  without  limitation,  invoices  relating  to
Borrower's purchase of goods listed in said schedule; and the Borrower shall not
sell Inventory on consignment.

         SECTION 6.25.  Interest Rate  Protection.  The Borrower will obtain and
maintain interest rate protection (for example, without limitation,  an interest
rate swap,  cap,  floor or collar),  satisfactory  to the Bank on at least fifty
percent (50%) of the Commitment.  The Borrower agrees that it will, from time to
time,  execute and deliver to the Bank,  or cause to be executed and  delivered,
such further instruments,  documents,  contracts and agreement as may reasonably
be required by the Bank for carrying  out the  requirements  for  interest  rate
protection or  facilitating  the  performance by the Borrower of its obligations
under this Section 6.25.
<PAGE>
                              ARTICLE VII. DEFAULTS

         SECTION 7.01.  Events of Default.  The occurrence of any one or more of
the following  events shall constitute an Event of Default by the Borrower under
this Agreement:

         (a) the  Borrower  shall  fail to pay  when  due any  principal  of any
Advance,  or shall  fail to pay any  interest  on any  Advance  within  five (5)
Domestic  Business Days after such  interest  shall become due, or shall fail to
pay any fee or other amounts payable hereunder within five (5) Domestic Business
Days after such fee or other amount becomes due; or

         (b) the  Borrower  shall  fail  to  observe  or  perform  any  covenant
contained in Sections 6.03 through 6.15, inclusive,  and Sections 6.17 and 6.24;
or

         (c) the  Borrower  shall fail to observe or  perform  any  covenant  or
agreement contained in this Agreement (other than those covered by clause (a) or
(b) above) for thirty  (30) days after the earlier of (i) the first day on which
a responsible  officer of the Borrower has  knowledge of such  failure,  or (ii)
written notice thereof has been given to the Borrower by the Bank; or

         (d) any  representation,  warranty,  certification or statement made by
the Borrower in Article V, or deemed made by the Borrower or any  Guarantor,  in
any certificate,  financial  statement or other document  delivered  pursuant to
this Agreement or the Guaranty  Agreement  shall prove to have been incorrect in
any material respect when made (or deemed made); or

         (e) the Borrower  shall fail to make any payment when due or within any
applicable  grace period in respect of Debt  outstanding  (other than the Note),
which Debt in the aggregate exceeds $100,000.00; or

         (f)  any  event  or  condition   shall  occur  which   results  in  the
acceleration  of  the  maturity  of  Debt  outstanding  of the  Borrower  or any
Guarantor  which in the aggregate  exceeds  $100,000.00  or the purchase of such
Debt by the Borrower (or its  designee) or by such  Guarantor  (or his designee)
prior to the  scheduled  maturity  thereof  or enables  (or,  with the giving of
notice or lapse of time or both,  would  enable) the holders of such Debt or any
Person acting on such  holders'  behalf to  accelerate  the maturity  thereof or
require  the  purchase  thereof by the  Borrower  (or its  designee)  or by such
Guarantor (or his designee)  prior to the scheduled  maturity  thereof,  without
regard to whether such  holders or other  Person shall have  exercised or waived
their right to do so;

         (g) the Borrower or any Guarantor  shall  commence a voluntary  case or
other  proceeding  seeking  liquidation,  reorganization  or other  relief  with
respect to itself or its debts under any bankruptcy, insolvency or other similar
<PAGE>
law now or  hereafter  in  effect  or  seeking  the  appointment  of a  trustee,
receiver,  liquidator,  custodian  or  other  similar  official  of  it  or  any
substantial part of its property,  or shall consent to any such relief or to the
appointment of or taking  possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the  benefit  of  creditors,  or shall fail  generally  to pay its debts as they
become  due,  or  shall  take  any  corporate  action  to  authorize  any of the
foregoing; or

