Exhibit 4

                          LOAN AND SECURITY AGREEMENT

                                 BY AND BETWEEN

                         CONGRESS FINANCIAL CORPORATION
                                    AS LENDER

                                       AND

                                  BONTEX, INC.
                                   AS BORROWER


                             Dated: January 26, 2000



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                           LOAN AND SECURITY AGREEMENT

         This Loan and Security Agreement ("Agreement") dated January 26, 2000
is entered into by and between Congress Financial Corporation ("Lender") and
Bontex, Inc., a Virginia corporation ("Borrower").

                              W I T N E S S E T H:

         WHEREAS, Borrower has requested that Lender enter into certain
financing arrangements with Borrower pursuant to which Lender may make loans and
provide other financial accommodations to Borrower; and

         WHEREAS, Lender is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth herein;

         NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:

SECTION 1.  DEFINITIONS

         All terms used herein which are defined in Article 1 or Article 9 of
the Uniform Commercial Code shall have the meanings given therein unless
otherwise defined in this Agreement. All references to the plural herein shall
also mean the singular and to the singular shall also mean the plural unless the
context otherwise requires. All references to Borrower and Lender pursuant to
the definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns. The words "hereof",
"herein", "hereunder", "this Agreement" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. The
word "including" when used in this Agreement shall mean "including, without
limitation". An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 11.3 or is cured in a
manner satisfactory to Lender, if such Event of Default is capable of being
cured as determined by Lender. Any accounting term used herein unless otherwise
defined in this Agreement shall have the meanings customarily given to such term
in accordance with GAAP. For purposes of this Agreement, the following terms
shall have the respective meanings given to them below:

         1.1 "Accounts" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.

         1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one-sixteenth (1/16) of one (1.0%) percent)
determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a
percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes
hereof, "Reserve Percentage" shall mean the reserve percentage, expressed as a
decimal, prescribed by any


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United States or foreign banking authority for determining the reserve
requirement which is or would be applicable to deposits of United States dollars
in a non-United States or an international banking office of Reference Bank used
to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with the
proceeds of such deposit, whether or not the Reference Bank actually holds or
has made any such deposits or loans. The Adjusted Eurodollar Rate shall be
adjusted on and as of the effective day of any change in the Reserve Percentage.

         1.3 "Adjusted Tangible Net Worth" shall mean as to Borrower, at any
time, in accordance with GAAP (except as otherwise specifically set forth
below), on a consolidated basis for Borrower and its subsidiaries (if any), the
amount equal to (a) the difference between: (i) the aggregate net book value of
all assets of Borrower and its subsidiaries, calculating the book value of
inventory for this purpose on a first-in-first-out basis, after deducting from
such book values (A) all appropriate reserves in accordance with GAAP (including
all reserves for doubtful receivables, obsolescence, depreciation and
amortization); (B) all accounts receivable from Borrower's parent or other
related parties; (C) deferred taxes and loan origination costs; and (D) all
intangible assets, including goodwill, trademarks, trade names, licenses and
other assets classified as intangible in accordance with GAAP and (ii) the
aggregate amount of the indebtedness and other liabilities of Borrower and its
subsidiaries (including tax and other proper accruals); plus (b) Subordinated
Debt. Any fluctuation in the exchange rate between the United States dollar and
any foreign currency from exchange rate as of date hereof shall not be
considered for purposes of determining Adjusted Tangible Net Worth.

         1.4 "Availability Reserves" shall mean, as of any date of
determination, such amounts as Lender may from time to time establish and revise
in good faith reducing the amount of Revolving Loans which would otherwise be
available to Borrower under the lending formula(s) provided for herein: to
reflect events, conditions, contingencies or risks which, as determined by
Lender in good faith, do or may affect either the Collateral or any other
property which is security for the Obligations or its value, the assets,
business or prospects of Borrower or any Obligor or the security interests and
other rights of Lender in the Collateral (including the enforceability,
perfection and priority thereof) or to reflect Lender's good faith belief that
any collateral report or financial information furnished by or on behalf of
Borrower or any Obligor to Lender is or may have been incomplete, inaccurate or
misleading in any material respect or in respect of any state of facts which
Lender determines in good faith constitutes an Event of Default or may, with
notice or passage of time or both, constitute an Event of Default.

         1.5 "Blocked Accounts" shall have the meaning set forth in Section
6.3 hereof.

         1.6 "Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the State of New York, and a day on which the Reference Bank and
Lender are open for the transaction of business, except that if a determination
of a Business Day shall relate to any Eurodollar Rate Loans, the term Business
Day shall also exclude any day on which banks are closed for dealings in dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market.

         1.7 "Collateral" shall have the meaning set forth in Section 5 hereof.

         1.8 "Deeds of Trust" shall mean these certain mortgages or deed of
 trusts, as the same may


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be amended, modified, renewed, extended, replaced, restated or substituted from
time to time, to be executed by Borrower on or prior to the date of this
Agreement under which Borrower shall grant and convey to Lender, or to trustees
for the benefit of Lender, as security for the Obligations, a lien upon the Real
Property.

         1.9 "Eligible Accounts" shall mean Accounts created by Borrower which
are and continue to be acceptable to Lender (in its sole discretion) based on
the criteria set forth below. In general, Accounts shall be Eligible Accounts
if:

                  (a) Such Accounts arise from the actual and bona fide sale and
delivery of goods by Borrower or rendition of services by Borrower in the
ordinary course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related thereto;

                  (b) Such Accounts are not unpaid more than the earlier of (i)
sixty (60) days from their next due date or (ii) ninety (90) days after the date
of the original invoice for them;

                  (c) Such Accounts comply with the terms and conditions
contained in Section 7.2(c) of this Agreement;

                  (d) Such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval, or other terms under which
payment by the account debtor may be conditional or contingent;

                  (e) The chief executive office of the account debtor with
respect to such Accounts is located in the United States of America, or, at
Lender's option, if either: the account debtor has delivered to Borrower an
irrevocable letter of credit issued or confirmed by a bank satisfactory to
Lender and payable only in the United States of America and in U.S. dollars,
sufficient to cover such Account, in form and substance satisfactory to Lender
and, if required by Lender, the original of such letter of credit has been
delivered to Lender or Lender's agent and the issuer thereof notified of the
assignment of the proceeds of such letter of credit to Lender (and, as to any
Account from Stanco International Corporation ("Stanco"), Borrower's draft
against the letter of credit shall have been accepted by a domestic bank
acceptable to Congress for Settlement within 120 days), or such Account is
subject to credit insurance payable to Lender issued by an insurer and on terms
and in an amount acceptable to Lender, or such Account is otherwise acceptable
in all respects to Lender in its sole and absolute discretion (subject to such
lending formula with respect thereto as Lender may determine);

                  (f) Such Accounts do not consist of progress billings, bill
and hold invoices or retainage invoices, except as to bill and hold invoices, if
Lender shall have received an agreement in writing from the account debtor, in
form and substance satisfactory to Lender, confirming the unconditional
obligation of the account debtor to take the goods related thereto and pay such
invoice;

                  (g) The account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to, any right of setoff against such
Accounts (but the portion of the Accounts of such account


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debtor in excess of the amount at any time and from time to time owed by
Borrower to such account debtor or claimed owed by such account debtor may be
deemed Eligible Accounts);

                  (h) There are no facts, events or occurrences which would
impair the validity, enforceability or collectibility of such Accounts or reduce
the amount payable or delay payment thereunder;

                  (i) Such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;

                  (j) With the exception of Stanco, neither the account debtor
nor any officer or employee of the account debtor with respect to such Accounts
is an officer, employee or agent of or affiliated with Borrower directly or
indirectly by virtue of family membership, ownership, control, management or
otherwise;

                  (k) The account debtors with respect to such Accounts are not
any foreign government, the United States of America, any state, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any state, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
state or local law, if applicable, has been complied with in a manner
satisfactory to Lender;

                  (l) There are no proceedings or actions which are pending or,
to the knowledge of Borrower, threatened against the account debtors with
respect to such Accounts which would reasonably be expected to result in any
material adverse change in any such account debtor's financial condition;

                  (m) Such Accounts of a single account debtor or its affiliates
(other than governmental agencies and other than Eligible Letter of Credit
Accounts) do not constitute more than twenty percent (20%) of all otherwise
Eligible Accounts (but the portion of the Accounts not in excess of such
percentage may be deemed Eligible Accounts);

                  (n) Such Accounts are not owed by an account debtor who has
Accounts unpaid more than ninety (90) days after the date of the original
invoice for them or sixty (60) days past the due date which constitute more than
fifty (50%) percent of the total Accounts of such account debtor;

                  (o) Such Accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed the credit limit with respect to such
account debtors as determined by Borrower from time to time and acceptable to
Lender in Lender's sole but reasonable discretion (but the portion of the
Accounts not in excess of such credit limit may be deemed Eligible Accounts);
and

                  (p) Such Accounts are owed by account debtors deemed
creditworthy at all times by Lender, as determined by Lender.



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General criteria for Eligible Accounts may be established and revised from time
to time by Lender in good faith. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.


         1.10 "Eligible Letter of Credit Accounts" shall mean an Account due
from a Person identified on Schedule 1.10 hereto secured by an irrevocable
letter of credit issued or confirmed by a bank satisfactory to Lender and
payable only in the United States of America and in U.S. dollars, sufficient to
cover such Account, in form and substance satisfactory to Lender and meeting the
definition of an Eligible Account except for clause 1.9 (b), provided the
Account is unpaid for less than one hundred twenty (120) days after the date of
the original invoice.

         1.11 "Eligible Inventory" shall mean Inventory consisting of finished
goods held for resale in the ordinary course of the business of Borrower and raw
materials for such finished goods which are acceptable to Lender based on the
criteria set forth below. In general, Eligible Inventory shall not include:
work-in-process; components which are not part of finished goods; spare parts
for equipment; packaging and shipping materials; supplies used or consumed in
Borrower's business; Inventory at premises other than those owned and controlled
by Borrower, except if Lender shall have received an agreement in writing from
the person in possession of such Inventory and/or the owner or operator of such
premises in form and substance satisfactory to Lender acknowledging Lender's
first priority security interest in the Inventory, waiving security interests
and claims by such person against the Inventory and permitting Lender access to,
and the right to remain on, the premises so as to exercise Lender's rights and
remedies and otherwise deal with the Collateral; Inventory subject to a security
interest or lien in favor of any person other than Lender except those permitted
in this Agreement; bill and hold goods; unserviceable, obsolete or slow moving
Inventory (the parties agreeing that finished goods Inventory in existence more
than six (6) months shall conclusively be presumed to be obsolete); Inventory
which is not subject to the first priority, valid and perfected security
interest of Lender; returned, damaged and/or defective Inventory; and Inventory
purchased or sold on consignment. General criteria for Eligible Inventory may be
established and revised from time to time by Lender (in its sole but reasonable
discretion). Any Inventory which is not Eligible Inventory shall nevertheless be
part of the Collateral.

         1.12 "Environmental Laws" shall mean any federal or state statute,
ordinance, law, rule or regulation at any time enacted or adopted by any
federal, state or local government, governmental agency or other governmental or
quasi-governmental entity pertaining to environmental matters, including,
without limitation, the Federal Comprehensive Environmental Response
Compensation Liability Act ("CERCLA"), Environmental Cleanup Responsibility Act
("ECRA"), and the Federal Resource Conservation Recovery Act ("RCRA") or the
releasing, spilling, leaking, pumping, pouring, emitting, emptying, dumping or
otherwise disposing of Hazardous Waste (as defined in 12 U.S.C.
ss.6903(5)) or Hazardous Materials.