         (h) an involuntary case or other proceeding shall be commenced  against
the  Borrower or any  Guarantor  seeking  liquidation,  reorganization  or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the  appointment of a trustee,
receiver,  liquidator,  custodian  or  other  similar  official  of  it  or  any
substantial part of its property,  and such involuntary case or other proceeding
shall remain  undismissed  and unstayed for a period of 60 days; or an order for
relief shall be entered  against the Borrower or any Guarantor under the federal
bankruptcy laws as now or hereafter in effect; or

         (i) the  Borrower or any member of the  Controlled  Group shall fail to
pay when due any material amount which it shall have become liable to pay to the
PBGC or to any  Plan  under  Title IV of  ERISA;  or the  PBGC  shall  institute
proceedings  under  Title IV of ERISA to  terminate  or to cause a trustee to be
appointed  to  administer  any  such  Plan or  Plans  or a  proceeding  shall be
instituted  by a fiduciary  of any such Plan or Plans to enforce  Section 515 or
4219(c)(5) of ERISA and such proceeding  shall not have been dismissed within 30
days thereafter; or a condition shall exist by reason of which the PBGC would be
entitled  to obtain a decree  adjudicating  that any such Plan or Plans  must be
terminated;  or the Borrower or any other member of the  Controlled  Group shall
enter into,  contribute or be obligated to contribute to, terminate or incur any
withdrawal liability with respect to, a Multiemployer Plan; or

         (j) one or more  judgments  or orders  for the  payment  of money in an
aggregate amount in excess of $100,000.00 shall be rendered against the Borrower
or any  Guarantor  and such  judgment or order shall  continue  unsatisfied  and
unstayed for a period of 30 days; or

         (k) a federal  tax lien  shall be filed  against  the  Borrower  or any
Guarantor  under  Section  6323 of the Code or a lien of the PBGC shall be filed
against the Borrower under Section 4068 of ERISA and in any case such lien shall
remain undischarged for a period of 25 days after the date of filing; or

         (l) (i) any Person or two or more Persons  (other than S. Leslie Flegel
and  William H. Lee,  Jr.)  acting in concert  shall  have  acquired  beneficial
ownership  (within  the  meaning of Rule 13d-3 of the  Securities  and  Exchange
Commission  under  the  Securities  Exchange  Act of 1934) of 20% or more of the
outstanding shares of the voting stock of the Borrower; or (ii) as of any date a
majority of the Board of Directors of the Borrower  consists of individuals  who
<PAGE>
were not either (A)  directors of the Borrower as of the  corresponding  date of
the previous year, (B) selected or nominated to become directors by the Board of
Directors of the Borrower of which a majority consisted of individuals described
in clause (A), or (C) selected or nominated to become  directors by the Board of
Directors of the Borrower of which a majority consisted of individuals described
in clause (A) and individuals described in clause (B); or

         (m) a judgment  creditor  of the  Borrower  shall  lawfully  obtain and
retain  for at least five (5) days  possession  of any  material  portion of the
Collateral  by any  lawful  means,  including,  but  without  limitation,  levy,
distraint, replevin or self-help; or

         (n) the  Guarantors  (or any one of  them)  shall  fail to  observe  or
perform any  obligation  under the Guaranty  Agreement or any other  document to
which  any  Guarantor  is a  party  relating  to the  Advances  or the  Guaranty
Agreement; or

         (o) a default or an event of default under any of the Loan Documents or
Collateral Documents shall occur and be continuing; or

         (p) the  occurrence  of any  event,  act or  condition  which  the Bank
determines  either does or has a  reasonable  probability  of causing a Material
Adverse Effect; or

         (q) a breach,  violation,  failure of performance,  default or event of
default  shall  occur  and be  continuing  under  the FMA  Agreement  or the FMA
Agreement is terminated.

         SECTION 7.02.  Remedies on Default.  Upon the occurrence of an Event of
Default, the Bank may, by notice to the Borrower, terminate the Commitment which
shall  thereupon  terminate,  and by notice  to the  Borrower  declare  the Note
(together with accrued interest thereon) to be, and the Note and all outstanding
Advances  shall   thereupon   become,   immediately   due  and  payable  without
presentment,  demand,  protest  or other  notice of any  kind,  all of which are
hereby waived by the Borrower;  provided that if any Event of Default  specified
in clause (g) or (h) above  occurs  with  respect to the  Borrower,  without any
notice  to the  Borrower  or any other act by the  Bank,  the  Commitment  shall
thereupon  terminate and the Note and all  outstanding  Advances  (together with
accrued  interest  thereon)  and fees shall become  immediately  due and payable
without presentment,  demand,  protest or other notice of any kind, all of which
are hereby  waived by the  Borrower.  In addition and upon the  occurrence of an
Event of Default, the Bank may exercise any rights, powers or remedies under any
of the Loan  Documents.  Notwithstanding  the  foregoing,  the Bank  shall  have
available  to it all  rights  and  remedies  provided  under the Loan  Documents
(including,  without  limitation,  the  Collateral  Documents)  and in  addition
thereto, all other remedies at law or in equity, and may exercise any one or all
of them.

         SECTION 7.03.  Security  Interest;  Offset.  In addition to, and not in
limitation  of, all rights of offset  that the Bank or other  holder of the Note
may have under  applicable  law, the Borrower  hereby grants to the Bank, and to
each  Participant,  Assignee or other  Transferee,  as security for the full and
punctual  payment  and  performance  of the  obligations  to pay to the Bank the
principal of and interest on the Advances  and other  amounts due  hereunder,  a
<PAGE>
continuing lien on and security interest in all deposits and other sums credited
by or due from the Bank (or such  Participant,  Assignee or other Transferee) to
the Borrower or subject to  withdrawal by the  Borrower;  and  regardless of the
adequacy  of any  collateral  or  other  means  of  obtaining  repayment  of the
Obligations,  the Bank (and each such Assignee  and, to the extent  permitted by
applicable  law, each such  Participant and other  Transferee)  may, at any time
after the  occurrence of an Event of Default and without notice to the Borrower,
set off the whole or any  portion or portions  of any or all such  deposits  and
other sums against the amounts owing under this Agreement and the Note,  whether
or not any other Person or Persons could also withdraw money therefrom.


                           ARTICLE VIII. MISCELLANEOUS

         SECTION 8.01. Notices.  All notices,  requests and other communications
to any party hereunder shall be in writing (including facsimile  transmission or
similar  writing)  and shall be given to such party at its address or  facsimile
number set forth below or such other  address or facsimile  number as such party
may hereafter specify for the purpose by notice to the other party:

         (a) If to the Borrower:

             The Source Company
             11644 Lilburn Park Road
             St. Louis, Missouri 63146
             Attention: Mr. S. Leslie Flegel
             Fax number: (314) 995-9022

         (b) If to the Bank:

             Wachovia Bank of North Carolina, N.A.
             Post Office Box 21048
             Greensboro, North Carolina 27420-1048
             [230 North Elm Street - 27401-2429]
             Attention: John K. Stephens
             Fax number: 910-412-7100

Each such notice, request or other communication shall be effective (i) if given
by facsimile transmission,  when such facsimile is transmitted to the fax number
specified in this Section and the facsimile  machine used by the sender provides
a written confirmation that such facsimile has been so transmitted or receipt of
such facsimile  transmission is otherwise  confirmed,  (ii) if given by mail, 72
hours  after such  communication  is  deposited  in the mails  with first  class
postage  prepaid,  addressed  as aforesaid or (iii) if given by any other means,
when delivered at the address  specified in this Section;  provided that notices
to the Bank  under  Article  II or  Article  III  shall not be  effective  until
received.

         SECTION 8.02. No Waivers. No failure or delay by the Bank in exercising
any  right,  power or  privilege  hereunder  or under the Note or any other Loan
Documents  shall  operate  as a waiver  thereof  nor shall any single or partial
<PAGE>
exercise  thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.  The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.