         1.13 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers, computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.



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         1.14 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.

         1.15 "Eurodollar Rate" shall mean with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1.0%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrower and approved by Lender) on or
about 9:00 a.m. (New York time) two (2) Business Days prior to the commencement
of such Interest Period in amounts substantially equal to the principal amount
of the Eurodollar Rate Loans requested by and available to Borrower in
accordance with this Agreement, with a maturity of comparable duration to the
Interest Period selected by Borrower.

         1.16 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.

         1.17 "Excess Availability" shall mean the amount, as determined by
Lender, calculated at any time, equal to: (a) the lesser of (i) the amount of
the Revolving Loans available to Borrower as of such time based on the
applicable lending formula, as determined by Lender and subject to the sublimits
and Availability Reserves from time to time established by Lender hereunder and
(ii) the Maximum Credit, minus (b) the sum of (i) the amount of all then
outstanding and unpaid Revolving Loans and (ii) the aggregate amount of all
trade payables of Borrower which are more than sixty (60) days past due as of
such time.

         1.18 "Financing Agreements" shall mean, collectively, this Agreement
and all notes, Deeds of Trust, guarantees, security agreements, blocked account
agreements, lock box agreements, agreements relating to letters of credit, and
other agreements, documents and instruments now or at any time hereafter
executed and/or delivered by Borrower or any Obligor in connection with this
Agreement, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.

         1.19 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied.

         1.20 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous constituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).



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         1.21 "Information Certificate" shall mean the Information Certificate
of Borrower attached hereto as Exhibit A containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.

         1.22 "Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), three (3) or six (6) months duration as
Borrower may elect, the exact duration to be determined in accordance with the
customary practice in the applicable Eurodollar Rate market; provided, that,
Borrower may not elect an Interest Period which will end after the last day of
the then-current term of this Agreement.

         1.23 "Interest Rate" shall mean, as to Prime Rate Loans, a rate of one
percent (1.0%) per annum in excess of the Prime Rate and, as to Eurodollar Rate
Loans, a rate of three and three quarters of one percent (3.75%) per annum in
excess of the Adjusted Eurodollar Rate (based on the Eurodollar Rate applicable
for the Interest Period selected by Borrower as in effect three (3) Business
Days after the date of receipt by Lender of the request of Borrower for such
Eurodollar Rate Loans in accordance with the terms hereof, whether such rate is
higher or lower than any rate previously quoted to Borrower).

         1.24 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.

         1.25 "Loans" shall mean the Revolving Loans and the Term Loan.

         1.26 "Maximum Credit" shall mean the maximum amount of Revolving Loans
outstanding under Section 2.1 of this Agreement, which shall be Four Million
Dollars ($4,000,000).

         1.27 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less sales, excise or similar taxes included in the amount
thereof and returns, discounts, claims, credits and allowances of any nature at
any time issued, owing, granted, outstanding, available or claimed with respect
thereto.

         1.28 "Net Amount of Eligible Letter of Credit Accounts" shall mean the
gross amount of Eligible Letter of Credit Accounts less sales, excise or similar
taxes included in the amount thereof and returns, discounts, claims, credits and
allowances of any nature at any time issued, owing, granted, outstanding,
available or claimed with respect thereto.

         1.29 "Obligations" shall mean any and all Revolving Loans, the Term
Loan and all other obligations, liabilities and indebtedness of every kind,
nature and description owing by Borrower to Lender and/or its affiliates,
including principal, interest, charges, fees, costs and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise,
whether arising under this Agreement or otherwise, whether now existing or
hereafter arising, whether arising before, during or after the initial or any
renewal term of this Agreement or after the commencement of any case with
respect to Borrower under the United States Bankruptcy Code or any similar
statute (including the payment of interest and other amounts which would accrue
and become due but for the


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commencement of such case, whether or not such amounts are allowed or allowable
in whole or in part in such case), whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, secured or unsecured, and however acquired by Lender.

         1.30 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than Borrower.

         1.31 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.

         1.32 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including any corporation which elects
subchapter S status under the Internal Revenue Code of 1986, as amended),
limited liability company, limited liability partnership, business trust,
unincorporated association, joint stock corporation, trust, joint venture or
other entity or any government or any agency or instrumentality or political
subdivision thereof.

         1.33 "Prime Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Prime Rate in accordance with the terms
thereof.

         1.34 "Prime Rate" shall mean the rate from time to time publicly
announced by First Union National Bank, or its successors, at its office in
Philadelphia, Pennsylvania, as its prime rate, whether or not such announced
rate is the best rate available at such bank.

         1.35 "Real Property" shall mean those certain parcels of ground and the
improvements thereon as described in the Deeds of Trust.

         1.36 "Records" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).

         1.37 "Reference Bank" shall mean First Union National Bank, or such
other bank as Lender may from time to time designate in its sole discretion.

         1.38 "Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.

         1.39 "Subordination Agreement(s)" shall mean one or more Subordination
Agreements provided to Lender pursuant to Section 4.1(m) hereof.

         1.40 "Subordinated Debt" shall mean all indebtedness of Borrower,
whether secured or unsecured, which is subject and subordinate in right of
payment to the prior full and final payment of


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all of the Obligations.

         1.41 "Term Loan" shall mean the term loan made by Lender to Borrower as
provided for in Section 2.2 hereof.

         1.42 "Term Note" shall mean that certain Term Promissory Note dated
January 27, 2000 in the principal amount of $1,000,000 from Borrower payable to
the order of Lender.

         1.43 "Value" shall mean, as determined by Lender its sole discretion,
with respect to Inventory, the lower of cost computed on a first-in-first-out
basis in accordance with GAAP or market value.


SECTION 2 CREDIT FACILITIES

         2.1  Revolving Loans.

                  (a) Subject to and upon the terms and conditions contained
herein, Lender agrees to make Revolving Loans to Borrower from time to time in
amounts requested by Borrower in an aggregate amount equal to the sum of:

                    (i)  eighty-five percent (85%) of the Net Amount of Eligible
Accounts, plus

                    (ii) eighty-five percent (85%) of the Net Amount of Eligible
Letter of Credit Accounts, plus

                    (iii) the lesser of: (A) the sum of sixty percent (60%) of
the Value of Eligible Inventory consisting of finished goods plus fifty percent
(50%) of the Value of Eligible Inventory consisting of raw materials for such
finished goods, or (B) Two Million Dollars ($2,000,000); less

                    (iv)  any Availability Reserves.

                  (b) Lender may, in its sole discretion, from time to time,
upon not less than five (5) Business Days prior notice to Borrower: (i) reduce
the lending formula with respect to Eligible Accounts to the extent that Lender
determines in good faith that: (A) the dilution with respect to the Accounts for
any period (based on the ratio of the aggregate amount of reductions in Accounts
other than as a result of payments in cash to the aggregate amount of total
sales) has increased in any material respect or may be reasonably anticipated to
increase in any material respect above historical levels, or (B) the general
creditworthiness of account debtors has declined or (ii) reduce the lending
formula(s) with respect to Eligible Inventory to the extent that Lender
determines that: (A) the number of days of the turnover of the Inventory for any
period has changed in any material respect or (B) the liquidation value of the
Eligible Inventory, or any category thereof, has decreased, or (C) the nature
and quality of the Inventory has deteriorated. In determining whether to reduce
the lending formula(s), Lender may consider events, conditions, contingencies or
risks which are also considered in determining Eligible Accounts, Eligible
Inventory or in establishing Availability Reserves.



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                  (c) Except in Lender's sole discretion, the aggregate amount
of the Revolving Loans outstanding at any time shall not exceed the Maximum
Credit. In the event that the outstanding amount of any component of the Loans,
or the aggregate amount of the outstanding Loans, exceed the amounts available
under the lending formulas or the Maximum Credit, as applicable, such event
shall not limit, waive or otherwise affect any rights of Lender in that
circumstance or on any future occasions and Borrower shall, upon demand by
Lender, which may be made at any time or from time to time, immediately repay to
Lender the entire amount of any such excess(es) for which payment is demanded.

         2.2 Term Loan. Lender is making a Term Loan to Borrower in the original
principal amount of One Million Dollars ($1,000,000). The Term Loan is evidenced
by a Term Note in such original principal amount duly executed and delivered by
Borrower to Lender concurrently herewith; to be repaid, together with interest
and other amounts, in accordance with this Agreement, the Term Note, and the
other Financing Agreements and secured by all of the Collateral.

         2.3 Availability Reserves. All Revolving Loans otherwise available to
Borrower pursuant to the lending formulas and subject to the Maximum Credit and
other applicable limits hereunder shall be subject to Lender's continuing right
to establish and revise Availability Reserves; provided, however, that Lender
shall give Borrowers at least give (5) days prior notice before increasing
Availability Reserves.

SECTION 3.  INTEREST AND FEES

         3.1 Interest.

                  (a) Borrower shall pay to Lender interest on the outstanding
principal amount of the Obligations at the Interest Rate, except that Borrower
shall pay to Lender interest, at Lender's option, without notice, at a rate that
is two percent (2.0%) per annum in excess of the Interest Rate: (i) for the
period (A) from and after the date of termination or non-renewal hereof until
Lender has received full and final payment of all Obligations (notwithstanding
entry of a judgment against Borrower) and (B) from and after the date of the
occurrence of an Event of Default for so long as such Event of Default is
continuing as determined by Lender, and (ii) on the Revolving Loans at any time
outstanding in excess of the amounts available to Borrower under Section 2
(whether or not such excess(es), arise or are made with or without Lender's
knowledge or consent and whether made before or after an Event of Default). All
interest accruing hereunder on and after the date of any Event of Default or
termination or non-renewal hereof shall be payable on demand.

                  (b) Borrower may from time to time request that Prime Rate
Loans be converted to Eurodollar Rate Loans or that any existing Eurodollar Rate
Loans continue for an additional Interest Period. Such request from Borrower
shall specify the amount of the Prime Rate Loans which will constitute
Eurodollar Rate Loans (subject to the limits set forth below) and the Interest
Period to be applicable to such Eurodollar Rate Loans. Subject to the terms and
conditions contained herein, three (3) Business Days after receipt by Lender of
such a request from Borrower, such Prime Rate Loans shall be converted to
Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the case
may be, provided, that, (i) no Event of Default, or event which with notice or
passage of time or both would constitute an Event of Default exists or has
occurred and is continuing, (ii) no party hereto shall


                                      -10-

<PAGE>



have sent any notice of termination or non-renewal of this Agreement, (iii)
Borrower shall have complied with such customary procedures as are established
by Lender and specified by Lender to Borrower from time to time for requests by
Borrower for Eurodollar Rate Loans, (iv) no more than four (4) Interest Periods
may be in effect at any one time, (v) the aggregate amount of the Eurodollar
Rate Loans must be in an amount not less than One Million Dollars
($1,000,000.00) or an integral multiple of Five Hundred Thousand Dollars
($500,000.00) in excess thereof, (vi) the maximum amount of the Eurodollar Rate
Loans at any time requested by Borrower shall not exceed the amount equal to (A)
the principal amount of the Term Loan which it is anticipated will be
outstanding as of the last day of the applicable Interest Period plus (B) eighty
(80%) percent of the lowest principal amount of the Revolving Loans which it is
anticipated will be outstanding during the applicable Interest Period, in each
case as determined by Lender (but with no obligation of Lender to make such
Revolving Loans) and (vii) Lender shall have determined that the Interest Period
or Adjusted Eurodollar Rate is available to Lender through the Reference Bank
and can be readily determined as of the date of the request for such Eurodollar
Rate Loan by Borrower. Any request by Borrower to convert Prime Rate Loans to
Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall be
irrevocable. Notwithstanding anything to the contrary contained herein, Lender
and Reference Bank shall not be required to purchase United States Dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market to fund any Eurodollar Rate Loans, but the provisions hereof shall be
deemed to apply as if Lender and Reference Bank had purchased such deposits to
fund the Eurodollar Rate Loans.