         SECTION 8.03.  Expenses;  Documentary Taxes;  Indemnification.  (a) The
Borrower shall pay (i) all out-of-pocket expenses of the Bank, including without
limitation,  reasonable  attorneys' fees and all  disbursements of attorneys for
the Bank, in connection  with the  preparation  of this  Agreement and the other
Loan Documents,  any waiver or consent  hereunder or any amendment hereof or any
actual or alleged Default hereunder and (ii) if an Event of Default occurs,  all
out-of-pocket expenses incurred by the Bank, including fees and disbursements of
counsel,  in  connection  with such Event of Default  and  collection  and other
enforcement  proceedings resulting therefrom,  including  out-of-pocket expenses
incurred in enforcing this Agreement and the other Loan Documents.

         (b) The Borrower shall  indemnify the Bank against any transfer  taxes,
documentary taxes, assessments or charges made by any Authority by reason of the
execution and delivery of this Agreement or the other Loan Documents.

         (c) The Borrower shall  indemnify the Bank and each  Affiliate  thereof
and their respective  directors,  officers,  employees and agents from, and hold
each of them  harmless  against,  any and all  losses,  liabilities,  claims  or
damages  to which  any of them  may  become  subject,  insofar  as such  losses,
liabilities,  claims  or  damages  arise  out of or  result  from any  actual or
proposed use by the  Borrower of the proceeds of any  extension of credit by the
Bank  hereunder  or breach by the  Borrower of this  Agreement or any other Loan
Document or from investigation,  litigation (including,  without limitation, any
actions  taken by the Bank to enforce  this  Agreement  or any of the other Loan
Documents) or other proceeding  (including,  without limitation,  any threatened
investigation or proceeding)  relating to the foregoing,  and the Borrower shall
reimburse the Bank, and each Affiliate  thereof and their respective  directors,
officers, employees and agents, upon demand for any expenses (including, without
limitation,  reasonable  attorneys' fees and all  disbursements of attorneys for
the  Bank,  any  Affiliate  thereof,  or any  such  other  Person)  incurred  in
connection  with any such  investigation  or proceeding;  but excluding any such
losses, liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified.

         SECTION 8.04.  Amendments and Waivers. Any provision of this Agreement,
the Note or any other Loan  Documents  may be amended or waived if, but only if,
such  amendment  or waiver is in writing and is signed by the  Borrower  and the
Bank.

         SECTION  8.05.  Successors  and  Assigns.  (a) The  provisions  of this
Agreement  shall be binding upon and inure to the benefit of the parties  hereto
and their respective successors and assigns;  provided that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement.

         (b) The  Bank  may at any  time  sell to one or  more  Persons  (each a
"Participant")  participating interests in any Advance, the Note, the Commitment
hereunder or any other interest of the Bank hereunder.  In the event of any such
sale by the  Bank of a  participating  interest  to a  Participant,  the  Bank's
obligations under this Agreement shall remain  unchanged,  the Bank shall remain
solely responsible for the performance thereof, the Bank shall remain the holder
<PAGE>
of any the Note for all purposes  under this  Agreement,  and the Borrower shall
continue to deal solely and directly with the Bank in connection with the Bank's
rights and  obligations  under  this  Agreement.  In no event  shall the Bank be
obligated to the Participant to take or refrain from taking any action hereunder
except  that the Bank may agree  that it will not  (except as  provided  below),
without  the  consent  of the  Participant,  agree to (i) the change of any date
fixed for the payment of  principal  of or  interest  on the related  Advance or
Advances,  (ii) the change of the amount of any principal,  interest or fees due
on any date fixed for the payment thereof with respect to the related Advance or
Advances,  (iii) the change of the principal of the related Advance or Advances,
(iv) any change in the rate at which either  interest is payable  thereon or (if
the  Participant  is entitled  to any part  thereof)  commitment  fee is payable
hereunder from the rate at which the Participant is entitled to receive interest
or commitment fee (as the case may be) in respect of such participation, (v) the
release or substitution of all or any substantial part of the Collateral held as
security for the Advances,  or (vi) the release of the Guaranty  Agreement given
to support payment of the Advances. The Bank shall, within ten Domestic Business
Days after  selling a  participating  interest  in any  Advance,  the Note,  the
Commitment or other  interest  under this  Agreement,  provide the Borrower with
written  notification  stating that such sale has occurred and  identifying  the
Participant and the interest purchased by such Participant.  The Borrower agrees
that each  Participant  shall be  entitled  to the  benefits  of Article III and
Section 7.03 with respect to its participation in Advances outstanding from time
to time.