                  (c) Any Eurodollar Rate Loans shall automatically convert to
Prime Rate Loans upon the last day of the applicable Interest Period, unless
Lender has received and approved a request to continue such Eurodollar Rate Loan
at least three (3) Business Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at Lender's option, upon notice
by Lender to Borrower, convert to Prime Rate Loans in the event that (i) an
Event of Default or event which, with the notice or passage of time, or both,
would constitute an Event of Default, shall exist, (ii) this Agreement shall
terminate or not be renewed, or (iii) the aggregate principal amount of the
Prime Rate Loans which have previously been converted to Eurodollar Rate Loans
or existing Eurodollar Rate Loans continued, as the case may be, at the
beginning of an Interest Period shall at any time during such Interest Period
exceed either (A) the aggregate principal amount of the Loans then outstanding,
or (B) the sum of the then outstanding principal amount of the Term Loan plus
the Revolving Loans then available to Borrower under Section 2 hereof. Borrower
shall pay to Lender, upon demand by Lender (or Lender may, at its option, charge
any loan account of Borrower) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any loss (including loss of
anticipated profits), cost or expense incurred by such person, as a result of
the conversion of Eurodollar Rate Loans to Prime Rate Loans pursuant to any of
the foregoing.

                  (d) Interest shall be payable by Borrower to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate on obligations (other than Eurodollar Rate Loans)
shall increase or decrease by an amount equal to each increase or decrease in
the Prime Rate effective on the first day of the month after any change in such
Prime Rate is announced based on the Prime Rate in effect on the last day of the
month in which any such change occurs. In no event shall charges constituting
interest payable by Borrower to Lender exceed the maximum amount or the rate
permitted under any applicable law or regulation, and if any such part or
provision of this Agreement


                                      -11-

<PAGE>



is in contravention of any such law or regulation, such part or provision shall
be deemed amended to conform thereto. In the event the interest rate is
increased as provided in Section 3.1(a) upon the occurrence of an Event of
Default hereunder, Borrower acknowledges that: (i) such additional rate is a
material inducement to Lender to extent the Revolving Loans; (ii) Lender would
not have extended the Revolving Loans in the absence of the agreement of the
Borrower to pay such additional rate; (iii) such additional rate represents
compensation for increased risk to Lender that the Loans will not be repaid; and
(iv) such rate is not a penalty and represents a reasonable estimate of (a) the
cost to Lender in allocating its resources (both personnel and financial) to the
ongoing review, monitoring, administration and collection of the Loans and (b)
compensation to Lender for losses that are difficult to ascertain.

         3.2 Closing Fee. Borrower shall pay to Lender as a non-refundable
closing fee the amount of Thirty Seven Thousand Five Hundred Dollars ($37,500),
which shall be fully earned as of and payable on the date hereof.

         3.3 Servicing Fee. Borrower shall pay to Lender monthly a servicing fee
in an amount equal to One Thousand Dollars ($1,000) in respect of Lender's
services for each month (or part thereof) while this Agreement remains in effect
and for so long thereafter as any of the Obligations are outstanding, which fee
shall be fully earned as of and payable in advance on the date hereof and on the
first day of each month hereafter.

         3.4 Unused Line Fee. Borrower shall pay to Lender monthly an unused
line fee at a rate equal to one half of one percent (0.50%) per annum calculated
upon the amount by which the Maximum Credit exceeds the average daily principal
balance of the outstanding Revolving Loans during the immediately preceding
month (or part thereof) while this Agreement is in effect and for so long
thereafter as any of the Obligations are outstanding, which fee shall be payable
on the first day of each month in arrears.

         3.5 Changes in Laws and Increased Costs of Loans.

                  (a) Notwithstanding anything to the contrary contained herein,
all Eurodollar Rate Loans shall, upon notice by Lender to Borrower, convert to
Prime Rate Loans in the event that (i) any change in applicable law or
regulation (or the interpretation or administration thereof) shall either (A)
make it unlawful for Lender, Reference Bank or any participant to make or
maintain Eurodollar Rate Loans or to comply with the terms hereof in connection
with the Eurodollar Rate Loans, or (B) shall result in the increase in the costs
to Lender, Reference Bank or any participant of making or maintaining any
Eurodollar Rate Loans by an amount deemed by Lender to be material, or (C)
reduce the amounts received or receivable by Lender in respect thereof, by an
amount deemed by Lender to be material or (ii) the cost to Lender, Reference
Bank or any participant of making or maintaining any Eurodollar Rate Loans shall
otherwise increase by an amount deemed by Lender to be material. Borrower shall
pay to Lender, upon demand by Lender (or Lender may, at its option, charge any
loan account of Borrower) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any loss (including loss of
anticipated profits), cost or expense incurred by such person as a result of the
foregoing, including, without limitation, any such loss, cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such person to make or maintain the Eurodollar Rate Loans or any
portion thereof. A certificate of Lender



                                      -12-

<PAGE>



setting forth the basis for the determination of such amount necessary to
compensate Lender as aforesaid shall be delivered to Borrower and shall be
conclusive, absent manifest error.

                  (b) If any payments or prepayments in respect of the
Eurodollar Rate Loans are received by Lender other than on the last day of the
applicable Interest Period (whether pursuant to acceleration, upon maturity or
otherwise), including any payments pursuant to the application of collections
under Section 6.3 or any other payments made with the proceeds of Collateral,
Borrower shall pay to Lender upon demand by Lender (or Lender may, at its
option, charge any loan account of Borrower) any amounts required to compensate
Lender, the Reference Bank or any participant with Lender for any additional
loss (including loss of anticipated profits), cost or expense incurred by such
person as a result of such prepayment or payment, including, without limitation,
any loss, cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such person to make or maintain such
Eurodollar Rate Loans or any portion thereof.

SECTION 4CONDITIONS PRECEDENT

         4.1 Conditions Precedent to Initial Loans. Each of the following is a
condition precedent to Lender making the initial Loans hereunder:

                  (a) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first priority, and
only security interests in and liens upon the Collateral and any other property
which is intended to be security for the Obligations or the liability of any
Obligor in respect thereof, subject only to the security interests and liens
permitted herein or in the other Financing Agreements;

                  (b) All requisite corporate action and proceedings in
connection with this Agreement and the other Financing Agreements shall be
satisfactory in form and substance to Lender, and Lender shall have received all
information and copies of all documents, including records of requisite
corporate action and proceedings which Lender may have requested in connection
therewith, such documents where requested by Lender or its counsel to be
certified by appropriate corporate officers or governmental authorities;

                  (c) No material adverse change shall have occurred in the
assets, business or prospects of Borrower since the date of Lender's latest
field examination and no change or event shall have occurred which would impair
the ability of Borrower or any Obligor to perform its obligations hereunder or
under any of the other Financing Agreements to which it is a party or of Lender
to enforce the Obligations or realize upon the Collateral;

                  (d) Lender shall have completed a field review of the Records
and such other information with respect to the Collateral as Lender may require
to determine the amount of Revolving Loans available to Borrower, the results of
which shall be satisfactory to Lender, not more than three (3) business days
prior to the date hereof;

                  (e) Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem



                                      -13-

<PAGE>



necessary or desirable in order to permit, protect and perfect its security
interests in and liens upon the Collateral or to effectuate the provisions or
purposes of this Agreement and the other Financing Agreements, including
acknowledgments by lessors, mortgagees and warehousemen of Lender's security
interests in the Collateral, waivers by such persons of any security interests,
liens or other claims by such persons to the Collateral and agreements
permitting Lender access to, and the right to remain on, the premises to
exercise its rights and remedies and otherwise deal with the Collateral;

                  (f) Lender shall have received evidence of insurance and
lender loss payee endorsements required hereunder and under the other Financing
Agreements, in form and substance satisfactory to Lender, and certificates of
insurance policies and/or endorsements naming Lender as lender loss payee;

                  (g) Lender shall have received, in form and substance
satisfactory to Lender, such opinion letters of counsel to Borrower with respect
to the Financing Agreements and such other matters as Lender may reasonably
request;

                  (h) The Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to Lender,
in form and substance satisfactory to Lender;

                  (i) Lender shall have received title insurance reports and
insurance issued thereunder, commitments, financing statements, surveys and
flood plain certificates of the Real Property;

                  (j) Lender shall have received the Deeds of Trust, in form and
substance satisfactory to Lender, duly executed by Borrower;

                  (k) Lender shall have received collateral assignments of life
insurance policies (including assignment of cash values) owned by Borrower on
the life of James C. Kostelni;

                  (l) Lender shall have received, in form and substance
satisfactory to Lender, the Subordination Agreement(s) between Lender and any
holder of Subordinated Debt, as acknowledged and agreed to by Borrower,
providing for subordination of such indebtedness to the prior, full and final
payment of all Obligations and further providing for such parties' relative
rights and priorities with respect to the assets and properties of Borrower
(including, without limitation, the Collateral) and related matters, duly
authorized, executed and delivered by each such holder of Subordinated Debt and
Borrower; and

                  (m) The Excess Availability, as determined by Lender on and as
of the date hereof, shall be not less than Five Hundred Thousand Dollars
($500,000) after giving effect to any Revolving Loans made on the date hereof.

         4.2 Conditions Precedent to All Loans. Each of the following is an
additional condition precedent to Lender making Loans to Borrower, including the
initial Loans and any future Loans:

                  (a) All representations and warranties contained herein and in
the other Financing



                                      -14-

<PAGE>



Agreements shall be true and correct in all material respects with the same
effect as though such representations and warranties had been made on and as of
the date of the making of each such Loan and after giving effect thereto; and

                  (b) No Event of Default and no event or condition which, with
notice or passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be continuing on and as of the date of the making of
such Loan and after giving effect thereto.