         (c) The Bank may at any time  assign to one or more banks or  financial
institutions  (each an "Assignee")  all, or a proportionate  part of all, of its
rights and  obligations  under this  Agreement  and the Note,  and such Assignee
shall  assume all such rights and  obligations,  pursuant to an  Assignment  and
Acceptance in the form attached  hereto as Exhibit C executed by such  Assignee,
the Bank and the Borrower; provided that (i) no interest may be sold by the Bank
pursuant to this paragraph (c) unless the Assignee shall agree to assume ratably
equivalent  portions of the Commitment,  and (ii) no interest may be sold by the
Bank pursuant to this paragraph (c) to any Assignee which is not an Affiliate of
the Bank  without  the  consent  of the  Borrower,  which  consent  shall not be
unreasonably  withheld or delayed.  Upon (A)  execution  of the  Assignment  and
Acceptance by the Bank,  such  Assignee,  and the  Borrower,  (B) delivery of an
executed copy of the Assignment and Acceptance to the Borrower,  and (C) payment
by such  Assignee to the Bank of an amount  equal to the  purchase  price agreed
between the Bank and such  Assignee,  such Assignee  shall for all purposes be a
Bank party to this Agreement and shall have all the rights and  obligations of a
Bank under this  Agreement  to the same extent as if it were an  original  party
hereto with a Commitment as set forth in such instrument of assumption,  and the
Bank shall be released from its obligations hereunder to a corresponding extent,
and no further  consent or action by the Borrower or the Bank shall be required.
Upon the consummation of any transfer to an Assignee  pursuant to this paragraph
(c), the Bank and the Borrower shall make  appropriate  arrangements so that, if
required, a new Note is issued to such Assignee.

         (d) Subject to the provisions of Section 8.06, the Borrower  authorizes
the Bank to disclose to any  Participant,  Assignee or other  transferee (each a
"Transferee") and any prospective  Transferee any and all financial  information
in the Bank's possession concerning the Borrower which has been delivered to the
Bank by the Borrower  pursuant to this  Agreement or which has been delivered to
<PAGE>

the Bank by the Borrower in connection with the Bank's credit  evaluation  prior
to entering into this Agreement.

         (e) No  Transferee  shall be entitled  to receive  any greater  payment
under Section 3.03 than the transferor  Bank would have been entitled to receive
with respect to the rights  transferred,  unless such  transfer is made with the
Borrower's  prior written consent or by reason of the provisions of Section 3.03
requiring  the Bank to  designate  a  different  Lending  Office  under  certain
circumstances  or at a time when the  circumstances  giving rise to such greater
payment did not exist.

         (f) Anything in this Section 8.05 to the contrary notwithstanding,  the
Bank may assign and pledge all or any Advances and/or obligations owing to it to
any Federal  Reserve Bank or the United States  Treasury as collateral  security
pursuant to Regulation A of the Board of Governors of the Federal Reserve System
and Operating  Circular issued by such Federal  Reserve Bank,  provided that any
payment in respect of such  assigned  Advances  and/or  obligations  made by the
Borrower  to the Bank in  accordance  with the  terms  of this  Agreement  shall
satisfy  the  Borrower's  obligations  hereunder  in  respect  of such  assigned
Advances  and/or  obligations to the extent of such payment.  No such assignment
shall release the Bank from its obligations hereunder.

         SECTION  8.06.  Confidentiality.  The Bank agrees to exercise  its best
efforts to keep any  information  delivered or made available by the Borrower to
it which is clearly indicated to be confidential information,  confidential from
any one other  than  persons  employed  or  retained  by the Bank who are or are
expected  to  become   engaged  in   evaluating,   approving,   structuring   or
administering the Advances; provided, however, that nothing herein shall prevent
the Bank from  disclosing  such  information  (i) upon the order of any court or
administrative  agency, (ii) upon the request or demand of any regulatory agency
or authority  having  jurisdiction  over the Bank, (iii) which has been publicly
disclosed,  (iv) to the  extent  reasonably  required  in  connection  with  any
litigation to which the Bank or their respective  Affiliates may be a party, (v)
to the extent reasonably  required in connection with the exercise of any remedy
hereunder,  (vi) to the Bank's legal counsel and independent  auditors and (vii)
to any actual or proposed  Participant,  Assignee or other  Transferee of all or
part of its  rights  hereunder  which has  agreed in  writing to be bound by the
provisions of this Section.