SECTION 5. GRANT OF SECURITY INTEREST

         5.1 Lien on Personal Property. To secure payment and performance of all
Obligations, Borrower hereby grants to Lender a continuing security interest in,
a lien upon, and a right of set off against, and hereby assigns to Lender as
security, the following property and interests in property of Borrower, whether
now owned or hereafter acquired or existing, and wherever located (collectively,
the "Collateral"):

                  (a) Accounts;

                  (b) All present and future contract rights, general
intangibles (including tax and duty refunds, registered and unregistered
patents, trademarks, service marks, copyrights, trade names, applications for
the foregoing, trade secrets, goodwill, processes, drawings, blueprints,
customer lists, licenses, whether as licensor or licensee, chooses in action and
other claims and existing and future leasehold interests in equipment, real
estate and fixtures), chattel paper, documents, instruments, securities and
other investment property, letters of credit, bankers' acceptances and
guaranties;

                  (c) All present and future monies, securities, credit
balances, deposits, deposit accounts and other property of Borrower now or
hereafter held or received by or in transit to Lender or its affiliates or at
any other depository or other institution from or for the account of Borrower,
whether for safekeeping, pledge, custody, transmission, collection or otherwise,
and all present and future liens, security interests, rights, remedies, title
and interest in, to and in respect of Accounts and other Collateral, including
rights and remedies under or relating to guaranties, contracts of suretyship,
letters of credit and credit and other insurance related to the Collateral,
rights of stoppage in transit, replevin, repossession, reclamation and other
rights and remedies of an unpaid vendor, lienor or secured party, goods
described in invoices, documents, contracts or instruments with respect to, or
otherwise representing or evidencing, Accounts or other Collateral, including
returned, repossessed and reclaimed goods, and deposits by and property of
account debtors or other persons securing the obligations of account debtors;

                  (d) Inventory;

                  (e) Equipment;

                  (f) Records; and

                  (g) All products and proceeds of the foregoing, in any form,
including insurance proceeds and all claims against third parties for loss or
damage to or destruction of any or all of the



                                      -15-

<PAGE>



foregoing.

         5.2 Lien on Real Property. The Deeds of Trust securing prompt payment
and performance of all of the Obligations shall be executed by Borrower in favor
of Lender and shall be duly recorded, at Borrower's expense, in each office
where such recording is required to constitute a fully perfected lien on the
Real Property covered thereby. Borrower shall deliver to Lender, at Borrower's
expense, mortgagee title insurance policies issued by a title insurance company
satisfactory to Lender, which policies shall be in form and substance
satisfactory to Lender and shall insure a valid first lien in favor of Lender on
the Real Property covered thereby, subject only to those exceptions acceptable
to Lender and its counsel. Borrower shall also deliver to Lender such other
documents and assurances, including, without limitation, existing survey prints
and flood plain certificates of the Real Property, as Lender and its counsel may
request relating to the Real Property subject to the Deeds of Trust.

SECTION 6.  COLLECTION AND ADMINISTRATION

         6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded all Loans and other
Obligations and the Collateral, all payments made by or on behalf of Borrower
and all other appropriate debits and credits as provided in this Agreement,
including fees, charges, costs, expenses and interest. All entries in the loan
account(s) shall be made in accordance with Lender's customary practices as in
effect from time to time.

         6.2 Statements. Lender shall render to Borrower each month a statement
setting forth the balance in Borrower's loan account(s) maintained by Lender for
Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrower and conclusively binding
upon Borrower as an account stated except to the extent that Lender receives a
written notice from Borrower of any specific exceptions of Borrower thereto
within forty five (45) days after the date such statement has been mailed by
Lender. Until such time as Lender shall have rendered to Borrower a written
statement as provided above, the balance in Borrower's loan account(s) shall be
presumptive evidence of the amounts due and owing to Lender by Borrower.

         6.3 Collection of Accounts.

                  (a) Borrower shall establish and maintain, at its expense,
blocked accounts or lockboxes and related blocked accounts (in either case,
"Blocked Accounts"), as Lender may specify, with such banks as are acceptable to
Lender into which Borrower shall promptly deposit and direct its account debtors
to directly remit all payments on Accounts and all payments constituting
proceeds of Inventory or other Collateral in the identical form in which such
payments are made, whether by cash, check or other manner. The banks at which
the Blocked Accounts are established shall enter into an agreement, in form and
substance satisfactory to Lender, providing that all items received or deposited
in the Blocked Accounts are the property of Lender, that the depository bank has
no lien upon, or right to setoff against, the Blocked Accounts, the items
received for deposit therein, or the funds from time to time on deposit therein
and that the depository bank will wire, or otherwise transfer, in immediately
available funds, on a daily basis, all funds received or deposited into the
Blocked Accounts to such bank account of Lender as Lender may from time to time
designate for such purpose



                                      -16-

<PAGE>



("Payment Account"). Borrower agrees that all payments made to such Blocked
Accounts or other funds received and collected by Lender, whether on the
Accounts or as proceeds of Inventory or other Collateral or otherwise shall be
the property of Lender.

                  (b) For purposes of calculating the amount of the Loans
available to Borrower, such payments will be applied (conditional upon final
collection) to the Obligations on the Business Day of receipt by Lender of
immediately available funds in the Payment Account provided such payments and
notice thereof are received in accordance with Lender's usual and customary
practices as in effect from time to time and within sufficient time to credit
Borrower's loan account on such day, and if not, then on the next business day.
For the purposes of calculating interest on the Obligations, such payments or
other funds received will be applied (conditional upon final collection) to the
Obligations one (1) business day following the date of receipt of immediately
available funds by Lender in the Payment Account provided such payments or other
funds and notice thereof are received in accordance with Lender's usual and
customary practices as in effect from time to time and within sufficient time to
credit Borrower's loan account on such day, and if not, then on the next
business day.

                  (c) Borrower and all of its affiliates, subsidiaries,
shareholders, directors, employees or agents shall, acting as trustee for
Lender, receive, as the property of Lender, any monies, checks, notes, drafts or
any other payment relating to and/or proceeds of Accounts or other Collateral
which come into their possession or under their control and immediately upon
receipt thereof, shall deposit or cause the same to be deposited in the Blocked
Accounts, or remit the same or cause the same to be remitted, in kind, to
Lender. In no event shall the same be commingled with Borrower's own funds.
Borrower agrees to reimburse Lender on demand for any amounts owed or paid to
any bank at which a Blocked Account is established or any other bank or person
involved in the transfer of funds to or from the Blocked Accounts arising out of
Lender's payments to or indemnification of such bank or person. The obligation
of Borrower to reimburse Lender for such amounts pursuant to this Section 6.3
shall survive the termination or non-renewal of this Agreement.

         6.4 Payments. All Obligations shall be payable to the Payment Account
as provided in Section 6.3 or such other place as Lender may designate from time
to time. Lender may apply payments received or collected from Borrower or for
the account of Borrower (including the monetary proceeds of collections or of
realization upon any Collateral) to such of the Obligations, whether or not then
due, in such order and manner as Lender determines. At Lender's option, all
principal, interest, fees, costs, expenses and other charges provided for in
this Agreement or the other Financing Agreements may be charged directly to the
loan account(s) of Borrower. Borrower shall make all payments to Lender on the
Obligations free and clear of, and without deduction or withholding for or on
account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts,
fees, deductions, withholding, restrictions or conditions of any kind. If after
receipt of any payment of, or proceeds of Collateral applied to the payment of,
any of the Obligations, Lender is required to surrender or return such payment
or proceeds to any Person for any reason, then the Obligations intended to be
satisfied by such payment or proceeds shall be reinstated and continue and this
Agreement shall continue in full force and effect as if such payment or proceeds
had not been received by Lender. Borrower shall be liable to pay to Lender, and
does hereby indemnify and hold Lender harmless for the amount of any payments or
proceeds surrendered or returned. This Section 6.4 shall remain effective
notwithstanding any contrary action which may be taken by Lender in reliance
upon such payment or proceeds. This Section 6.4 shall survive the payment of the
Obligations and the termination or non-renewal of this



                                      -17-

<PAGE>



Agreement.

         6.5 Authorization to Make Loans. Lender is authorized to make the Loans
based upon telephonic or other instructions received from anyone purporting to
be any of the authorized officers or representatives of Borrower identified on
Schedule 6.5 hereto (as said Schedule 6.5 may be amended or revised from time to
time) or, at the discretion of Lender, if such Loans are necessary to satisfy
any Obligations. All requests for Loans hereunder shall specify the date on
which the requested advance is to be made (which day shall be a business day)
and the amount of the requested Loan. Requests received after 11:00 a.m.
(Eastern Time) on any day shall be deemed to have been made as of the opening of
business on the immediately following business day. All Loans under this
Agreement shall be conclusively presumed to have been made to, and at the
request of and for the benefit of, Borrower when deposited to the credit of
Borrower or otherwise disbursed or established in accordance with the
instructions of Borrower or in accordance with the terms and conditions of this
Agreement.

         6.6 Use of Proceeds. Borrower shall use the initial proceeds of the
Loans provided by Lender to Borrower hereunder only for: payments to each of the
persons listed in the disbursement direction letter furnished by Borrower to
Lender on or about the date hereof and costs, expenses and fees in connection
with the preparation, negotiation, execution and delivery of this Agreement and
the other Financing Agreements. All other Loans made by Lender to Borrower
pursuant to the provisions hereof shall be used by Borrower only for general
operating, working capital and other proper corporate purposes of Borrower not
otherwise prohibited by the terms hereof. None of the proceeds will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
security or for the purposes of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for any other
purpose which might cause any of the Loans to be considered a "purpose credit"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, as amended.

         6.7 Mandatory Prepayment. Immediately upon the sale or other
disposition of that certain parcel of Real Property located at 15 Nuttman
Street, Newark, New Jersey (which sale or disposition shall be upon terms and
conditions acceptable to Lender in its sole but reasonable discretion), Borrower
shall prepay the Term Loan with all of the Net Proceeds of such sale or other
disposition. For purposes of Section 6.7, the term "Net Proceeds" shall mean
gross proceeds at sale less direct costs incurred in connection with such sale
or other disposition such as, but not limited to, broker's commissions,
recording costs, transfer fees, and any other costs necessary to remove
encumbrances and permit conveyance thereof.

SECTION 7. COLLATERAL REPORTING AND COVENANTS

         7.1 Collateral Reporting. Borrower shall provide Lender with the
following documents in a form satisfactory to Lender: (a) on a regular basis as
required by Lender, a schedule of Accounts, sales made, credits issued and cash
received; (b) on a monthly basis or more frequently as Lender may request,
perpetual inventory reports, and agings of accounts payable; (c) upon Lender's
request, copies of customer statements and credit memos, remittance advices and
reports, copies of deposit slips and bank statements, copies of shipping and
delivery documents, and copies of purchase orders, invoices and delivery
documents for Inventory and Equipment acquired by Borrower; (d) on a monthly
basis



                                      -18-

<PAGE>



or more frequently as Lender may request, an aging of Accounts; (e) on a weekly
and monthly basis, a report of Inventory broken down by raw materials (based on
a physical count and including pulp, latex, chemicals, inks, dyes, foam, and any
other physically counted raw materials), work in progress and finished goods
(including aging of finished goods); (f) on a monthly basis, commencing March
20, 2000, an aging of finished goods Inventory; (g) weekly listing of held
checks; and (h) such other reports as to the Collateral as Lender shall request
from time to time. If any of Borrower's records or reports of the Collateral are
prepared or maintained by an accounting service, contractor, shipper or other
agent, Borrower hereby irrevocably authorizes such service, contractor, shipper
or agent to deliver such records, reports, and related documents to Lender and
to follow Lender's instructions with respect to further services at any time
that an Event of Default exists or has occurred and is continuing.

         7.2  Accounts Covenants.

                  (a) Borrower shall notify Lender promptly of: (i) any material
delay in Borrower's performance of any of its obligations to any account debtor
or the assertion of any claims, offsets, defenses or counterclaims by any
account debtor, or any disputes with account debtors, or any settlement,
adjustment or compromise thereof; (ii) all material adverse information relating
to the financial condition of any account debtor; (iii) and any event or
circumstance which, to Borrower's knowledge would cause Lender to consider any
then existing Accounts as no longer constituting Eligible Accounts. No credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor without Lender's consent, except in the ordinary
course of Borrower's business in accordance with practices and policies
previously disclosed in writing to Lender. So long as no Event of Default exists
or has occurred and is continuing, Borrower shall settle, adjust or compromise
any claim, offset, counterclaim or dispute with any account debtor. At any time
that an Event of Default exists or has occurred and is continuing, Lender shall,
at its option, have the exclusive right to settle, adjust or compromise any
claim, offset, counterclaim or dispute with account debtors or grant any
credits, discounts or allowances.