         SECTION 8.07.  Interest  Limitation.  Notwithstanding any other term of
this  Agreement,  the Note or any other Loan  Document,  the  maximum  amount of
interest which may be charged to or collected  from any person liable  hereunder
or under the Note by the Bank shall be  absolutely  limited  to, and shall in no
event exceed,  the maximum amount or interest which could lawfully be charged or
collected  under  applicable  law  (including,  to the  extent  applicable,  the
provisions  of section  5197 of the  Revised  Statutes  of the United  States of
America, as amended,  12 U.S.C.  ss.85, as amended),  so that the maximum of all
amounts  constituting  interest under applicable law, howsoever computed,  shall
never exceed as to any Person liable therefor such lawful maximum,  and any term
of this Agreement,  the Note or any other Loan Document which could be construed
as providing  for interest in excess of such lawful  maximum shall be and hereby
is made expressly subject to and modified by the provisions of this paragraph.

         SECTION  8.08.  Survival  of Certain  Obligations.  Article III and the
obligations of the Borrower thereunder,  and Section 8.03 and the obligations of
the Borrower  thereunder,  shall  survive,  and shall continue to be enforceable
notwithstanding,  the  termination  of this Agreement and the Commitment and the
payment in full of the principal of and interest on the Advances.
<PAGE>

         SECTION  8.09.  Governing  Law.  This  Agreement  and the Note shall be
construed  in  accordance  with and  governed  by the law of the  State of North
Carolina.  This  Agreement  and  the  Note  are  intended  to  be  effective  as
instruments executed under seal.

         SECTION 8.10. Counterparts.  This Agreement may be signed in any number
of counterparts,  each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.

         SECTION  8.11.  Consent to  Jurisdiction.  The  Borrower (a) submits to
personal jurisdiction in the State of North Carolina, the courts thereof and the
United States  District  Courts  sitting  therein,  for the  enforcement of this
Agreement,  the  Note and the  other  Loan  Documents,  (b)  waives  any and all
personal  rights  under  the law of any  jurisdiction  to  object  on any  basis
(including, without limitation, inconvenience of forum) to jurisdiction or venue
within the State of North Carolina for the purpose of litigation to enforce this
Agreement,  the Note or the other Loan Documents, and (c) agrees that service of
process  may be made upon it in the manner  prescribed  in Section  8.01 for the
giving of notice to the  Borrower.  Nothing  herein  contained,  however,  shall
prevent the Bank from bringing any action or exercising  any rights  against any
security  and against  the  Borrower  personally,  and against any assets of the
Borrower, within any other state or jurisdiction.

         SECTION 8.12.  Severability.  If any provisions of this Agreement shall
be held invalid under any applicable  laws, such invalidity shall not affect any
other  provision of this  Agreement that can be given effect without the invalid
provision, and, to this end, the provisions hereof are severable.

         SECTION  8.13.  Captions.  Captions  in  this  Agreement  are  for  the
convenience of reference only and shall not affect the meaning or interpretation
of the provisions hereof.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the year and day first above written.

                                   BORROWER:
  
                                   THE SOURCE COMPANY
ATTEST:


____________________________       By:________________________________________
Assistant Secretary                Title: Chairman and Chief Executive Officer



[CORPORATE SEAL]

<PAGE>


                                   BANK:

Lending Office                     WACHOVIA BANK OF NORTH CAROLINA, N.A.
Wachovia Bank of North
Carolina, N.A.                     By:_________________________________________
230 N. Elm Street                  Title:______________________________________
Greensboro, North Carolina 27401