                  (b) Without limiting the obligation of Borrower to deliver any
other information to Lender, Borrower shall promptly report to Lender any return
of Inventory by any one account debtor if the inventory so returned in such case
has a value in excess of Twenty Five Thousand Dollars ($25,000). At any time
that Inventory is returned, reclaimed or repossessed, the Account (or portion
thereof) which arose from the sale of such returned, reclaimed or repossessed
Inventory shall not be deemed an Eligible Account. In the event any account
debtor returns Inventory when an Event of Default exists or has occurred and is
continuing, Borrower shall, upon Lender's request, (i) hold the returned
Inventory in trust for Lender; (ii) segregate all returned Inventory from all of
its other property; (iii) dispose of the returned Inventory solely according to
Lender's instructions, and (iv) not issue any credits, discounts or allowances
with respect thereto without Lender's prior written consent.

                  (c) With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete; (ii) no payments shall be made thereon except payments
immediately delivered to Lender pursuant to the terms of this Agreement; (iii)
no credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor except as reported to Lender in
accordance with this Agreement and except for credits, discounts, allowances or
extensions made or given in the ordinary course of Borrower's business in
accordance with practices and policies previously disclosed to Lender; (iv)
there



                                      -19-

<PAGE>



shall be no setoffs, deductions, contras, defenses, counterclaims or disputes
existing or asserted with respect thereto except as reported to Lender in
accordance with the terms of this Agreement; and (v) none of the transactions
giving rise thereto will violate any applicable State or Federal laws or
regulations, all documentation relating thereto will be legally sufficient under
such laws and regulations and all such documentation will be legally enforceable
in accordance with its terms.

                  (d) Lender shall have the right at any time or times, in
Lender's name or in the name of a nominee of Lender, to verify the validity,
amount or any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.

                  (e) Borrower shall deliver or cause to be delivered to Lender,
with appropriate endorsement and assignment, with full recourse to Borrower, all
chattel paper and instruments which Borrower now owns or may at any time acquire
immediately upon Borrower's receipt thereof, except as Lender may otherwise
agree.

                  (f) Lender may, at any time or times that an Event of Default
exists or has occurred and is continuing; (i) notify any or all account debtors
that the Accounts have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all accounts debtors to make
payment of Accounts directly to Lender; (ii) extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations; (iii) demand, collect or
enforce payment of any Accounts or such other obligations, but without any duty
to do so, and Lender shall not be liable for its failure to collect or enforce
the payment thereof or for the negligence of its agents or attorneys with
respect thereto; and (iv) take whatever other action Lender may deem necessary
or desirable for the protection of its interests. At any time that an Event of
Default exists or has occurred and is continuing, at Lender's request, all
invoices and statements sent to any account debtor shall state that the Accounts
and such other obligations have been assigned to Lender and are payable directly
and only to Lender and Borrower shall deliver to Lender such originals of
documents evidencing the sale and delivery of goods or the performance of
services giving rise to any Accounts as Lender may require.

                      Borrower will comply with the Federal Assignment of Claims
Act of 1940, as amended, in a manner satisfactory to Lender, with respect to
Accounts due from any individual department, agency or instrumentality of the
United States of America.

         7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower
shall at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) Borrower shall conduct a
physical count of the Inventory at least once each year, but at any time or
times as Lender may request on or after an Event of Default, and promptly
following such physical inventory shall supply Lender with a report in the form
and with such specificity as may be reasonably satisfactory to Lender concerning
such physical count; (c) Borrower shall not remove any Inventory from the
locations set forth or permitted herein, without the prior written consent of
Lender, except for sales of Inventory in the ordinary course of Borrower's
business and except to move Inventory directly from one location set forth or
permitted



                                      -20-

<PAGE>



herein to another such location; (d) upon Lender's request, Borrower shall, at
its expense, no more than once in any twelve (12) month period, but at any time
or times as Lender may request on or after an Event of Default, deliver or cause
to be delivered to Lender written reports or appraisals as to the Inventory in
form, scope and methodology acceptable to Lender and by an appraiser acceptable
to Lender, addressed to Lender or upon which Lender is expressly permitted to
rely; (e) Borrower shall produce, use, store and maintain the Inventory with all
reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with applicable laws (including the requirements of
the Federal Fair Labor Standards Act of 1938, as amended and all rules,
regulations and orders related thereto); (f) Borrower assumes all responsibility
and liability arising from or relating to the production, use, sale or other
disposition of the Inventory; (g) Borrower shall not sell Inventory to any
customer on approval, or any other basis which entitles the customer to return
or may obligate Borrower to repurchase such Inventory; (h) Borrower shall keep
the Inventory in good and marketable condition; and (i) Borrower shall not,
without prior written notice to Lender, acquire or accept any Inventory on
consignment or approval. Notwithstanding the foregoing, provided no Event of
Default, or event which with notice or passage of time or both would constitute
an Event of Default exists or has occurred, Borrower's annual inventory audit
performed by KPMG Peat Marwick shall satisfy the requirements of subclause (b)
above.

         7.4 Equipment Covenants. With respect to the Equipment: (a) upon
Lender's request, Borrower shall, at its expense, at any time or times as Lender
may request on or after an Event of Default, deliver or cause to be delivered to
Lender written reports or appraisals as to the Equipment in form, scope and
methodology acceptable to Lender and by an appraiser acceptable to Lender; (b)
Borrower shall keep the Equipment in good order, repair, running and marketable
condition (ordinary wear and tear excepted); (c) Borrower shall use the
Equipment with all reasonable care and caution and in accordance with applicable
standards of any insurance and in conformity with all applicable laws; (d) the
Equipment is and shall be used in Borrower's business and not for personal,
family, household or farming use; (e) Borrower shall not remove any Equipment
from the locations set forth or permitted herein, except to the extent necessary
to have any Equipment repaired or maintained in the ordinary course of the
business of Borrower or to move Equipment directly from one location set forth
or permitted herein to another such location and except for the movement of
motor vehicles used by or for the benefit of Borrower in the ordinary course of
business; (f) the Equipment is now and shall remain personal property and
Borrower shall not permit any of the Equipment to be or become a part of or
affixed to real property; and (g) Borrower assumes all responsibility and
liability arising from the use of the Equipment.

         7.5 Power of Attorney. Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as Borrower's true and
lawful attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name,
to: (a) at any time an Event of Default or event which with notice or passage of
time or both would constitute an Event of Default exists or has occurred and is
continuing (i) demand payment on Accounts or other proceeds of Inventory or
other Collateral, (ii) enforce payment of Accounts by legal proceedings or
otherwise, (iii) exercise all of Borrower's rights and remedies to collect any
Account or other Collateral, (iv) sell or assign any Account upon such terms,
for such amount and at such time or times as Lender deems advisable, (v) settle,
adjust, compromise, extend or renew an Account, (vi) discharge and release any
Account, (vii) prepare, file and sign Borrower's name on any proof of claim in
bankruptcy or other similar document against an account debtor, (viii) notify
the post office authorities to change the address for delivery of Borrower's
mail to



                                      -21-

<PAGE>



an address designated by Lender, and open and dispose of all mail addressed to
Borrower, and (ix) do all acts and things which are necessary, in Lender's
determination, to fulfill Borrower's obligations under this Agreement and the
other Financing Agreements and (b) at any time to (i) take control in any manner
of any item of payment or proceeds thereof, (ii) have access to any lockbox or
postal box into which Borrower's mail is deposited, (iii) endorse Borrower's
name upon any items of payment or proceeds thereof and deposit the same in
Lender's account for application to the Obligations, (iv) endorse Borrower's
name upon any chattel paper, document, instrument, invoice, or similar document
or agreement relating to any Account or any goods pertaining thereto or any
other Collateral, (v) sign Borrower's name on any verification of Accounts and
notices thereof to account debtors and (vi) execute in Borrower's name and file
any UCC financing statements or amendments thereto. Borrower hereby releases
Lender and its officers, employees and designees from any liabilities arising
from any act or acts under this power of attorney and in furtherance thereof,
whether of omission or commission, except as a result of Lender's own gross
negligence or wilful misconduct as determined pursuant to a final non-appealable
order of a court of competent jurisdiction.

         7.6 Right to Cure. Lender may, at its option, (a) cure any default by
Borrower under any agreement with a third party or pay or bond on appeal any
judgment entered against Borrower, (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral and (c) pay any amount, incur any expense or perform any act
which, in Lender's judgment, is necessary or appropriate to preserve, protect,
insure or maintain the Collateral and the rights of Lender with respect thereto.
Lender may add any amounts so expended to the Obligations and charge Borrower's
account therefor, such amounts to be repayable by Borrower on demand. Lender
shall be under no obligation to effect such cure, payment or bonding and shall
not, by doing so, be deemed to have assumed any obligation or liability of
Borrower. Any payment made or other action taken by Lender under this Section
shall be without prejudice to any right to assert an Event of Default hereunder
and to proceed accordingly.

         7.7 Access to Premises. From time to time as requested by Lender, at
the cost and expense of Borrower, (a) Lender or its designee shall have complete
access to all of Borrower's premises during normal business hours and after
notice to Borrower, or at any time and without notice to Borrower if an Event of
Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of Borrower's books
and records, including the Records, and (b) Borrower shall promptly furnish to
Lender such copies of such books and records or extracts therefrom as Lender may
request, and (c) use during normal business hours such of Borrower's personnel,
equipment, supplies and premises as may be reasonably necessary for the
foregoing and if an Event of Default exists or has occurred and is continuing
for the collection of Accounts and realization of other Collateral.

SECTION 8.  REPRESENTATIONS AND WARRANTIES

         Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans by Lender to
Borrower:

         8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower is
a corporation duly organized and in good standing under the laws of its state of
incorporation and is duly qualified as a



                                      -22-

<PAGE>



foreign corporation and in good standing in all states or other jurisdictions
where the nature and extent of the business transacted by it or the ownership of
assets makes such qualification necessary, except for those jurisdictions in
which the failure to so qualify would not have a material adverse effect on
Borrower's financial condition, results of operation or business or the rights
of Lender in or to any of the Collateral. The execution, delivery and
performance of this Agreement, the other Financing Agreements and the
transactions contemplated hereunder and thereunder are all within Borrower's
corporate powers, have been duly authorized and are not in contravention of law
or the terms of Borrower's certificate of incorporation, by-laws, or other
organizational documentation, or any indenture, agreement or undertaking to
which Borrower is a party or by which Borrower or its property are bound. This
Agreement and the other Financing Agreements constitute legal, valid and binding
obligations of Borrower enforceable in accordance with their respective terms.
Borrower does not have any subsidiaries except as set forth on the Information
Certificate.

         8.2 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrower which have been or may hereafter be delivered by
Borrower to Lender have been prepared in accordance with GAAP and fairly present
the financial condition and the results of operation of Borrower as at the dates
and for the periods set forth therein. Except as disclosed in any interim
financial statements furnished by Borrower to Lender prior to the date of this
Agreement, there has been no material adverse change in the assets, liabilities,
properties and condition, financial or otherwise, of Borrower, since the date of
the most recent audited financial statements furnished by Borrower to Lender
prior to the date of this Agreement.

         8.3 Chief Executive Office; Collateral Locations. The chief executive
office of Borrower and Borrower's Records concerning Accounts are located only
at the address set forth below and its only other places of business and the
only other locations of Collateral, if any, are the addresses set forth in the
Information Certificate, subject to the right of Borrower to establish new
locations in accordance with Section 9.2 below. The Information Certificate
correctly identifies any of such locations which are not owned by Borrower and
sets forth the owners and/or operators thereof and to the best of Borrower's
knowledge, the holders of any mortgages on such locations.

         8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens shown on Schedule 8.4 attached
hereto and made part hereof and the other liens permitted under Section 9.8
hereof. Borrower has good and marketable title to all of its properties and
assets subject to no liens, mortgages, pledges, security interests, encumbrances
or charges of any kind, except those granted to Lender and such others as are
specifically listed on Schedule 8.4 or permitted under Section 9.8 hereof.

         8.5 Tax Returns. Borrower has filed, or caused to be filed, in a timely
manner all tax returns, reports and declarations which are required to be filed
by it (without requests for extension except as previously disclosed in writing
to Lender). All information in such tax returns, reports and declarations is
complete and accurate in all material respects. Borrower has paid or caused to
be paid all taxes due and payable or claimed due and payable in any assessment
received by it, except taxes the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to Borrower
and with respect to which adequate reserves have been set aside on its books.
Adequate provision has been made for the payment of all accrued and unpaid
federal, state, county,



                                      -23-

<PAGE>



local, foreign and other taxes whether or not yet due and payable and whether or
not disputed.

         8.6 Litigation. Except as set forth on the Information Certificate,
there is no present investigation by any governmental agency pending, or to the
best of Borrower's knowledge threatened, against or affecting Borrower, its
assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of Borrower's knowledge threatened, against
Borrower or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which if adversely determined against Borrower
would result in a material adverse change in the business of Borrower or would
materially impair the ability of Borrower to perform its obligations hereunder
or under any of the other Financing Agreements to which it is a party or of
Lender to enforce any Obligations or realize upon any Collateral.

         8.7 Compliance with Other Agreements and Applicable Laws. Borrower is
not in default in any material respect under, or in violation in any material
respect of any of the terms of, any agreement, contract, instrument, lease or
other commitment to which it is a party or by which it or any of its assets are
bound and Borrower is in compliance in all material respects with all applicable
provisions of laws, rules, regulations, licenses, permits, approvals and orders
of any foreign, federal, state or local governmental authority.

         8.8 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrower maintained at any bank or
other financial institution are shown on Schedule 8.8 attached hereto and made
part hereof, subject to the right of Borrower to establish new accounts in
accordance with Section 9.13 below.

         8.9 Accuracy and Completeness of Information. All information furnished
by or on behalf of Borrower in writing to Lender in connection with this
Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including all information on the Information
Certificate is true and correct in all material respects on the date as of which
such information is dated or certified and does not omit any material fact
necessary in order to make such information not misleading. No event or
circumstance has occurred which has had or could reasonably be expected to have
a material adverse affect on the business, assets or prospects of Borrower,
which has not been fully and accurately disclosed to Lender in writing.

         8.10 Environmental Compliance.  Except as shown on Schedule 8.10
hereto:

                  (a) Borrower has not generated, used, stored, treated,
transported, manufactured, handled, produced or disposed of any Hazardous
Materials, on or off its premises (whether or not owned by it) in any manner
which at any time violates any applicable Environmental Law or any license,
permit, certificate, approval or similar authorization thereunder and the
operation of Borrower complies in all respects with all Environmental Laws and
all licenses, permits, certificates, approvals and similar authorizations
thereunder.

                  (b) There has been no investigation, proceeding, complaint,
order, directive, claim, citation or notice by any governmental authority or any
other person nor is any pending or to the best of Borrower's knowledge
threatened, with respect to any non-compliance with or violation of the
requirements of any Environmental Law by Borrower or the release, spill or
discharge, threatened or



                                      -24-

<PAGE>



actual, of any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter, which affects
Borrower or its business, operations or assets or any properties at which
Borrower has transported, stored or disposed of any Hazardous Materials.

                  (c) Borrower has no liability, contingent or otherwise, in
connection with a release, spill or discharge, threatened or actual, of any
Hazardous Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials.

                  (d) Borrower has all licenses, permits, certificates,
approvals or similar authorizations required to be obtained or filed in
connection with the operations of Borrower under any Environmental Law and all
of such licenses, permits, certificates, approvals or similar authorizations are
valid and in full force and effect.

                  (e)  Borrower has no actual knowledge of:

                           (i)  the presence of any Hazardous Materials on any
of the Real Property or on which the Collateral is located, or

                           (ii)  any on-site spills, releases, discharges,
disposal or storage of Hazardous Materials that have occurred or are presently
occurring on any of such real property, or

                           (iii) any spills, releases, discharges or disposal of
Hazardous Materials that have occurred or are presently occurring on such real
properties as a result of the activities of Borrower, or

                           (iv)  any notice, summons, citation or other
communication sent to Borrower from any state or federal agency concerning any
intentional or unintentional action or conduct, inaction or omission, past or
present which is or may be in violation of any state or federal environmental
law, rule or regulation.

         8.11 Solvency. Borrower has sufficient capital to carry on its business
operations, and presently owns property having a fair salable value which is
greater than the amount required to pay all of Borrower's debts as they become
due.

         8.12 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrower shall now or hereafter give, or cause to be given, to Lender.






                                      -25-

<PAGE>


SECTION 9.  AFFIRMATIVE AND NEGATIVE COVENANTS

         9.1 Maintenance of Existence. Borrower shall at all times preserve,
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on its business. Borrower shall give Lender thirty
(30) days prior written notice of any proposed change in its corporate name,
which notice shall set forth the new name and Borrower shall deliver to Lender a
copy of the amendment to the Certificate of Incorporation of Borrower providing
for the name change certified by the Secretary of State of the jurisdiction of
incorporation of Borrower as soon as it is available.

         9.2 New Collateral Locations. Borrower may open any new location within
the continental United States provided Borrower gives Lender thirty (30) days
prior written notice of the intended opening of any such new location and
executes and delivers, or causes to be executed and delivered, to Lender such
agreements, documents, and instruments as Lender may deem reasonably necessary
or desirable to protect its interests in the Collateral at such location,
including UCC-1 financing statements.

         9.3 Compliance with Laws, Regulations, Etc. Borrower shall, at all
times, comply in all material respects with all laws, rules, regulations,
licenses, permits, approvals and orders of any federal, state or local
governmental authority applicable to it.

         9.4 Payment of Taxes and Claims. Borrower shall duly pay and discharge
all taxes, assessments, contributions and governmental charges upon or against
it or its properties or assets, except for taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books. Borrower shall be liable for any tax or penalties imposed on
Lender as a result of the financing arrangements provided for herein and
Borrower agrees to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrower such amount shall be added and deemed part of the Loans, provided,
that, nothing contained herein shall be construed to require Borrower to pay any
income or franchise taxes attributable to the income of Lender from any amounts
charged or paid hereunder to Lender. The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.

         9.5 Insurance. Borrower shall, at all times, maintain with financially
sound and reputable insurers insurance with respect to the Collateral against
loss or damage and all other insurance of the kinds and in the amounts
customarily insured against or carried by corporations of established reputation
engaged in the same or similar businesses and similarly situated. Said policies
of insurance shall be satisfactory to Lender as to form, amount and insurer.
Borrower shall furnish certificates, policies or endorsements to Lender as
Lender shall require as proof of such insurance, and, if Borrower fails to do
so, Lender is authorized, but not required, to obtain such insurance at the
expense of Borrower. All policies shall provide for at least thirty (30) days
prior written notice to Lender of any cancellation or reduction of coverage and
that Lender may act as attorney for Borrower in obtaining, and at any time an
Event of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Borrower shall cause Lender to be named
as a lender loss payee and an additional insured (but without any liability for
any premiums) under such insurance policies and Borrower shall obtain
non-contributory lender's loss payable endorsements to all insurance



                                      -26-

<PAGE>



policies in form and substance satisfactory to Lender. Such lender's loss
payable endorsements shall specify that the proceeds of such insurance shall be
payable to Lender as its interests may appear and further specify that Lender
shall be paid regardless of any act or omission by Borrower or any of its
affiliates. At its option, Lender may apply any insurance proceeds received by
Lender at any time to the cost of repairs or replacement of Collateral and/or to
payment of the Obligations, whether or not then due, in any order and in such
manner as Lender may determine or hold such proceeds as cash collateral for the
Obligations.

         9.6  Financial Statements and Other Information.

                  (a) Borrower shall keep proper books and records in which true
and complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of Borrower and its subsidiaries (if
any) in accordance with GAAP and Borrower shall furnish or cause to be furnished
to Lender: (i) within forty-five (45) days after the end of each fiscal month,
monthly unaudited consolidated financial statements, and, if Borrower has any
subsidiaries, unaudited consolidating financial statements (including in each
case balance sheets, statements of income and loss, statements of cash flow, and
statements of shareholders' equity), all in reasonable detail, fairly presenting
the financial position and the results of the operations of Borrower and its
subsidiaries as of the end of and through such fiscal month; and (ii) within
ninety (90) days after the end of each fiscal year, audited consolidated
financial statements and, if Borrower has any subsidiaries, audited
consolidating financial statements of Borrower and its subsidiaries (including
in each case balance sheets, statements of income and loss, statements of cash
flow and statements of shareholders' equity), and the accompanying notes
thereto, all in reasonable detail, fairly presenting the financial position and
the results of the operations of Borrower and its subsidiaries as of the end of
and for such fiscal year, together with the unqualified opinion of independent
certified public accountants, which accountants shall be an independent
accounting firm selected by Borrower and reasonably acceptable to Lender, that
such financial statements have been prepared in accordance with GAAP, and
present fairly the results of operations and financial condition of Borrower and
its subsidiaries as of the end of and for the fiscal year then ended.

                  (b) Borrower shall promptly notify Lender in writing of the
details of any loss, damage, investigation, action, suit, proceeding or claim
relating to the Collateral or any other property which is security for the
Obligations or which would result in any material adverse change in Borrower's
business, properties, assets, goodwill or condition, financial or otherwise and
the occurrence of any Event of Default or event which, with the passage of time
or giving of notice or both, would constitute an Event of Default.

                  (c) Borrower shall promptly after the sending or filing
thereof furnish or cause to be furnished to Lender copies of all reports which
Borrower sends to its stockholders generally and copies of all reports and
registration statements which Borrower files with the Securities and Exchange
Commission, any national securities exchange or the National Association of
Securities Dealers, Inc.

                  (d) Borrower shall furnish or cause to be furnished to Lender
such budgets, forecasts, projections and other information respecting the
Collateral and the business of Borrower, as Lender may, from time to time,
reasonably request. Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of
Borrower to any court



                                      -27-

<PAGE>



or other government agency or to any participant or assignee or prospective
participant or assignee. Borrower hereby irrevocably authorizes and directs all
accountants or auditors to deliver to Lender, at Borrower's expense, copies of
the financial statements of Borrower and any reports or management letters
prepared by such accountants or auditors on behalf of Borrower and to disclose
to Lender such information as they may have regarding the business of Borrower.
Any documents, schedules, invoices or other papers delivered to Lender may be
destroyed or otherwise disposed of by Lender one (1) year after the same are
delivered to Lender, except as otherwise designated by Borrower to Lender in
writing.

                  (e) Along with the set of financial statements delivered to
Lender pursuant to Section 9.6(a)(ii) hereof, Borrower shall deliver to Lender a
certificate from its chief financial officer or treasurer setting forth that the
signer has reviewed the relevant terms of this Agreement, and has made (or
caused to be made under his supervision) a review of the transactions and
condition of Borrower from the beginning of the fiscal year covered by the
statement being delivered therewith to the date of the certificate, and that
such review has not disclosed the existence during such period of any condition
or event which constitutes an Event of Default or if any such condition or event
existed or exists, specifying the nature and period of existence thereof and
what action Borrower has taken or proposes to take with respect thereto.

                  (f) The advent of the year 2000 shall not adversely affect
Borrower's operations or the performance of its information technology. Without
limiting the generality of the foregoing, (i) the hardware and software utilized
by borrower are designed to be used prior to, during, and after calendar year
2000 A.D. and such hardware and software will operate during each such time
period without error relating to date data, specifically including any error
relating to, or the conduct of, date data which represents or references
different centuries or more than one century, (ii) the hardware and software
utilized by Borrower will not abnormally end or provide invalid or incorrect
results as a result of date data, and (iii) the hardware and software utilized
by Borrower have been designed to ensure year 2000 A.D. compatibility, including
date data, century recognition, leap year, calculations which accommodate same
century and multicentury formulas and date values, and date data interface
values that reflect the century.

         9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower
shall not, directly or indirectly, (a) merge into or with or consolidate with
any other Person or permit any other Person to merge into or with or consolidate
with it, or (b) sell, assign, lease, transfer, abandon or otherwise dispose of
any stock or indebtedness to any other Person or any of its assets to any other
Person (except for (i) sales of Inventory in the ordinary course of business and
(ii) the disposition of worn-out or obsolete Equipment or Equipment no longer
used in the business of Borrower so long as (A) if an Event of Default exists or
has occurred and is continuing, any proceeds are paid to Lender and (B) such
sales do not involve Equipment having an aggregate fair market value in excess
of One Hundred Fifty Thousand Dollars ($150,000) for all such Equipment disposed
of in any fiscal year of Borrower), or (c) form or acquire any subsidiaries, or
(d) wind up, liquidate or dissolve or (e) agree to do any of the foregoing.

         9.8 Encumbrances. Borrower shall not create, incur, assume or suffer to
exist any security interest, mortgage, pledge, lien, charge or other encumbrance
of any nature whatsoever on any of its assets or properties, including the
Collateral, except: (a) the liens and security interests of Lender; (b)



                                      -28-

<PAGE>



liens securing the payment of taxes, either not yet overdue or the validity of
which are being contested in good faith by appropriate proceedings diligently
pursued and available to Borrower and with respect to which adequate reserves
have been set aside on its books; (c) non-consensual statutory liens (other than
liens securing the payment of taxes) arising in the ordinary course of
Borrower's business to the extent: (i) such liens secure indebtedness which is
not overdue or (ii) such liens secure indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower, in each
case prior to the commencement of foreclosure or other similar proceedings and
with respect to which adequate reserves have been set aside on its books; (d)
zoning restrictions, easements, licenses, covenants and other restrictions
affecting the use of real property which do not interfere in any material
respect with the use of such real property or ordinary conduct of the business
of Borrower as presently conducted thereon or materially impair the value of the
real property which may be subject thereto; (e) purchase money security
interests in Equipment (including capital leases) and purchase money mortgages
on real estate not to exceed Two Hundred Thousand Dollars ($200,000) in the
aggregate at any time outstanding so long as such security interests and
mortgages do not apply to any property of Borrower other than the Equipment or
real estate so acquired, and the indebtedness secured thereby does not exceed
the cost of the Equipment or real estate so acquired, as the case may be; and
(f) the security interests and liens set forth on Schedule 8.4 hereto.

         9.9 Indebtedness. Borrower shall not incur, create, assume, become or
be liable in any manner with respect to, or permit to exist, any obligations or
indebtedness, except:

                  (a) the Obligations;

                  (b) trade obligations and normal accruals in the ordinary
course of business not yet due and payable, or with respect to which Borrower is
contesting in good faith the amount or validity thereof by appropriate
proceedings diligently pursued and available to Borrower and with respect to
which adequate reserves have been set aside on its books;

                  (c) purchase money indebtedness (including capital leases) to
the extent not incurred or secured by liens (including capital leases) in
violation of any other provision of this Agreement;

                  (d) the indebtedness (including Subordinated Debt) set forth
in Schedule 9.9 hereto provided, that: (i) such Subordinated Debt is the subject
of one or more Subordination Agreements, (ii) Borrower may only make regularly
scheduled payment of principal and interest in respect of such indebtedness, in
accordance with the terms of the agreement or instruments evidencing or giving
rise to such indebtedness as in effect of the date hereof, (iii) Borrower shall
not, directly or indirectly, (A) amend, modify, alter or change any terms of
such indebtedness or any agreement, document or instrument related thereto, or
(B) redeem, retire, defease, purchase or otherwise acquire such indebtedness, or
set aside or otherwise deposit or invest any sums for such purpose, and (iv)
Borrower shall furnish to Lender all notices, demands or other materials
concerning such indebtedness either received by Borrower or on its behalf,
promptly after receipt thereof, or sent by Borrower or on its behalf,
concurrently with the sending thereof, as the case may be.




                                      -29-

<PAGE>



         9.10 Loans, Investments, Guarantees, Etc. Borrower shall not, directly
or indirectly, make any loans or advance money or property to any person, or
invest in (by capital contribution, dividend or otherwise) or purchase or
repurchase the stock or indebtedness or all or a substantial part of the assets
or property of any person, or guarantee, assume, endorse, or otherwise become
responsible for (directly or indirectly) the indebtedness, performance,
obligations or dividends of any Person or agree to do any of the foregoing,
except: the endorsement of instruments for collection or deposit in the ordinary
course of business; investments in: short-term direct obligations of the United
States Government, negotiable certificates of deposit issued by any bank
satisfactory to Lender, payable to the order of Borrower or to bearer and
delivered to Lender, and commercial paper rated A1 or P1; provided, that, as to
any of the foregoing, unless waived in writing by Lender, Borrower shall take
such actions as are deemed necessary by Lender to perfect the security interest
of Lender in such investments and the loans, advances and guarantees set forth
on Schedule 9.10 hereto; provided, that, as to such loans, advances and
guarantees, Borrower shall not, directly or indirectly, amend, modify, alter or
change the terms of such loans, advances or guarantees or any agreement,
document or instrument related thereto, or as to such guarantees, redeem,
retire, defease, purchase or otherwise acquire the obligations arising pursuant
to such guarantees, or set aside or otherwise deposit or invest any sums for
such purpose, and Borrower shall furnish to Lender all notices or demands in
connection with such loans, advances or guarantees or other indebtedness subject
to such guarantees either received by Borrower or on its behalf, promptly after
the receipt thereof, or sent by Borrower or on its behalf, concurrently with the
sending thereof, as the case may be.

         9.11 Dividends and Redemptions. Without the prior written consent of
Lender (which consent will not be unreasonably withheld), Borrower shall not,
directly or indirectly, declare or pay any dividends on account of any shares of
class of capital stock of Borrower now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of capital stock
(or set aside or otherwise deposit or invest any sums for such purpose) for any
consideration other than common stock or apply or set apart any sum, or make any
other distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing.

         9.12 Transactions with Affiliates. Borrower shall not, directly or
indirectly, purchase, acquire or lease any property from, or sell, transfer or
lease any property to, any officer, director, agent or other person affiliated
with Borrower, except in the ordinary course of and pursuant to the reasonable
requirements of Borrower's business and upon fair and reasonable terms no less
favorable to Borrower than Borrower would obtain in a comparable arm's length
transaction with an unaffiliated person or make any payments of management,
consulting or other fees for management or similar services, or of any
indebtedness owing to any officer, employee, shareholder, director or other
person affiliated with Borrower except reasonable compensation to officers,
employees and directors for services rendered to Borrower in the ordinary course
of business.

         9.13 Additional Bank Accounts. Borrower shall not, directly or
indirectly, open, establish or maintain any deposit account, investment account
or any other account with any bank or other financial institution, other than
the Blocked Accounts and the accounts set forth in Schedule 8.8 except: as to
any new or additional Blocked Accounts and other such new or additional accounts
which contain any Collateral or proceeds thereof, with the prior written consent
of Lender and subject to such conditions thereto as Lender may establish and as
to any



                                      -30-

<PAGE>



accounts used by Borrower to make payments of payroll, taxes or other
obligations to third parties, after prior written notice to Lender.

         9.14 Adjusted Tangible Net Worth. Borrower shall, at all times,
maintain Adjusted Tangible Net Worth of not less than Eight Million and Three
Hundred Thousand Dollars ($8,300,000).

         9.15 Costs and Expenses. Borrower shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including: (a) all costs and
expenses of filing or recording (including Uniform Commercial Code financing
statement filing taxes and fees, documentary taxes, intangibles taxes and
mortgage recording taxes and fees, if applicable); (b) all insurance premiums,
appraisal fees and search fees; (c) costs and expenses of remitting loan
proceeds, collecting checks and other items of payment, and establishing and
maintaining the Blocked Accounts, together with Lender's customary charges and
fees with respect thereto; (d) costs and expenses of preserving and protecting
the Collateral; (e) costs and expenses paid or incurred in connection with
obtaining payment of the Obligations, enforcing the security interests and liens
of Lender, selling or otherwise realizing upon the Collateral, and otherwise
enforcing the provisions of this Agreement and the other Financing Agreements or
defending any claims made or threatened against Lender arising out of the
transactions contemplated hereby and thereby (including preparations for and
consultations concerning any such matters); (f) all out-of-pocket expenses and
costs heretofore and from time to time hereafter incurred by Lender during the
course of periodic field examinations of the Collateral and Borrower's
operations, plus a per diem charge at the rate of Six Hundred Fifty Dollars
($650) per person per day for Lender's examiners in the field and office; and
(g) the reasonable fees and disbursements of counsel (including legal
assistants) to Lender in connection with any of the foregoing.

         9.16 Further Assurances. At the request of Lender at any time and from
time to time, Borrower shall, at its expense, duly execute and deliver, or cause
to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of
Borrower representing that all conditions precedent to the making of Loans
contained herein are satisfied. In the event of such request by Lender, Lender
may, at its option, cease to make any further Loans until Lender has received
such certificate and, in addition, Lender has determined that such conditions
are satisfied. Where permitted by law, Borrower hereby authorizes Lender to
execute and file one or more UCC financing statements signed only by Lender.

SECTION 10. EVENTS OF DEFAULT AND REMEDIES

         10.1 Events of Default. The occurrence or existence of any one or more
of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":

                  (a) Borrower fails to pay when due any of the Obligations or
fails to perform any



                                      -31-

<PAGE>



of the terms, covenants, conditions or provisions contained in this Agreement
or any of the other Financing Agreements;

                  (b) Any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;

                  (c) Any Obligor revokes, terminates or fails to perform any of
the terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;

                  (d) Any judgment for the payment of money is rendered against
Borrower or any Obligor in excess of One Hundred Fifty Thousand Dollars
($150,000) in any one case or in excess of Three Hundred Thousand Dollars
($300,000) in the aggregate and shall remain undischarged or unvacated for a
period in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against Borrower or
any Obligor or any of their assets;

                  (e) Borrower, or any Obligor which is a partnership, limited
liability company, limited liability partnership or a corporation, dissolves or
suspends or discontinues doing business;

                  (f) Borrower or any Obligor becomes insolvent (however defined
or evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;

                  (g) A case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against Borrower or any Obligor or all or any part of its
properties and such petition or application is not dismissed within thirty (30)
days after the date of its filing or Borrower or any Obligor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;

                  (h) A case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by Borrower or any Obligor or for all or any part of its
property; or

                  (i) Any default by Borrower or any Obligor under any
agreement, document or instrument relating to any indebtedness for borrowed
money owing to any person other than Lender, or any capitalized lease
obligations, contingent indebtedness in connection with any guarantee, letter of
credit, indemnity or similar type of instrument in favor of any person other
than Lender, in any case in an amount in excess of One Hundred Fifty Thousand
Dollars ($150,000), which default continues for more than the applicable cure
period, if any, with respect thereto, or any default by Borrower or any



                                      -32-

<PAGE>



Obligor under any material contract, lease, license or other obligation to any
person other than Lender, which default continues for more than the applicable
cure period, if any, with respect thereto;

                  (j) Any change in the controlling ownership of Borrower;

                  (k) The indictment or threatened indictment of Borrower or any
Obligor under any criminal statute, or commencement or threatened commencement
of criminal or civil proceedings against Borrower or any Obligor, pursuant to
which statute or proceedings the penalties or remedies sought or available
include forfeiture of any of the property of Borrower or such Obligor;

                  (l) There shall be a material adverse change in the business
or assets of Borrower or any Obligor after the date hereof; or

                  (m) There shall be an event of default under any of the other
Financing Agreements.

         10.2  Remedies.

                  (a) At any time an Event of Default exists or has occurred and
is continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by Borrower or any Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
the appointment of a receiver or for an injunction to restrain a breach or
threatened breach by Borrower of this Agreement or any of the other Financing
Agreements. Lender may, at any time or times, proceed directly against Borrower
or any Obligor to collect the Obligations without prior recourse to the
Collateral.

                  (b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its discretion
and without limitation, accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, require Borrower, at Borrower's expense, to assemble
and make available to Lender any part or all of the Collateral at any place and
time designated by Lender, collect, foreclose, receive, appropriate, setoff and
realize upon any and all Collateral, remove any or all of the Collateral from
any premises on or in which the same may be located for the purpose of effecting
the sale, foreclosure or other disposition thereof or for any other purpose,
sell, lease, transfer, assign, deliver or otherwise dispose of any and all
Collateral (including entering into contracts with respect thereto, public or
private sales at any exchange, broker's board, at any office of Lender or
elsewhere) at such prices or terms as Lender may deem reasonable, for cash, upon
credit or for future delivery, with Lender having the right to purchase the
whole or any part of the Collateral at any such public sale, all of the
foregoing being free



                                      -33-

<PAGE>



from any right or equity of redemption of Borrower, which right or equity of
redemption is hereby expressly waived and released by Borrower and/or terminate
this Agreement. If any of the Collateral is sold or leased by Lender upon credit
terms or for future delivery, the Obligations shall not be reduced as a result
thereof until payment therefor is finally collected by Lender. If notice of
disposition of Collateral is required by law, five (5) days prior notice by
Lender to Borrower designating the time and place of any public sale or the time
after which any private sale or other intended disposition of Collateral is to
be made, shall be deemed to be reasonable notice thereof and Borrower waives any
other notice. In the event Lender institutes an action to recover any Collateral
or seeks recovery of any Collateral by way of prejudgment remedy, Borrower
waives the posting of any bond which might otherwise be required.

                  (c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due. Borrower shall remain liable to
Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including attorneys' fees and legal expenses.

                  (d) Without limiting the foregoing, upon the occurrence of an
Event of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or reduce the lending formulas or amounts of Revolving Loans
available to Borrower and/or (ii) terminate any provision of this Agreement
providing for any future Loans to be made by Lender to Borrower.

SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

         11.1  Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.

                  (a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of New York
(without giving effect to principles of conflicts of law).

                  (b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the State of New York and the United States
District Court for the Southern District of New York and waive any objection
based on venue or forum non conveniens with respect to any action instituted
therein arising under this Agreement or any of the other Financing Agreements or
in any way connected with or related or incidental to the dealings of the
parties hereto in respect of this Agreement or any of the other Financing
Agreements or the transactions related hereto or thereto, in each case whether
now existing or hereafter arising, and whether in contract, tort, equity or
otherwise, and agree that any dispute with respect to any such matters shall be
heard only in the courts described above (except that Lender shall have the
right to bring any action or proceeding against Borrower or its property in the
courts of any other jurisdiction which Lender deems necessary or appropriate in
order to realize on the Collateral or to otherwise enforce its rights against
Borrower or its property).




                                      -34-

<PAGE>



                  (c) Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so deposited in the U.S. mails, or,
at Lender's option, by service upon Borrower in any other manner provided under
the rules of any such courts. Within thirty (30) days after such service,
Borrower shall appear in answer to such process, failing which Borrower shall be
deemed in default and judgment may be entered by Lender against Borrower for the
amount of the claim and other relief requested.

                  (d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF
THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND LENDER
EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER OR
LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.

                  (e) Lender shall not have any liability to Borrower (whether
in tort, contract, equity or otherwise) for losses suffered by Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Lender, that the losses were
the result of acts or omissions constituting gross negligence or willful
misconduct. In any such litigation, Lender shall be entitled to the benefit of
the rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement.

         11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on Borrower which Lender may elect to give shall entitle Borrower
to any other or further notice or demand in the same, similar or other
circumstances.

         11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Borrower. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only



                                      -35-

<PAGE>



to the extent specifically set forth therein. A waiver by Lender of any right,
power and/or remedy on any one occasion shall not be construed as a bar to or
waiver of any such right, power and/or remedy which Lender would otherwise have
on any future occasion, whether similar in kind or otherwise.

         11.4 Waiver of Counterclaims. Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.

         11.5 Indemnification. Borrower shall indemnify and hold Lender, and its
directors, agents, employees and counsel, harmless from and against any and all
losses, claims, damages, liabilities, costs or expenses imposed on, incurred by
or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the reasonable fees and
expenses of counsel. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in this Section may be unenforceable because it violates
any law or public policy, Borrower shall pay the maximum portion which it is
permitted to pay under applicable law to Lender in satisfaction of indemnified
matters under this Section. The foregoing indemnity shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.

SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS

         12.1 Term.

                  (a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the date two (2) years
from the date hereof ("Maturity Date"), provided, that, this Agreement and all
other Financing Agreements must be terminated simultaneously. Lender, in its
sole and absolute discretion, may elect to extend this Agreement for one (1)
year from the Maturity Date. If Lender elects to extend this Agreement pursuant
to the prior sentence, this Agreement shall automatically renew for successive
one (1) year terms thereafter unless either Borrower or Lender provide written
notice to the other party of its election not to extend this Agreement at least
sixty (60) days prior to the end of the then effective renewal term. Upon the
effective date of termination or non-renewal of the Financing Agreements,
Borrower shall pay to Lender, in full, all outstanding and unpaid Obligations
and shall furnish cash collateral to Lender in such amounts as Lender determines
are reasonably necessary to secure Lender from loss, cost, damage or expense,
including attorneys' fees and legal expenses, in connection with any contingent
Obligations, including checks or other payments provisionally credited to the
Obligations and/or as to which Lender has not yet received final and
indefeasible payment. Such payments in respect of the Obligations and cash
collateral shall be remitted by wire transfer in Federal funds to such bank
account of Lender, as Lender may, in its discretion, designate in writing to
Borrower for such purpose. Interest shall be due until and including the next
business day, if the amounts so paid by Borrower to the bank account designated
by Lender are received in such bank account later than



                                      -36-

<PAGE>



12:00 noon (Eastern Time).

                  (b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Lender's continuing security interest in the Collateral and the rights and
remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid.

                  (c) If for any reason this Agreement is terminated prior to
the end of the renewal term of this Agreement, in view of the impracticality and
extreme difficulty of ascertaining actual damages and by mutual agreement of the
parties as to a reasonable calculation of Lender's lost profits as a result
thereof, Borrower agrees to pay to Lender, upon the effective date of such
termination, an early termination fee in the amount set forth below if such
termination is effective in the period indicated:
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

--------------------------------------------------------------------------------------------------------------------------
                                   AMOUNT                                                 PERIOD
--------------------------------------------------------------------------------------------------------------------------
(i)         2.0% of the sum of the Maximum Credit                  From the date hereof to any time prior to
            and the unpaid principal balance of the                the first anniversary of this Agreement.
            Term Loan
--------------------------------------------------------------------------------------------------------------------------
(ii)        1.0% of the sum of the Maximum Credit                  From the first anniversary of this
            and the unpaid principal balance of the                Agreement to any time on or prior to the
            on or prior to the Term Loan                           second anniversary of this Agreement.
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower agrees
that it is reasonable under the circumstances currently existing. In addition,
Lender shall be entitled to such early termination fee upon the occurrence of
any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if
Lender does not exercise its right to terminate this Agreement, but elects, at
its option, to provide financing to Borrower or permit the use of cash
collateral under the United States Bankruptcy Code. The early termination fee
provided for in this Section 12.1 shall be deemed included in the Obligations.
Notwithstanding the foregoing, if at any time after the first anniversary of
this Agreement Borrower refinances its Obligation under this Agreement with
First Union National Bank, Borrower shall not be required to pay the above early
termination fee.

         12.2 Notices. All notices, requests and demands hereunder shall be in
writing and made to Lender at its address set forth below and to Borrower at its
chief executive office set forth below, or to such other address as either party
may designate by written notice to the other in accordance with this provision,
and deemed to have been given or made: if delivered in person, immediately upon
delivery; if by telex, telegram or facsimile transmission, immediately upon
sending and upon confirmation of receipt; if by nationally recognized overnight
courier service with instructions to deliver the next business day, one (1)
business day after sending; and if by certified mail, return receipt requested,
five (5) days after mailing.




                                      -37-

<PAGE>



         12.3 Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.

         12.4 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrower, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans, or any other interest
herein to another financial institution or other person, in which event, the
assignee or participant shall have, to the extent of such assignment or
participation, the same rights and benefits as it would have if it were Lender
hereunder, except as otherwise provided by the terms of such assignment or
participation.

         12.5 Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.


                          SIGNATURES ON FOLLOWING PAGE




                                      -38-

<PAGE>



         IN WITNESS WHEREOF, Lender and Borrower have caused these presents to
be duly executed as of the day and year first above written.

                                    BONTEX, INC.
Address for Notices:
One Bontex Drive                    By:s/
Buena Vista, Virginia 24116         Name:
Attn:    Jeffrey Kostelni           Title:
         Chief Financial Officer
Facsimile:  540.261.3784

                                    CONGRESS FINANCIAL CORPORATION

Address for Notices:
1133 Avenue of the Americas         By:
New York, New York 10036            Name:
Attn:    Josephine Norris           Title:
         First Vice President
Facsimile: 212.545.4555